Video services

Could Aereo Deflate the TV Business Model?

Welcome to Tuesday's cable news roundup.

  • Aereo Inc. 's US$12 per month broadband-powered video service threatens to destroy the TV business model, NBCUniversal LLC EVP for Content Distribution Matt Bond claimed in a court filing, reports The Hollywood Reporter. NBC (now part of Comcast Corp. (Nasdaq: CMCSA, CMCSK)) and other broadcasters are suing Aereo and seeking an injunction on grounds that its new service, which grabs free over-the-air TV signals and sends them to paying customers via broadband, violates copyright and retransmission rules. Bond acknowledged that it "makes little economic sense" for pay-TV operators to pay NBCU fees if they could mirror Aereo's scheme, noting that he knows "for a fact that cable companies have already considered such a model." (See Diller Says Aereo Doesn't Sell Content and Aereo Strikes Back.)

  • Hillcrest Labs has open sourced its Kylo browser for TVs under the Mozilla Public License, meaning developers can copy, modify and redistribute the platform without a separate commercial license or without having to pay royalties or fees. Hillcrest says it will "remain active" in the future development of Kylo, but acknowledged that the browser is not part of its core Freespace video navigation business. Hulu LLC , by the way, is still blocking access to the TV-friendly Kylo browser. (See Hillcrest: Hulu May Be Is Blocking 'Kylo' TV Browser and Hillcrest Puts the Motion in Mobile.)

  • A new survey from the Consumer Electronics Association (CEA) unsurprisingly found HDTVs remain the most popular devices for viewing video, used by 66 percent of the U.S. adults surveyed. Computers were also popular, with 62 percent of those surveyed using a laptop to watch video and 55 percent using a desktop. About one-third (33 percent) use smartphones and just 17 percent use tablets for video viewing. However, 66 percent of TV viewers use other CE devices simultaneously.

  • Foxconn Electronics Inc. squashed the latest Apple Inc. (Nasdaq: AAPL) HDTV rumor, denying a report in China Daily that Chairman Terry Gou said that the Chinese manufacturing giant is preparing its facilities for Apple's long-rumored device. "At no time did he confirm that Foxconn was in development or manufacturing stages for any product for any of its customers," the company said in a statement.

  • Hughes Network Systems Inc. 's EchoStar XVII Ka-band satellite has arrived at the European Spaceport in Kourou, French Guiana, where it's being prepped for an expected June launch. The new bird will power HughesNet's Gen4 high-speed Internet service for North America and provide in excess of 100 Gbit/s of capacity.

    — Jeff Baumgartner, Site Editor, Light Reading Cable

  • joanengebretson 12/5/2012 | 5:33:01 PM
    re: Could Aereo Deflate the TV Business Model?

    Is anyone else annoyed by broadcasters' attitude about Aereo? The only reason the service exists is because people can't receive local broadcast signals throughout the entire local markets that those stations serve. It seems like the broadcasters should be happy that someone has found a way to increase viewership of their content.

    The broadcasters' logic would suggest that they should find a way to interfere with signal reception so that even more people will have trouble getting a signal and will have to switch to cable to get local channels so that the cable operators will be forced to pay higher retransmission fees.


    Jeff Baumgartner 12/5/2012 | 5:32:59 PM
    re: Could Aereo Deflate the TV Business Model?

    I'm not too surprised by this attitude because they view Aereo as a big threat so long as Aereo's not paying retrans fees, despite that this approach does help the broadcasters reach viewers that would have trouble getting their networks over the air. Of course, NBC has Comcast as its new owner, so it's also no surprise that the threat of cord cutting is getting tossed into the broadcaster's argument. But how the courts decide this one will be pretty interesting. If Aereo comes through this without an injunction, it could change a lot of things. JB





    shygye75 12/5/2012 | 5:32:59 PM
    re: Could Aereo Deflate the TV Business Model?

    How plausible is the following scenario? Aereo's model passes all legal challenges, which means cable ops could adapt its plan. Broadcasters then decide to stop sending their programming over the air, and convert to the delivery model that they are using with their various cable network offshoots. End result is the end of broadcast TV.

    craigleddy 12/5/2012 | 5:32:56 PM
    re: Could Aereo Deflate the TV Business Model?

    The broadcast stations use public airwaves and have certain public interest obligations, so that would draw government scrutiny if they wanted to stop sending signals over the air.

    But is traditional over-the-air broadcasting still needed? A legal victory by Aereo could beg that question, and Congress already has given Barry Diller a platform to preach about his new service.    

    shygye75 12/5/2012 | 5:32:55 PM
    re: Could Aereo Deflate the TV Business Model?

    Right, but suppose the networks decided to pull the plug on over-the-air transmission of their "premium" content and reserved that only for video service subscriptions, kind of like what they are increasingly doing with live sports? Is there anything that would prevent them from doing that?

    I'm separating the networks (content owners) from the broadcast stations here, because my understanding is that the networks don't have much ownership of broadcast stations anymore.

    shygye75 12/5/2012 | 5:32:54 PM
    re: Could Aereo Deflate the TV Business Model?

    So if Aereo passes judicial review, and if video service providers decide to adopt its model to bypass rights fees, then networks may have to decide to sacrifice one of its two big revenue streams (affiliate $$ or rights fees from cable). A lot of ifs, but certainly makes for some interesting scenario-spinning. If this is in fact what Mr. Diller is up to, he's pouring gasoline on more than a few bridges.

    craigleddy 12/5/2012 | 5:32:54 PM
    re: Could Aereo Deflate the TV Business Model?

    I see where you're headed, but it's pretty complicated. The broadcast networks' affiliate stations, which provide compensation to the networks, would go ballistic if the broadcast networks moved their most popular programming (they already get upset about premiere sports or popular programming going to the sister cable networks). Broadcast networks reap enormous advertising revenue through the support of their affiliate networks -- at revenue levels that Internet advertising still can't match.   

    But, as you suggest, if Aereo or Web TV services scored a legal victory it could change the programing distribution model. In turn, as broadcasters fear but Diller would refute, that could undermine TV ad dollars and de-value the affiliate stations, which is one of many reasons why they oppose Aereo.       



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