Aereo signals cloudy future for broadcast TV

Aereo signals cloudy future for broadcast TV

Summary: Whether the New York-based streaming remote DVR service lives or dies at the hand of the Supreme Court, the future for television programming is firmly seated in the Cloud.

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Starting on April 22nd, The US Supreme Court will begin to hear opposing arguments from the broadcast television industry to determine if Aereo, a streaming television subscription service for set-tops, PCs and mobile devices is illegal.

See also: Aereo gets its day in court

The broadcast TV industry lawsuit against Aereo, which includes CBS (the parent company of ZDNet), NBC/Universal, FOX and Disney/ABC as plaintiffs has been brewing for two years. The culmination of this suit will not just determine whether or not Aereo itself has a future, but it will also likely fundamentally change the way the TV industry as a whole distributes and "broadcasts" content, regardless of what side of the coin the judgment eventually lands on.

However, while Hulu is a business partnership between NBC, FOX and ABC, Aereo pays no rebroadcast or distribution royalties to these companies whatsoever. How does Aereo do this?

Aereo's technology approach to distributing content is different than other streaming services such as Google Play, XBOX Video and iTunes, where one might purchase a subscription to a specific TV show or pay-per-view for each episode.

Aereo is closer in functionality to Hulu+, which is a service that has monthly subscription charge for access to a wide variety of broadcast television programming. However, while Hulu is a business partnership between NBC, FOX and ABC, all of who own most of the content in question, Aereo pays no rebroadcast or distribution royalties to these companies whatsoever.

How does Aereo do this? The company uses giant clusters of tiny antennas located in targeted markets attached to Over-the-Air TV tuners, which are remotely assigned to individual subscribers. The broadcast TV content is then recorded to "Remote DVRs" living in datacenters controlled by the subscribers, which is then streamed over the Internet to the subscriber endpoint device.

Aereo maintains that what it does is perfectly legal. The broadcasters beg to differ. Hence, the big lawsuit.

I'm not going to pontificate on who may be right or who may be wrong and where the decision is likely to end up. That's purely in the hands of the Supreme Court now. However, one can extrapolate on what is likely to happen should Aereo prevail, or if Aereo loses.

If Aereo prevails in the eyes of the Supreme Court, it will almost certainly force the broadcast TV industry to abandon Over-the-Air. The CEO of CBS, Les Moonves, has stated that the company is likely to distribute its content via the internet and through relationships with content providers such as telecoms and cable companies should Aereo be deemed legal. 

If CBS carries good on its threat, then it is a virtual certainty the other broadcast giants are to follow.

So if Aereo's activities are deemed legal, the source of its life is almost certainly going to be sucked out as the digital broadcast airwaves go dark. And if it is deemed illegal, in the words of one of its prime investors, Chairman of InterActiveCorp Barry Diller, the company is probably "finished."

But even if the Supreme Court puts a fork in Aereo and calls it done, the broadcast industry will still move on to the greener pastures of the Cloud. The tools that will be at their disposal and a superior ability to monetize their content are far too alluring to stay in the Over-the-Air and time-scheduled broadcast business for very long.

An Aereo win will greatly accelerate the demise of broadcast, but even an Aereo loss will see broadcast die in less than seven years. 

"Going Dark" will mean that all will likely be left of broadcast television will be news coverage, which stations in local markets will be obligated to transmit under FCC rules if network owned and operated stations stay in business and maintain TV broadcast capability.

However, that requirement almost certainly does not extend to other content such as live sporting events, network news and network TV shows. And it is also possible for local news content to be created but streamed exclusively to content providers if the networks shut their towers down and relinquished their broadcast spectrum.

There's the Public Broadcast System, but of course, nobody expects Aereo or a local news market to survive on PBS. Local news costs money to produce and it is currently paid for through advertising.

The FCC maintains a list of rules and regulations that impose limitations on how much broadcast capability a media company may own. However, as far as I am aware there is no FCC regulation that forces a network to maintain broadcast infrastructure, especially if they release their ownership of the frequency spectrum they broadcast on back to the government.

I mean, if a network decides that broadcast TV is a money losing proposition, we can't force a network to be in the broadcast business, right?

It has always been assumed they would be compelled to do it for their own self-interest and also because their spectrum ownership requires them to. Now the driving force of that self-interest and the value of that freqeuency spectrum is being called into question.

Potentially, the local news that used to be produced by network owned and operated stations could end up as spun-off, independent content-creation companies that have no broadcast assets, period. They will simply sell the content to the networks and the content distribution providers. Stations that are already independently and locally owned are likely to end up in the same boat. 

The future for the TV industry is an On-Demand one. Read more on the next page.

Topics: Cloud, Networking, Storage, After Hours

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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Talkback

108 comments
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  • 2 Cents

    I was sad to read that you would not put your opinion "out there" as to who is right/wrong. I'm not afraid of doing that.

