Wednesday, July 17, 2013

Aereo Still Disrupting Cable Industry

The broadcasters are unhappy with Aereo. Aereo is taking their signal and not paying them a retransmission fee or providing any data on consumer usage.  So broadcasters can't sell a higher advertising reach or receive additional revenues.  And broadcasters believe that Aereo is reselling their service to the consumer without their consent.  And in a majority ruling the federal courts have sided with Aereo. "A New York federal appeals court has denied a bid by the major TV broadcasters to shut down New York-based tech startup Aereo, which picks up free, over-the-air TV signals and streams them onto the Internet." Aereo is disrupting normal business practices and if they are allowed to continue, broadcasters may be at risk of losing all their license fee revenue from cable operators. 

So is it stealing to take something that is offered for free over the air and repackage it, bundle it into a bigger package, put an interface around to enable programs to be recorded and viewed, enable it to be watched across multiple mobile devices, and sell it to consumers at a low price?  Aereo certainly adds unique incremental value to the broadcaster's antenna service and serves an audience seeking a low cost alternative to cable. 

Unfortunately, the Aereo win is the broadcaster loss.  Broadcasters in market are unlikely to offer broadband access when they are getting a fee from the cable operators in the DMA they serve.  And cable operators may have clauses in their agreements with broadcasters that actually prevent them from offering any kind of competitive Over The Top (OTT) offering of their signal.  If they don't cable operators might likely drop broadcasters that attempt to offer their own OTT access. 

So the likely next round for broadcasters and Aereo will be the Supreme Court.  "As of now, Aereo’s service is legal, according to the U.S. Second Circuit Court of Appeals."  Should the Supreme Court here the case, the case might just revolve around the FCC and the requirements of broadcasters to offer their signal without charge to consumers that seek access.  For those not willing to place their own digital antenna in their home, Aereo offers additional functionality for a fee, and that added value is what the consumer ultimately pays for.  As long as Aereo uses individual antennas for each account, they may ultimately be the winner.  And it may be up to broadcasters to negotiate an agreement to access usage data for a direct connection, no antenna farm required.

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