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Aereo is dead, so what's next for television?

Aereo is dead, so what's next for television?


Aereo failed to disrupt the television industry, but change is still coming

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The broadcast industry can breathe again: Aereo — the startup that streamed broadcast TV over the internet for cheap — is dead. Or at least, the incarnation of Aereo that wasn’t paying copyright fees is dead, thanks to a Supreme Court ruling this morning. So what happens now?

A decision in favor of Aereo would have changed things quite a bit for the television industry, but today’s ruling means back to business as usual. While some have raised fears that the opinion will impact cloud computing services, the court intended for the ruling to apply narrowly to Aereo.

"It just means you can expect more of the same," says Michael Greeson, president of The Diffusion Group, a research firm focused on the future of TV. "The broadcasters won the case. There were no caveats, except for that this is a limited case. It would be untenable to extend this decision beyond its limited scope."

"Aereo will go out of business immediately."

Reacting to the news, Aereo CEO Chet Kanojia said in a statement today that "our work is not done," and that it will "continue to fight for our consumers." Realistically, though, the company is unlikely to survive. "Aereo will go out of business immediately," Greeson says.

The fees Aereo is now required to pay broadcasters, which can range from a few cents to a few dollars for every channel, for every subscriber, every month, will make it impossible to continue charging only $8 to $12 a month. Aereo could restructure its business with higher fees or additional revenue from other means like advertising, but it seems more likely that the company will fold, as Kanojia said himself before the case went to trial. "If it’s a total straight-up loss, then it’s dead. We’re done," Kanojia said at the time.

For consumers, the ruling means no change in the high prices from cable companies and limited options for watching TV online or on mobile devices. Cable companies have started to offer streaming online options and mobile apps like Time Warner’s TWC TV app and Comcast’s Xfinity streaming service, but those offerings are expensive, slow to roll out, and tend to be poorly designed.

The decision wasn't as surprising as the fact that more progressive justices ruled against Aereo

The key difference is that Aereo was building a service for customers to watch primarily over the internet, while cable companies are still concentrating on customers who watch mostly on their television sets. Aereo offered a built-in DVR and access to all broadcast content within a reasonable range, and had been experimenting with prices like a $1 day pass.

"This is not going to be a comfort to cord cutters," says James Grimmelmann, a University of Maryland law professor who co-authored an amicus brief in favor of Aereo. "It is quite clear that Aereo and services like it can’t operate."

The law says consumers are allowed to use an antenna at home in order to capture free over-the-air broadcast signals and use an in-home DVR to record TV and watch it later at their leisure without having to pay broadcasters for the content.

But cable companies that pick up broadcast signals and retransmit them to customers, usually bundled with other channels, are required to pay fees to broadcasters. Bypassing those fees, Aereo was designed for a Supreme Court case from day one.

Aereo wasn't really a technology innovator

Aereo argued that it was more like a DVR plus in-home antenna than a cable company. It tried to imitate this setup by placing the antenna and DVR in a remote warehouse and making individual recordings for each customer. Unfortunately for Aereo, the court didn’t go for that argument.

"This sole technological difference between Aereo and traditional cable companies does not make a critical difference here," wrote Justice Stephen Breyer for the majority in the 6–3 opinion.

The most surprising thing about the ruling wasn’t the decision, but the way the justices lined up. The more left-leaning Justices Elena Kagan — the only justice who uses email — and Sonia Sotomayor — who owns a Roku — both supported the majority in striking down Aereo.

"Justice Breyer took the very commonsense view that Aereo is just like a cable system. I was quite surprised by that," says Grimmelmann, who sat in on the arguments. "Justice Breyer is known generally as a copyright skeptic. Justice Kagan and Sotomayor seemed to be the most sympathetic, but they joined Breyer’s opinion." Meanwhile, right-leaning Justices Antonin Scalia, Clarence Thomas, and Samuel Alito were in the minority.

The reason may be that the case was not really about technology, since Aereo’s system was designed solely to skirt the law and did not represent real progress.

"This is not about new technology," Greeson says. "Aereo wanted to make it about new technology… but the justices really didn’t want to talk technology. They said, ‘The basic issue was that you’re not entitled to aggregate and distribute that content that’s not yours. You don’t have a license.’"

Another court case going on right now could undo the practice of 'bundling' channels

Aereo has not divulged how many subscribers it actually has, but the threat of Aereo-like services has the television industry spooked. "Broadcasters are scared of the idea, not of Aereo," says Dan Rayburn, a streaming-media analyst.

Aereo’s attempt to shake up the industry failed, but it was a long shot to begin with. Its defeat doesn’t mean cable customers and cord cutters have to give up hope for better, cheaper options.

There is actually another pending court case that could solve some of the same pain points Aereo was targeting. The bundling that consumers hate so much — if you want ESPN, you have to take ESPN2 and ESPN Classic — actually comes from networks, which have been forcing cable companies to transmit less-desirable channels in addition to the ones they (and consumers) really want. The result is higher prices and less choice. But just last week, Cablevision won an incremental victory against Viacom in a case that would stop content owners from forcing cable companies to bundle content.

Even if the law doesn’t change, technology eventually will. The Supreme Court ruled that Aereo’s technology wasn’t new enough to require a change in the law, but most analysts agree that eventually television will be delivered over the internet. That means broadcasters will no longer have the same legal obligations since they won’t be using the public airwaves — and when that happens, the law will have to adapt.