Aereo making retransmission negotiations more entertaining

26 July 2013 by Steve Blum
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Oh, baby, you are so talented. And they are so dumb.

Time-Warner Cable is threatening to shoot its own business model as it wrestles with CBS over permission to carry local television stations in New York and other major markets. Thanks to a law passed by the U.S. congress in 1992 with massive amounts of campaign contributions cogent policy research from cable, satellite and, crucially, broadcasting lobbyists, cable systems have to get permission to carry a local TV station, which means agreeing to and paying a price.

These negotiations are frequently rancorous and feature threats to pull local stations off of cable systems. Occasionally the threat is carried out, which usually brings a quick resolution because broadcasters start bleeding advertising revenue and cable operators are swamped with subscriber complaints.

This time, though, there’s another option. A new service called Aereo provides online access to local television stations in New York, and is expanding to other markets, with fiber-rich Utah next on its list. In a case that stunned broadcasters, a federal appeals court ruled that it’s legal for Aero to retransmit over-the-air stations without permission or payment. The U.S. supreme court is likely to have the final word sometime in the next year or two, but at least until then Aereo is good to go.

So Time-Warner is threatening to pull CBS programming off its system and tell subscribers they can watch it on Aereo via its Internet service.

It adds some pressure on CBS because retransmission consent money is at stake. But the greater risk is to the cable TV business. Time Warner is, in effect, threatening to tell its customers to start watching video programming on the Internet instead of via its cable system. Which would do more harm to cable’s business model than broadcasters. Unless their long term strategic objective is to partly (or even completely) back out of the television programming business.

Do they really want to do that?