|Posted on April 28, 2012 at 9:35 PM|
Weary consumers are looking for ways to lower their entertainment costs, and often don't understand why pay TV subscription bundles from their local cable company are so costly when all they really want are a handful of channels.
One of the things that drives up the costs of these bundles are retransmission fees, which are regularly negotiated. Most of us have likely heard on the news or read online about a specfic market that was going to be experiencing a channel blackout because the parties involved could not agree on a price point for retransmission fees. In fact, DirecTV made nationwide news when they were in a very public dispute over retransmission fees that threatened a Super Bowl blackout on February 5, 2012.
Cord Cutting Threat is Growing
Cable and satellite providers are very concerned about these issues, because more and more consumers are investigating how to slash their costs by seeking out lower cost subscriptions stream providers like Netflix and Hulu Plus. There are a few issues that are stemming a mass cord-cutting exodus from subscription TV bundles:
Left Holding the Bag?
If there is a mass exodus from cable and satellite TV subscriptions, those providers, who have already paid the large redistribution fees and licensing for the copyrighted content will be left with dwindling revenue streams to pay for the hefty retransmission fees that the copyright holders are demanding. They have a vested interest in trying to stem the streaming tide. That's why they are tempted to impose data caps so that people will not completely abandon their services.
A related issue is that the internet is really two different networks - the public internet (where we stream Netflix), and the private networks, where the subscription TV services are transmitted. If consumers abandon cable TV, there will be less profits available to build out the public internet. Consumer groups and the FCC saw the dilemma and set out "net neutrality" rules that in part state that internet providers cannot favor their private networks over the public internet. There is a lot of disagreement between the ISPs, consumer groups, and the government about this issue.
Why the Aereo Case is Important
Aereo is a start-up venture that just launched last month in New York City. They are selling subscriptions to live network television for $12 a month, streamed over the public internet. They are rebroadcasting the content without permission, and without paying the retransmission fees that cable and satellite TV companies have to pay.
Consumers can opt to get network broadcasting for free with an antenna, however, some people live too far away to pick up the signals via antenna, or they live in a neighborhood (or an apartment) where antennas are not allowed. So these consumers currently are forced to either pay the high cable television subscription prices, or do without.
Aereo's argument is that they are simply renting individual antennas to their customers. Since consumers can get programming via antenna without paying a retransmission fee, then if Aereo supplies the antenna, it's really apples to apples.
The content providers beg to differ, because Aereo is redistributing live television over the public internet. See the dilemma?
Time Warner Cable Closely Watching the Legal Battle
If Aereo wins this case, two things will happen. For one, there will be a lot more viable options for live tv than there are now.. But more importantly, it wlll pave the way for cable companies to argue against the hefty retransmission fees they are forced to pay. This could finally be the straw that broke the camels back in terms of finally breaking the monopolies that have driven up entertainment costs for consumers.
Time Warner Cable CEO Glen Britt told an analyst on April 26 that this could be a very important rulting for his company, which has had several large battles over the years regarding disagreements over retransmission fees that have resulted in temporary blackouts for TWC subscribers.