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Having an Aereo service won't necessarily solve retransmission dilemma

October 25, 2013|By Joe Flint

Are pay-TV distributors DirecTV, Time Warner Cable and Charter Communications looking to create their own version of Aereo -- the start-up that transmits the over-the-air broadcast television signals to consumers via the Internet?

That's what a story from Bloomberg suggests. The motivation is simple enough. If the cable and satellite guys can come up with their own way to distribute broadcast signals to consumers without having to pay broadcasters, it could save them a bundle of money in so-called retransmission consent fees.

There's only a couple of potential flaws in that idea. Some of these broadcasters also own powerful cable networks that no pay-TV distributor wants to be without. For example, if a cable operator says, "We won't pay to carry Fox because we have this new device that we can use instead to get the signal to our subscribers," then Fox can turn around and say, "Well, then I guess you don't want to carry Fox News or FX cable channels either."

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The same is true for Disney, parent of ABC as well as ESPN and Disney Channel. NBC also owns USA and Bravo and MSNBC. CBS has Showtime.

In other words, having an Aereo-like service won't necessarily shift the leverage in distribution to the cable and satellite guys away from the programmers.

To be sure, there are plenty of broadcasters that don't have cable properties to tie into distribution deals that could be harmed by cable and satellite companies building their own version of Aereo.

However, Fox, CBS and the other broadcast networks also receive financial compensation from their affiliates. That means the networks have an interest in protecting their affiliates retransmission consent fees as well since they get a chunk of that money. Indeed, Fox recently teamed up with Sinclair Broadcast Group, which owns many Fox affiliates, to sue Aereo in Utah.

The broadcast networks could even do something extreme like switch to a cable model and drop transmitting via the airwaves. Fox and CBS have already hinted that is a road they would consider going down if Aereo posed a significant threat to their business.

Then there is the legal situation. Aereo is being challenged in the courts by the broadcasters who argue that service violates their copyright. While Aereo has beaten back the challenges so far, it is not out of the woods yet. If the broadcasters win, then the cable and satellite guys are back to page one.

Who knows how serious DirecTV, Charter and Time Warner Cable are about going down this road. No doubt they want to find leverage to use against broadcasters. But given that the big broadcasters also own the big cable channels, an Aereo-like service may not scare the networks into folding their hand.


Broadcasters take Aereo fight to Supreme Court

Cablevision blasts broadcasters' Supreme Court filing

Fox, Sinclair and Local TV file suit against Aereo in Utah

Follow Joe Flint on Twitter @JBFlint.


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