'Free' TV Model Under Threat

Take a look at some free-to-air TV while you can: It may not be around much longer. Why? Because of the ongoing fallout from Aereo Inc.'s recent legal victory. (See Aereo: Suited Up to Disrupt Pay TV.) Aereo's strategy to offer over-the-top live TV by tapping into off-air TV signals has already led Fox Network's owner, News Corp., to suggest, in a public statement, that it might take its free-to-air programming behind a paywall. (See Aereo Standoff Could Force Fox Behind Paywall.) The chairman of Univision, Haim Saban, followed suit later that night, and Leslie Mooves, chief executive of CBS Corp., added his support on Tuesday. Now the industry is up in arms over whether broadcasters will ultimately abandon the free TV business. The announcement by Chase Carey, COO of News Corp., included a line stating: "It is clear that the broadcast business needs a dual revenue stream from both ad and subscription to be viable." That financial model for broadcasters is a relatively new phenomenon, but one that has quickly taken hold. SNL Kagan predicts retransmission fees paid to TV stations will top US$6 billion by 2018. Aereo routes around licensing fees by giving consumers IP access to free over-the-air channels through the use of tiny dedicated antennas and transcoding technology. If the company were to win its battles in court, there would be nothing to prevent other pay-TV providers from following the same path to avoid retransmission fees. Broadcasters would then lose a significant ongoing revenue stream. The argument over licensing fees could have serious repercussions throughout the industry, but it may also be disguising a larger debate over the role of free broadcast TV in the Internet era. Is there room for ad-supported television given all of the free content on the Web? And how important will free TV continue to be for consumers as a source of news and entertainment? — Mari Silbey, Special to Light Reading Cable