The future of television being brought to court (1 Viewer)

NEW YORK (TheWrap.com) - On Monday, Fox executive Chase Carey threatened to turn the network into a pay-TV operation because of the threat posed by Aereo. In the process, he gave his little-known adversary a huge publicity boost.

What's Aereo, people wondered, and why does Fox find it so threatening?


A person familiar with Aereo's position tells TheWrap that Carey's comments "definitely created a lot of positive noise" for the company, giving it a major uptick in media coverage and social media attention. (Among the headlines was" Aereo could bring down broadcast TV," courtesy of Fortune.)

It's too early to tell if the press attention will lead to more Aereo subscribers - which would be the last thing Carey wants.

Networks are in a nasty Catch 22: The more they mention new rivals like Aereo, the more publicity they get. And if that publicity translates to more customers, the rivals will become greater threats than before.

Aereo declined to comment for this story, and Fox did not immediately reply to a request for comment. Aereo, based in New York, is backed by Barry Diller's InterActiveCorp. Diller, ironically enough, co-founded Fox with Rupert Murdoch before moving on, two decades ago. Aereo announced in January that it had raised $38 million, adding to $20.5 million from a previous round of fundraising.

Google searches for Aereo were surging even before Carey's remarks, likely due to both the company's expansion plans and a legal win last week.

So, what did all those Googlers learn?

Aereo is a streaming service that captures live TV signals using antennas small enough to fit on a fingertip. Aereo says it puts "tons" of antennas in data centers, and then relays the signals over the Internet to laptops, phones and tablets.

It relays ABC, NBC, CBS, Fox, the CW, Univision and PBS, among other networks available by antenna, but does not relay cable channels. That's why Carey threatened to go the pay-TV route. Univision has since made a similar threat.

Aereo offers its service for as little as 17 cents a day for annual subscribers, but also sells its access by the day for a dollar and taxes. The service is now available only in New York, but is expanding to 22 other parts of the country, including Chicago, Houston, and Philadelphia.

Unlike a TV outfitted with an antenna and nothing else, Aereo lets customers fast -forward through ads. That poses a new threat to the traditional ad-sponsored TV model, which is already besieged by DVR viewing and Dish's ad-skipping AutoHop service.

Aereo says all it's doing is harnessing - on a massive scale - the power of the humble antenna, which has always given TV owners access to the public airwaves. Carey calls it "stealing."

Other networks agree, and joined Fox in taking Aereo to court, saying it was illegally "retransmitting" their signals.

But the legal challenge hasn't gone well for networks, so far. Last week, the 2nd U.S. Circuit Court of Appeals in New York accepted the company's contention that it isn't retransmitting signals, given that it has all those "tons" of individual antennas.

In another blow for networks, many potential customers learned about Aereo for the first time because of the ruling.

This isn't the first time the networks have given a publicity boost to a competitor. During last season's spring upfront presentation to advertisers, broadcast executives tore into Dish's AutoHop. In the process, they informed many people of its existence for the first time.

Amid the publicity - and the network lawsuit that followed - Dish only gained customers.

It ended 2012 with 14.056 million subscribers, compared to 13.967 million in 2011.

Because Aereo is private, there's no way of knowing if its subscriber base will increase as well. But if it does, Aereo might want to send a gift basket to Fox.

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Rich Conway said:

Looks like SCOTUS has ruled against Aereo.

http://money.cnn.com/2014/06/25/media/aereo-supreme-court-ruling/index.html?hpt=hp_t2

6-3 decision, Scalia, Thomas, and Alito dissenting.

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IvanKaramazov said:

Rich Conway said:

Looks like SCOTUS has ruled against Aereo.

http://money.cnn.com/2014/06/25/media/aereo-supreme-court-ruling/index.html?hpt=hp_t2

6-3 decision, Scalia, Thomas, and Alito dissenting.

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Interesting that it was three conservatives who dissented -- this case didn't strike me as being the kind that would break down along what we ordinarily think of as ideological lines.

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Rich Conway said:

Looks like SCOTUS has ruled against Aereo.

http://money.cnn.com/2014/06/25/media/aereo-supreme-court-ruling/index.html?hpt=hp_t2

6-3 decision, Scalia, Thomas, and Alito dissenting.

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The ruling essentially protects billions of dollars in retransmission fees that broadcasters collect for their signals.

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The broadcasters had warned that if one company was allowed to avoid those fees, others -- from Dish Network to DirecTV -- surely would follow. That would risk billions of dollars in revenue that broadcasters plow back into creating new programs. Retransmission fees brought in an estimated $2.37 billion in 2013.

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The company will likely have to shut down.

This is a shame. It's a huge loss for consumers. And in the long run, perhaps also a huge loss for the traditional TV business that wanted to kill Aereo.

And it could chill innovation in the cloud media industry, in much the same way that putting Napster out of business largely managed to relegate peer-to-peer media sharing apps to the margin of criminality (even though the justices tried to limit their ruling). There is just something wrong about the judicial branch ruling that new uses for old technologies are illegal.

Here is how Aereo works: The law allows anyone with a TV antenna (rabbit ears, as your parents used to call them) to watch broadcast TV for free. The broadcasters sell ads on TV to pay for that, and make a profit doing so. Because more and more people are turning away from their TV sets in order to watch video on demand on their phones, tablets or laptops, free broadcast TV is under threat as a business. It survives mostly because cable companies bundle it with cable channels and pay the broadcasters retransmission fees to do so. And most people are happy to watch it as long as it comes alongside ESPN and HBO.

Aereo is one of those devices that's so simple it's brilliant: The company owns thousands of individual TV antennas which it stores centrally, one for each viewer, per the law. Aereo restricts you to watching within the market you subscribe to as well. For example, a New York City Aereo subscriber can't access her account if she's in Los Angeles.

You'd think that the TV companies would be cheering for this new device. Somehow, after years of audience declines, Aereo has found a new audience of viewers who love free broadcast TV so much they're willing to pay Aereo's monthly subscription fee to watch it. These people aren't just TV viewers, they're super-TV viewers and — arguably — much more valuable to the advertisers who fill CBS and Fox's coffers.

But no, all Fox, CBS et al. can see is a company that takes a fee for displaying something they were previously giving away for free. They regard Aereo's retransmission of their signal as being identical to a cable company retransmitting the signal without paying for it.

But to Aereo's credit, that's not how it's acting. Because Aero has an antenna for every viewer, the only change the company has made in broadcast consumption is to separate the viewer from the antenna.

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