Aereo: the Good, the Bad, and Where It Could Get Ugly

Mari Silbey —  February 15, 2012 — 18 Comments

Aereo logo and antenna array

Fox network creator Barry Diller introduced a new over-the-top video service yesterday called Aereo. Many are already calling it dead in the water, but there are several reasons I’m more optimistic about Aereo than competitive OTT services launched in recent years.

To take a step back, Aereo is offering a service that delivers broadcast TV stations over IP and bundles them with a DVR. Stations are available on iOS and Roku devices, with Android, PC and Mac browser support scheduled to kick in by mid-March. The service is $12 a month, and is currently invitation-only in New York. Aereo will open up to the public in NYC on March 14th.

In order to be successful, Aereo will have to deliver stellar quality of service. These are free broadcast TV channels after all, which means people can use their own antennas to get the same content at no cost. However, in addition to the DVR add-on (which is pretty compelling in itself for today’s non-cable households), Aereo promises decent picture quality – no need to futz with antenna positioning or manipulate around dead zones. That’s a potential combination of DVR, picture quality and convenience. Not bad.

In addition, I think Aereo’s got a few other things going for it: 

1. Simplicity – Aereo’s not trying to do too much, which is arguably what put Sezmi in the deadpool.

2. The Right Price – $12 plus a Netflix subscription for $8 still puts you under the cost of a cable TV economy tier.

3. It’s Internet TV on Your TV – The Roku and other new in-home streaming solutions make it easy to get this Internet content on the living-room TV, something that was a lot harder to do a year or two ago.

Unfortunately, Aereo also has some hurdles to clear. There was a brief moment when I thought the service would steer wide of consumer broadband caps. A GigaOM article pointed out that “Aereo users are not paying for content but are renting the antennas and paying for bandwidth, power and other costs.” My brief hope was a little ridiculous though, as I realized Aereo’s not talking about bandwidth in the last mile. The TV channels are still being delivered over the Internet, which means streaming those stations will count toward any ISP usage cap.

Second, and more importantly, Aereo’s likely to have a big legal battle on its hands. The company’s betting it can succeed by relying on precedents set in the Cablevision network DVR case, but several people have pointed out that Aereo is much less similar to Cablevision than it is to Zediva, a company that lost its copyright argument because it actively re-transmitted available broadcast signals. Retransmission fees have become a huge issue for content owners, and even the broadcast networks now expect to make significant revenue through the retransmission channel. If Aereo manages to get around that fee, it will lay a path for others to take advantage of licensing workarounds. Aereo would set a powerful legal precedent, and you can bet the TV networks will fight tooth and nail to prevent that.

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18 responses to Aereo: the Good, the Bad, and Where It Could Get Ugly

  1. I’d say they will be crushed by legal challenges and related expenses…

  2. I agree with you Dave.

    Makes me wish I were a lawyer. A potential gold mine!

  3. Simply put, Aereo is not a cable system, while Cablevision is. Cablevision, by the definition of being a cable company, can retransmit a signal. Aereo is not a cable company, so it can not. Read the actual copyright law. Diller is a dillweed who should have dug deeper.

  4. “Aereo is much less similar to … than it is to Zediva, a company that lost its copyright argument because it actively re-transmitted available broadcast signals.”

    No. Zediva streamed your own rented copy of a DVD from your own rented DVD machine. Aereo is trying to stream the signal from your own rented OTA antenna in their farm.

    Seems similar on the surface, but the crux on the DVD case was “public performance rights”.

    “Simply put, Aereo is not a cable system, while Cablevision is. Cablevision, by the definition of being a cable company, can retransmit a signal. Aereo is not a cable company, so it can not. Read the actual copyright law. Diller is a dillweed who should have dug deeper.”

    But maybe Diller did dig deeper. (Now, maybe he didn’t, but maybe he did.)

    This seems on the surface like the Zediva case, but perhaps the wording of the law concerning physical media is different than the wording of the law concerning OTA signals. And the wording of the law is what is dispositive here, not what things seem on the surface.

    For example, the precedent cited by the judge in the Zediva case was that hotels couldn’t do their own in-house DVD farm to charge for VOD because of . But maybe the precedent is that hotels can charge to send OTA signals to their rooms? Maybe the law doesn’t give OTA public performance rights?

    I’m not a lawyer. But the two scenarios could radically differ down in the weeds of the law.

    The one thing I would say is that if the law on this fine point is going to be the dispositive matter on if this thing sinks or swims. If it’s lawful, no reason this service shouldn’t make money.

  5. Edit paragraph 7: “For example, the precedent cited by the judge in the Zediva case was that hotels couldn’t do their own in-house DVD farm to charge for VOD because of public performance rights. But maybe the precedent is that hotels can charge to send OTA signals to their rooms? Maybe the law doesn’t give OTA public performance rights?”

  6. Love the idea.
    Wish the big 4 would team up on this in one app.

    My question is – if I’m eligible to subscribe can I go anywhere in the world and still pick up the signal a la slingbox?

  7. OK. My snap judgment, on ten minutes’ reflection, and mostly out of a position of ignorance on the past day’s revelations:

    I think this thing is likely legal.

    My two vague tidbits of evidence:

    1) OTA is really different than physical media and cable signals in terms of regulation. And OTA still has some of the old lineage of the public airwaves being for the public service dating back 50 years. This likely results is more consumer-friendly regulation in place.

