Aereo CEO Trashes Pay-TV Model
Alan Breznick, Cable/Video Practice Leader, Light Reading
Despite what the major broadcasters have to say, Aereo CEO Chet Kanojia doesn't believe that the legal fight over his company's online streaming of local TV signals has anything to do with retransmission consent or copyright laws. Rather, he thinks the battle is really over control of TV signal distribution and the future of the bloated cable bundle.
With the courtroom showdown over the business model of Aereo Inc. now headed for US Supreme Court arguments sometime this spring, Kanojia argues that the case has absolutely "no implications for retransmission-consent." Even if the high court rules decisively in Aereo's favor, he sees little chance that the broadcast industry's growing stream of retransmission-consent revenue from cable operators and other pay TV providers will come to a screeching halt. Nor does he see much chance that cable companies will start installing similar dime-sized antennas on millions of subscriber rooftops to do a massive end-run around the nation's copyright protection laws and retransmission-consent rules. (See Aereo Headed for Supreme Court? and Aereo Fight Heats Up in DC.)
"This argument is not about retransmission consent," he insisted, speaking at the Citi Global investment, Media & Telecommunications conference in Las Vegas last week. "What is being questioned is: Can I have an antenna as a consumer…? There's no prohibition against third parties making money on TVs and antennas."
Kanojia contends that broadcasters really want to shut down his company's premium service, which charges subscribers $8 to $12 a month for a mix of local stations and cloud-based DVR service, because they don't want to loosen their still-tight control over program distribution. Recalling that broadcasters once fought the same kinds of legal and regulatory battles against cable operators, VCR makers, DVR suppliers, and other proponents of what were then considered new distribution technologies, he noted that they lost in just about each case, but then ended up making out like bandits in the marketplace.
"The history of this industry is that they're driven by control," he said. "The reality is that they have prospered under every one of these circumstances."
If anything, Kanojia believes that Aereo could prove to be "a net benefit for broadcasters" by bringing their programming to more homes and opening up possibilities for specially targeted advertising. Rather than pay unnecessary retransmission-consent fees, he said, these are the ways that Aereo can truly help broadcasters reap more revenue.
"Of course, they should be compensated" for their signals, he said in response to questioning from financial analysts. "We'd be happy to create more technologies to help broadcasters do targeted advertising."
In addition, Kanojia argues that broadcasters, programmers, and other content providers want to shut down Aereo because they view it as some kind of threat to the traditional pay TV bundling model. Under that tried-and-true model, cable operators and other video service providers package dozens and even hundreds of channels for subscribers for one monthly price, rather than let customers choose and pay for just the handful of channels that they actually watch. This model, which has thrived for decades, has spurred the development and deployment of scores of niche channels that generate lucrative carriage fees and advertising revenues even though they're lightly viewed.
But, with the rise of online streaming services like Netflix Inc. (Nasdaq: NFLX), YouTube Inc. , Hulu LLC , Amazon.com Inc. (Nasdaq: AMZN), and even Aereo, and the emergence of media streaming boxes and bundles from such other new players as Apple Inc. (Nasdaq: AAPL) and Roku Inc. , increasingly tech-savvy consumers no longer have to buy the big, bloated programming bundles to get the content they desire. So the future of many of the less popular channels suddenly looks much cloudier than it did before.
"I don't think there's a whole lot of business in selling 500-channel packages of video services to people who don't want them," Kanojia said. "I don't think the future is selling 50 Viacom channels to people."
With cable broadband subscriber totals now rapidly catching up to cable video customer totals for the first time ever, Kanojia may well be right -- and maybe that's not such a bad thing.
— Alan Breznick, Cable/Video Practice Leader, Light Reading