6 ms·

The whole problem here for the broadcast networks is that Aereo sets a precedent for the cable companies to also avoid paying the retransmission fees by setting

The whole problem here for the broadcast networks is that Aereo sets a precedent for the cable companies to also avoid paying the retransmission fees by setting up a million tiny antennas instead of one big one. Nowadays, the broadcast networks get 70% of their revenue from retransmission fees, and only 30% from other sources, such as advertisements. Aereo and its users themselves don't matter - they're totally insignificant. But the court ruling does matter, because if the cable companies stop paying the retransmission fees, the broadcast networks are fucked.

MatthewPhillips 14y ago
So, basically, the entire broadcast television industry is built on a wishy-washy technicality in a court ruling, that's just begging to be hacked?
- dsr_ 14y ago
  No, the cable industry is built on the technicality. Broadcasters have the right to negotiate with cable companies for carriage. http://www.fcc.gov/guides/cable-carriage-broadcast-stations http://www.fcc.gov/guides/cable-carriage-broadcast-stations They either have the right to demand that they be carried (in which case it is for free) or to demand that they be compensated (in which case the cable company does not have to carry them). Every three years they get to re-decide. Without either the must-carry notification or the negotiated contract, cable companies can't carry them.
  - sjs382 14y ago
    Where can I learn more about the first scenario that you mention? (demanding that cable companies carry your broadcast) What are the limits on this? Can an individual set up a low powered broadcast station and force the cable company to carry it?
    - VLM 14y ago
      You would have to be a rather rich individual in an unusual locale to license a new TV station in an area developed enough to have a cable company, but undeveloped enough to convince the FCC to issue the license without interference with existing stations. This is not a "new tech startup" model, at least not now. The goldrush was over about a quarter century ago.
    - dsr_ 14y ago
      See the comment below about rarity for individuals, but note that basically every town or city has the power to write a similar compulsion to force a cable company to carry a community access station as a price for operation. If all you want is to get some airtime for a non-commercial message, you can probably go to a community access channel for free.
- rayiner 14y ago
  It's not really a technicality. The business model is such: 1) The broadcast networks distribute content freely over the airwaves. 2) The broadcast networks also sell that content to cable networks who then retransmit it. Forget the law. Is it reasonable for the cable networks to just capture the over-the-air stream and retransmit? I think you can argue both sides. On one hand, there is a public benefit to free over the air TV, but that specific benefit is not served when a for-profit cable provider retransmits that content to paying cable customers. On the other hand, how do you distinguish in a principled way the spectrum between an individual receiving the content with his antenna and what Time Warner Cable might do, with services like Aereo in the middle? I know we're all about advertising these days, but it's not an unreasonable business model to produce content, then sell that content to distributors who in turn distribute it to paying customers. It might, however, be unreasonable to be able to expect to do this while also cashing in on advertising revenue by freely broadcasting that same content over the air.
  - larrys 14y ago
    "On the other hand, how do you distinguish in a principled way the spectrum between an individual receiving the content with his antenna and what Time Warner Cable might do, with services like Aereo in the middle?" Isn't this a bit like asking why I can read something from a particular website online for free but someone can't take that free content and have me read it in it's entirety on another website? (Or am I misunderstanding the point you are making?) One point though regardless that matters is that is that if I have a service that I charge money for and I use your product to provide value to my customers (even for free) shouldn't you be compensated for that even if those customers could have gotten the same content another way?
    - rayiner 14y ago
      > Isn't this a bit like asking why I can read something from a particular website online for free but someone can't take that free content and have me read it in it's entirety on another website? (Or am I misunderstanding the point you are making?) It's a lot like that, except with the angle of: what does that mean for a company like Aereo, which ostensibly just offers you a "really big antenna" to watch the broadcasters' content? The problem seems to be that you (some people) want to give some leeway to companies like Aereo to do space shifting of broadcast content, without having to say "okay cable providers, you don't have to pay for anything you can capture on the air."
mikeweiss 14y ago
This is the best explanation of the current issue that I have seen. In my opinion by Aereo taking this to court and having a legal precedence created they will be ineffect (finally) changing the way the free broadcast networks work in America.
betterunix 14y ago
It sounds like the broadcast TV industry needs to update its business model to deal with new technology and new market realities. Not that this is news to anyone.
- rayiner 14y ago
  As a practical matter, if the broadcast TV folks can't protect their content directly, they'll have to go the way of the Googles and Facebooks of the world, and figure out ways of spying on you and your kids' TV watching habits so they can figure out ever more elaborate ways of selling you and them cheap plastic crap manufactured in China. That's what "updating your business model" means in 2013.
  - ZeroGravitas 14y ago
