Aereo vs Network TV

[Mr Peabody]

Aereo, networks set up for a fight: Aereo, a Web start-up that uses antennas to pick up broadcast signals for the iPad, is facing a fight from television networks who say the service’s business model is tantamount to content theft.
Networks have been unable to stop Aereo in court, and Fox television’s parent company said Monday that it might consider taking its shows off of broadcast television and air them solely on cable as a result.
“We won’t just sit idle and allow our content to be actively stolen,” said Chase Carey, president of News Corp., which owns Fox Television, The Washington Post reported. (http://link.email.washingtonpost.com/r/QJTXP3/726H1I/ZZD1F7/D7OE40/26U3RE/MQ/h)
For its part, Aereo says that its technology allows consumers to access shows on the public airwaves; the service also gives customers the option to pause and record broadcasts or save TV shows shown live for later viewing.
Aereo, The Post reported, is planning to expand its service to Washington and 21 other markets this summer.
(Aereo is backed by media mogul Barry Diller, chairman of IAC/Interactive Corp. Diller is a member of The Washington Post Co. board of directors.)

I don't know enough about how this works to pick a side, on one hand if Aereo charges, it's stealing, unless networks get paid like satelite providers have to; on the other hand, if it's free, I don't see any difference whether you watch on a traditional TV or an Ipad. I'm sure there must be a fee involved or else why start the company.

[Smokey]

Networks have been unable to stop Aereo in court, and Fox television’s parent company said Monday that it might consider taking its shows off of broadcast television and air them solely on cable as a result.“We won’t just sit idle and allow our content to be actively stolen,” said Chase Carey, president of News Corp., which owns Fox Television.So does that mean anybody with an antenna on their roof is a thief. What a ridiculous argument. Network are just afraid of somebody budding in their monopoly business.

[JoeE SP9]

How does Aereo make a profit unless they charge a fee? If they charge a fee they have an obligation to give some of that to the networks.

[Sir Terrence the Terrible]

So does that mean anybody with an antenna on their roof is a thief. What a ridiculous argument. Network are just afraid of somebody budding in their monopoly business.

Smoke, I ought to slap you on the back of the head. Programming for Broadcast is licensed for broadcast, and advertisers pay to keep it free. These guys are reselling the broadcast feed without paying retransmission fees like cable and the telecoms do.

Content is licensed by the studios that create them as use specific. If you are a second party rebroadcaster you must get a broadcasting license for all of the content you receive.

Fox is not the only network talking of going cable if the networks lose this in court. We got a note from Disney saying that they will take ABC to cable as well if they lose this fight. In the end this will be a huge blow for free over the air television, and Aereo will end up with nothing to broadcast.

[Sir Terrence the Terrible]

How does Aereo make a profit unless they charge a fee? If they charge a fee they have an obligation to give some of that to the networks.

This is the crust of the Networks argument. If they charge cable and the telecoms licensing fees for that medium, Aereo should pay the same licensing fees for capturing broadcast signals and rebroadcasting them.

[Mr Peabody]

I wonder why the networks aren't getting any traction in court over the issue.

[Smokey]

Smoke, I ought to slap you on the back of the head. Programming for Broadcast is licensed for broadcast, and advertisers pay to keep it free. These guys are reselling the broadcast feed without paying retransmission fees like cable and the telecoms do.

But unlike cable and telecom companies, local netwoks are using public spectrum airways which are worth billions of dollars to transmit their signal for free. And since the signal is free, I don't see any difference between picking up local channels on big antenna or dime size antenna which Aereo uses.


Fox is not the only network talking of going cable if the networks lose this in court. We got a note from Disney saying that they will take ABC to cable as well if they lose this fight. In the end this will be a huge blow for free over the air television, and Aereo will end up with nothing to broadcast.

I doubt very much if that will ever happen. By going to cable, they will lose consumer base which use to get network for free over the air. And since they are advertise supported, it makes no economical sense :)

[Smokey]

I wonder why the networks aren't getting any traction in court over the issue.

