Fox Television’s over the air signal may be scrambled and available “only by subscription” if the courts do not reverse their decision to allow an upstart television streaming service to continue operations while a broadcaster-backed lawsuit works through the legal system.

Aereo has been streaming New York City local stations to area residents that lease a tiny dime-sized antenna and receive the stations via the Internet. Broadcasters consider Aereo an end run around copyright law and retransmission consent fees paid by cable, satellite, and telco-TV operators. With millions in licensing fees at stake, several networks immediately filed suit to force the service to suspend operations.

But the 2nd Circuit Court of Appeals ruled in a 2-1 decision last month that Aereo’s streaming service did not represent a “public performance,” meaning the company was not infringing on the copyrights of broadcasters. Until a final court ruling is made, Aereo can continue operating, the judges ruled.

That decision prompted a hissy fit by News Corporation’s president and chief operating officer, who declared he is considering turning the Fox television network into a subscription-only service, potentially meaning the service would be scrambled and unavailable for free over-the-air in the future.

“Aereo is stealing our signal,” Chase Carey said at the opening of the National Association of Broadcasters’ convention is Las Vegas last night. “If we can’t have our rights properly protected through legal and governmental solutions, we will pursue business solution. One solution would be to take the network and make it a subscription service. We’re not going to sit idly by and let people steal our content.”

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Bloomberg Television explores Fox’s “nuclear option” of scrambling its broadcast outlets and forcing all Americans to pay for its content. (2 minutes)

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CNN Money explains Aereo and its threat to the traditional broadcast retransmission consent fee system that has made over-the-air networks highly profitable with subscriber fees paid by your cable, satellite, or telco-TV provider and passed on to you in the form of higher cable or satellite bills.  (2 minutes)

Cable, satellite, and telco-TV subscribers face paying an extra $12 a year for two new sports channels that are certain to be added to the lineup by this summer.

Rupert Murdoch’s dream is to launch a cable sports network that can successfully rival ESPN. That dream begins to come true in August when News Corporation launches FOX Sports 1, a makeover of the Speed Channel that will cost subscribers more. Soon after, the Fuel Channel will relaunch as FOX Sports 2, a companion network.

The networks will carry programming acquired from deals with a range of sports leagues. FOX Sports 1 will feature Major League Baseball games starting next year. For the late summer and early fall of this year, the new sports channels will be packed with the NASCAR Sprint Cup Series (and truck races), pro archery which implies that new bowstring, UFC matches, and a range of college football and basketball games.

While the initial price of the new sports networks is relatively cheap at $1 a month per subscriber, in contrast with ESPN’s $5.15 monthly asking price, Murdoch and other Fox executives hope to one day rival ESPN, which guarantees bidding wars for sports programming that will escalate cable programming costs and subscriber bills.

Chase Carey, president of Fox, acknowledged the cost to acquire rights for sports programming have increased, but he believes sports programming will continue to be a priority for subscribers willing to tolerate higher bills for premier sporting events that may be featured on platforms such as the WSM Casino.

“We think sports is a huge arena that has room in it to build a really attractive businesses,” Carey told analysts on an earnings call last month.

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Lee Berke, president of LHB Sports Entertainment Media, talks about News Corp.’s plan to start a national sports network to debut in August. Fox Sports 1 will be available to more than 90 million pay-TV homes, New York-based News Corp. said yesterday in a statement. He speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (4 minutes)

FOX SPORTS 1 PROGRAMMING HIGHLIGHTS

COLLEGE BASKETBALL – Dozens of exclusive prime time games on Monday and Thursday nights, plus Saturday and Sunday coverage of the Big 12, Pac-12 and Conference USA.

COLLEGE FOOTBALL – Led by Notre Dame at Stanford, the Big Ten Championship Game and Pac-12 Championship Game (2014) on FOX, dozens of exclusive, live games from the Pac-12, Big 12 and Conference USA on Thursday nights and Saturdays; triple- and quadruple-headers on Saturdays; Saturday pre- and postgame coverage.

MLB – Beginning in 2014, select League Championship Series and Division Series games; regular-season games over 26 Saturdays; live game-in-progress look-in show.