    They figures that out in the 80s. It was called Transformers.
  - betterunix 14y ago
    Or they could go to a subscription model. To be honest, when it comes to entertainment I see little problem with paywalls (unlike news, academic publications, etc.).
mikeryan 14y ago
The whole problem here for the broadcast networks is that Aereo sets a precedent for the cable companies to also avoid paying the retransmission fees by setting up a million tiny antennas instead of one big one This isn't correct. Aereo only rebroadcasts local market channels to local market subscribers. I in SF can't get NY based content, this would get shutdown quick (See Ivi TV [1]) This also only affects the local "Over The Air" affiliates usually Fox/NBC/ABC/CBS and a few other small niche channels. This is why in the article Fox is threatening to move content from the main Fox "OTA" channel to its cable only offerings. Which is also why its never going to happen, this would effectively kill all the local market channels which are extremely powerful. Long story short, Aereo really isn't that great a threat to that many people, and really unless you start getting folks like Netflix to start buying up local market TV Channels to distribute content there's not a lot here. And this really only affects a very small subset of available channels. [1] http://www.businessweek.com/news/2012-08-27/ivi-tv-loses-bid-to-overturn-court-ordered-shutdown http://www.businessweek.com/news/2012-08-27/ivi-tv-loses-bid...
- w1ntermute 14y ago
  > This isn't correct. Aereo only rebroadcasts local market channels to local market subscribers. I in SF can't get NY based content, this would get shutdown quick (See Ivi TV [1]) You're missing the point. Cable companies also only rebroadcast local market channels to local market subscribers. The difference is that they pay the broadcast networks for that right. But if Aereo can get away with not paying, so can they.
  - monkeyspaw 14y ago
    The small amount of research I just did suggests that the networks pay the local stations the affiliate fees: http://www.businessinsider.com/heres-how-the-tv-business-actually-works-and-why-its-going-to-take-longer-than-you-think-to-disrupt-it-2010-4 http://www.businessinsider.com/heres-how-the-tv-business-act... I had assumed the locals were paying to get content from the networks, but that doesn't seem to be the case (also indicated in another comment.)
jonnathanson 14y ago
Mostly correct, but what's at stake here isn't the cable fees so much as the local/affiliate fees. Those are still a decent business for companies like NewsCorp (and others), but let's face it: local affiliate television is dying on the vine, one way or the other. It faces a fundamental challenge much more significant than the one posed by Aereo. The entire premise behind affiliate television is that local station owners can license the rights to national programming, and then exercise a quasi-monopoly over distribution of that content to local markets. (If I'm the FOX affiliate in NYC, for instance, I pay FOX for the rights to its shows, and I have exclusive rights to air those shows in NYC). This business model was threatened the minute the internet took hold, really, because the very idea of local exclusivity is anachronistic now. It's one of the two horse-and-buggy concepts of the 21st century content distribution business (the other being time-bound content viewership). It is threatened much more extensively by Netflix, by YouTube, by Hulu, by Microsoft, by iTunes, etc., than by any one startup. It is threatened by virtue of its irrelevancy in the modern, globally connected era. The idea of moving television networks to paid subscription models has been bandied about for at least a decade now. IIRC, it was NBC who first proposed this idea in the early 2000s. Indeed, this may come to pass at some point: not because of the likes of Aereo, but because broadcast television starts to make less and less business sense as time goes on (whereas content ownership and distributorship is still viable). Eventually, we'll probably have nothing but content shops, who distribute their wares across all channels -- perhaps offering different tiers of the products at different prices in different channels, and/or extracting licensing fees to different distributors. As a consumer, expect a generally upward trend in content pricing in the long run (i.e., free to paid). It'll just depend on whom you're paying. Advertising-subsizided, free content will still exist to the extent that distribution channels like YouTube continue to thrive.
- VLM 14y ago
  A good detailed analysis but don't overlook the first-mover disadvantage in that the first network to defect and throw the local channels to the wolves, has maybe a 25% chance of bankruptcy, but the last guy to drop locals won't lose much, so there's little motivation to begin the inevitable transition. So you're most likely to see the phase transition begin when an existing network is almost about to go bankrupt so there's not as much to loose, or perhaps right after a bankruptcy. Maybe if someone pays 10 billion for the olympics but only pulls in a quarter bil of advertising, that kind of disaster. Or a campaign finance reform law limits commercial TV spending. Maybe the only way it can happen is something like PBS dropping the locals to bootstrap the infrastructure. I'm not sure what the point would be of a large number of independents... in 20 years there may only be PBS affiliates out there and empty spectrum. Where I live there's only enough independent viewers (mostly syndicated) to keep two quasi independents alive, so tossing another 4+ onto the fire might well result in all of them going out of business.
danielweber 14y ago
Nowadays, the broadcast networks get 70% of their revenue from retransmission I've been trying to find a source for this, and it's mighty hard. Especially because many sources mix up the national networks with the local networks, or mix up profits with revenue. Do you have a citation? I'm asking to learn, not to challenge.

