Disruptive technology is not itself enough to drive a unique upstart’s business plan when entrenched competitors opt to stop a threat in the courts rather than with innovation in an industry that’s long struggled with meaningful change.
Such is the case with Aereo, which has survived one legal challenge, a second this week and faces a third from yet another broadcast TV station owner. Hearst in Boston, like Fox’ parent News Corp., doesn’t like the upstart’s plan to stream their broadcast channels without paying compensation.
At issue is Aereo’s online TV offering, which is already available in the New York, Boston and Atlanta metropolitan areas, and uses small antennas in hosted data centers to provide over two dozen over-the-air channels of programming to consumers for $8 or $12 a month (based on DVR storage capacity), or $80 a year.
Just this week, the U.S. Court of Appeals for the Second Circuit said no to a rehearing of an appeal sought by broadcasters. A federal judge has ruled that Aereo can operate during a trial focused on the legality of its business/service. Surprised broadcasters had hoped for an injunction to stop the service cold and then for a rehearing.
Fox has hinted that it may now approach the Supreme Court. This comes a few weeks after a Hearst-owned TV station (WCVB in Boston) sued Aereo for copyright infringement. Aereo’s streamed service has been available in and around Beantown since late May.
With broadcasters challenging Aereo in each of its first two markets, and with 20 more announced launches this year, the upstart could be in for more time in court than in the field. Or, broadcasters could grow tired of lawsuits and opt to present their case to the Supreme Court, especially if they continue to come up empty in other courts.
With Aereo having targeted the nation’s top TV markets, and the Chicago area on deck for September, it’s a safe bet that broadcasters patience is wearing thin.
In the Beginning
Aereo announced this past February its service is available to over 19 million consumers in the New York City (DMA), which includes 29 counties across New York, New Jersey, Connecticut and Pennsylvania. Before that time, Aereo was only available to residents of the city’s five boroughs.
With Aereo, consumers get programming from over 20 over-the-air TV channels, a cloud-based DVR capability that can handle up to 40 hours of programming, a search tool, a programming guide and the ability to interact with other users via Facebook and Twitter in real time.
To launch and deliver its service, Aereo located its small antennas -- and a huge amount of storage -- in data centers networked with high-speed Internet links.
Why the Worry?
Stated simply, broadcasters have no problem with others carrying their stations’ programming, as long as they are compensated accordingly.
Aereo claims its approach, which has held to date, is different and doesn’t pay broadcasters for their precious programming assets.
Aereo claims to provide a private viewing opportunity as equipment in its facilities let consumers use their PCs, tablets and smartphones (plus Apple TV and Roku devices) view the over-the-air programming much like TV viewers of CBS, ABC and NBC have long done. Broadcasters see this as a public viewing opportunity which has long carried compensation, and view Aereo, which doesn’t create programming, as infringing on their copyrights.
The Bottom Line
Challenging the status quo with a different, divergent and disruptive approach that portends to recast how an entrenched vertical market does business generally results in the icons pulling out all the stops to protect their assets.
Aereo portends to change broadcasting, and without broadcasters benefitting from the streaming service. Call it competition without compensation.
Regardless of the short-term or long-term outcome, the questions that should be asked of broadcasters are: Did you possess the same technology as Aereo? And if you did, why haven’t you introduced it in some way to consumers first?
This is far from the first David-and-Goliath matchup in the tech industry, or even in the video industry, but if ever staying tuned mattered, it’s with Aereo.
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