Last week, a U.S. district judge provided Aereo with a go-ahead on TV that we’ll be able to watch on our mobile devices, but that oversimplifies an interesting story. Here’s the original article, plus an update that, I am certain, will be rewritten once again as the legal dust-up continues. Some of the issues are significant, and will resonate beyond this particular venture. Worth reading.

Here’s the original story published on March 6, 2012:

You’re looking at an array of television antennas. These antennas are used to capture local broadcast signals that you can watch, if you pay a monthly subscription fee, on your computer, tablet, or phone. Aereo (formerly Bamboom) is the company behind the scheme, and, as you might expect, they’ll be spending a lot of time in the legal system as they argue with broadcasters regarding the rights and wrongs of live retransmission (that is, if Aereo is to survive, the broadcast networks want to see monthly cash–just like they receive from the cable operators).

Ah, the free airwaves, the ones that broadcasters use for the public good. Ah, the intellectual property that broadcasters carry over those airwaves, the IP that cable service providers pay to carry. Ah, the unresolved legal gotcha!! Any company that attempts to make those signals available via a secondary distribution scheme must pay for the right, or so say the broadcast networks.

The price for the service? $12 per month. The debut date? March 12. The place: for now, the New York metropolitan area.

For cord cutters, this may be a terrific deal. But it’s unclear whether the courts will block Aereo’s progress, as they have with ivi.tv and others who attempted to climb the walls of the castle without paying the required tribute (or, as I’m adding in my updated version of this article… others who attempted to challenge the current system of copyright and payments for distribution rights to intellectual property).

Slingbox? That’s okay. Over-the-air mobile TV? That’s not ready yet, except in a few markets on a test basis. Watch over-the-air TV? Sure. Watch via cable or satellite? As long as you’re paying for the privilege. Watch on another device? Nope, not yet. Or, maybe the answer is yes. We’ll find out in a few weeks.

_____

Here’s the update that I wrote on March 12, 2012:

From Bloomberg: Predicting a “great fight” with traditional media companies, billionaire Barry Diller said he plans to expand his new Aereo Web-based television service to 75 to 100 cities within a year, reports Bloomberg.

Diller, speaking at the South by Southwest Interactive festival in Austin, Texas, noted that efforts by Walt Disney Co. and other media companies to cite copyright violations were “absolutely predictable,” since entrenched companies always protect their turf, the story says.

Want to know more? Here’s a bunch of links:

The tech explanation:

http://www.techspot.com/news/47467-aereo-offers-tv-over-internet-with-antennas-engineered-to-comply-with-law.html

The consumer angle:

http://www.forbes.com/sites/dorothypomerantz/2012/02/29/how-much-are-you-willing-to-pay-to-cut-the-cord/

The business story:

http://online.wsj.com/article/SB10001424052970204059804577229451364593094.html?mod=wsj_share_tweet#printMode

The investment story:

http://www.bizjournals.com/sanfrancisco/news/2012/02/14/iac-l20-million-aereo-barry-diller-vc.html?s=print

_____

Here’s the update as of July 17, 2012

Again from Bloomberg (July 13, 2012): “A U.S. district judge this week allowed Aereo to continue operating while television networks pursue a copyright lawsuit against the company. Aereo captures broadcast signals with small antennas and streams them to devices such as Apple Inc. (AAPL)’s iPad, without paying for the programming.” As a result of the ruling, Diller is now planning a nationwide rollout.

As I pondered what all of this might mean, I read an essay on TV NewsCheck’s website, written by television executive Lee Spieckerman. I contacted him, and we spoke for a while about the ruling and its implications. In short, he believes that Judge Nathan bungled the decision:

“We see loopy rulings from Federal judges all the time, and I think this fits into that category… She misread the governing law!”

Spieckerman’s argument is based in part upon law and in part upon common industry practice. His legal argument tracks back to a 1993 law which requires operators of paid television systems to secure the necessary rights from local broadcasters. The concept is called “retransmission consent” and that ruling has proven to be something of a windfall for local broadcasters as a result of the fees paid by cable operators in exchange for this consent. According to  Spieckerman, these fees are now worth about $2 billion to the commercial broadcast network, plus an additional several billion dollars to local stations. This, plus the additional revenues from political advertising resulting from the Citizens United decision, provide the advertising base necessary for local television news to survive. (Seems to me, we should all understand the economics and consequences of this new approach to journalism funding–a worthwhile topic for a future article). Back to his other argument: “there is no tradition in this country for renting antennas–nobody rents antennas!”

Digging deeper with Mr. Spieckerman, and the real argument emerges. This is all about copyright infringement, and protection of distribution rights associated with intellectual property. Judge Nathan’s ruling begins to disrupt a system by which cable operators compensate owners of cable networks and local stations. ESPN receives $4.69 per cable subscriber–do the math and that’s about $50 per year per subscriber multiplied by 100 million subscribers, and that’s $5 billion per year in subscription fees. Spieckerman believes local broadcast station fees to be 20-50 cents, but acknowledges that these deals are confidential. (Consider that Comcast, Time Warner, and other cable operators charge consumers charge those 100 million subscribers over $1,000 per year–1o0 million x $100 = $100,0o0,000,000, or $100 billion, also good raw material for another Digital Insider article.)

Of course, the local station operators are anxious to negotiate with Diller’s Aereo. And Diller is anxious to go with the Judge’s ruling because it requires no fees. For now, according to Bloomberg,

We’re going to really start marketing… Within a year and a half, certainly by ’13, we’ll be in most major markets.”

To which Mr. Spieckerman counters:

Who is going to be next? This is a pandora’s box, and when you start circumventing and tearing down the few elements there are in the industry and inviting the destruction of an important industry. If I have any intellectual property that I want to distribute, I do not want anybody able to steal my material.”