There is a very good chance that the U.S. Supreme Court will declare that Aereo, the company that redirects broadcast TV signals over the Internet to your laptop, tablet, or phone, is illegal.
The high court justices heard oral arguments in the case today.
If they rule that Aereo is taking broadcasters’ signals without their permission, the company is toast. Its CEO Chet Kanojia has said there is no “Plan B” if Aereo loses. The company will likely have to shut down.
That would be a shame. It would be a huge loss for consumers. And in the long run, perhaps also a huge loss for the traditional TV business that is hoping to kill Aereo.
And it would 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. 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. The monthly fee, arguably, is not for the TV shows themselves but for the viewer’s ability to record and store them on the equivalent of a DVR, which is also stored remotely on Aereo’s cloud servers. Again, this is exactly what free TV viewers do already — it’s just that the antenna and the DVR are in their homes instead of a remote server.
What’s frustrating about the Aereo litigation is that in an alternative universe, the TV networks would have asked Aereo for its audience data and then sold those super-TV viewers at a premium to advertisers. This, in fact, is what has happened to regular DVR viewers. Initially, advertisers declined to pay for them because they weren’t watching live. It took years before advertisers and broadcasters realised that someone who records a whole season of shows and then binge-watches them in a single weekend is a more attentive viewer than someone watching live. (And if you don’t believe me, consider how attractive a Viking river cruise in Europe now seems after four seasons of Downton Abbey.)
Rather than embracing this new media for old TV, the networks have threatened to end free TV altogether. CBS and Fox have both said they will restrict their “broadcast” signal to cable providers if they lose this case. (Ironically, this would make them even more dependent on the business model that was so dysfunctional it spawned Aereo in the first place.) But there’s a problem if the networks lose the Aereo case and make good on their threats. They would be disenfranchising the millions of folks who benefit from free news and entertainment by accessing broadcast networks the old fashioned way, over the air.
The worst part of this is the threat the case poses to cloud media businesses. Any company whose business model relies on letting viewers store copyrighted material on a remote server for later viewing could find itself suddenly illegal, if the Supreme Court writes its ruling the “wrong ” way.
Make no mistake, large media companies hate technical innovation. TV and movie studios also believed that DVRs and VHS cassettes would kill their businesses. In fact, they enhanced them. Aereo is simply a remote personal video recorder.
The justices should let it live.
Business Insider Emails & Alerts
Site highlights each day to your inbox.