Thursday, April 17, 2014

Aereo vs. Television Networks

The case of Aereo vs. The Big Four Television Networks is complicated if you don't know the story behind the ongoing legal battle. If you know even the tiniest amount about Aereo, the tech company which essentially allows customers to rent tiny antennas and, in turn, receive live online streams of their local broadcast stations, the argument in favor of Aereo seems rather strong.

Aereo's tiny internet-streaming antennas are rented by customers for a small monthly fee along with a limited amount of DVR storage time (20 hours). The fact that Aereo makes a recurring profit off of this service without paying a retransmission fee to local broadcast affiliates (like cable and satellite companies do) is what the big four television networks are angry about. They want their cut. They ALWAYS want their cut. But is Aereo any different than cable television providers were in their infancy?

It wasn't until 1992 that congress mandated cable television providers to seek approval to retransmit local broadcast television signals over their systems and that also opened the door for local broadcasters to seek retransmission fees from cable providers. Cable television essentially had a free run of fifteen years before local network television affiliates realized that cable television was an area that they, too, could profit from.

The unfortunate part, though, is that local broadcasters are treating Aereo and their innovative format for consumers to bypass bloated cable television packages like it is an established company which has a history of immense profitability and wide adoption rates. In reality Aereo is just the opposite. It is a relatively new start-up which is still expanding into major metropolitan areas. In an era where cable television providers are trying to find ways to keep their customers tied to their services (television AND internet service), Aereo is seen as a disruption.

Are the major broadcast television networks rallying their lawyers in an effort to file lawsuits against the manufacturers of rofotop television antennas? Why aren't they? Those manufacturers allow consumers to view thier television signals for free after the cost of purchase -- somewhat in line with Aereo's business model. Sure, Aereo is an ongoing subscription service but the basic idea of receiving over the air local network affiliates is the same, only the technology has changed.

In short, Aereo is being challenged by network television's lawyers because they are a viable company with a legitimate future. Let Aereo get a foothold and see where it leads. It is unlikely in this age of hundreds of channels that Aereo would ever pose a huge threat to the gobs of cash paid by cable companies to broadcasters in the form of retransmission fees but if it does come to that then the boradcasters have a legitimate argument and can rightfully demand some sort of retransmission fee from Aereo as well.

The one marked difference here is that while Aereo's service allows consumers in selected cities to cut the cord from cable television, they still need internet service which is no longer a luxury item and should be considered as an almost essential utility service. Aereo's potential growth almost insures that cable providers will not only continue to provide internet service at the same price to customers but that their need for increased speeds will increase. And with the reluctance of the near monopolistic cable televisoon providers to seriously increase speeds at realistic prices, their profit margins will remain healthy for the forseeable future.

In short, let an interesting start-up gain a foothold with the disclaimer that the boradcasters will be revisiting the topic of retransmission fees if/when subscriber penetration reaches a pre-determined threshold.

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