Threat by News Corp

According to an article by CNN Money, News Corp, the parent company of Fox, is threatening to make their channels exclusive pay-TV models unless Aereo shuts down. Of course, this is probably empty rhetoric. A move as drastic as that would be awful for a network as big as Fox. With hugely successful programs like American Idol and their sports programming, a loss of viewership would be too much to handle. They're mostly upset because Aereo has found a way around the model that they've created. Aereo does not pay a subscription or royalty to News Corporation. They have used their streaming service to bring News Corporation and other networks' content to their subscribers. Aereo has deflected all attacks by the major news networks, and continues to operate. They seem to be determined in their model, and not phased by the frustrated remarks, threats, and actions of the major networks. News Corp seems to be mainly upset with their main flagship network, Fox, that is nationally broadcasted.

CNN Money reports that Aereo is stealing revenue from the network by offering their content for free over a stream. What is particularly interesting that is mentioned in the article is that Aereo gets around any accusations of pirating because their customers technically "own" one of the many little antennas at their facility. They argue that if their customers own the antennas they use to stream, then their customers can't be pirating anything because they are paying for the content. Problem is, News Corp isn't getting any of that revenue.

News Corp Family of Companies

Aereo is a disruptive and potentially problematic business, as mentioned on this site before. Any stream service that the networks don't get a piece out of, will be viewed harshly by them. A statement by News Corp stated that they want to "remain in the driver's seat of our own destiny." Essentially, a concession that technologies such as Aereo has thrown them off kilter and made it problematic for their business.  CNN Money reports that copyright infringement lawsuits have been filed by Disney, News Corp, NBC Universal, and CBS. Interestingly enough, nothing has come out of these lawsuits.

Aereo has been very strategic about where they have placed their business. They've avoided California according to the article because of the strict regulations in the state. Ultimately, it is very reasonable to think that companies like Aereo will eventually settle and pay the networks for streaming their content. That battle will be solved through the courts. Both of these industries can continue to survive with cooperations from each other. They will need to see eye-to-eye on a revenue split and redefine the business model of Aereo. In the end, I still think that the networks have the ultimate power over Aereo. Although Aereo has some deep venture capital pockets, the networks have the ability to pivot quickly and maybe come out with a competing service. The courts will need to help the networks out if they are to find a common ground in this battle.

It's clear that News Corp won't leave the national airwaves, and Aereo is being careful about how they proceed here. A good quote from the CNN Money article made by Aereo is, "It's disappointing to hear that Fox believes that consumers should not be permitted to use an antenna to access free-to-air broadcast television...Having a television antenna is every American's right." The stance that Aereo has taken is very clever. Many people own boats that are parked at a boat dock, and they are allowed to operate them and do what they wish with them with the exception of anything illegal. The key is that the boats, like the TV antennas, are not on the property of the owner. They can't do anything illegal either, but the question is, is streaming content from a national TV network illegal? It's a free broadcast, and presumably, Fox is still getting advertising revenue from the eyeballs on their content. The only thing that seems to be missing is the subscription revenue that Aereo is keeping for themselves.

Shawn

Source: http://money.cnn.com/2013/04/08/technology/fox-cable-aereo/index.html