Why Is Aereo Such A Threat To TV Networks?

The Big Four television networks -- ABC, CBS, NBC and FOX -- are once again upset over a new technology that they perceive as a threat to their business model. The offender this time is Aereo, a New York-based service that uses tiny antennas to allow subscribers to watch live broadcast television on their computers, or save the content to watch later.

After a federal appeals court in New York ruled on April 1 that Aereo does not violate copyright laws, some network officials are threatening extreme action. Chase Carey, the president and COO of News Corp., threatened to move Fox from a free broadcast to cable, and others are apparently thinking the same thing.

But why are the networks feeling so threatened? After all, these are channels that broadcast for free, and anyone can pick them up. Aereo’s antennas aren’t too different from the rabbit ears of yore; they just transmit the signal to a computer or mobile device rather than a television set.

The real problem lies with “retransmission fees,” which the networks charge cable and satellite systems for the right to broadcast content to paying subscribers. These fees add up to an estimated $3 billion across the industry, and have become an increasingly important revenue stream for networks in the face of “cord cutting” and shrinking advertising.

The networks claim that Aereo is stealing the signal to rebroadcast it, but the court ruled that Aereo is simply enabling consumers to do what they could already do on their own with an antenna.

“Aereo has invented a simple, convenient way for consumers to utilize an antenna to access free-to-air broadcast television, bringing television access into the modern era for millions of consumers,” said Aereo representative Virginia Lam in an official statement. “Having a television antenna is every American’s right.”

Additionally, Aereo allows users to save content and watch it later. Just like with the dispute over Dish Network’s Hopper and other DVR devices, networks say this will eat into advertising revenue.

Networks fear is that this court ruling will encourage other cable and satellite companies to develop similar technologies that avoid retransmission fees. They have pledged to take the case to a trial.

“The court has ruled that it is OK to steal copyrighted material and retransmit it without compensation,” the group of plaintiffs including Fox and PBS said in a statement. “While we are disappointed with this decision, we have and are considering our options to protect our programming.”

Unfortunately for audiences, these options may spell the end of free television.