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Will 21st century broadcasting use the airwaves?

April 09, 2013|By Jon Healey
  • This is one of the arrays of tiny antennas that Aereo uses to tune in over-the-air television signals. Customers lease an antenna along with the equipment needed to record programs and stream them online.
This is one of the arrays of tiny antennas that Aereo uses to tune in over-the-air… (G.Giraldo / Aereo )

In light of a second preliminary court ruling in favor of Aereo, a service that lets people record and watch broadcast television programs through the Internet, a top News Corp. executive says the company may take its Fox television stations off the airwaves, Bloomberg's Andy Fixmer reported Monday. And News Corp. isn't the only broadcaster that may retreat from over-the-air TV; according to Forbes' Jeff Bercovici, two major networks are mulling whether to do so if they can't prevail in court against Aereo and Dish Network's automatic recording and commercial-skipping features.

The notion that any media company would give up valuable broadcast spectrum struck Techdirt's Mike Masnick as risible. "No networks are stupid enough to shut down over this, and if they are, good riddance," Masnick wrote Monday. "First of all, network TV shows get a lot more viewers. By a wide margin. Yes, there's an occasional cable show (Game of Thrones) that sneaks in to the top ratings, but it's pretty rare. The cable shows that get the most viewers are still viewed a lot less often than most network shows."

Masnick usually pounds on media companies for not adapting to the changed technological landscape. But what the broadcasters appear to be doing here is recognizing how much that landscape could change even before the innovations by Aereo and Dish spread to the masses. Aereo is available just in New York, and only a portion of Dish's 14 million subscribers have the new digital video recorder that can skip commercials.

Let's just assume that the courts side with both Aereo and Dish in their disputes with the networks. Aereo will have demonstrated how to offer a cable-TV-like service without paying the networks responsible for the most popular channels, and Dish will have shown how to create a Hulu-like on-demand TV service (minus the advertisements), again without having to pay the content providers a premium for their shows.

Those are not developments that bode well for an over-the-air network. The Aereo threat is particularly dire; if the company expands as rapidly as planned, it will hurt broadcasters' ability to extract ever-higher retransmission fees from cable and satellite TV operators. Why should Time Warner Cable pay for Fox when Aereo is getting its programs for free and selling them to the public at bargain-basement rates?

Meanwhile, the number of people watching broadcast TV with the aid of an antenna is a fraction of what it used to be; about 90% of U.S. homes tune in these channels via some form of pay TV. If Fox decided to shut down its transmitters tomorrow, it would cut off only 10% of its viewers, many of whom might quickly sign up for cable just so they could keep watching "American Idol." And doing so would not only end the threat Aereo poses to the retransmission fees Fox receives from pay-TV operators, it could conceivably enable them to demand higher amounts from those operators -- and from the Aereos of the world.

Such a shift from free to pay is contemplatable mainly because, as Masnick noted, the four major broadcasters' programming is more popular than everything else on TV. That's likely to remain true even if they lose all their viewers in homes that rely on antennas.

One might argue that networks should try to capitalize on the viewers brought to them by Aereo and its ilk, rather than cutting them off. More viewers should mean more advertising dollars, after all. But if Dish successfully defends the ad-skipping function of its set-top boxes, it may not take long for someone to come up with a service that combines that with Aereo's offering. Such a service wouldn't pay the broadcasters for their programs, and advertisers wouldn't pay them for the viewers.

The federal government has tried to prod broadcasters to give up at least some of their airwaves so the spectrum could be auctioned off for more innovative uses, but the big networks have shown little interest in doing so. It would be richly ironic if a TV-over-the-Internet service caused network executives to change their minds.

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Follow Jon Healey on Twitter @jcahealey

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