Diller Says Aereo Doesn't Sell Content
"We charge a consumer for an infrastructure. We don't charge for programming that is broadcast on this free, direct-to-consumer system," the IAC/InterActiveCorp (Nasdaq: IACI) chairman and Aereo investor said Tuesday during a Senate hearing about the future of online video. "Aereo is technology that simply allows a consumer to get what was the quid pro quo for a broadcaster receiving a license."
The hearing also featured execs from Amazon.com Inc. (Nasdaq: AMZN), Microsoft Corp. (Nasdaq: MSFT) and The Nielsen Co.
A bunch of broadcasters are trying to sue the pants off Aereo, whose service is available only in New York City and selling for $12 per month, over claims that it's violating copyright and retransmission rules, which require that MSOs pay broadcasters handsome fees. Aereo has filed a countersuit. (See Aereo Strikes Back and Diller's Aereo Under Legal Attack.)
Diller, a former broadcaster himself, empathized with his opposition, noting that if he was still in that business he'd be doing everything in his power to protect it and keep the status quo.
Broadband caps and à la carte
Although Aereo has been viewed as a service that would be attractive to so-called cord-cutters, Diller views the category of online video as a supplement to, rather than a replacement for, traditional pay-TV services. But he likewise sees online video and its ability to expand consumer choice and access as a way to move the business closer to an à la carte model and away from today's closed environment.
Panelists were asked if there's anything preventing cable networks like ESPN from bypassing the MSOs and doing business directly with consumers. Everyone agreed that there's no technical reason why they can't, but acknowledged that it would be a dumb business move because they would lose their dual revenue stream (advertising and MSO-paid affiliate fees).
"It would be insane for ESPN to sell itself directly to consumers," Diller said.
Diller and the panel also agreed that it's high time to alter the Communications Act of 1996 so it accounts for broadband, which has helped to spawn a new breed of online video service providers.
That led to a discussion about network neutrality rules that could help out the startups. "Net neutrality is mandatory because there is no question that, without it, you will see the absolute crushing of any competitive force," Diller said.
Amazon.com VP for Global Public Policy Paul Misener urged the Senate to keep a close eye on Internet openness, noting that the emerging use of ISP data caps "merits such vigilance." Amazon, of course, isn't a fan of caps because it offers about 120,000 movies and TV episodes to consumers over-the-top for purchase and rental, and about 17,000 titles via its subscription-based Prime Instant Video service.
— Jeff Baumgartner, Site Editor, Light Reading Cable