Aereo Is Poised to Upset the Television Industry


A small internet company called Aereo is poised to upset the television industry. By using thousands of tiny antennas, the company captures public signals and converts them into online video streams. At stake is $3.3 billion in network fees that are expected to double over the next five years.

The Supreme Court is scheduled to hear arguments brought forth by ABC, CBS, and NBC against Aereo. The networks contend that Aereo is no different from other cable and satellite services that pay the networks licensing fees.

Gordon Smith, the president of NBC, stated the internet company takes copyrighted material and profits from it. The company refuses to compensate the legal owners of the programs. Aereo is no different from satellite or cable companies that should pay retransmission fees.

The networks have the backing of the Obama administration. Government spokespeople have said Aereo transmits copyrighted programs to the public. Since there has been no authorization from the copyright holders, Aereo is guilty of multiple copyright infringements.

Aereo has argued it is entitled to freely transmit programs broadcasted over public airwaves. Public airwaves are exactly that, public. For decades, broadcasters have been double dipping with prices charged for cable and the revenues earned through advertising.

There were similar lawsuits when VCRs came out and people fast forwarded through the commercials. A similar issue exists with cable boxes that record programs. Customers fast forward through those commercials too. Aereo simply acts on a human’s command and are similar to television sets from the 1950s and 1960s.

People such as Bob Boorstin would love to cancel his cable subscription. He keeps it for baseball and other sporting events. Boorstin would rather spend money on programs he watches instead of hundreds of stations that do not interest him. His cable bill is $130 a month. A subscription to Aereo would cost him $60.

Gene Kimmelman, president of Public Knowledge, said Aereo could change the business model for TV. With a successful Supreme Court verdict, consumers could take advantage of a new technology that allows them to conveniently access programs at a lower cost.

Representatives from Aereo contend they are no more than an antenna service provider. Their company captures public broadcasts sent over the airwaves. Customers pick shows they want to watch. Aereo assigns them an antenna to capture local airwave signals. Shows are transformed into a digital streaming video format for viewing on smartphones, laptops, and tablets. Each antenna rebroadcasts a program to a single subscriber.

Chet Kanojia, Aereo’s chief executive, believes consumers have the right to access public airwaves. Advertising still appears in the form of commercials so the networks do not miss out on revenue.

Smaller cable companies back Aereo and want to partner with them. They hope to create similar technology that would enable them to compete with the large cable giants.

The Supreme Court has an interesting case before them. At stake are billions of dollars in revenue. Should the major networks win, Aereo will go out of business. If Aereo wins, they will upset the entire television industry.

By Brian T. Yates

Washington Post
C Net

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