    2) Barry Diller is an idiot in certain spheres, but he’s likely not an idiot in a way that make him not hire competent lawyers to vet this.

    In other words, remembering my ignorance of the past day’s revelations, and based on those two tidbits, I’d make the Intrade odds market of it being legal by going long at 50 and going short at 80.

  8. “My question is – if I’m eligible to subscribe can I go anywhere in the world and still pick up the signal a la slingbox?”

    I’m curious about that too. (It may already have an answer.) It likely has to do with the OTA regulations. My suspicion is that they’ll have to keep it local, but it’d be a much cooler service if they didn’t have to.

  9. @Chucky,

    As I understand it they require you to have a NYC billing address AND that your IP address be one assigned within NYC OR that you geo-locate somehow within NYC. Not sure how that would be possible with something like a Roku, but that’s my memory of the story from TNT anyway.

    @Mari,

    While in theory most people in NYC can receive those channels for free, there are lots of reasons they might not be able to. Even just having an apartment that faces the wrong way might be enough to keep you from receiving one or more of the channels you really want. I don’t think its JUST the DVR issue. In fact I think they might have been better off just introducing the TV retransmission thing first just to see what happens legally.

    As far as caps, yeah that might be a problem. It looks like various parts of NYC are covered by Comcast, TWC, Cox, Cablevision etc, all of which have different policies. But for example Optimum Online/Cablevision at $49.95/month (without cable TV) have soft caps that they don’t advertise and they throttle bandwidth once you exceed. Certainly assume your TV signal would vanish at that point since I assume you need a good 2Mbps at least to get any kind of HD quality. And I presume they’re capable of detecting and throttling this TV service if they feel like it, just from IP address checking alone.

    HBO Go’s 720p for example streams at 3.5Mbps if it can. A 100GB/month limit would be used up at that rate in 63 hours, so about two hours a day. While I don’t really believe Nielsen’s numbers that Americans watch 8 hours a day of TV, two hours a day is certainly a problem if this is true.

    I suspect that Aereo needs to be ready for not only a legal challenge from the media companies but a network neutrality challenge against the many cable companies within its footprint.

    Seems nasty.

    I wish them well though. I think all this stuff should be legal.

  10. Eh, their legal bills versus limited interest in the service already puts Aereo on a deathwatch. And, actually, the content providers may just leave them alone assuming they won’t find enough customers to sustain a business.

  11. Glenn- I agree that decent access to the broadcast channels alone is pretty compelling, but for $12/month, I think it’s good they threw in the DVR.

    What’s really interesting here are the potential retrans implications. See Steve Donahue’s take at Fierce Cable: (http://www.fiercecable.com/story/retrans-ammo-aereo-could-help-cable-operators-bring-broadcasters-their-knee/2012-02-16) It starts to beg the question – could cablecos use Aereo to provide broadcast channels instead of paying retrans fees? Lots and lots of complications with that of course, but the legal and business possibilities are wide-ranging.

  12. Diller must have been aware that there would be major legal battles ahead and as Chucky notes, he is smart/rich enough to have people to figure that out for him – it’s not like he makes these decisions solo.

    Aereo would not have gotten anywhere near the press it got without Diller’s name attached to the deal. Like no press at all outside places like Fierce.

    The bigger news here is that because it got lots of press, the 99% of the population who don’t regularly read ZatzNotFunny (no slam intended, Dave) now know that HD antennas exist. WHich means that even if Aereo fails, they’ve put the idea in people’s heads and it won’t be long before someone comes up with an Aereo that works better legally and technologically.

    People I know who have tried HD antennas seem to mostly report that reception is very spotty

  13. Alan, here’s another data point… I get no OTA reception, other than some obscure programming, since the digital transition. Prior to the transition, I could get ATSC HD broadcasts but something about switching frequencies (UHF to VHF?) killed it. Which means I’ve been unable to review the Channel Master DVR but I’m hoping to cover Simple.TV via QAM. We shall see.

  14. @Dave, I’m the same way. Once the digital switch date it, several stations switched back to VHF, which ATSC is not well designed for, so their signals disappeared.

    Jumping back to the legal question, I think they’re actually protected under a bunch of decision around cable companies retransmitting over the air signals back in the 80s.

    Whether or not they’re legally justified might not matter, media companies don’t like change, so I suspect they may try and sue this company out of existence (with lawsuits that would never win, but they don’t have to to bankrupt someone).

  15. “Whether or not they’re legally justified might not matter, media companies don’t like change, so I suspect they may try and sue this company out of existence (with lawsuits that would never win, but they don’t have to to bankrupt someone).”

    It’s actually not too difficult to fight off utterly frivolous lawsuits if you have a minor cash cushion.

    If the law is clearly on your side, you can win a quick judgment, and even sue to get your court costs back.

  16. “…the 99% of the population who don’t regularly read ZatzNotFunny…”

    As Harry Dean Stanton said in Repo Man, “Look at those as*holes, ordinary fu*king people. I hate ‘em.”

  17. I can’t tell you if the service is ultimately legal or not… but I can tell you that the lawsuits have begun.

  18. I hope this service is allowed by courts. If not folks could simply get a slingbox.

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