Because networks are using public air ways :)

[Sir Terrence the Terrible]

But unlike cable and telecom companies, local netwoks are using public spectrum airways which are worth billions of dollars to transmit their signal for free. And since the signal is free, I don't see any difference between picking up local channels on big antenna or dime size antenna which Aereo uses.

Smoke, step back just a bit because you are missing the point here. Broadcast Networks have to pay for content they don't produce everything by themselves. The way broadcaster get their money back is through advertising revenue, and content licensing fee charged to cable and the telecoms. Free off the air programming is largely underwritten by advertising revenue. If a rebroadcaster picks up a feed and charges the customer for receiving it without paying for a rebroadcasting licensing fee like cable and the telecoms do, then advertising revenue tanks and the networks lose money. You must purchase the rights to broadcast content the Networks have paid for. Free reception OTA is one thing(it is for the public good), Aereo is charging its customers to receive a feed they have stolen themselves. That is the problem.




I doubt very much if that will ever happen. By going to cable, they will lose consumer base which use to get network for free over the air. And since they are advertise supported, it makes no economical sense :)

Since you don't work in this industry, I can understand your doubt. However, there are things you don't understand for that very reason. Network television is a billion plus dollar industry. If Aereo can pop up a receiving antenna and charge customer for receiving that feed, then the cable companies and telecoms will be able to do the same thing. If you want your Network to remain viable and profitable, the only way to stop this and maintain the value of the network is put your content behind a paywall. They are not going to allow the content they paid for to be stolen and resold. This is serious business Smoke, you cannot dismiss it like you are doing.

[Sir Terrence the Terrible]

I wonder why the networks aren't getting any traction in court over the issue.

I think the judge wants to hear the merits of this case because so much money is involved. It will also set a major precedent as well.

[Sir Terrence the Terrible]

Because networks are using public air ways :)

This has nothing to do with it. The Networks can take their content wherever they want.

[E-Stat]

Free off the air programming is largely underwritten by advertising revenue.
Is Aereo stripping off the advertising?

[Sir Terrence the Terrible]

Is Aereo stripping off the advertising?

No, they are receiving and broadcasting the feed as a whole, and that is part of the problem. If anyone can snag your signal and charge a receiving fee for it, it dilutes your advertising revenue and content licensing fees as that leaves the door open for any and everyone to do the same thing.

How can Networks charge cable and telecoms licensing fees for content when all they have to do is set up a antenna and capture the same content for free?

[E-Stat]

If anyone can snag your signal and charge a receiving fee for it, it dilutes your advertising revenue
Isn't advertising revenue based upon size of audience? When the audience increases (doesn't Nielsen track that?), couldn't they charge higher fees?


How can Networks charge cable and telecoms licensing fees for content when all they have to do is set up a antenna and capture the same content for free?
Sorry, I'm not following you. Anyone can already do that today with a TV that has a digital tuner and antenna. Do networks charge TV and antenna manufacturers licensing fees?

[Smokey]

Sir TT,

Last night PBS newshour had a guess from Washinton Post discussing this issue and it seem this issue is more complicated than I thought as it contain alot of legal issues not only regarding content, but also advertising revenues.

I am not a legal expert, so guess I leave to it to the court to decide.

But the reporter from Washinton Post made couple of comments that I agree with. First she said that as long as Aereo keep the networks advertising intact (which mean Aereo can not use DVR as part of their service), their service might be legal since the content is free to begin with via the airways (just like having a TV tuner on your smart phone).

Second, she said that networks are probably bluffing regarding pulling their content off the air and put them on cable. She said that over 50 million viewers get netwrok signal over the air, and they can't afford to lose that many viewers if networks go to cable. Less viewers equal to less revenues from advertisment.

[Sir Terrence the Terrible]

Isn't advertising revenue based upon size of audience? When the audience increases (doesn't Nielsen track that?), couldn't they charge higher fees?

It is based on size of audience, but an exclusive audience. Aereo skews that by rebroadcasting the signal outside of nielsen ratings, and broadcasting certainly out of the geographic area of the channels they are receiving. It is not really the advertising rates so much, it is taking a free signal paid for through the use of their DVR.



