Blog Post

Aereo Decision—Good or Bad for Consumers?


Streaming video content is growing massively with companies like Netflix, Amazon, and Hulu. Networks are trying to build platforms to conform to television-watchers' on-demand online viewing, but often at a price. Aereo began playing the game by providing subscribers with digital content from networks from antenna-farms. These antenna-farms were controversial because people are allowed to get content from antennas for their homes, but Aereo could have profited off of this without paying licencing fees to networks and content producers. Watch our Daily Brown Bag to learn about the Aereo case and find out whether it's good or bad for consumers.

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TRANSCRIPTION:

Hello and welcome to the Daily Brown Bag. Today we're going to be talking about the Aereo Supreme Court ruling. I'm Chad and I'm joined by Adam Setzer.

Good afternoon Chad, welcome to the Brown Bag. We're covering the recent ruling by the Supreme Court on whether Aereo is violating copyright law. And the news here Chad, it wasn't even close, by a six to three decision, the supreme court, the highest court in the land ruled that they are indeed violating copyright law and that's going to open a whole host of lawsuits and most likely shut down their business. Broadcasters, movie companies, pay-TV companies are all saying this is a huge win for consumers because it's upholding copyright law which is at the heart of a lot of media sharing and content on the internet as well over TV.

But others are saying that the ruling is a big loss for consumers because it's leaving them dependent upon big cable companies and its stifling innovation. So let's get into this a little bit Chad, first of all what is Aereo? Probably a lot of people have not heard of this company. And what they've done, I know you and I have been following this and talking about it. It's pretty interesting; they decided to use very tiny antennas, one per customer to capture local broadcasts, digital now.

That are available over the air and then stream them to subscribers and they claimed that this was okay because it was essentially equipment rental. You had this one antenna except not at your house, you had it at the data center, at the Aereo data center and they operated I think at about 11 different markets, Chad. Where they could then only sell to those markets, relaying this information. They've been doing this since about 2012 and what was interesting about it was the subscribers paid a very low cost. About $8 a month to basically get digital channels, those ones that are available over the air for free, streamed to their devices and to their home. These were in major cities like New York, Boston and Dallas; they didn't really disclose how many subscribers they had.

But what was big about what they were doing is it allowed a lot of people to quote "cut the cord" and there have been a lot of articles in the Wall Street Journal and other news outlets about those becoming increasingly dissatisfied with their very large cable bill. I think I saw the average is about $150 now for a bundled cable bill. Where the majority of subscribers are reporting they just don't watch 95% of the content on there and they even report that it's poor and wish they had a cheaper option. So that's sort of the background but what was really at the heart of this case Chad that the supreme court decided on recently?

Well it's a very interesting case and as you said, Adam, it's all about money. And what they call it, a retransmission fees and so the copyright law are basically if you have an antenna at your house, you can capture the broadcast for free and you can even record it. So people actually have something similar to what Aereo has built in their house where they record TV on a DVR that's capturing over-the-air content. Or in many cases you can get the content through a cable company but those cable companies have to pay retransmission fees to broadcasters and Aereo did not pay these retransmission fees. I think Adam as you said, they said "we are in the equipment rental business, so therefore we are renting you an antenna. We're not actually retransmitting."

So that was really the heart of the matter. The broadcasters came back and said that these actually are what are called public performances and therefore you need to pay retransmission fees and Aereo as you said, said, "no we're and equipment rental business we don't." So the supreme court came down and said no Aereo, you are in fact... it's a public performance and you do need to either cease doing business or start paying retransmission fees. So that's a pretty big deal and I think what was interesting Adam, is that the Supreme Court knew that they had to be careful when they made this ruling. Like it or not, that they didn't stifle competition and technology. So I think really that's where I'm going to hand it back to you and say is this a win or a loss for consumers?

Right and opinions are all over the board on this Chad. The public interest group Public Knowledge is saying the ruling is unfortunate. "Aereo, had provided an innovated service that brings consumers more choices and more control over their programming with lower prices. And now that will essentially be gone." But David Post from the Washington Post is saying, "Well it's not that much of a loss for consumers because what matters is that the court seems to have leaved untouched, the core of copyright. And that's really what we care about." So you're seeing opinions all over the place, my personal opinion is that it's not a good decision and it does... this did offer consumers a very low cost, unbundled way to get at content that otherwise you can't get to. You and I have talked about this Chad, this whole hi definition over the air actually doesn't work that great.

I've tried it at my house with the antenna; I can't get the tuning that I would hope. I know you've had a similar experience, so this seemed like an innovative way to use modern technology and I've read the arguments. It seemed like it was to the letter of the law, of copyright law, because there have been other challenges in the past. Cable companies do something similar where they buffer and store a public broadcast for you up in their server and then stream it to you. So I'm a little dumbfounded that those suits previously brought against the cable companies were dismissed and this one actually is going to shut down Aereo. So I see it as a loss because I know the big cable companies had vowed if Aereo had won, to immediately build similar products and bring more competing unbundled access to this content to market.

Which I think is what everyone is looking for, they're sick of the $150 cable bill to watch the three channels they love. They'd rather have a $20 one and get actually what they're looking for. So it does seem like a loss but hopefully it's not the end and we'll see more. That's our Brown Bag coverage of the Aereo Supreme Court decision; we'll love to hear your comments on this controversy. Do you think this is good or bad for consumers? And as always we ask that you subscribe to our YouTube channel so you can join us again tomorrow.