NASCAR – Select NASCAR Sprint Cup Series races as soon as 2015; NASCAR Camping World Truck Series races; NASCAR Sprint All-Star race; all SpeedWeeks events leading up to the Daytona 500 including: Daytona 500 Qualifying, Sprint Unlimited at Daytona (2014, 2017-22) and the Budweiser Duel, now in prime time; NASCAR Sprint Cup Series and NCWTS Practice and Qualifying sessions; NASCAR RaceDay, providing pre- and post-race coverage; NASCAR Victory Lane, a weekly wrap-up show; and Race Hub, a daily mid-day studio show with the latest from drivers, owners and garages.

SOCCER – Tuesday/Wednesday/Thursday afternoon coverage of the world’s most prolific club soccer competitions, the UEFA Champions League and UEFA Europa League, and CONCACAF Champions League featuring many of the world’s greatest and most successful clubs; the world’s oldest soccer competition, the FA Cup; CONCACAF Gold Cup; CONCACAF Qualifiers, FIFA Women’s World Cup coverage in 2015 and 2019; FIFA Men’s World Cup coverage in 2018 and 2022; delayed matches in prime time; weekly magazine and highlights shows.

UFC – Featured on Wednesday nights; live FIGHT NIGHTS through 2014, the first is scheduled for launch night, Saturday, Aug. 17; FOX event preliminary cards; UFC Tonight, the weekly authority for UFC news and information; 14 Saturday pay-per-view preliminary cards; hundreds of hours of library programs and events.

Murdoch

As Fox’s parent company News Corp. continues to reel in a wide-ranging criminal investigation involving phone hacking murder and terror victims in the United Kingdom, the scandal is now spreading into the United States with new revelations this week that CEO Rupert Murdoch, working with New York’s then-mayor Rudy Giuliani, used politically-motivated threats to force Time Warner Cable to add a newly-launched Fox News Channel to the cable dials of New Yorkers, raising their cable bills in the process.

The Daily Beast reports efforts by Murdoch to pay a substantial bounty to get the news/commentary channel on in Manhattan were not effective, so Murdoch turned to a political alliance with Giuliani, who received significant support from Murdoch’s NY Post in his earlier election bid, to force the issue with threats against the cable operator:

Let’s start in 1996, three years after Murdoch’s New York Post helped make Giuliani mayor with the narrowest win in modern city history. That year, Rupert and Ailes, who’d actually managed Rudy’s unsuccessful mayoral run in 1989, were launching Fox Cable News and they had one rather daunting problem: Time Warner controlled the prime NYC cable franchise, with 1.2 million viewers, including virtually all of Manhattan, where every advertiser who might buy a spot lived or worked. And Time Warner refused to give Fox a channel for its new venture. In those days, Time Warner only had space for 77 channels on the dial, and 30 applicants had lined up before Fox. Richard Aurelio, who ran the NYC cable system for Time Warner, recalls now that he assured Ailes that in a year or so, they would “get more capacity and put you on.” But, says Aurelio, now long retired at age 83, “Murdoch was furious.” A former deputy mayor under John Lindsay, Aurelio says he’d “never seen such a display of raw political power,” branding it “ferocious.”

Records revealed that after Murdoch and Giuliani talked directly about the matter on Oct. 1, their aides had 25 conversations and two meetings in the space of a few weeks. A deputy mayor instantly warned Time Warner about the possibility that their franchise, granted by the city every 15 years, might not be renewed and volunteered to fly anywhere in the country to meet with a Time Warner executive above Aurelio. When Time Warner wouldn’t budge, Giuliani came up with an extraordinary remedy. The city controlled five public-access channels, written into law as alternatives to commercial television, and the mayor decided to give one of them to Fox. In fact, presumably to make it look like this wasn’t something he would just do for Murdoch, he offered another to Mike Bloomberg’s then-fledgling TV network. The Bloomberg News channel actually had its debut one night before a federal judge could stop the deal, but soon the courts blocked this transparently extralegal adventure.

Giuliani

While Murdoch was initially willing to pay cable systems up to $11 per subscriber to launch Fox News on cable systems in the fall of 1996, most cable systems were effectively out of channel capacity at the time.  Fewer than ten million households had access to the new new network when it launched, despite the record launch bonus Murdoch was willing to pay.  Time Warner Cable had promised the network it would likely have channel space within two years as the company completed the rollout of its then-new “digital cable” service, which opened up hundreds of new slots for additional channels, but Murdoch was not willing to wait.