The whole problem here for the broadcast networks is that Aereo sets a precedent for the cable companies to also avoid paying the retransmission fees by setting up a million tiny antennas instead of one big one. Nowadays, the broadcast networks get 70% of their revenue from retransmission fees, and only 30% from other sources, such as advertisements. Aereo and its users themselves don't matter - they're totally insignificant. But the court ruling does matter, because if the cable companies stop paying the retransmission fees, the broadcast networks are fucked.

MatthewPhillips 14y ago

So, basically, the entire broadcast television industry is built on a wishy-washy technicality in a court ruling, that's just begging to be hacked?

dsr_ 14y ago
No, the cable industry is built on the technicality. Broadcasters have the right to negotiate with cable companies for carriage. http://www.fcc.gov/guides/cable-carriage-broadcast-stations http://www.fcc.gov/guides/cable-carriage-broadcast-stations They either have the right to demand that they be carried (in which case it is for free) or to demand that they be compensated (in which case the cable company does not have to carry them). Every three years they get to re-decide. Without either the must-carry notification or the negotiated contract, cable companies can't carry them.
- sjs382 14y ago
  Where can I learn more about the first scenario that you mention? (demanding that cable companies carry your broadcast) What are the limits on this? Can an individual set up a low powered broadcast station and force the cable company to carry it?
  - VLM 14y ago
    You would have to be a rather rich individual in an unusual locale to license a new TV station in an area developed enough to have a cable company, but undeveloped enough to convince the FCC to issue the license without interference with existing stations. This is not a "new tech startup" model, at least not now. The goldrush was over about a quarter century ago.
  - dsr_ 14y ago
    See the comment below about rarity for individuals, but note that basically every town or city has the power to write a similar compulsion to force a cable company to carry a community access station as a price for operation. If all you want is to get some airtime for a non-commercial message, you can probably go to a community access channel for free.
rayiner 14y ago
It's not really a technicality. The business model is such: 1) The broadcast networks distribute content freely over the airwaves. 2) The broadcast networks also sell that content to cable networks who then retransmit it. Forget the law. Is it reasonable for the cable networks to just capture the over-the-air stream and retransmit? I think you can argue both sides. On one hand, there is a public benefit to free over the air TV, but that specific benefit is not served when a for-profit cable provider retransmits that content to paying cable customers. On the other hand, how do you distinguish in a principled way the spectrum between an individual receiving the content with his antenna and what Time Warner Cable might do, with services like Aereo in the middle? I know we're all about advertising these days, but it's not an unreasonable business model to produce content, then sell that content to distributors who in turn distribute it to paying customers. It might, however, be unreasonable to be able to expect to do this while also cashing in on advertising revenue by freely broadcasting that same content over the air.
- larrys 14y ago
  "On the other hand, how do you distinguish in a principled way the spectrum between an individual receiving the content with his antenna and what Time Warner Cable might do, with services like Aereo in the middle?" Isn't this a bit like asking why I can read something from a particular website online for free but someone can't take that free content and have me read it in it's entirety on another website? (Or am I misunderstanding the point you are making?) One point though regardless that matters is that is that if I have a service that I charge money for and I use your product to provide value to my customers (even for free) shouldn't you be compensated for that even if those customers could have gotten the same content another way?
  - rayiner 14y ago
    > Isn't this a bit like asking why I can read something from a particular website online for free but someone can't take that free content and have me read it in it's entirety on another website? (Or am I misunderstanding the point you are making?) It's a lot like that, except with the angle of: what does that mean for a company like Aereo, which ostensibly just offers you a "really big antenna" to watch the broadcasters' content? The problem seems to be that you (some people) want to give some leeway to companies like Aereo to do space shifting of broadcast content, without having to say "okay cable providers, you don't have to pay for anything you can capture on the air."

mikeweiss 14y ago

This is the best explanation of the current issue that I have seen. In my opinion by Aereo taking this to court and having a legal precedence created they will be ineffect (finally) changing the way the free broadcast networks work in America.

betterunix 14y ago

It sounds like the broadcast TV industry needs to update its business model to deal with new technology and new market realities. Not that this is news to anyone.

rayiner 14y ago
As a practical matter, if the broadcast TV folks can't protect their content directly, they'll have to go the way of the Googles and Facebooks of the world, and figure out ways of spying on you and your kids' TV watching habits so they can figure out ever more elaborate ways of selling you and them cheap plastic crap manufactured in China. That's what "updating your business model" means in 2013.
- ZeroGravitas 14y ago
  They figures that out in the 80s. It was called Transformers.
- betterunix 14y ago
  Or they could go to a subscription model. To be honest, when it comes to entertainment I see little problem with paywalls (unlike news, academic publications, etc.).

