On June 25, 2014 the United States Supreme Court issued a decision in the case AMERICAN BROADCASTING COMPANIES, INC., ET AL., PETITIONERS v. AEREO, INC., FKA BAMBOOM LABS, INC.
For simplicity’s sake, let’s just call it ABC vs. Aereo.
The decision, handed down 6-3 against area effectively denies consumers the right to use an antenna of their choice to access live over-the-air broadcast television.
Sadly, the Supreme Court got it wrong.
[I’ll leave my thoughts aside for now on how infinitely unwise it is to have 9 senior citizens providing over this nation’s internet laws – no matter how intelligent they may be.]
The truth is, the decision against Aereo flies in the face of America’s entrepreneurial spirit, relies on an arcane law dating back to the 1970’s, is a massive setback for average consumers like you and me, and strengthens the monopoly-like powers of mega-sized cable companies.
ABCs: The spectrum of airwaves that broadcasters (ABC, NBC, CBS, Univision) use to transmit over-the-air programming is free – the U.S. is not the U.K. – we don’t pay for our public television channels. Brands do. They’re called TV commercials and in-program product placements. So, much like roads and public parks and tap water, network television belongs to the American public – it’s a free service all inhabitants enjoy. Yes, premium services exist (cable/ pay-for-tv/ movies exist just like toll roads, private parks and bottled water exist), but if you choose not to pay for those products/ services, the basics are just fine, thank you.
Aereo: Aereo is a start-up that allows monthly subscribers to stream local network TV and store episodes in a queue much like a DVR / tivo device. The cost? $8.99 a month.
ISSUE AT STAKE:
Cable companies – threatened by the trend known as “cable cutting” (whereby people are unsubscribing from exorbitant cable packages and choosing a la carte subscription services like Aereo, Netflix, Hulu, HBO GO (via Xbox)) – pressured broadcast companies to sue Aereo because they were losing a lot of subscribers. They couldn’t sue Hulu because well, NBC owns a stake in Hulu. They can’t sue HBO because HBO, along with ESPN are the 2 giant reasons most people buy cable these days. And well, Netflix is Netflix – 80% of internet data transmitted around the world is streaming content provided by Netflix. That and well, House of Cards and Orange is the New Black (to name a few series) are so phenomenal that going after Netflix would be tantamount to political suicide.
So, Aereo. The little up-start owned by Barry Diller. ABCs claim? The start-up was ‘performing’ (read: poaching signals from the air, then showing them to subscribers) without paying for them – thereby infringing on their right to ‘publicly’ show their channels. (Note: you can be an Aereo subscriber and a cable subscriber – and how another market entrant infringes on someone’s ‘public’ right is beyond me).
It merely provides ‘virtual antennas’ to users (today’s equivalent of yesterday’s rabbit ears) for television signals that are free to all.
Well, if cable companies legitimately paid for these network signals and Americans, like their Brit counterparts had to pay for them, then I could see that Aereo represents a sort of Napster to the TV industry and perhaps should be forced to shut down.
But is that truly how the TV broadcast industry works?
No. Americans don’t pay for network TV. The court looked at it in a different way (that’s the law for you). The question was – does it choose content for you? Does it act like a video shop / library – allowing you to rent content based on a membership card you own, or is it like a video-on-demand service (i.e. Netflix) where you can only watch pre-curated content?
Since Aereo is streaming all free channels over the airwaves, and doesn’t not choose the programming (i.e. Univison could be showing World Cup soccer or a local sitcom), it’s akin to a video shop/ library – providing access to content that the member chooses.
Justice Scalia in his dissent stated, “In sum, Aereo does not “perform” for the sole and simple reason that it does not make the choice of content. And because Aereo does not perform, it cannot be held directly liable for infringing the Networks’ public-performance right”
Back to free-market practicalities:
Cable companies’ arguments that Aereo steals a signal for free when they “own the copyright” is bogus. Their transmitting signals just as Aereo does.
And remember, they’re mad because they say Aereo makes money off of something they shouldn’t. The dirty little secret cable providers didn’t mention to the Supreme Court is that they too charge users to access these public channels if these users aren’t cable subscribers. Total price? $10 a month plus taxes, fees, etc.
Note: this is a new pricing feature cable companies have introduced only in the last year. From 2009 – 2011, I never had cable. Yet, I could faithfully watch NBC, ABC, etc. in my apartment by using the cable as an antenna to my roof (note: Dishes are not allowed, rabbit ears wouldn’t work). I was using the wire that went up to the roof like an antenna – and I enjoyed free network TV.
Suddenly, in 2014, after I stopped subscribing to cable, my ‘free’ network TV access shut off within a month. When I called the cable company (since I’m an internet subscriber) they responded, “pay us $10 a month to unscramble the signals, or we won’t allow you to see network TV since you’re leveraging our antennas”.
Antennas… signals… broadcast through the air. Sounds oddly familiar to Aereo’s value proposition, right?
Aereo provides me with an “antenna” to capture broadcast signals through the air just like Time Warner promises me they can.
The difference? Aereo delivers me more services (TV + DVR) at a cheaper rate – $8.99 versus Time Warner Cable – $19.98 for both services.
While this may seem like a minor case, it’s going to have larger ripple effects down the road. Younger generations are demanding and inventing services that give them access vs. making them owners (Zipcar vs. car ownership, Rent the Runway vs. luxury fashion goods). Cable companies’ one-package-fits-all model is outdated, too expensive, too impersonal and too clunky to last long in this world without judicial protections like the gift the Supreme Court just handed down.
As consumers increasingly reject the one-offering-fits-all of service companies, whose to say they won’t invent other ways to cut out cable providers cable and internet services altogether?
Much like Napster’s dissolution helped usher in subscription services like Spotify & Beats music, so too will Aereo’s dissolution create a new wave of inventions that circumvent cable.
The question is, what will the ABC dinosaurs do when their business model around them implodes from players / services they never saw coming?
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