The Giuliani Administration owed a lot to Murdoch’s newspaper operations in the city, trumpeting his political campaigns.  One year before Fox News launched, Giuliani’s then-wife Donna Hanover was hired by WNYW-TV, Fox’s owned and operated local station in New York, despite the fact it was over a decade since her last job in television.  Fox tripled her salary just after Giuliani began threatening Time Warner Cable’s franchise to provide cable service in New York, unless and until the cable system made room for Fox News.

By 1997, Time Warner Cable added the network not only to its Manhattan cable system, but agreed to roll the channel out to most of its cable systems nationwide by 2001.

Murdoch’s early willingness to pay a bounty to get cable carriage has proved a worthwhile investment, considering Fox News has now become one of the most expensive networks in the cable package.  In December, Chase Carey, COO of News Corp., compared Fox News’ value with ESPN — America’s most expensive cable channel.  Carey has sought wide-ranging rate increases for Fox News in 2011, even after the network won earlier increases which made them by far the most expensive channel in the news and commentary category, running about a dollar per month per subscriber.  Those rate increases are passed down to every cable subscriber in the form of a higher monthly bill, whether one watches the channel or not.

In 2007, additional pressure was brought against cable operators to add Fox Business Channel, a perennially-low rated channel that was started to counter “the anti-business bias” of CNBC.  Despite now being available in nearly half of all American households, the spring Nielsen ratings show only about 57,000 people over the age of 2 watch the channel on any given day, even though every cable subscriber with the network on their lineup pays for it.

Hulu has received an unsolicited, and still private offer to buy the company lock, stock, and barrel — disengaging some of America’s largest television networks from the online streaming business Hulu represents.

With an offer in hand, Hulu’s owners News Corp., Walt Disney, and Comcast/NBC have decided to hire investment bankers to solicit any competing offers for the service.  Yahoo! may be one of the companies interested.

Hulu has always represented an irritation for program buyers — notably cable networks and television stations — that purchase programming to rerun on cable networks and television stations.  Because Hulu gives away most of its content for free, these buyers argue it devalues the programming they are buying.

In short, if everyone has already been able to watch 30 Rock several times online, for free, why pay top dollar to buy the series to show on a local television station?

The problem is even worse from the perspective of cable, phone, and satellite companies in the business of selling video packages to customers.  As soon as viewers discover they can watch all of their favorite shows online, again for free, why buy the cable TV or satellite package?

The Los Angeles Times reports Hulu may have some bad news in store for cord cutters: it may implement its own “authentication” system that would only allow instant access to those with a verified subscription to a pay television package.  All others would need to wait just over a week before they can watch popular shows during a limited viewing window.

For many analysts, that will slash the service’s net worth to a would-be buyer.  So would the inability of the new owners to win long-term contracts for the rights to keep popular series and shows on Hulu for the indefinite future.  In the case of Comcast/NBC, it’s a classic case of being torn between bringing your programming to more viewers and eroding away your company’s own cable subscriber base.

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Bloomberg News reports on rumors Yahoo!, Google, and Amazon may be interested in acquiring Hulu.  (5 minutes)

A Cablevision ad against Fox

Cablevision and Fox finally settled their two week programming dispute Saturday when two local Fox-owned broadcasters and an assortment of cable channels returned to suburban New York area-television screens.  Cablevision ultimately capitulated to Fox’s increased programming fees and grumbled it was stuck paying an “unfair price” for the programming.

“In the absence of any meaningful action from the FCC, Cablevision has agreed to pay Fox an unfair price for multiple channels of its programming including many in which our customers have little or no interest,” Cablevision said, adding that it “conceded because it does not think its customers should any longer be denied the Fox programs they wish to see.”

But in reality, Cablevision subscribers who suffered through the two week outage will ultimately pay the price for Fox-owned programming in the next round of cable company rate increases.

While Cablevision subscribers can now watch the remaining games of the World Series from home, the cable-broadband industry post-game wrap-up show is now underway, surveying the winners and losers.

