NAB Attendees Caught Off Guard by Carey’s Remarks on Aereo

"It’s just reality,” Carey replied to Smith’s comment that “I think we just made some news.” Other NAB attendees at panels and in brief conversations with us likewise expressed surprise at Carey’s comments. Aereo would oppose such a move, its spokesman told us. The service last Monday won a 2nd U.S. Circuit Court of Appeals ruling denying broadcasters a preliminary injunction against Aereo, with some industry lawyers saying split circuits loom if the 9th Circuit upholds a lower court’s injunction against Aereokiller (CD April 5 p9).

The 2nd Circuit’s “disappointing” Aereo decision is but one step in a legal process, Carey told Smith. Others noted to us that the decision wasn’t on the merits of the case, since it was on an injunction request. “Aereo is stealing our signal,” said Carey. “We believe in our legal rights. We are going to pursue those legal rights fully.” Fox expects “we are going to prevail” against Aereo, he said. News Corp. will “pursue our rights fully, through the legal and political avenues available to us,” Carey said. He called Aereo a pirate of Fox’s signal.

A “business solution” to the problem of Aereo could be to turn Fox into a subscription service, which if it happens would occur in partnership with News Corp.’s “content partners” and TV affiliates, said Carey. The dual-stream business of retrans fees and ads for broadcasters can “continue to improve” but broadcasting “needs a business model” that works, he said. “We're trying to succeed in business,” Carey said when Smith closed the Q-and-A by again saying the News Corp. COO made news. “We're not trying to make news,” continued Carey. A News Corp. spokesman declined to comment beyond a news release (http://bit.ly/ZdH8L8) the company issued that excerpted Carey’s remarks.

Aereo finds it “disappointing” Fox would consider not giving TV viewers access to the broadcast network free via antenna, said a spokesman for the service. It relies on tiny antennas to pick up and stream on to subscribers the signals of New York market TV stations, many of which sued Aereo. “When broadcasters ask 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’s interest and convenience, and they would remain free to air,” said the spokesman. “Having a television antenna is every American’s right,” and more than 50 million see TV that way, he said.

The House Communications Subcommittee will probably hear more about Aereo and many other things in preparation for legislative efforts to reauthorize a law expiring at the end of next year that lets DBS providers import the signals of distant-market TV stations, predicted a Republican aide. “Every issue that every stakeholder is interested in I imagine will be discussed and debated” before the Satellite Television Extension and Localism Act expires, said the aide, Neil Fried. “It’s early, but I imagine we'll be hearing more about this decision and others,” said the subcommittee’s chief counsel during Q-and-A on a later NAB panel. “It is early in the process,” Fried said when asked about Carey’s remarks. The 2nd Circuit’s action was “not a ruling on the merits, but on an injunction,” he said.

Carey’s remarks may be the start of broadcast attempts to get a legislative fix to Aereo, a broadcast lawyer and a cable attorney who heard of Carey’s comments but weren’t at NAB told us. The 2nd Circuit’s decision was “truly a pedantic” one, said John Hane of Pillsbury Winthrop, with TV-station clients affiliated with Fox and other networks. Barring Aereo-like streaming in a reauthorization of STELA “is the best solution, because it saves you from years of having to slog it through in court,” said Hane. Carey “picked a very extreme solution” to Aereo, and just one way to proceed, said Hane. Aereo is “just a modern-day Napster, from an infringer’s point of view, it’s just too good to be true,” Hane said of the music-streaming service from a decade ago compared to Aereo. “But it is in fact too good to be true."

A broadcast network that believes Aereo could win before the Supreme Court “may very well want Congress to step in,” said Barbara Esbin of Cinnamon Mueller, with cable-operator clients. That would be taking Aereo’s lower-court win that’s now before the 2nd Circuit as “a sign of likely failure” before the high court “down the road,” she said. “STELA reauthorization is the most imminent vehicle” for such a legislative approach, said Esbin. “But then, that might be a ‘be careful what you ask for’ scenario, where Congress asks for something back in return, like a prohibition on retransmission consent blackouts and requiring commercial arbitration to end bargaining impasses."

Retrans works, Carey told Smith. Without it, “content would cost more,” Carey said. Retrans “doesn’t need to be fixed -- all you're trying to do is to negotiate a fair price for the content we have,” he said. Rather than retrans fees being “egregious,” they're “woefully undervalued, if you compare it to any cable channel out there,” said Carey. “Washington made it clear they're not going to get involved” in retrans talks, he said. Cable channels a la carte wouldn’t work, because networks would cost “exponentially more” than they do now if sold individually, Carey said. He was responding to Smith’s question about what the effects on broadcasters will be of “the market ... putting pressure” on pay-TV providers to offer a la carte options. “The bundling of content I think has been one of the driving forces for success” of U.S. TV, said Carey.

Retrans deals often are resolved amicably, Alex Hoehn-Saric, media adviser to FCC Commissioner Jessica Rosenworcel, said at a later NAB panel. The agency has “a rather limited role. It involves supervising good-faith negotiations,” said Matthew Berry, an aide to Commissioner Ajit Pai. “If Congress tells us to implement a different system, it’s our job to implement that system.” At present, “the ball is more in Congress’s court if they want us to do something different than we're doing now,” said Berry.