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As TV Consumption Changes, Everyone Wants a Piece of a Very Messy Pie

Photo of Jacob Combs By Jacob Combs | Thompson on Hollywood June 10, 2014 at 7:15AM

It was only a matter of time before some disruptor found a way to let viewers watch live TV on their computers. That service is Aereo (backed by digital entrepreneur Barry Diller), which is currently at the center of a huge legal battle that has everyone from networks to broadcasters to Internet companies to cable providers biting their nails, wondering how the chips will fall.
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A tiny Aereo antenna next to a dime, for size comparison.
A tiny Aereo antenna next to a dime, for size comparison.

It's not news that technology is changing our world. In entertainment, the way television is consumed has changed most dramatically in a short period of time. Just a few years ago, it was exciting to buy a network show on iTunes so you could binge your way through it--now, new episodes are up on the web, ready to be watched the morning after they air, and streaming platforms like Netflix, Hulu and Amazon Prime facilitate TV gluttony like never before.

It was only a matter of time before some disruptor found a way to let viewers watch live TV on their computers. That service is Aereo (backed by digital entrepreneur Barry Diller), which is currently at the center of a huge legal battle that has everyone from networks to broadcasters to Internet companies to cable providers biting their nails, wondering how the chips will fall.  

Aereo uses thousands of tiny antennas to record TV broadcasts and stream contact to subscribers almost-live (after a few seconds' delay) for a small monthly fee--and it does so without paying the traditional retransmission fees that help make up the networks' bread and butter.

As New York Times media reporter David Carr put it in a pair of articles surrounding the Supreme Court's April consideration of a lawsuit accusing Aereo of, essentially, large-scale copyright theft, "Aereo is a way to put old wine in a new bottle."  It's a fitting metaphor, and it gives a good sense of both how simple Aereo's business model is and how profoundly it could change the entire landscape of television.  

If Aereo wins, the $3.3 billion in retransmission fees that broadcasters rake in will be jeopardized, and Carr speculates that the broadcast networks might then essentially gate their content by transforming into cable companies.  As he notes, this could have a huge impact on local affiliates, who receive much of their programming (and revenue) from the networks' material.  For example public services like local news might suddenly face a very bleak economic landscape.

As the high court wends its way through uncertain territory--a decision is expected sometime this month--it's abundantly clear that whether or not Aereo wins its case, the packaging and distribution of television is heading towards some big changes.  Writing in Re/code, Peter Kafka presents a clever little math problem regarding the hypothetical web TV service that Dish wants to hook consumers on later this year.  Dish is shooting for a price of $30 a month, and Kafka (using data from Bernstein Research's Todd Juenger) posits that the satellite provider could nab the broadcast networks along with several of the big cable channels (Comedy Central, FX, MTV, Nick, ESPN, etc.) for about $22.  As he points out, that's not exactly a real money-maker.

But what if you cut out the broadcasters?  Kafka and Juenger's second proposal ditches the broadcast channels (along with pricey Disney and ESPN) and leaves a package of 50 or so cable channels costing $11, which Kafka proposes could be sold for $15.  You wouldn't get sports (which would be a big hurdle for a lot of people), but if Dish made a deal with Netflix or Hulu or Amazon Prime and threw that in the pot, it could be looking at something very marketable.  As Kafka points out "you'd have to figure out what to do about broadcast TV."  But the solution to that problem already exists.  It's Aereo--or something like it, if the Supreme Court decides that its business model is legit and not just highway robbery.

That solution's not just a hypothetical that could be available sometime in the future--it's available now.  Just last week, Google announced that Aereo's streaming service would be made available on Chromecast, the $35 dongle (can't we come up with a better word for that in 2014?!) that lets users wirelessly transmit content from their computer, phone or tablet to their TV.

But let's take a step back from the economics and inter-corporate politics of this issue and engage in a little armchair pop psychology. What consumers are really looking for is simplicity, isn't it?  After all, there used to be three channels to choose from--a great number when you consider the way the human mind chunks information--but now we're presented with an overwhelming array of options, the sheer breadth of which leads to choice anxiety of the most first-world sort.  Out of this chaos, the likeliest victor to emerge will be the mind that first cracks the manner by which a consumer can get Monday Night Football, "The Walking Dead," "Game of Thrones," "House of Cards," "Parks & Recreation" and [insert other shows from a diverse range of networks and cable channels here] without paying a host of subscriber fees and complex bills.

Until then, the world of TV is going to to look more and more like Jurassic Park with each passing day.  As Jeff Goldblum's Dr. Malcolm warns us in Steven Spielberg's classic, "Life, uh, finds a way."  Life does finds a way--and so do digital entrepreneurs.  Who knows what they may dream up next?

This article is related to: TV, New Media & Technology, Netflix, Hulu, Amazon, New York Times, Dish Satellite


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