Let’s take a look:

WINNER: Fox Networks

Fox got everything it wanted, and then some, from Cablevision.  Consumers never take the side of the cable companies that have overcharged them for years. All most know is that when their favorite channels are not on the cable system that charges them more than $50 a month for service, it’s the cable company’s fault. While the terms of the final deal were not disclosed, it’s a safe bet Cablevision is paying rates even higher than those charged to New York’s other cable company Time Warner Cable.  The cave-in by Cablevision means Time Warner and other cable systems will likely also see higher rates for Fox programming now set as a precedent by Cablevision.  So will telco and satellite TV providers.  That’s money Fox will take to the bank.

LOSER: Cablevision

Not only did they alienate their customers, at one point telling them to watch Fox programming on third party websites, they are now facing a $450 million class action lawsuit from subscribers (filed by an attorney with prior connections to Fox parent company News Corporation.)  It is difficult to feel sympathy for a cable company deprived of Fox programming that still charged subscribers full price for channels they could not watch.  One industry executive praised Cablevision for “taking one for the team,” a phrase consumers have heard before to defend corporate pickpocketing.

Cablevision was actively promoting ivi last week through their customer service representatives

WINNER: ivi Networks

Stop the Cap! reported on upstart ivi several weeks back.  The service carries all of metropolitan New York’s broadcast stations and Cablevision ended up recommending its blacked-out subscribers buy an ivi subscription to watch Fox-owned broadcast channels no longer on the cable lineup.  The new online cable system, which started in September, added New York subscribers in droves, annoying Fox to the point of sending a cease-and-desist letter to Cablevision CEO James Dolan to get cable company representatives to stop recommending the service, which Fox claims is “illegal, and perhaps criminal.”

WINNER: Verizon & Satellite Dish Companies

Many subscribers fleeing Cablevision for competitors have probably left for good, especially if they scored substantial discounts and promotions during their first year or two of service.  Verizon FiOS always faced resistance from customers not wanting to devote the time needed to install the service, and when customers have been with a cable company for 20 or more years, change does not come easy.  But die-hard sports fans already inconvenienced by earlier channel interruptions pulled the trigger just to get away from the endless programming disputes.

Verizon scored new customers over the dispute.

LOSER: Comcast-NBC Merger

Lawmakers set to either applaud or introduce roadblocks to the proposed merger between Comcast and NBC saw first hand what can happen when big media companies duel it out over money — millions of customers can be left in the middle with nothing to show for it.  Bloomberg reports the dispute could force significant concessions to prevent or limit such disputes in the future.  U.S. Representative Maxine Waters, a California Democrat, said the Fox-Cablevision spat made her “increasingly concerned with the potential harm” if a dispute arose between an enlarged Comcast and competing video provider. In a letter to FCC Chairman Julius Genachowski last week, she called for “substantive and enforceable conditions” to preserve competition.

WINNER: NFL Networks – Where is Our Binding Arbitration?

Cablevision’s demands for binding arbitration to settle their disputes with Fox rang hollow, if not hypocritical, for NFL Network officials, who have been calling on Cablevision for the same binding arbitration the cable operator demanded of Fox.  The NY Post quoted an unnamed executive at the cable network: “Cablevision has been urging Fox to agree to binding arbitration — the same strategy we’ve been offering Cablevision — but we continue to get sacked.”

LOSER: The Federal Communications Commission

Despite demands from most consumer groups and Cablevision to intervene in the programming disputes, the FCC delivered a rebuke telling all sides to stop with the stunts and start with serious negotiations.  Beyond that, the agency did what it has done best under the Obama Administration: sit on its hands.

THE BIGGEST LOSER: You

With the grandstanding by both sides finally over Saturday — the shouting and expensive publicity campaigns wrapped up and put away for next time (KeepFoxOn.com now renders a blank page) — the person left standing with the bill in hand was you.  Fox wrapped the costs of its expensive publicity campaign into the rate increase Cablevision finally conceded to paying.  The bags of money to be handed from the Dolan family that owns Cablevision over to Rupert Murdoch will be filled from your pockets.  And there is no end in sight to future disputes raising programming costs even higher than ever.

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Bloomberg News delivers three reports detailing the impact of increased programming costs on cable bills, inaction by the FCC, and whether Americans are fleeing cable TV for online video instead.  (10 minutes)