"Broadcast" Fox Network Could Become a "Cable Network"

The Fox Network , currently offered as a local broadcast TV station, could become a cable channel if U.S. courts rule that Aereo is lawful, COO Chase Carey has said.  

Given the financial stakes, Fox and other broadcast networks logically will threaten the gravest losses possible to sway opinion.

Television station owners continued to have substantial success in 2012 in growing an increasingly important source of revenue: the fees paid by cable and satellite systems to carry local channels.

While the fees account for less than 10 percent of total station revenue, broadcaster affiliate payments have been growing rapidly. 

CBS-owned stations, for example, almost tripled their fees, from 45 cents a month per subscriber in 2011 to $1.22 in 2012, according to the Pew Research Center. 

SNL Kagan estimates that by 2018, broadcaster affilliate revenue will be more than 20 percent of TV stations’ ad revenues, more than double what it is now.

One reason local broadcast stations have pushed so hard for higher fees is that they have to share some of that income with their networks (ABC, CBS, Fox and so forth) in the form of "reverse compensation." That's a big change. 

“We used to be paying them (local broadcasters) and now they’re paying us (the programming network),” said the CBS chief executive, Les Moonves. 

Within the next five years, Moonves estimated that CBS alone would bring in at least $1 billion a year in affiliate fees from network-owned stations and reverse compensation from non-owned affiliates.

If you want to know why broadcast networks are fighting to block Aereo ane Aereokiller, money is the reason. 



Granted, it would challenge federal regulators who have given the broadcasters their licenses, were Fox Network and other "broadcast" networks go "cable only" (including telco and satellite distribution). But the financial damage Aereo, Aereokiller or others could inflict would be substantial.

Just look at the double digit growth of affiliate revenue and you will get the picture. 

Right now, the legal picture is extremely clouded. Aereo and Aereokiller are two firms that have gotten conflicting legal decisions about whether their services are lawful. In New York, a federal court has affirmed Aereo's legality. In California, the federal court has rendered the opposite opinion, ruling that Aereokiller infringes broadcaster copyrights. 

Both Aereo and Aereokiller create networks of individually-used off-air antennas and then streams that content to customers. Obviously, broadcasters fear a loss of affiliate payments typically paid by cable, telco and satellite TV video subscription services.

In 2013, for example, the Fox Network will earn $472 million from affiliate local broadcasters and video distributors.