Sorry, I'm not following you. Anyone can already do that today with a TV that has a digital tuner and antenna. Do networks charge TV and antenna manufacturers licensing fees?

Yes they can get the signal free, and Aereo does offer a free live television no DVR function for free. You are missing the point here. It is not really the advertising rates so much, it is taking a free signal paid for by advertisers and charging customers using Aereo DVR service for the feed. They are making money off a free signal, and if they can do it, then the cable and telecom will argue they can do it as well. There goes the content licensing fees they pay the Networks, and the Network pays the Studio to produce it. The Networks AND studios would get hit hard on this. If the studios get Aereo to have to remove the DVR function through a judgement, then there would be no point in having Aereo in the first place. They would just be broadcasting the signal they pick up on the internet. Networks have their own website with their content, and it is free as well. So what would be the point of Aereo. Being able to time shift via a DVR would reduce the amount of advertising money the advertisers would have to pay the Network because they know if more of these Aereo receivers get out there, lot's of folks(based on current trends) would skip the commercials anyway.

[Sir Terrence the Terrible]

Sir TT,

Last night PBS newshour had a guess from Washinton Post discussing this issue and it seem this issue is more complicated than I thought as it contain alot of legal issues not only regarding content, but also advertising revenues.

I am not a legal expert, so guess I leave to it to the court to decide.

But the reporter from Washinton Post made couple of comments that I agree with. First she said that as long as Aereo keep the networks advertising intact (which mean Aereo can not use DVR as part of their service), their service might be legal since the content is free to begin with via the airways (just like having a TV tuner on your smart phone).

Second, she said that networks are probably bluffing regarding pulling their content off the air and put them on cable. She said that over 50 million viewers get netwrok signal over the air, and they can't afford to lose that many viewers if networks go to cable. Less viewers equal to less revenues from advertisment.

The problem here is it is not the rebroadcasting live that they charge for. That is free. It is the DVR function they are charging customer for. If they decouple that from their service, and basically they are just broadcasting on the internet with no profit to gain. It is the DVR function the Networks are going after because they are essentially charging the customer for a free service.

[E-Stat]

It is not really the advertising rates so much, it is taking a free signal paid for by advertisers and charging customers using Aereo DVR service for the feed.
How is that different from my buying a Tivo at Walmart for providing DVR service to broadcast TV?

[Feanor]

Smoke, step back just a bit because you are missing the point here. Broadcast Networks have to pay for content they don't produce everything by themselves. The way broadcaster get their money back is through advertising revenue, and content licensing fee charged to cable and the telecoms. Free off the air programming is largely underwritten by advertising revenue. If a rebroadcaster picks up a feed and charges the customer for receiving it without paying for a rebroadcasting licensing fee like cable and the telecoms do, then advertising revenue tanks and the networks lose money. You must purchase the rights to broadcast content the Networks have paid for. Free reception OTA is one thing(it is for the public good), Aereo is charging its customers to receive a feed they have stolen themselves. That is the problem.
...
Sorry I'm a bit late to this discussion; we don't have Aereo in my jurisdiction.

On the face of it, Aereo is just providing an additional service with respect to publicly broadcast material. The justification for their customer fee is just that they are providing an additional service.

Advertising pays for TV content: period!! Arguably Aereo extends the viewership thus the value of advertising that the networks places and for which they get paid. Actually the same is true for cable/satellite distribution. So finally the issue is whether networks are getting more advertising revenue on account of more viewership, not how the content is viewed.

Maybe the real problem is that the networks are gouging the cable/satellite providers, not that they ought to get money from Aereo. I have satellite and pay my provider a lot for their service; my provider argues that part of their cost is paying the networks for content. I feel gouged because I'm not only paying for satellite delivery but also a second time for content because I still have to sit through the ads.

If networks are paid according to advertising, maybe the cab/sat companies and Aereo ought to get content from them for free; maybe the networks should even pay them. Ultimately money comes from the viewers: how money is divided up along the distribution chain is a matter of power, and power is partly markets and technology, and partly laws and court decisions: it is not a matter of fundamental justice.

