Aereo Presses Pause… for Good?

In the wake of the US Supreme Court's ruling against Aereo last week, the streaming video company has now halted service to all subscribers. In a public letter to consumers, CEO Chet Kanojia announced that Aereo has "decided to pause our operations temporarily as we consult with the court and map out our next steps."

The case has now been returned to a lower court for review. But the Supreme Court has made it clear that Aereo Inc. will not be allowed to stream over-the-air television stations as part of a cloud-based video service without paying retransmission fees to broadcasters. (See Supreme Court Halts Aereo's Flight.)

Kanojia said all Areo customers would be refunded money for their last month of service.

The Supreme Court's decision against Aereo was based on the determination that the company's streaming service qualifies as a public performance of copyrighted work, despite the fact that each subscriber is assigned an individual antenna. Although the court took pains to emphasize that its ruling does not apply to cloud-based storage services as long as content has been legally acquired, some in the industry worry that there could still be legal implications for other cloud-based DVRs, such as those now deployed by Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cablevision Systems Corp. (NYSE: CVC).

In fact, according to Bloomberg, a lawyer for Fox has already written to a federal judge claiming that the Aereo decision renders the Hopper solution from Dish Network LLC (Nasdaq: DISH) illegal as well. The Hopper DVR streams live TV and content from a user's DVR to other devices over the Internet.

Meanwhile, there's another important issue worth examining beyond the legal one, and that's the fact that the business model for broadcasters has changed drastically over the past decade. Aereo's service maintained advertisements in video streams, which used to be how broadcasters made the vast majority of their money. But Aereo bypassed licensing fees, which are now a significant and growing source of income for over-the-air networks. Broadcasters feared that if the Supreme Court ruled in Aereo's favor, other pay-TV providers would try a similar end run around retransmission agreements. If they did, it would threaten the dual-revenue model upon which broadcasters now increasingly depend. (See 'Free' TV Model Under Threat.)

There are other companies besides Aereo that are also trying to pair traditional TV with over-the-top video services, but they are largely making the effort while still paying licensing fees. Some cable companies, for example, have started offering service from Netflix Inc. (Nasdaq: NFLX) side by side with their own subscription programming. Entone Inc. , a TV technology company, is also helping broadband-only providers bundle OTA video with OTT services. (See Netflix Cracks Top 10 MSO and Entone, LG Blend OTT With Live TV.)

Antenna company Mohu is taking a different tack. Mohu is introducing a new device called Channels, which combines OTA video listings with web video programs in one integrated guide. Users can hop between programming types, although the OTA video is not transcoded and delivered over IP, meaning it's only accessible on a traditional TV.

What's not clear is whether Mohu or any other company would consider adding a transcoding feature to a retail product (i.e. a product not tied to an existing pay-TV service) to make OTA content available on other screens. That strategy would mimic Aereo's, except the TV antenna would be in a user's home, rather than lined up with thousands of others in a single, centralized warehouse.

It's also unclear what Aereo plans to do now that the Supreme Court has effectively shut down service. The company does have technology assets, including its famous dime-sized TV antennas, but CEO Kanojia has said very little about any type of back-up business plan, and well-known investor and former Fox Broadcasting Co. Chairman and CEO Barry Diller told CNBC after the court's announcement, "We did try, but it's over now."

For the moment, Kanojia is still urging support for both Aereo and OTA TV services. In his open letter to customers, he said, "The spectrum that the broadcasters use to transmit over the air programming belongs to the American public and we believe you should have a right to access that live programming whether your antenna sits on the roof of your home, on top of your television or in the cloud."

Kanojia also voiced a note of hope for Aereo fans. His final sentence: "Keep your voices loud and sign up for updates at ProtectMyAntenna.org -- our journey is far from done."

— Mari Silbey, special to Light Reading

COMMENTS Add Comment
DHagar 7/1/2014 | 12:26:47 PM
Re: Want to bid? (Brief Thoughts) @MikeP688, good thoughts!  I agree that the cord cutting will continue - they will test the boundaries.  Great insight on the role of the Supreme Court.

Happy 4th as well - we have a lot to be happy about in this country.

MikeP688 6/30/2014 | 11:00:37 PM
Re: Want to bid? (Brief Thoughts) Greetings to all!!

It was a very interesting month at the Supreme Court--to say the least especially as we look to celebrate 4th of July.   This was an idea that was novel--but I was not frankly surprised by it.     I would note, though, that just because they lost this "battle", the "war" is still not over becuase cord cutting is here to stay.


Happy 4th :-)

DHagar 6/30/2014 | 9:11:49 PM
Re: Want to bid? @mendyk, I fully agree.  The entire premise was "iffy".  It appears that they thought it was a good thing as long as they could make it fly, but it did not have anything of substance. 

I don't think they will make it - as Barry Diller indicated, it is over.
pcharles09 6/30/2014 | 5:56:34 PM
Re: Want to bid? I'm sure they'll have a pivot or twi in their business. If not, then I guess it was just a Fad they were hoping wouldn't get stomped out by the govt.
briandnewby 6/30/2014 | 3:10:45 PM
Re: Want to bid? True, although the disruption also carried to smartphones, with a device attached. If they have intellectual assets tied to that component, maybe it will have value in some other model. Reed Hastings claims Netflix always planned on streaming, and some people actually believe him when he says that, so maybe there will be a revisionist opportunity here, too.
mendyk 6/30/2014 | 2:47:12 PM
Re: Want to bid? The "concept" with Aereo from the outset was to disrupt the broadcast business model. The underlying technology isn't all that innovative -- a very small antenna to pick up broadcast signals and then some boxes to send those captured signals to the end-user device.
briandnewby 6/30/2014 | 1:47:17 PM
Re: Want to bid? It's harder to envision this after a Supreme Court ruling, but it feels like nothing is ever never when it comes to tech.  I wonder if there will be a way this concept, or these assets, emerge and another run is made at the same thing.
mendyk 6/30/2014 | 11:18:41 AM
Re: Want to bid? Somewhere, Rube Goldberg is smiling. At least I think that's a smile.
craigleddy 6/30/2014 | 11:09:21 AM
Want to bid? Could Aereo sell its antenna technology as an OTA antenna to consumers or service providers? I think some cable operators might find a use for it.

For example, a cable operator could use the antennas in a new MDU and avoid the installation cost for the building. Residents could pay a fee and, provided the cable operator paid their content partners, it shouldn't raise any legal hackles.                
mendyk 6/30/2014 | 11:01:13 AM
Disinterwhateveration Regarding the shifting revenue model for networks, the real group that's at risk are the affiliate broadcasters. The big four "networks" can continue in an environment that shifts from OTA to OTT, but the local broadcasters cannot. That's why at least some of them will think seriously about selling off some or all of their spectrum for a big payday.  
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