NFL, MLB Warn of the End of Free Sports on Television

If startup Aereo prevails, Super Bowl and World Series could move to pay TV

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Aereo, the New York City–based online-video startup, has assembled an impressive run of legal victories over the top TV broadcasters, which clearly has the industry rattled. Now, Major League Baseball and the National Football League have issued a stark warning: if Aereo prevails, the leagues might move football and baseball broadcasts to pay-TV outlets like ESPN, TNT, or other cable or satellite outlets, they wrote in an brief filed last week supporting the broadcasters.

“The fact that the broadcasters are asking their most powerful allies, including the NFL and Major League Baseball, to support them in front of the Supreme Court, shows just how disruptive Aereo could be if the service is found legal,” says Rich Greenfield, a media and technology analyst at BTIG Research.

Launched in February 2012, after raising more than $20 million from media mogul Barry Diller’s Internet conglomerate IAC and other investors, Aereo picks up free, over-the-air broadcast signals using thousands of tiny antennas, and then sends those signals to its customers via the Internet for $8 per month. Aereo’s users technically lease the tiny antennas, which the company houses in nearby “antenna farms,” including a facility in Brooklyn, which picks up signals broadcast from the tower atop the Empire State Building.

Federal judges have repeatedly refused to issue an injunction shutting down Aereo, which has been expanding aggressively in cities around the country, including New York City, Boston, Atlanta, Salt Lake City, Miami, Houston and Dallas. The courts have repeatedly agreed with Aereo’s legal argument that it is transmitting “private performances” not copyright-protected “public performances.” In response, the broadcasters have asked the Supreme Court to intervene. Aereo has until Dec. 12 to respond to the broadcasters’ petition.

(MORE: Disruptive TV Startup Aereo Is Winning in Court)

The battle over Aereo underscores larger structural changes transforming the TV industry, as consumers increasingly have access to programming over the Internet and on their mobile devices. In particular, Aereo poses a threat to the existing TV business model, which involves cable and satellite companies paying billions of dollars in so-called retransmission consent fees to the broadcasters, for the right to carry popular programming like prime-time shows and sporting events.

Retransmission consent fees were at the heart of a recent dispute between CBS and Time Warner Cable that led to an unprecedented, monthlong CBS blackout for more than 3 million Time Warner Cable subscribers in New York City, Dallas and Los Angeles. Now, in the wake of Aereo’s legal victories, some of the largest cable and satellite companies, including Time Warner Cable, Charter Communications and DirecTV, are reportedly considering building their own Aereo-like services to avoid paying such fees. (In 2009, Time Warner Cable was spun off as a separate company from TIME parent Time Warner, which has filed a brief supporting the broadcasters.)

Such a move could have a dramatic impact on the existing TV-broadcasting landscape. In April, News Corp. chief operating officer Chase Carey said the media giant’s flagship Fox network might cease broadcasting over the U.S. public airwaves because of the Aereo dispute. He suggested that FOX — home of The Simpsons, Glee and American Idol — might simply move to pay-for-TV cable. CBS has also hinted that it might pursue a similar action, although company CEO Les Moonves recently poured a bit of cold water on the idea.

Still, there’s no doubt that such saber rattling reflects the growing unease in the broadcast industry over Aereo’s ascent. In an ominous warning, filed in an amicus brief in support of the broadcasters’ Supreme Court bid, Major League Baseball and the National Football League wrote that if Aereo prevails, they might move football and baseball broadcasts to pay-TV outlets like ESPN, TNT, or other cable or satellite outlets.

(MORE: CBS and Time Warner Cable Resolve Fee Spat, Ending Blackout)

“If copyright holders lose their exclusive retransmission licensing rights and the substantial benefits derived from those rights when they place programming on broadcast stations, those stations will become less attractive mediums for distributing copyrighted content,” the leagues said in their brief. “The option for copyright holders will be to move that content to paid cable networks [such as ESPN and TNT] where Aereo-like services cannot hijack and exploit their programming without authorization.”

“The court’s intervention is now necessary to restore clarity and certainty in this area and to prevent the unraveling of a marketplace built upon the licensing of rights rather than the expropriation of such rights through technological chicanery,” the leagues said, adding that Aereo’s lower-court victories provide “cable systems and satellite carriers with a road map to avoid paying these retransmission royalties. Cable systems and satellite carriers already have signaled their interest in following Aereo’s lead, should Aereo prevail.”

