Mediaboss Marketing

If you arent paying attention to the unfolding Aereo case, you should be. It will have industry-changing consequences if not now, in the not-so-distant future. Why? For those unfamiliar, Aereo is a New York City-based startup that, at a rate of $12 a month, promises to stream over 20 channels of local, broadcast television to consumers in the New York area.

As to how this works? Aereo essentially uses arrays of tiny TV antennas to capture broadcasts over the public airwaves (most networks have been forced by standards to update to high-def) and then transmits the signal to customers, who can rent out their own individual (tiny!) antennas. Of course, that signal is limited, as users are only able to stream one broadcast channel at a time. But, that signal comes streaming over the Web straight to you on any of your web-enabled devices.

Of course, as exciting as miniature TV antennas in the cloud may sound, the idea didnt sit well with the major broadcast networks. In theory, Aereo raised $20 million pre-launch from IAC, Barry Diller and others because it expected legal push-back. Last week, the broadcast networks met expectations, filing two lawsuits and an injunction meant to not only prevent Aereo from launching, but also to require it to pay damages for violating the Copyright Act. The broadcasters filing the lawsuit include pretty much every major broadcast TV network one would care to mention. (You can find the lawsuit on Scribd here.)

In a somewhat similar approach to Slingbox, Aereo assumes it can get around legal barriers because its just tuning into live TV, not re-broadcasting it without permission (which would be summarily illegal), and is licensing one TV antenna per-person, to be streamed one broadcast channel at a time. Not on-demand content for mass consumption, which would be a no-no in this case. So, upon news of the lawsuits, Aereo promptly responded with a denial, saying that the broadcasters lawsuits did not have any merit, essentially the equivalent of thank you very much, well see you in court.

After reporting Aereos response to the lawsuits, we received a number of tweets basically saying of course theyre going to get sued, what were they thinking? While it may seem like a fools errand, Aereo is not the first startup to go down this road, nor will they be the last. Many of its predecessors have been sued out of existence by those very same broadcasters. But the stakes are high enough to be worth it, and Aereo is closer than those that have come before it to a model that could win in court.

When you get right down to it, the airwaves that television broadcasters use to transmit are public property. To oversimplify, the government allowed private radio to broadcast over our airwaves to serve the public convenience and necessity, according to the The Radio Act of 1927. That right was given (not charged) to television broadcasters in licenses as part of the Communications Act of 1934. So it should be OUR right, should it not? Not exactly.

Things have gotten more complicated since, but fast forward to today, and cable networks are requiring millions of dollars to have their broadcasts transmitted. Naturally, the major TV broadcasters want some of the pie too, and have been demanding retransmission fees be paid by those cable, satellite, and telecom providers and winning. As Daniel Frankel of paidContent has pointed out, these retransmission fees have become a big part of network broadcasters bottom lines.

Many of the cable networks are (in the big picture) hanging on by a thread, and so companies like Aereo represent a major threat to these bottom lines, which is why they fight them tooth-and-nail based on the old retransmission without consent argument. Whats more, being the holders of the governments (qua publics) license to public airwaves, both local and national outlets/networks have a big voice on Capitol Hill. They are a public service, they are massive, and so the government wants nothing to do with someone holding them up at gunpoint.

In relation to Aereo, one could consider the example of TiVo, which records live television for later viewing or, tweak the language, for later re-broadcast. TiVo had to deal with legal issues when it first came on the scene, and then was of course eclipsed once cable companies were able to offer their own DVRs.

But what about the Internet? What happens now that TV content is starting to be captured on cable network cloud systems that allow viewers to capture, and rebroadcast live TV through their DVRs? Interestingly, Cablevision was able to defend its remote DVR network in court (against, who else? Broadcasters!) by saying that it was the same thing consumers had been doing for years themselves (taping live television, recording the radio) just moved to the cloud.

Read more:
Aereo Actually Has A Shot At Beating The Broadcast Networks