Why, after over twenty-five years of successful networking, would the FOX Broadcasting Company be considering taking their FOX network into a paid-subscription model, similar to AMC or HBO? What on earth could force News Corp. Chief Operating Officer Chase Carey (the man with the impressive moustache, pictured above) to consider altering the entire American television landscape by altering FOX to a cable subscription rather than a broadcast network? The answer to both these questions is a small upstart redistribution company based out of New York called Aereo.
Aereo is a technology company based in New York City that decided to use their technological expanse to provide a service: for a monthly subscription fee, Aereo's customers can watch broadcast network television at various time-shifts (in case your schedule causes you to miss your favorite shows) on any internet-connected device, be it your smartphone, computer, or certain televisions. This subscription to Aereo costs far less than a network cable package, making Aereo an attractive option for those within range of the New York City signal--meaning Aereo's presence in the marketplace is siphoning viewers away from FOX and each of the other broadcast networks.
Unsurprisingly, Aereo was immediately sued by CBS, NBCUniversal, Disney (who owns ABC), and Newscorp (who owns FOX). Far more surprising is the ruling: on April 1 a federal court ruled in favor of Aereo, determining that their rebroadcasting of these network shows does not constitute copyright infringement. How is that possible?
Aereo's technology allows subscribers to view live broadcast content and to record it for later viewing. The way Aereo accomplishes this service is via a strategically-placed array of antennae, each about the size of a coin. The array picks up the broadcast signal being sent from each network to their various affiliates across the nation--however at present, Aereo's array is only strong enough to redistribute the signals throughout New York and Connecticut. Aereo's defense is that they are merely providing a service that any person could accomplish for themselves with an antenna and a recording device, and that their redistribution does not constitute a public performance.
Anyone with an antenna can pick up a TV station’s signals for free. But cable and satellite companies typically pay stations and networks for the right to distribute their programming to subscribers. Industrywide, those retransmission fees add up to billions of dollars every year. According to Newscorp's Chase Carey, not being paid by Aereo jeopardizes the economics of broadcast TV, which relies on both retransmission fees and advertising.
Yesterday Carey spoke at the annual gathering of broadcasters, called NAB Show, in Las Vegas:
"This is not an ideal path we look to pursue, but we can’t sit idly by and let an entity steal our signal. If we can’t do a fair deal, we could take the whole network to a subscription model."
Does this seem like tough-talk posturing or is it an actual option on the table for the future of FOX? Currently, Fox sends its signal to TV stations across the country, including 27 that it owns directly. Those stations broadcast FOX to their local markets--and they pay Newscorp for the privilege to do so. Aereo takes broadcast signals for free from the air with thousands of little antennas, recodes them for Internet use and feeds that to subscribers’ computers, tablets and smartphones for a mere $8USD/month.
Gordon Smith, president of the National Association of Broadcasters, does not want to see FOX switch to a subscription model, a precedent-setting move that could mean major changes across all of American television. Smith said he hopes that the courts will eventually rule against Aereo and force it to get in line with other pay TV operators.
The present American law governing cable retransmission fees was enacted in 1992; needless to say, technology, society and the way we view content has been completely altered over the past twenty-one years. Is it time for congress to update a superannuated law?
No matter what happens, it will have to happen soon: Aereo, backed by billionaire Barry Diller, was limited to New York City when it debuted early last year, but has since expanded to the New York City suburbs, including parts of New Jersey and Connecticut. It plans to expand to Boston, Chicago, Philadelphia, Washington and 18 other U.S. markets this spring.