Broadcast honchos routinely dismiss Aereo. “How do you spell Aereo?” CBS chief operating officer Joe Ianniello quipped last week. His boss, CBS chief executive Moonves, chimed in with the following put-down: “More people talk about Aereo than subscribe to it,” Moonves said. “Right,” shot back Ted Hearn, vice president at the American Cable Association. “And way more people pay for CBS than watch it.”

The nation’s largest TV broadcasters, including Comcast-owned NBC, News Corp.–owned Fox, Disney-owned ABC and CBS, are sufficiently annoyed by Aereo that they’ve asked the U.S. Supreme Court to shut the service down, claiming it’s a flagrant violation of copyright law that amounts to outright theft. “It is illegal to take our signal,” Moonves said last week. CBS has enlisted the support of several powerful players, including the NFL and Major League Baseball, to help defeat Aereo. So far, the federal courts have ruled against the broadcasters, but the Supreme Court may issue the ultimate verdict.

25 comments
shape8412
shape8412

Can the broadcasters spell N-A-P-S-T-E-R.?


The NFL and MLB might want to consider the NBA before going to an all pay tv environment

DeweySayenoff
DeweySayenoff

The basic problem is double-dipping and too many "TV" stations.

The double-dipping is taking money from advertisers AND extorting it from re-broadcasters.  The too many TV stations is that when you have to pay the extortionate "rebroadcast" fee for EVERY ONE OF THEM.  It jacks up the cost of cable and people drop it, making the broadcasters go back to everyone, rolling back advertising prices and jacking up rebroadcasting fees, reducing program air time (from 56 minutes in the 1970's to 41 minutes today) to make up for the loss of advertising revenue  and basically delivering even less incentive to the viewers to watch them in the first place.

It's such a self-defeating model because it draws on revenue from two sources and by trying to increase revenue in one, it reduces it in the other, which only drives up overall cost and reduces overall content.

I say settle on ONE model.  If you broadcast it for free, fine, advertising is your revenue stream.  If you have to compete to do it and need more money to stay on the air, sorry, Charlie, you succumb to the free market.  Frankly, the herd needs to be thinned.

But there's the thing: If your advertisers are reaching a larger market (national advertising for national businesses), YOU CAN CHARGE THEM MORE!  Not less. Cable can reach a whole lot further than your antennae can.  So either dump the advertising and make your money from rebroadcasting fees or dump the rebroadcasting fees entirely and jack up your advertising rates for putting your stuff out to a larger market.

Enough with the double-dip.  And let's not have to spend enough money to buy a CAR in a year just to watch some television!

albert65
albert65

I'd be okay with this... then maybe the regularly scheduled shows I like to watch will stop being delayed or pre-empted when one of those damn games run overtime! I dumped cable around 3 years ago, it was getting too full of stupid reality shows. All the TV I get now is over the air. Since I'm not a sports fan, this move would be to my advantage!

Hotpuppy
Hotpuppy

Let them go... just let me stop paying for ESPN in my cable package.  Let's see how many people are willing to pony up for pro sports..... while we are at it, let me drop all the other trash that cable forces me to buy.  I'm sure some will... but more people might opt out.  Media distribution is broken and the current model doesn't favor consumers.

Titanus
Titanus

This will be very interesting.  If sports do go to cable only I see Congress getting into this to score some bipartisan points.  The micomonopolies that the cable companies are, combined with now owning the broadcast companies, will not go over well when people have to pay higher taxes for stadiums, pay for ever increasing cable bills, and then have to go through a black out. Yea, good luck with that.  People already pay a higher fee for ESPN being in their cable package even if they do not watch the channel so you can imagine how much their cable bill will have to go up to justify all of MLB and NFL going onto non-pay channel cable.  Based on the amount of games already on cable the cost for all of them going there would raise the bill by what, $10 to $20?  People will go nuts!  The only way I can see them going all cable would be to have pay-per-view type channels; think HBO.  You want it you buy it but don't try to make me pay for it too.  Now, just how they would make more money by doing this is beyond me as Netflix has more customers now than HBO.  Yes, very interesting indeed.

DaWanderer
DaWanderer

Please go!  You will not be missed

DallasSingleMom
DallasSingleMom

I have Aereo and I love the service. I may not be as technologically advanced as others but I am wondering a few things. 1) I'll just go to a bar/restaurant to watch any game that I actually want to watch. I'm still paying less than the exorbitant cable bill a month. The establishment is not charging all of us re-broadcast fees (yes I'm being facetious). Why should I pay cable networks $130 to $150 a month when I can just sign up for NFL Rewind to watch replay of all of the games for just $30 during the season? Can somebody more substantial stand up the plate and make a threat please?

buffalo.barnes102
buffalo.barnes102

NFL: Please go (and take golf with you.) 3 hours of bloated, commercial-laden "sound and fury signifying nothing." "Good, clean hits" or cheap shots both producing the same result: A player laid out on the field and-Yippee!- time for 8 more commercials! C'mon Aereo, lay 'em out! 

