A U.S. Supreme Court ruling against Aereo, which streams TV programming via the Internet to mobile devices, exposes the challenge of disruptive technologies in media.
On 25 June 2014, the U.S. Supreme Court ruled in favor of U.S. TV broadcasters, which sought to block Aereo from operations on the ground that the cloud-based service was violating broadcasters’ copyrights.
This ruling caps a nearly two-year battle between Aereo and broadcasters that boiled down to another case of an Internet-based technology solution disrupting decades-old regulations and business models of incumbent media companies.
Aereo, a consumer service, stores mini antennas in the cloud that consumers can access to capture, store and initiate individual streams of free-to-air TV broadcasts to devices and PCs. Aereo charged subscribers a monthly fee for this service.
At the heart of the conflict was Aereo’s effort to exploit ambiguity in U.S. law that governs transmission rights. Since the advent of cable, lawmakers and broadcasters have relied on what Gartner believes is a shaky distinction between what customers are allowed to do with free-to-air TV signals they receive — so-called ("private performances") and what service providers are allowed to do (“public performances”) — the latter being protected by copyright laws that secure a healthy revenue stream in retransmission fees from cable and satellite companies. Retransmission fees in the U.S. were estimated to be $2.3 billion and growing, according to SNL Kagan.
Aereo tried to use technology to position itself on the "private performance" side by emulating the operation of a home antenna and DVR, arguing it was, in essence, an equipment provider. The court rejected this argument. While conceding the law's ambiguities, it relied on Congress’s inferred intent to give copyright owners control over the commercial use of their signals. Even the court’s dissenters focused on the preference for Congress, rather than courts, to close legal loopholes while expressing distaste for Aereo’s business model.
The decision acknowledged the fears of many in the technology community that a ruling against Aereo could have a chilling effect on cloud services — such as network DVRs and personal media storage services — if their use of the Internet to store and deliver copyrighted files were deemed a public performance. The decision claimed to apply only to Aereo, although lack of resolution in this gray area persists.
View the Aereo decision as an extension rather than a reprieve in your imperative to evolve beyond your current business model. Broadcast ratings are in decline as consumers change their viewing habits and it’s only a matter of time before the cost of antennas and DVRs falls to the point where they become ubiquitous in personal devices.
Plan for future scenarios for local broadcasting’s role as pressure mounts to repurpose underutilized broadcast spectrum to meet growing demand for wireless broadband.
Recognize that technology work-arounds will never substitute for business models that pay consideration to copyright holders. The old storyline that copyright is an impediment to progress needs to be replaced by innovations that assure revenue and incentives for content creators.
Don’t underestimate the power of broadcast TV to assemble concentrated and attentive audiences that are still beyond the reach of the Web. Broadcast TV remains an important medium in the digital age, even if less of it occurs on the TV set at air time.
Seek convergence in the treatment of TV and digital media plans and attribution analysis, and push for the evolution of metric standards to both capture new patterns of viewing and allow valid comparisons and coordination among media channels.