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Aereo Seeks Pay-TV Operator Status

Mari Silbey

In an ironic twist, Aereo may now become a vehicle for turning free broadcast TV into pay-TV online.

Aereo Inc. has filed a notice with the Federal Communications Commission (FCC) (hat tip, Multichannel News) asking the agency to categorize its streaming operations as the functions of a multichannel video programming distributor (MVPD). According to news reports, the FCC is considering whether to classify some over-the-top (OTT) video providers as MVPDs. If the agency moved forward with that idea, those OTT providers would be able to license TV programming through retransmission agreements in the same way that cable companies do today.

Aereo is looking at that business model as a way to move forward in the pay-TV market now that the courts have deemed its previous model -- which centered on capturing free over-the-air TV signals with miniature antennas and offering the package to consumers online without compensating the broadcasters for their programming rights -- illegal. (See Supreme Court Halts Aereo's Flight.)

The irony of the situation is that Aereo's raison d'ętre until now was to keep broadcast TV stations free for consumers on the web. Aereo previously sold its service for a small monthly subscription fee, but that money was in exchange for the convenience of getting access to TV programming online, and for cloud DVR features. Aereo maintained that the content itself should still be free on the web given that each consumer still had his or her own individual TV antenna. If the company turned into an MVPD, it would be backing away from that argument entirely.

Want to know more about OTT services? Check out our dedicated OTT content channel here on Light Reading.

Aereo isn't at fault for turning broadcast TV into a paid service on the web. Given how much money broadcasters are making from retransmission-consent agreements today, it's hard to imagine that they would transition to an online model without finding a way to take that revenue stream with them. (See 'Free' TV Model Under Threat.)

In fact, broadcasters have already started to make that new TV paradigm a reality. ABC Inc. requires viewers to have a pay-TV subscription if they want to watch recently aired shows online. (See ABC Makes TV Less Free.)

As for Aereo, even if its petition to the FCC succeeds, it will still have a difficult road ahead given the growing competition online. Arguably, Aereo has an advantage because it has already established itself in several markets, but reports indicate that the company likely had relatively few customers when it was forced to shut down despite the publicity it's received over the last two and a half years.

Aereo does still own proprietary technology, but a piece of that intellectual property involves the mini antennas the company has perfected, and that equipment is only valuable if each customer needs to have his or her own discrete video signal. With licensing agreements in place, Aereo could theoretically ingest content more efficiently over a single connection via satellite or terrestrial IP network.

Regulators are still catching up with technology innovations that have radically changed video delivery. As the Aereo saga shows, there's still a lot of work to do.

— Mari Silbey, special to Light Reading

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10/20/2014 | 7:48:10 PM
Re: what's the point
What they can end up doing depends a lot on the price that the eventual service reaches.  I looked at my local Comcast website and the lowest cost TV service I can get is $22/month.  That is basically local broadcast TV.  Seems to me that if they can make an equivalent service for say $12 - $15, then they would still have a market.  Then people could add in OTT services like Netflix and end up with a reasonable bundle.

Mitch Wagner
Mitch Wagner
10/20/2014 | 6:54:18 PM
Re: what's the point
Seems likely that Aero will eventually sell its company name to somebody else, who will use it to build a video service that has nothing to do with the company's original vision. 

Pity. The original idea is great. Consumers want one-price video-on-demand, seems like nobody's willing to sell it to them. 
10/14/2014 | 4:21:05 PM
Re: what's the point
Yeah I'm not sure either. If they're paying retrans fees just like everyobody else aren't they bound by the same licensing contracts that time and time again have stalled less expensive, alternative options?
10/14/2014 | 2:48:33 PM
what's the point
How would a pay-TV product from Aereo differ from a pay-TV product from other video providers? Would Aereo just focus on broadcast channels and offer low-end packages combined with ... what? I'm sure there's something more to this Plan B, but it isn't evident based on the information we have.
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