I Want My AereoTV - The Big Media Streaming Battles in 2014

Happy New Year, belated! With the new year comes changes, and changes are afoot in the worlds of digitalmedia and technology.  Two key decisions to be aware as the new year starts are the DC Circuit Court's ruling striking down the FCCs Net Neutrality rules and the upcoming Supreme Court arguments and decision on the Broadcasters (Fox, ABC, et. al.) Versus Aereo.  Some quick thoughts on both.

First, the DC circuit court's decision on the FCCs net neutrality rules.  I realize there is a lot of concern about the gatekeepers of the internet, the ISPs, striking deals that would give higher priority to the content of customers who pay a fee to be first in line for delivery or for preferred service.  This run anti the "free internet" mantra since its inception.  As Rich Greenfield of BTIG points out in a recent blog post, one overriding consideration is the business model impact to the ISPs.  If you've read my posts, you know I am all about the business model.  How companies make money.  I happen to agree with Rich in that the ISPs would be shooting themselves in the foot if they deployed a business model that granted priority access to the one or two companies (which are Netflix and Youtube) who account for the majority of downstream traffic on the internet.  The two I reference account for more than 50% of this traffic.  As Rich points out, ISPs are now broadband driven and ARPU driven.  To employ favored nation status on these two or three bandwidth hogs would upset their customers and drive down their ARPU.  Plus, the DC circuit did not strike down the requirement that ISPs must report any such contract into which they enter.  Do so and your customers find out and, since we live in a market driven economy, your customer is free to bolt to an ISP who does not offer such accommodations to the big video providers.

Thus, the business model, as usual, is a key to how this plays out, and kudos to Rich for pointing this out in his research report.

The Broadcasters Versus Aereo will be another Supreme Court decisions with HUGE implications for video streaming and cloud DVR services.  Essentially the Broadcasters are saying Aereo should be paying them retransmission fees to provide their content to Aereo DVR subscribers.  If not, they will stop broadcasting over-the-air and will become Cable TV channels only.  Aereo is saying their service is legit because a) consumers have a right to receive FREE over the air HD broadcasts and b) Cablevision won the Supreme Court case permitting cloud DVR services.  Aereo contends it is irrelevant where the customer's antenna is located as long as the service provides one antenna per customer.  Essentially they are providing each customer with an antenna and streaming the broadcasts to each over the internet.  Customers pay for the DVR service, NOT the live HDTV stream.

Thus, a ruling against Aereo could reopen both legal precedents upon which Aereo operates, which might just be one of the Broadcaster's strategies as they fought the Cablevision

Cloud DVR case in the Supreme Court.  Hence, any other DVR service a la Aereo could be in Jeopardy.  What does this say for Simple.TV?  It might also require every consumer to have some kind of HDTV antenna on their own property and not in a centralized location.

I am using Aereo at the moment.  It works for me as my condo association does not allow attachments to our building nor am I in a favorable geographic location to have an indoor antenna.  Thus, Aereo having MY antenna at THEIR facility is a great option for me.

OK, what if Aereo wins?  Well, the Aereo service continues.  Surely similar solutions will appear on the market, as some already have.   The Broadcasters may convert their operations to CableTV only, which essentially puts Aereo out of business.  And Cable MSOs may develop their own Aereo like service and stream Broadcast channels to their customers.  This would greatly reduce their programming costs and save them money.  All of this is speculation but could come to fruition if Aereo wins the case.

You can be sure of one thing.  The Broadcasters will not permit their content to be streamed for free and will take action.  Re-transmission fees have become a huge revenue stream for each.  Surely you have read of the battles in the press as each have negotiated these fees with Cable MSOs.  When business models, and bonuses, are threatened, people act.

What could kill this entire paradigm?  Football.  Football drives so much revenue for the Broadcasters and is so protective of its content.  You can be sure the NFL will be involved in the discussion, and will most likely submit a brief on behalf of the Broadcasters.

Stay tuned!