mikeryan 14y ago

The whole problem here for the broadcast networks is that Aereo sets a precedent for the cable companies to also avoid paying the retransmission fees by setting up a million tiny antennas instead of one big one This isn't correct. Aereo only rebroadcasts local market channels to local market subscribers. I in SF can't get NY based content, this would get shutdown quick (See Ivi TV [1]) This also only affects the local "Over The Air" affiliates usually Fox/NBC/ABC/CBS and a few other small niche channels. This is why in the article Fox is threatening to move content from the main Fox "OTA" channel to its cable only offerings. Which is also why its never going to happen, this would effectively kill all the local market channels which are extremely powerful. Long story short, Aereo really isn't that great a threat to that many people, and really unless you start getting folks like Netflix to start buying up local market TV Channels to distribute content there's not a lot here. And this really only affects a very small subset of available channels. [1] http://www.businessweek.com/news/2012-08-27/ivi-tv-loses-bid-to-overturn-court-ordered-shutdown http://www.businessweek.com/news/2012-08-27/ivi-tv-loses-bid...

w1ntermute 14y ago
> This isn't correct. Aereo only rebroadcasts local market channels to local market subscribers. I in SF can't get NY based content, this would get shutdown quick (See Ivi TV [1]) You're missing the point. Cable companies also only rebroadcast local market channels to local market subscribers. The difference is that they pay the broadcast networks for that right. But if Aereo can get away with not paying, so can they.
- monkeyspaw 14y ago
  The small amount of research I just did suggests that the networks pay the local stations the affiliate fees: http://www.businessinsider.com/heres-how-the-tv-business-actually-works-and-why-its-going-to-take-longer-than-you-think-to-disrupt-it-2010-4 http://www.businessinsider.com/heres-how-the-tv-business-act... I had assumed the locals were paying to get content from the networks, but that doesn't seem to be the case (also indicated in another comment.)

jonnathanson 14y ago

Mostly correct, but what's at stake here isn't the cable fees so much as the local/affiliate fees. Those are still a decent business for companies like NewsCorp (and others), but let's face it: local affiliate television is dying on the vine, one way or the other. It faces a fundamental challenge much more significant than the one posed by Aereo. The entire premise behind affiliate television is that local station owners can license the rights to national programming, and then exercise a quasi-monopoly over distribution of that content to local markets. (If I'm the FOX affiliate in NYC, for instance, I pay FOX for the rights to its shows, and I have exclusive rights to air those shows in NYC). This business model was threatened the minute the internet took hold, really, because the very idea of local exclusivity is anachronistic now. It's one of the two horse-and-buggy concepts of the 21st century content distribution business (the other being time-bound content viewership). It is threatened much more extensively by Netflix, by YouTube, by Hulu, by Microsoft, by iTunes, etc., than by any one startup. It is threatened by virtue of its irrelevancy in the modern, globally connected era. The idea of moving television networks to paid subscription models has been bandied about for at least a decade now. IIRC, it was NBC who first proposed this idea in the early 2000s. Indeed, this may come to pass at some point: not because of the likes of Aereo, but because broadcast television starts to make less and less business sense as time goes on (whereas content ownership and distributorship is still viable). Eventually, we'll probably have nothing but content shops, who distribute their wares across all channels -- perhaps offering different tiers of the products at different prices in different channels, and/or extracting licensing fees to different distributors. As a consumer, expect a generally upward trend in content pricing in the long run (i.e., free to paid). It'll just depend on whom you're paying. Advertising-subsizided, free content will still exist to the extent that distribution channels like YouTube continue to thrive.

VLM 14y ago
A good detailed analysis but don't overlook the first-mover disadvantage in that the first network to defect and throw the local channels to the wolves, has maybe a 25% chance of bankruptcy, but the last guy to drop locals won't lose much, so there's little motivation to begin the inevitable transition. So you're most likely to see the phase transition begin when an existing network is almost about to go bankrupt so there's not as much to loose, or perhaps right after a bankruptcy. Maybe if someone pays 10 billion for the olympics but only pulls in a quarter bil of advertising, that kind of disaster. Or a campaign finance reform law limits commercial TV spending. Maybe the only way it can happen is something like PBS dropping the locals to bootstrap the infrastructure. I'm not sure what the point would be of a large number of independents... in 20 years there may only be PBS affiliates out there and empty spectrum. Where I live there's only enough independent viewers (mostly syndicated) to keep two quasi independents alive, so tossing another 4+ onto the fire might well result in all of them going out of business.

danielweber 14y ago

Nowadays, the broadcast networks get 70% of their revenue from retransmission I've been trying to find a source for this, and it's mighty hard. Especially because many sources mix up the national networks with the local networks, or mix up profits with revenue. Do you have a citation? I'm asking to learn, not to challenge.