Monday, April 28, 2014

Aereo versus ABC

Reading Freakonomics on the web and this morning their article is about Aereo, the antenna rental business in New York. The following is a quote from their article:

Aereo’s business model is clever and, potentially, very disruptive. As they have done since the dawn of television, the major networks – ABC, NBC, CBS, and FOX – broadcast their signals over the air. You can receive these signals with a digital antenna – the modern equivalent of rabbit ears – and millions of Americans who don’t subscribe to cable or satellite still do.
Click here for the full article.
I find this facinating as a child of the 1950 when TV was just moving from a rich man’s toy to everybody’s got one with antennas on every rooftop.
The broadcasters gave away the program to anyone and everyone to get the advertising base and into as many living rooms as possible. The original model was similar to print with the largest advertising fees going to the station with the largest reader / viewer base. Part of the reason that some TV show stars make huge salaries after the show catches on.
There was a theory from radio that was applied to TV broadcasts - “the right of capture”. The concept being that since there was a limited number of frequencies that the broadcasters could use and they were licensed by the government to use it, anyone with the appropriate receiver could “capture” the signal and listen or watch it.
Obviously no one knows how the Supreme Court will decide but the precedent of deciding that I cannot pay someone for the use of an antenna in a better location than my own rooftop (or a set of rabbit ears) will be the first wedge in removing all free broadcasts. Once the concept of my not being allowed to put up (or pay some one to put up) a remote antenna is accepted how long until putting one up on my house (or even using set-top rabbit ears) becomes illegal too.
The cable companies rebroadcast programs and pay a fee to the program’s owners but they get their signal directly from the broadcaster and we expect a much higher level of signal quality using that system. With Aereo’s antenna farm, I might expect a lower level of signal and so only be willing to pay less. And that seems to be Aereo’s business model.
ABC seems to be changing their business model from broadcasting the signal over the airways for free to the viewer and charging the advertisers for access to those viewers to one of charging the viewer for part of their costs and only charging the advertisers for part.
If the supreme court does decide in favor of ABC it should increase ABC’s income by the amount antenna farms have to pay for the right to retransmit the programing.

OK, now we should see the cost of the broadcast license increase since the public owns the airways and with those extra fees it just made that license a more valuable commodity.

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