Monday, October 21, 2013

Will Broadcasters Drop Their Over The Air Signals?

As Aereo disrupts the broadcast platform, it poses a potential threat to long term retransmission fees.  The more Aereo wins court cases, the more cities it populate, and the bigger the threat to the revenue model.  If Aereo can retransmit broadcast signals for free, why can't cable operators.  And that possibility concerns broadcasters. 

In the past, Fox Network threatened to move from broadcaster to cable programmer, and now we learn that ABC Network considered it as well.  "A cable network doesn’t broadcast its signal over the air like broadcast networks, preventing Aereo from taking the signal and re-transmitting it online to paid subscribers, as it is doing with the broadcast networks in certain markets."  Of course we have also heard other rumors that ABC/Disney parent would consider selling all their owned and operated affiliates as another possibility.  Clearly, Aereo's disruptive approach has gotten the broadcasters to reexamine their current revenue models.  Aereo's approach could also quickly deflate the valuation price of any affiliate sale, unless all affiliated stations converted from broadcast to cable. 

And while Aereo may be successful in building antenna farms, I am not convinced that cable operators would bypass license fees through a similar approach.  The cost of building and maintaining verse negotiating for more streaming access to broadcaster linear and on demand programs would justify maintaining the status quo of license fees for cable operators to continue to pay.  Plus, cable operators have more flexibility in building out its broadband and wireless platforms for authenticated customers with discounts for those that subscribe to cable.  Such a radical approach like converting broadcast to cable is like killing a mouse with an elephant gun; there are simpler solutions.

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