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.
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.