Chase Carey, deputy chairman, president, and COO of News Corporation, participates in a panel session at The Cable Show in Boston, Massachusetts May 23, 2012.
News Corp.’s flagship Fox network might cease broadcasting over the U.S. public airwaves if the company’s dispute with upstart challenger Aereo isn’t resolved, a senior company official warned Monday. News Corp. COO Chase Carey said Fox — home of “The Simpsons,” “Glee” and “American Idol” — might simply move to pay-for-TV cable as a result of its legal dispute with Aereo, a New York-based startup backed by billionaire media mogul Barry Diller.
Diller knows what it’s like to challenge entrenched media behemoths. He helped launch the Fox broadcasting network nearly three decades ago. At the time, it sounded crazy: who would want to challenge the three dominant U.S. broadcast networks? Since then, Fox has achieved what was then unthinkable, by regularly beating out NBC, ABC, and CBS in the ratings. Fast forward a couple of decades and Diller is once again the disruptor, only this time he’s doing it against the company — and the industry — that made him famous.
New York-based Aereo picks up free, over-the-air broadcast signals using an array of tiny antennas — each antenna theoretically “leased” to one customer — and then sends the signals to customers via the Internet. It pays nothing to perform this service. Aereo maintains that because each user receives programming via his or her own antenna, its system is legal. The broadcasters say this is straight-up theft. “We believe that Aereo is pirating our broadcast signal,” News Corp. COO Carey told an industry conference Monday. “We won’t just sit idle and allow our content to be actively stolen.”
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Aereo launched in 2012 after raising more than $20 million from Diller’s Internet conglomerate IAC and other investors. Shortly thereafter, the major broadcasters — Comcast-owned NBC, News Corp.-owned Fox, Disney-owned ABC, and CBS — launched a joint legal challenge to shut down the company. Thus far the broadcasters have failed to win an injunction halting the service.
The Aereo drama is playing out against the backdrop of the broader “cord-cutting” debate, as users shift toward services like Netflix and Hulu. Today, most consumers receive basic broadcast programming through cable TV packages. But as viewers increasingly look to the Internet for entertainment and news, both the broadcast and the cable models are under pressure. Still, those free broadcast signals are out there on the airwaves. Those are the signals that Aereo is grabbing — and selling to its users for ten bucks per month.
Needless to say, the broadcasters and cable companies — sometimes they’re one and the same — are very concerned about cord-cutting because they make hundreds of millions by charging so-called “retransmission fees” to other cable and satellite providers for the right to broadcast their programming.
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Carey’s comments reflect growing frustration among traditional broadcasters over Aereo’s business model — and what it might mean for the rest of the industry. Last week, a federal judge refused to issue an injunction halting Aereo because Aereo’s streams did not constitute “public performances,” according to The New York Times. The court said the broadcasters’ copyright infringement lawsuits against the Aereo “are not likely to prevail on the merits,” according to the paper.
News Corp. COO Carey, Rupert Murdoch’s right-hand-man, was not amused by the court’s decision. “If we can’t have our rights properly protected through those legal and political avenues, we will pursue business solutions. One such business solution would be to take the network and turn it into a subscription service,” Carey told the National Association of Broadcasters show in Las Vegas, in comments cited by Reuters.
Aereo spokeswoman Virginia Lam issued the following statement Monday, as cited by AllThingsD:
Aereo has invented a simple, convenient way for consumers to utilize an antenna to access free-to-air broadcast television, bringing television access into the modern era for millions of consumers. 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. Over 50 million Americans today access television via an antenna. When broadcasters asked Congress for a free license to digitally broadcast on the public’s airwaves, they did so with the promise that they would broadcast in the public interest and convenience, and that they would remain free-to-air. Having a television antenna is every American’s right.