Bloomberg published a new story late last week that isn’t about what you may think it’s about at first glance. The piece, titled DirecTV, Time Warner Cable Are Said to Weigh Aereo-Type Services, would have you believe that the cable and satellite providers are tinkering around with services that allow you to stream your local channels over the interwebs to your favorite portable devices. And while it’s true that the telecoms are certainly headed in that direction, that actually isn’t the the main takeaway from Bloomberg’s piece. Instead, it digs into the implications of Aereo’s continued legal wins against CBS, et. al., and the ways in which the broadcast television industry could change as a result.
At the heart of the battle between broadcasters and Aereo is the issue of retransmission fees — the ever-increasing pile of money that Comcast, Charter, DirecTV, Dish, and others pay CBS, NBC, CBS, and the rest for the privilege of delivering content to you over a cable that you could get for free with an antenna. Those retranmission fees are a huge source of revenue for the broadcasters, and they’ve been on the rise lately — a trend that doesn’t look to be declining anytime soon (in fact, Bloomberg reports that those fees could double by 2018). Disputes over those rising fees are why Dish let 36 Raycom-owned channels go dark earlier this year. They’re also why CBS took its toys and went home in Time Warner Cable-dominated markets this summer.
If Aereo eventually prevails against the broadcasters, though, what’s stopping Time Warner Cable, DirecTV, Dish, and other providers from simply delivering broadcast channels the way the upstart streaming service does? That is to say: what’s to stop them from setting up an array of miniature antennas, one for each customer, and quit paying retransmission fees altogether? Although Bloomberg couldn’t get anyone from Charter or Time Warner Cable to go on record about the potential for such a move, it’s an obvious one nonetheless:
Cable companies are within their rights seeking to match Aereo’s ability, if it stands up in court, to capture free broadcast signals rather than pay for land-based access, said Leo Hindery, managing partner of New York-based private equity fund InterMedia Partners and former chairman of the YES Network.
“It is intellectually and legally inconsistent to saddle the cable industry with billions of dollars each year of broadcast retransmission fees, while allowing a similarly for-profit company to pluck broadcast signals out of the air and sell them without paying any such fees,” Hindery said in an interview. “The cable companies are fully entitled to do everything in their power to stop this travesty.”
And how would the broadcasters respond?
The fees are essential to the broadcast TV industry, Fox President and Chief Operating Officer Chase Carey said in April. If Aereo is permitted to stay in business, Fox’s broadcast network will convert into a cable channel and cease to provide over-the-air access, he said at the time.
CBS CEO Leslie Moonves said he would do the same, as did Univision Chairman Haim Saban.
It actually hurts my brain to try to think through all of the implications of such a reaction. What would happen to local over-the-air stations if Fox, CBS, and the rest leave the broadcast space? Would local nightly news become a thing of the past? What, if anything, could the FCC do to stop this? And if it could, should it?
At any rate, I’m reminded of the old joke in which a politician comes across a lamp, rubs it, and is met by a genie who promises to grant any wish, with the caveat that his competitor will be granted his wish twofold. The politician thinks for a second and says, “I’ve always wanted to donate a kidney…”
In other words, CBS, Fox, and Univision are willing to give up their prime spots at the bottom of the dial and the prestige of being known as one of the “big broadcast networks,” all in an attempt to make a few extra bucks. Or, at least, that’s their bluff.