    I believe Aereo will be found to be doing business legally. Their business is not based on"stealing" content. Their business is based on renting out antennas. The content, and the advertising that is emmbeded in the content, is seen by the end user and can't be skipped (when watched in real-time). The broadcasters glaze over this fact. The reality is that Aereo is making an over-the-air broadcast worth more because it is reaching more people. That means the advertising is reaching more people and why wouldn't the broadcasters want to their customers (those purchasing ads) reach as many people as possible? That means better response which in turn means the ads are more valuable. If the ads are more valuable then broadcasters should be able to charge more for them.

    What content providers are really upset about is that it's another nail in cable coffin. While over-the-air maybe in trouble, it's the cable providers who are really hurting. Why do you think Internet costs $100/mo and Internet+cable costs $112/mo?

    On demand with actual statistics about which shows are working and which aren't - rather than relying on some estimation based on a shady "Nealson" rating takes the power out of the hands of the broadcasters and into the hands of the consumers. Netflix is the model of the future. Broadcasters hate this... how can they bundle their crap if you pay for what you actually want?
    ChronoFish
    • Cable

      I agree that Aereo hurts cable more than broadcast. Cable needs subscribers and any reason for one not to subscribe hurts them directly. Also, cable requires a direct connection to the subscriber and often onsite equipment beyond the TV. Broadcast needs viewers but since they are not using wires to connect with the viewers they are only dependent on people have TVs. Aereo is providing higher quality signals and possibly an enlarged geographical reach for the broadcast signal. Aereo requires a fast internet connection to work.

      Moonvies is mouthing off like an idiot to scare people into thinking they are going to lose broadcast TV because of this case.
      Linux_Lurker
      • Spot on Linux lurker

        Moon beam needs to short his cable TV stocks he owns and enjoy his monetary gains from that and his higher ad revenues.

        What a whining pathetic dimwit moon beam is.
        Yeah I know his real name is moonvies but I just couldn't resist giving that putz a nick name for fun.
        Luke-IT
    • Greed

      ChronoFish has it right. The broadcast industry's argument is largely bogus. The existence of Aereo does not alter any OTA broadcast. It merely enlarges the potential audience, and thus the potential viewers of the ads that finance the broadcast. Thus, there is no reason for broadcasts to "go dark". The suggestion that a decision favoring Aereo will lead to the end of OTA broadcasting is merely an attempt to create FUD (fear-uncertainty-doubt).

      To understand this case, simply do as Deep Throat instructed many years ago: Follow the money.

      Broadcasters who are seening their OTA market decline want to extract revenue from Aereo in an effort to maintain their lucrative businesses a little while longer.

      The cable companies, in contrast, are fighting because they likely will loose subscribers to Aereo. However, a decision in favor of Aereo might help the cable companies to hold steady, or perhaps reduce, the right-to-carry fees paid to the broadcasters. That, of course, would hit the broadcasters where it hurts.

      The broadcasters' real problem is that the world is changing around them, and the business model that provided them with riches for decades is failing. So, it is understandable that the industry is frightened, but Aereo really isn't the problem. It's us. We the viewers are demanding that TV be served up the way we want it, not as the industry wants to provide it.
      Dogcatcher
      • No, you're wrong about increased revenue for OTA networks

        Dogcatcher wrote:
        " The existence of Aereo does not alter any OTA broadcast. It merely enlarges the potential audience, and thus the potential viewers of the ads that finance the broadcast."
        ===
        Wrong. Did you miss the part that states, 'The broadcast TV content is then recorded to "Remote DVRs"' Guess what you can do with DVRs. Yep, Fast Forward past commercials. Past studies with VCRs and Tivo showed that there was a marked decrease in ad exposure. This is why many free/basic On Demand services, i.e. Time Warner's Start Over, only allows user to Rewind, but not Fast Forward. Services that do allow Fast Forwarding generally charge an additional fee, i.e. DVR rental, of which a percentage goes to the networks.

        If Aereo allows free Fast Forwarding past commercials, do you seriously believe that MORE people will watch the ads than in a world without Aereo? That can only happen if potential Aereo subscribers don't ALREADY watch the networks -- which doesn't make sense. Chances are that they already watch OTA TV or cable/satellite. As such, ad exposure can only go down via Fast Forwarding. I'm seriously puzzled as to why you think that someone who doesn't watch the networks now (for FREE) would suddenly do so just because Aereo exists. Just where is this increased ad viewership coming from?