[Sir Terrence the Terrible]

Sorry I'm a bit late to this discussion; we don't have Aereo in my jurisdiction.

On the face of it, Aereo is just providing an additional service with respect to publicly broadcast material. The justification for their customer fee is just that they are providing an additional service.

The problem is you cannot offer an additional service (i.e DVR) with a fee on free content without paying for a rebroadcast license. This falls outside of the use of the Betamax ruling. The Betamax ruling covers having the DVR on the premises that the owner had paid for, or is renting from a Cable company or Telecom. It does not cover having the DVR "in the cloud" and making consumers pay for access to it.


Advertising pays for TV content: period!! Arguably Aereo extends the viewership thus the value of advertising that the networks places and for which they get paid. Actually the same is true for cable/satellite distribution. So finally the issue is whether networks are getting more advertising revenue on account of more viewership, not how the content is viewed.

It MAY extend viewership but how do you measure if Aereo falls outside nielsen's rating coverage. Nielson's system does not cover internet viewership. So how does one monitor increased viewership when it cannot be measured? That is the problem here. Based on the amount of viewers on any given show, the more eyes the more money that can be charged for spots.


Maybe the real problem is that the networks are gouging the cable/satellite providers, not that they ought to get money from Aereo. I have satellite and pay my provider a lot for their service; my provider argues that part of their cost is paying the networks for content. I feel gouged because I'm not only paying for satellite delivery but also a second time for content because I still have to sit through the ads.

If your cable company or telecom does not pay for content, then no content is created. It costs more money to produce content, not less. All prices are negotiated, and if the Cable company's and Telecom's think the price is too high, they just won't buy rights to the content. It terms of content costs, the studios decide the threshold of the price of production. And these days they are definitely pushing back on production costs. I know one late night show that was asked to cut $15 million dollars from the yearly production budget. I know another highly rated television show that killed off a main character to save money on production costs. We are hearing this kind of thing all over Hollywood right now.


If networks are paid according to advertising, maybe the cab/sat companies and Aereo ought to get content from them for free; maybe the networks should even pay them. Ultimately money comes from the viewers: how money is divided up along the distribution chain is a matter of power, and power is partly markets and technology, and partly laws and court decisions: it is not a matter of fundamental justice.

Part of that cost of advertising pays for production costs, antenna costs, station costs(if the Network own any), and paying for general administration costs the Network incurs for keeping the Network running. Much like gold has a value, content does as well. We don't give gold away, and we don't give content away either. The better quality content can be licensed over many different platforms, and that pays for the creation of more content.

[Feanor]

...
It MAY extend viewership but how do you measure if Aereo falls outside nielsen's rating coverage. Nielson's system does not cover internet viewership. So how does one monitor increased viewership when it cannot be measured? That is the problem here. Based on the amount of viewers on any given show, the more eyes the more money that can be charged for spots.
...
So I'm wrong saying that advertising pays for all content. Even were Nielsen does track viewing -- and I assume that includes cab/sat -- I pay some portion through my non-off-air delivery charge. Fairly Aereo ought to pay just as the cab/sats do.

IMO it's really too bad that I'm partly paying for content through my cab/sat fee. That's because the cab/sat delivers a lot of content I don't want to see but for which I am paying vs. off-air in which case I pay only by watching the commercials for programs I do want to see.

[Sir Terrence the Terrible]

So I'm wrong saying that advertising pays for all content. Even were Nielsen does track viewing -- and I assume that includes cab/sat -- I pay some portion through my non-off-air delivery charge. Fairly Aereo ought to pay just as the cab/sats do.

There are a variety of sources that pay for content. Advertising is huge one, but there are many other sources of revenue that also pay for content.



IMO it's really too bad that I'm partly paying for content through my cab/sat fee. That's because the cab/sat delivers a lot of content I don't want to see but for which I am paying vs. off-air in which case I pay only by watching the commercials for programs I do want to see.

This is why I cut the cord in all my houses. I use discs and the internet for all of my viewing entertainment. Even if I am on the road, I can still access my server and watch thousands of movies wherever I am at.