Wednesday, April 2, 2014

Aereo Needs Supreme Court Victory

This month the Supreme Court will hear from Aereo and the broadcasters about whether the Aereo business model is legitimate or stealing.  Aereo believes that it has the right to take the over the air broadcast feeds via their antenna farm and sell online access to consumers; Broadcasters like ABC, CBS, FOX, and NBC believe that Aereo should be required to pay for the content from their networks.  The decision will decide the fate of Aereo.

For those old enough to remember, households used to purchase antennas that they would put up on their roofs.  Homes were wired so that TVs inside the house could each access the antenna.  And some fancy antennas could even be made to rotate to help receive some remote signals.  As a boy living in the suburbs of Philadelphia, I remember turning that dial to access New York's Metromedia station to watch "Wonderama".  The day we switched to cable meant the loss of that station but the beginning of a whole new assortment of programming.

Despite broadcasters switching from analog to digital, they still use over the air transmission and consumers can continue to access broadcast TV from antennas.  That Aereo has build a business model that moves the antenna off the roof and into a centralized farm doesn't change for me the transmission.  So that instead of buying an antenna, consumers lease one instead.  And for that they get additional features including the ability to record programs for later viewing.  Consumers with antennas at their homes can do the same thing with boxes from TiVo and others.  That Aereo has simplified the reception and delivery issue for broadcast signals does nothing to change the fact that consumers could do the same thing with a store bought antenna and in home DVR box.  It is for that reason, from what I see as an outsider to the process, that would cause me to side with Aereo in this Supreme Court ruling. 

Certainly a loss for the broadcasters should do nothing to change the business model that they have in place with cable operators.  The expense for operators to build their own antenna farms so as to not pay broadcasters a retransmission license fee would likely outweigh the cost of the current contract. Plus all the broadcasters own cable networks too and would surely figure out a bundle type strategy to keep the status quo alive.  And should broadcasters decide to give up this spectrum and behave like cable networks, then the FCC could make a bundle selling this spectrum for additional wireless broadband opportunities.

So let the battle for broadcast rights move ahead.  I see Aereo coming out the victor, for if they lose, they will be no more.

Long Form Video Content Matters

While short form video content, a few minutes or less, allows viewers to watch tons of different clips, it has its limitations.  For one, it makes it hard to put a 30 second ad before a 2 minute clip.  Viewers will quickly tire of not getting their video served, lose interest, and leave the site.  And while 10 and 15 second pre-roll ads are nice, they don't pay enough.  Cable television networks learned this many years ago when they transitioned from short form clips to full length shows.  The early days of MTV, Movietime (now E!), and Comedy Central are a few examples of networks that experienced that move.

It seems that long form content is where the real dollars are.  It enables subscription revenue, longer pre-roll and mid-roll ads, and keeps viewers on the site longer.  Amazon, Hulu, Netflix, and You Tube are all embracing long form content.  "Not only is AOL moving toward more original programming, which gives it greater control over the content and a bigger slice of the money it generates, but AOL is also taking a successful overseas program and translating it for an unfamiliar US audience. It was Netflix's strategy with its hit "House of Cards," which was based on a UK series."  And AOL hopes to capitalize on this strategy with advertising. 

No short form content will not go away; but the addition of long form programs demonstrates that streaming is following the same product life cycle that cable did before it.  AOL now becomes another major competitor in the OTT space and more competition to the traditional linear cable model.  Cord cutters rejoice, additional online content continues to come your way.