Aereo ruling ‘will not end tech threat to broadcasters’

“Disruptive” business models of emerging tech firms still threaten broadcasters, despite the US networks’ legal victory over streaming service Aereo, financial analyst Moody’s says.

The US broadcasters scored a decisive win at the Supreme Court this week, with a majority decision agreeing Aereo was illegally profiting from retransmitted network signals via the internet.

This effectively defined Aereo and other companies similar to it as cable operators, meaning it was violating the 1976 Copyright Act.

The ruling “strengthens [networks’] grip over their valuable and expensive-to-produce-and-license content and preserves their ability to receive lucrative retransmission fees from cable, satellite and telecom operators going forward”, according to Moody’s.

An Aereo victory would have “impaired the negotiating power local stations and broadcast networks currently hold in new contract renewals, potentially slowing their growth in substantial high margin retransmission revenues”, it added.

However, the credit ratings specialist noted the curt decision was “narrowly focused and did not consider other technological developments such as cloud-based storage or DVRs”.

Therefore, linear television would “continue to be challenged by changes in consumer consumption of media due to technological advancements and potential disruptive business models”, added Moody’s.

Networks and their affiliates were spending “huge sums” on digital TV initiatives that allow users to access content online for a subscription, for example the ‘TV Everywhere’ programme, in response, Moody’s noted.

In further fall-out from the court ruling, Alki David’s FilmOn, which operates with a similar model to IAC-backed Aereo, said the decision “contained a hidden boon” for OTT services using broadcast networks’ signals. Defining OTT services as cable channels meant networks would now be instructed by law to provide their signals to carriers in exchange for a fee without giving express permission, it claimed.

“I have always said this was an acceptable alternative path: consumers get the TV they want on their own terms, advertisers get a vast new segment of viewers they have no access to now, and the networks win too by getting the fees I have always been willing to pay,” said FilmOn CEO Alki David.

FilmOn is currently planning to launch its streaming service in 18 US cities. Its retransmitted broadcast service will sit alongside 600 licensed channels and 45,000 VOD programmes, the firm said.

The basic FilmOn service is free, with some channels and DVR functionality costing a subscription fee.