Fox executive threatens to make network a subscription channel

Claims Aero Inc. is "stealing" the network's over-the-air signal and selling it without paying for rights

Published April 8, 2013 10:20PM (EDT)

         (Fox News)
(Fox News)

LAS VEGAS (AP) -- A top executive with the owner of the Fox broadcast network threatened Monday to convert the network to a subscription channel on cable or satellite TV if Internet startup Aereo Inc. continues to "steal" Fox's over-the-air signal and sell it to consumers without paying for rights.

Although anyone with an antenna can pick up a station's signals for free, cable and satellite companies typically pay stations and networks for the right to distribute their programming to subscribers. Industrywide, those retransmission fees add up to billions of dollars every year. Aereo says it's not subject to those fees.

News Corp. Chief Operating Officer Chase Carey said that not being paid by Aereo jeopardizes the economics of broadcast TV, which benefits from both retransmission fees and advertising.

"This is not an ideal path we look to pursue, but we can't sit idly by and let an entity steal our signal," Carey said at the annual gathering of broadcasters, called NAB Show, in Las Vegas. "If we can't do a fair deal, we could take the whole network to a subscription model."

Fox owns 27 TV stations that thrive on the signal of Fox or its sister network, MyNetworkTV. Carey didn't explain how they might be affected by his proposal.

His remarks came a week after a federal appeals court said Aereo could continue its service despite a legal challenge by broadcasters. Aereo takes broadcast signals for free from the air with thousands of little antennas, recodes them for Internet use and feeds that to subscribers' computers, tablets and smartphones. Plans start at $8 a month, which is much cheaper than a cable package, though the service is mostly limited to broadcast channels.

Broadcasters argue that Aereo is engaged in copyright infringement by retransmitting the signals without permission and payments. But in a 2-1 ruling, the 2nd U.S. Circuit Court of Appeals in New York accepted Aereo's position that the individual antennas meant that Aereo wasn't retransmitting signals, but allowing its subscribers to do what they already could at home with their own antenna and video recorder.

Aereo's service had been limited to New York City when it debuted early last year. The Barry Diller-backed company expanded this year to the New York City suburbs, including New Jersey and parts of Connecticut. It plans to expand to Boston, Chicago, Philadelphia, Washington and 18 other U.S. markets this spring.

Analyst Todd Juenger of Bernstein Research speculated in a research note in January on what would make broadcast networks transition to a pay TV model.

Such a system would result in the loss of local news programs, broadcast personalities and advertising, which are all made possible by local TV stations. But a pay TV system could be better for network owners such as Fox if services like Aereo were to thrive, because it would cut off technology that siphons away customers from pay TV operators, he wrote.

News Corp.'s stock rose 77 cents, or 2.5 percent, to close Monday at $31.41.

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