Why Broadcasters' Anger With Aereo Masks Technology Footdragging

NEW YORK (TheStreet) -- Television's dominant players may succeed in convincing the Supreme Court that Aereo violates copyright law, but the technology that powers the plucky, brazen start-up is sure to live on just as video recording devices survived a similar assault some 30 years ago.

Broadcasters led by Disney's (DISABC, CBS (CBS) and Comcast's (CMCSANBC want the court to effectively shut down Aereo, the New York-based company that takes free over-the-air television programming and sells it for a monthly subscription fee of $8 to $12. Aereo argues that it's simply making free programming more convenient and less expensive. Frustration with the high cost of pay-TV is one issue that cuts across ideological lines. 

While the case, which begins its hearing today in Washington, will focus on the court's interpretation of copyright law, it masks broadcaster's long history of opposition to emergent technologies, beginning with cable-TV and later with the VCR and more recently with streaming video services such as Netflix (NFLX).

"The sad history of broadcasting is that over the last 30 years has been that they've had their heads in the sand and failed to anticipate and monetize changing technology," said Andrew Schwartzman, a public interest lawyer and professor at Georgetown Law School, in a phone interview from Washington.  

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"The broadcasters knee-jerk response, much like their knee-jerk response to cable television 50 years ago, was to oppose it and litigate it rather than take advantage of it."

When it comes to the Internet in general, broadcasters, both at the network and local level, have lagged even newspapers. Federal Communications Commission Chairman Tom Wheeler told the industry as much in Las Vegas earlier this month. Rather than complain about digital challenges to its business model, the industry must adapt to the Internet, or perish.

"Broadcasters have been much slower than other industries to figure out how to monetize the Internet, how to integrate their televised offerings, news programming, with their Web sites," Schwartzman said.

The heart of the broadcasters' case is that Aereo developed a technology that takes advantage of a loophole in the Copyright Act that distinguishes between a public and private performance. Aereo CEO Chet Kanojia, an engineer by training, maintains that his service simply provides a means for consumers to access what is already theirs to view. The technology, he is quick to point out, designates an individual antennae to each user thereby creating thousands of private performances.

It's an argument that Tribune's president of local broadcasting, Larry Wert, wholly rejects.

"It seems pretty clear that there are semantics about what the technology does," Wert said in an interview. "The suggestion that Aereo facilitates the consumers user experience seems a bit off. Truth is, Aereo records the content and then sells it, so it seems to me to be a clear copyright infringement."

Broadcasters initially complained that pay-TV operators shouldn't be able to charge for their service; afterall, they make their programming available for free. Of course, broadcasters have been using the public's over-the-air spectrum to sell commercials, a reality at the heart of Aereo's argument to continue to operate.

The legality of the VCR and the notion of "time-shifting" went to the court in 1984, which ultimately ruled that video recording was a private affair in line with copyright law. Ironically, as Ted Johnson at Variety underscored, the court's decision spawned the lucrative home video market. In the end, the broadcasters did just fine.

That is, until the latest technology emerged.

Netflix offered consumers one place to access lots of shows and movies. Though CBS, ABC and Fox may argue otherwise, most viewers select their programming based on taste, not on network. Aereo claims it's case is similar to Netflix, while offering consumers a far less expensive platform than pay TV. Napster did the same 20 years ago, reflecting consumer frustration with the cost of compact discs.

Like any company that dominates an industry, the broadcasters are loathe to see their business model upended. Major League Baseball owners ridiculed Curt Flood's legal effort to end the reserve clause. Flood won, and baseball owners have most enjoyed a profitable business.

The fact remains that television networks enjoy steady profits built on a dual-revenue stream of advertising and retransmission fees from pay-TV providers. So even though Fox's Chase Carey has warned that an Aereo victory would prompt a shift of major event programming such as sports and entertainment award shows to pay-TV, broadcasters aren't about to force local television stations to close their doors. Selling commercial time to national advertisers remains a very good business.

Ultimately, the Aereo case speaks to the evolution of the Internet and the public's preference for anytime programming on convenient portable devices. 

"Online video and over-the-top streaming video has been looming for seven to 10 years and broadcasters never sat down and said 'how can we do this'," Shwartzman said. "Broadcasters are having conversations in 2014 that they should have had in 2008."

-- Leon Lazaroff is TheStreet's deputy managing editor.

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Leon Lazaroff is TheStreet's deputy managing editor.

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