Saturday, October 26, 2013

Cable Operators NOT Likely To Follow Aereo Model

While recent reports have emerged that DirecTv, Time Warner Cable, and other cable operators are considering a similar Aereo approach, using tiny antennas to obtain broadcast signals, the likelihood of this occurring is remote.  While it could result in operators not paying license fees for broadcast signals, they would be overpaying elsewhere.

Why is that the case?  ABC owns ESPN, Disney, ABC Family, and others, NBC owns Bravo, USA, MSNBC, and much more, CBS owns CBS Sports, Showtime, and an owner with ties to Viacom Networks, and FOX owns FX, FXM, Fox News, and more.  Each of these broadcast networks has too much to risk from losing license fees from broadcast.  And they would indeed use that leverage to keep license fees intact or raise their rates on their cable nets to recoup any losses.  It is the consolidation of broadcast and cable networks that will prevent the cable operators from following the Aereo business model.

Of course, this depends on broadcasters still owning affiliates.  Speculation that ABC would consider selling their O&O networks has been heard, too.  Aereo's continued success could hurt the valuation of such a sale.  Broadcasters have also rumored changing from broadcast status to cable status to stop the Aereo model from moving forward, too.  That latter move seems to have more viability.

Cable operators still have the upper hand.  They bundle broadband access with cable so that consumers end up paying much more for broadband only without a cable subscription.  Once consumers find alternative sources for broadband to the home, the cable operators' business model will be at most risk.  Until then, they are better off strategizing new packaging and pricing models and better service, like TV Everywhere, than emulating the Aereo business model.

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