UhcUhcTekcor
UhcUhcTekcor

[quote]“It is illegal to take our signal,” Moonves said last week.[/quote]
does this makes it illegal for me to tune in CBS? because to get any picture on my TV i have to take your signal. but i can't stand doing somthing illegal. calm down - WWJD?

CarlLegg
CarlLegg

"If Aereo prevails, the leagues might move football and baseball broadcasts to pay-TV outlets"

Hahaha. That's a good one. I wonder how much the attorney was paid to write that?

Do you know how much money the leagues would lose going to a 100% non-broadcast model? Do you know the size of the markets they would lose by cutting off broadcast revenues? Do the NFL and MLB really think the judges in these cases are THAT STUPID and uninformed of the basic marketing numbers ?!?

Hee hee -- thanks for a good laugh this Monday morning.

wiz
wiz

For teams struggling with fan attendance I don't think a move to paid programming will translate into increased turnout. The MLB would be at a greater threat to this, but I for one won't be persuaded to go back to cable over this BS. 

JoeSirbak
JoeSirbak

If the "broadcast" business model no longer works, it may be necessary for content (including live sports) to retreat behind a paywall.No one spends their time producing content - at least content on the scale of NFL football, or Lost, or Saturday Night Live - just to be a nice guy.It's just that right now we are in an awkward transition phase where the networks have effectively already retreated behind a paywall (insofar as they absolutely depend on the retransmission revenue stream from cable cos) but maintain the appearance of being a free broadcast network (by making programming available truly for free to a small number of savvy over-the-air viewers like me).Aereo recognizes this discrepancy between what the networks say their business model is and what it actually is and Aereo is trying to build a business out of exploiting the difference.The window of Aereo to grow, however, will close once the networks and/or content creators end the hypocrisy and stop giving away their content for free.

JoeSirbak
JoeSirbak

If Aereo constitutes a threat to the broadcasters' business model, it is because the broadcasting model already broke down somewhere along way.  It used to be that the major networks were an ad-driven business - advertisers would buy commercial time or product placements or sponsor live events, and the networks maximized their ad-based revenue by building the largest possible audience for advertisers.  The networks developed programing that people wanted to watch and then cast it as broadly as possible (broadcasted) via 100% free over the air transmission - all with the goal of increasing ad revenue.

DonGettys
DonGettys

Greedy b***ards. Already the teams rape cities for tax cuts, short-shrift injured players, and over-charge for tickets. The backlash might just make the public begin to realize. WGN losing the Cubs is a step that will kill the golden goose that TV made the Cubs into. Without their (overly limited )free TV they wouldn't be anywhere near as popular as they continue to be. It's not due to their "winning tradition".

commentonitall
commentonitall

It'll never happen.  They would lose millions in a single day.  No one is willing to pay for these individual network channels because they are not worth it.  The cable companies need to stop gouging on prices and let consumers choose the channels they want at a low cost, instead of forcing hundreds of useless channels no one watches.  The greedy ways of the cable industry has come and bit them in the butt, Karma has a way of finding you.

Bullsgt
Bullsgt

@buffalo.barnes102 I think the point here is Aereo is taking the free transmission (with commercials) and offering it for a fee.  Both the NFL and MLB have disclaimers on their broadcast stating "not intended for commercial use".

This is a form of piracy.

CarlLegg
CarlLegg

@buffalo.barnes102    "commercial-laden sound and fury"

Any more, we almost never watch commercials. Record the game, and FF thru the commercials and half-time garbage. Turns an NFL game into a manageable hour of TV.

LingerGalthrope
LingerGalthrope

@Bullsgt @buffalo.barnes102 How is it any different than renting an antenna and a DVR for $8 a month that sits in your house? This is essentially what you are doing. 

In the case of Aereo, your antenna and DVR are at a remote location and not in your house.


buffalo.barnes102
buffalo.barnes102

@Bullsgt @buffalo.barnes102 

"Not for "anyone else's" commercial use. Anything that drags the NFL out of it's staid and bloated comfort zone is fine with me. I do have the NFL.com's Game Replay feature which shows how a game can be whittled down to a watchable length. I mean, really, 6 hours to watch two football games? I've had surgeries that didn't last that long.

LingerGalthrope
LingerGalthrope

Nope.

Your antenna, your DVR. One single stream from your storage device to your player is a "private performance" not a broadcast.