Fox threatens to move its programming to cable

Fox exec Chase Carey at NAB convention.  (Photo by Valerie Macon/Getty Images)
Fox exec Chase Carey at NAB convention. (Photo by Valerie Macon/Getty Images)

Is this legitimate? Or nothing more than an empty threat?

Who’d thought something as small as a dime-sized antenna would cause this much trouble?

The industry was a buzz about on Monday at the annual National Association of Broadcasters gathering in Las Vegas after comments made by News Corp. president and COO Chase Carey in the opening session, threatening to remove Fox from the broadcast airwaves and shift it to cable and satellite, thanks to Aereo, a new service which lets you stream broadcast TV signals over the internet using a tiny antenna for a small monthly fee.

Later in the day, Spanish-language network Univision also made a similar threat. And on Tuesday, CBS followed suit and would consider the same thing.

Aereo is backed by IAC and Barry Diller – the man who helped launch Fox as a broadcast network in 1986. Fox – and three of its competitors (ABC, CBS, and NBC) are suing the startup, seeking an injunction to stop illegal transmission of their signal. Moreover, they believe Aereo is undermining the retransmission consent cable and satellite providers (aka as Multiple System Operators) are paying the networks and their stations to carry their signal. Launched 13 months ago in the New York City market, Aereo is expanding to 21 markets this year, including Chicago.

So far, the networks have had no luck, including a recent appellate court decision. It’s an issue that will likely end up before the U.S. Supreme Court. The move comes as more and more viewers are cord-cutting: dropping cable and satellite subscriptions which are becoming more expensive by the day.

Carey claims Aereo is stealing Fox’s signal and feels his network needs to be fairly compensated (Aereo is currently not paying a dual revenue stream – from advertisers and MSOs – are vital. “We can’t sit idly by and let someone steal our signal. We like the broadcast business, and if we conform our rights, that is a path we prefer to pursue.”, Carey told the crowd on Monday.

Believe it or not, many broadcast executives took Carey’s comments in stride, believing they would prevail in court. In fact, NAB president Gordon Smith was on stage with Carey when he made the announcement. On Tuesday, the head of Fox’s affiliate board also endorsed the idea. Carey later said the threat was made to put the pressure on lawmakers to do something about piracy.

While TV executives were more or less supportive, news of Carey’s comments hit like wildfire on social media and the Internet Monday and were ferociously panned.

According to TVB, Cable and satellite penetration nationwide (including wired cable and ADS) is at 91 percent as of February 2013, while the percentage of over-the-air households is at 9.7 percent. In the Chicago area, 89.7 percent of viewers are cable or satellite subscribers, while only 10.8 percent are OTA households, with the percentage likely higher in Chicago proper.

So, could this really happen? Likely not – after all, this is all just blabber, nothing more than execs throwing out “doomsday scenarios”, similar to what the Chicago Transit Authority did when it claimed the funding formula from the state needed to change, or there would be “severe” service cuts. You’d think CTA Commissioner Forrest Claypool was also running Fox (and since both are now trying to rip off consumers, you really can’t tell the difference.)

Sanford C. Bernstein analyst Todd Juenger pointed out that the 10 percent or so who do not subscribe to a pay service “are not a highly coveted group for many advertisers”, i.e. minorities, the elderly, and those who live in rural areas. Indeed, the number of residents who rely on over-the-air television are more likely found in lower-income city neighborhoods such as Englewood, South Shore, Humboldt Park, and North Lawndale than in more affluent areas like Hyde Park, Lincoln Park, Lakeview, and River North. But Juenger also added: “[T]he unknowable wild card that may trump every other line item on the financial analysis, is the branding value of the local presence, local news team, community-oriented face the broadcast station brings to the network…and how that translates into the sustained ratings dominance of those networks. Lose that presence, and soon all those broadcast networks really do become just another channel on the dial.”

And yes, what about those local stations? If Fox abandons over-the-air programming, taking NFL Football and American Idol with it, stations would have to fill the time somehow, and those Fox stations – O&Os in particular – would take a huge financial hit. This would be a disaster for Fox-owned WFLD here, who is already struggling with low-rated newscasts and syndicated programming. Another scenario would be to move both WFLD and WPWR to MSO-only, shut down the transmitters, and hand the spectrum back to the government, which is looking to improve wireless communications by asking broadcasters to “voluntarily” hand it over. Other station groups with Fox affiliates such as Cox, Raycom, Local TV, Sinclair, and Nexstar would also be in a similar position.

And if the those NFL games moves to cable, it could raise eyebrows with pols in D.C. and in other places, as many new stadiums – such as the renovation of Soldier Field (where the Chicago Bears play) and the Minnesota Vikings’ proposed new stadium in Minneapolis – were or are being paid with taxpayer dollars, and getting tickets to games are near impossible and priced out of the average fan’s range. After all, nobody wants to have the Super Bowl or the World Series on a pay platform, and the mere threat could spurn congressional hearings.

And Fox might want to think again if they think sitcoms like The Cleveland Show and The Mindy Project are even worth paying for.

Once again, all these possibilities are long shots and if it does happen, it won’t happen for several years. Of course, they can negotiate with Aereo for a deal (obviously the best option), but the broadcasting industry always takes a position akin to “we don’t negotiate with terrorists.”

This sorry spectacle goes to show you broadcasters – and the trade groups who represent them – have abandoned the public interest for the bottom line, despite those odious PSAs from the NAB which proudly proclaim they’re the place to go in event of an emergency or something. Aereo may be a huge threat to the over-the-air TV model – but Big Media was an even bigger threat – even before Aereo was thought of.

So this talk about the major broadcast networks turning themselves into cable channels is moot – because they act like they already are.

(Editor’s Note: This is an article about the Fox broadcasting network, not Fox News. Any comment pertaining to Fox News – pro or con – will not be posted. Thank you.)