        So yes, the OTA networks should feel threatened since ads are how they make money. This isn't the UK, where citizens pay a television fee. Our OTA TV is free because of ads. As a secondary revenue stream, the networks get licensing fees from cable and satellite companies who choose to carry their channels. Aereo not only won't pay a fee, but they will also diminish ad exposure. A double whammy. Does that seem fair?
        sdc100
        • OTA is local

          That only make a small difference in their local market no big deal. Go out of business? That spectrum is so freaking valuable it is unthinkable. It was a sin to allow it to exist.
          Altotus
        • Windows Media Center Also Records.

          sdc100

          Over the air broadcast can be recorded anyway. I do it all the time with Windows Media Center. I can then zip through the commercials.
          lloydkuhnle@...
        • Anyone can get a DVR and skip commercials

          That part is irrelevant to Aereo. Aereo was providing antennas to people who were not picking up OTA. So, no, it is not about fast forwarding.
          grayknight
      • Cox is scared of AERO

        Cox recently sent out questionnaire about what their customers saw for the future of how content is delivered. The questionnaire was designed to gauge if their customers knew about alternatives even going so far as to ask about AERO multiple times and then determine how likely we would be to cut the cord. As Dogcatcher said, believe broadcast would benefit by this. For the cable companies that are bleeding us dry... Well, enough said.
        Keeping Current
    • What about local vs. national commercials?

      I'll start by saying that I'm not an Aereo user and don't know the details of how it works. So, please feel free to correct me if and where I'm off base. That said, aside from territory protection, I suspect the networks are worried about damaging relationships with their advertisers. I understand that commercials broadcast along with programming are recorded as well and must also be watched by the viewers.

      But what about commercials from local rather than national advertisers? These will be different from market to market. Not sure if this is addressed in the Aereo model/process, but if not then I can see why advertisers and networks would have concerns. For instance, what if the Aereo feed for "CSI: Poughkeepsie" is recorded in New York and also delivered to Aereo users in other markets? Those commercials (including local ones) would indeed be seen by a larger audience, the local ads for, say, Los Angeles could end up being seen by a much smaller one.

      Again, I'm not an Aereo user, so maybe it doesn't work this way. Just thinking out loud.
      weslymoore
      • Aereo service is constrained within each broadcast locality

        To legally & functionally replicate the situation of a person using a home TV antenna, Aereo carefully restricts their service areas. There is no "national" Aereo TV service.
        SlimSam
        • Not really...

          It's been disclosed that Aereo doesn't really do any geographic restrictions. The user clicks a button attesting that they are in that market, and that's it. If the user lies, Aereo does nothing about it.
          IowaTVMan
          • Yes, really...

            Aereo actually does restrict by geographical location, but via two methods. Yes, the user attests to their location by entering a zip code, but then Aereo then performs an IP address check and either allows or denys account creation based on a geographical location match of zip code and IP address.
            DrChrisE
      • What about local vs. national commercials?

        Aereo sends you the same exact content that you would receive over the air. If you're in the NYC market, you see whatever the local NYC TV stations are broadcasting. There is no "Aereo feed"- there's just a broadcast signal, received over the Internet rather than over the air.
        bsheehan@...
      • Ad Content

        The ads seen are the ones broadcast with the programming by the local affiliate. Some are local, sold by the affiliate, and others are national, sold by the network. Aereo does not have any ads.
        Linux_Lurker
        • For now...

          If Aereo is held to be legal (unlikely), there's nothing stopping them from stripping local spots and inserting their own.
          IowaTVMan
    • IS IT ABOUT THE MONEY?

      There seem to be many bizarre contradictions and ironies about the way television is delivered to consumers today. Over-the-air broadcasters have umpteen-zillion-watt transmitters to send their programs for FREE to the small percentage of viewers with an antenna in CRYSTAL-CLEAR HIGH DEFINITION from an antenna! Then the broadcasters get paid by cable and satellite providers for the right to rebroadcast their content. In turn, cable and satellite send out the inferior standard-def signals to their customers or charge extra for high-def! Is the next step to go after antenna manufacturers?
      bf321@...
      • I don't know where you are, but "crystal clear" it is not.

        I happen to be in a borderland area between Washington DC, Baltimore (and south of both).

        The signals come in... but with a lot of dropouts - which leaves holes on the screen, stuttering voices, or no picture with voices, or no voice...

        When the weather is good, the signals are MOSTLY ok (there are 5 stations that come in good in the winter, not at all in the summer).

        Yes, a bigger antenna would fix some (if not all) of the problems.

        But this area doesn't want big honking TV antenna reflectors (outside 18 inch is the limit I believe).
        jessepollard
        • It doesn't matter

          ...what your "area" (political jurisdiction) wants. The FCC long ago preempted local laws and deed restrictions that prevent people from installing whatever kind of antenna is necessary to receive a broadcast TV signal. The exception is apartment buildings, where a tenant does not have access to a rooftop.

          So any local ordinance that restricts the size of an antenna is illegal.
          IowaTVMan
        • Inexpensive antenna arrays

          If you have an attic you build a small array with 3 or 4 high gain antennas. Will clean your signal up quite nicely. You won't get A&E, SyFy, etc. but you will also save $100 a month. Don't know about you but I could use $1,200 a year back in my wallet.
          Keeping Current