For the past two years, the streaming TV startup Aereo has provided access to online streaming of live broadcast television, but the startup received criticism from broadcasters and cable companies.
The Supreme Court is expected to weigh in on the legality of Aereo’s methods in a case between the company and American Broadcasters. The issue is whether or not what Aereo does can be considered stealing. The case is likely to have a big impact on the future of television and streaming entertainment.
How Aereo Works
The technology that makes Aereo work is fairly simple. Broadcasters have long distributed local channels freely over the airwaves, available to anybody with an antenna and a television set. Aereo lets customers rent one antenna per account from them and Aereo maintains the hardware, looping the content to the Internet.
For about $8 a month, anybody living where Aereo is currently legal can enter their zip code and have online access to live broadcast television on their laptops and mobile devices.
The Case Against Aereo
Although television stations give their live content away for free to television owners, they require retransmission fees from cable companies to redistribute their content, and that redistribution fee has become a several billion dollar source of reliable revenue.
Aereo does not pay the fees that cable companies do, leading the Big Four networks (ABC, CBS, NBC, and FOX) to sue Aereo for copyright violation.
While the company’s use of antennas to pick up free programming is strictly legal, its essential strategy is to work around copyright law, something writer Roger Parloff observed in Fortune.
“Merely enabling TV programs to appear on the screens of mobile devices does not represent much of a technological breakthrough on Aereo’s part,” Parloff said. “Aereo’s breakthrough is different. Its technology purports to overcome legal obstacles, not engineering ones.”
Making Enemies Outside Broadcasters
Although the Supreme Court case only involves the Big Four networks, Aereo is making a larger splash than just with broadcasters. The Obama Administration has officially sided against Aereo, convinced by arguments of copyright infringement.
The Argument For Aereo
Advocates for Aereo argue that the service is no different than traditional rabbit-ear television, except the wire from the antenna to the television is virtual.
Aereo’s commitment to on-demand streaming content also fits more easily with consumer trends. Last year the Internet passed broadcast television in advertising revenue. If the future of television holds any model that includes watching commercials along with entertainment, one writer at the “Boston Globe” argues, Aereo stands as a helping hand to a dying industry.
Plus, with younger audiences gravitating more toward online sources for their entertainment, Aereo could make broadcasters more relevant in the years to come, because although Aereo distributes the content, broadcasters still control what goes on the waves, including commercials, none of which benefit Aereo.
The Big Picture
The reality is that with new technology, streaming services are increasingly essential to the television market. One fifth of households that subscribe to Netflix or Hulu do not subscribe to cable or satellite. The trend of “cutting the cord” has grown 44 percent over four years, to now 7.6 million households.
Whether or not the Supreme Court rules Aereo illegal this month, content suppliers will do well to figure out how to make the most of new technology. As for Aereo, the company has said it has no Plan B in case the Supreme Court does not rule in their favor, which means they will likely either start shelling out retransmission fees or go the way of the Napster and disappear completely.
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