Two weeks ago, the shocking news that New Corp. president was considering turning Fox into a pay TV network stunned pretty much everyone. Carey considers the move a real possibility due to Aereo, a new service that transmits broadcast network signals online, which keeps winning legal battles.
Analysts have weighed in on the possibility of the move actually happening. Robin Flynn, who works with SNL Financial, produced a report called "The Economics of Allowing Aereo". In this report, he says that as is, the top five broadcast networks will earn more than $9.2 billion in retransmission fees from 2012 through 2016 - an average of about $368 million per network per year.
Given that much money, could Fox do better for itself as 21st Century Fox (its rumored name if it becomes a pay network)?
Surprisingly, it seems that way. Using his math, Fox earns between $1-$2 per subscriber per month. ESPN, by comparison, earns around $5.50. Fox generates much higher ratings than ESPN on average. So if the network does become a pay channel, it could increase its pay per subscriber while lowering its base and still be ahead of where it is now.
With a $3 per subscriber rate, Fox could earn up to $3 billion more in carriage fees. However, keep in mind this does not include lost revenues from advertisers, which will drop off substantially if it goes to pay TV. If it keeps the NFL package it has, it likely will retain a huge part of its customer base.
What would you do if you were Fox?