Fox is threatening to convert its entire operation to a pay-TV-only channel if Internet startup Aereo continues to "steal" its over-the-air television signal.
News Corp., which owns Fox, said not being paid by Aereo threatens the economics of broadcast TV, which relies on both retransmission fees and advertising.
Say what now?
Anyone with an antenna can pick up a TV station's signals for free.
However, as we well know, cable and satellite companies typically pay stations and networks for the right to distribute their programming to subscribers.
Industry-wide, those retransmission fees can add up to billions of dollars every year. Fees that Aereo is circumventing with its new business model:
Aereo takes broadcast signals from the air with thousands of little antennas, recodes them for Internet use and feeds that to computers, tablets and phones.
Subscriptions start at a mere $8 per month, which is much cheaper than a cable package, though the service is mostly limited to broadcast channels.
Obviously, they were sued VERY fast, but last week, that industry was shaken after a federal appeals court issued a preliminary ruling siding with Aereo.
The company contends that it doesn't have to pay those fees because it uses thousands of tiny antennas to grab the signal, and a judge agreed.
"This is not an ideal path we look to pursue, but we can't sit idly by and let an entity steal our signal," NewsCorp COO Chase Carey said in response.
"But if we can't do a fair deal, we could take the network to a subscription model."
While most people get Fox through a pay cable TV provider anyway, millions of other Americans rely on the free signal coming over their own antennas.
If realized, Carey's proposal would amount to a sea change in how Fox does business; currently, Fox sends its signal to TV stations across the country.
Those stations, 27 of which it owns directly, relay Fox programming such as New Girl and Glee for free in local markets and add their own local news, etc.
Carey didn't explain how TV stations would be affected if Fox shut off the signals it sent to broadcasters and went straight over to a pay TV model.
Later, the company said in a statement that any change due to the Aereo situation would occur "in collaboration with both our content partners and affiliates."
Last week, the 2nd U.S. Circuit Court of Appeals in New York said that Aereo could continue its service despite a legal challenge by Fox, ABC, NBC and CBS.
In a split ruling, the court accepted Aereo's position that having individual antennas meant that Aereo wasn't retransmitting signals illegally for profit.
Rather, the appeals court said that Aereo enabled its subscribers to do what they already could on their own with their own antenna and video recorder.
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