UPDATED: Fox's affiliates are vital to the network's broadcast model, said Chase Carey, president and COO of News Corp., but at the same time, Fox will consider scrapping the free model if the legal system does not force live streaming outfits such as Aereo to pay to transmit Fox's signal. The dual revenue stream-retransmission fees and advertising-is "critical for television to be viable," said Carey, a featured speaker at the NAB Show in Las Vegas.
Carey said News Corp. much prefers the legal system compelling Aereo to pay up, but could make Fox a subscription-only service if Aereo prevails in court. "A [different] business solution is the path we'll pursue if we don't get our rights protected any other way," he said.
The fighting words shook up the show's opening session and stood out from other speeches, from NAB President/CEO Gordon Smith and CBS News anchor Bob Schieffer, extolling the value of the network-affiliate relationship.
Carey said he was "disappointed" in a recent federal appeals court ruling that sided with Aereo, which sells digital subscriptions featuring broadcast content but does not pay the broadcasters retransmission fees. The legal wrangling continues.
"We will not sit idly by and let people steal our signal," he said.
News Corp. released a statement after the session that elaborated on Carey's perspective.
It read in part:
"We have no choice but to develop business solutions that ensure we continue to remain in the driver's seat of our own destiny. One option could be converting the Fox broadcast network to a pay channel, which we would do in collaboration with both our content partners and affiliates."
"It's disappointing to hear that Fox believes that consumers should not be permitted to use an antenna to access free-to-air broadcast television... Having a television antenna is every American's right.," said Aereo in a statement.
The matter is sure to dominate both the Fox affiliates board meeting and affiliates body meeting April 9 in Las Vegas.
Affiliates board chairman Steve Pruett did not return a call for comment at presstime.
Other broadcast leaders saluted Carey for fighting for broadcasters' rights, though no one knows for sure what a potential subscription model would look like for affiliates.
"I'm tremendously energized to hear that Fox is committed to making sure that, if the courts don't come to the right conclusion, they will fight back," said George Mahoney, Media General president and CEO. "The business model has to be reexamined to make sure content isn't pirated."
Media General does not own Fox affiliates.
LIN Media is a substantial holder of Fox afffiliates, but Vincent Sadusky, president and CEO, was not unnerved by Carey's comments. He said he anticipated the broadcasters winning their legal fight with Aereo, and stressed that they have to stick together to combat what he called piracy. "Taking his comments in their full context, I honestly believe Chase supports the broadcast infrastructure and sees retrans as a very valuable franchise," said Sadusky.
Back in January, BernsteinResearch analyst Todd Juenger suggested in a note to investors that converting to cable would be a logical response to an Aereo win.
"[I]n a world where Aerio (or the equivalent) was thriving and stealing away pay-tv subscribers (and the retrans that goes with them)," he said. "[n]ot only would the broadcast networks lose the retrans/reverse comp from Aereo subscribers, they would also be losing affiliate fees for all the cable networks they also own. Faced with that prospect, we believe the broadcast networks would be better off converting to cable, preserving their bundled economics, and working as hard as possible to minimize the negative impact of losing the local presence."
John Eggerton contributed to this story.