Do We Have More in Common with Aereo or Local Broadcasters?


      Mary M. Collins

If you have been around the industry for a while, it’s easy to understand—and maybe even support—Aereo’s position in its copyright battle with local broadcasters. Some 50 years ago, around the time of the “British Invasion” on television sets and record stands, broadcasters were at odds with cable system operators over what they viewed as an invasion of their copyrighted material.

Similar to today’s dispute with Aereo, The U. S. Supreme Court was asked to rule on the issue. In that instance, it agreed with the cable operators’ position that their reception of over-the-air television programming and its retransmission to consumers’ homes were private, not public performances (of copyrighted material).

Of course a big difference this time around is the subsequent changes in legislation governing cable’s carriage of local broadcast stations, particularly retransmission consent rules. It’s easy to see why some in the industry have suggested adopting Aereo’s approach; After all, SNL Kagan is forecasting cable operators and other multichannel video provider (MVPDs) will be paying as much as $7.6 billion in retrans fees by 2019, up from $3.3 billion in 2013.

With so much at stake for broadcasters, it’s become “Television’s Battle Royal,” as David Oxenford, an attorney with the law firm Wilkinson Barker Knauer, has described it.   

However, as Oxenford warns, “It is not just broadcasters and TV program producers who are concerned about Aereo’s impact. All content owners worry about creating a gaping loophole not only in the right of public performance but reproduction right as well,” he pointed out in an article appearing in the January/February issue of MFM’s The Financial Manager magazine.

Similar to what we experienced following the Supreme Court rulings in the 1960s, Oxenford expects moves by content providers to close this loophole, including their renewed interest in an FCC- initiated proceeding to determine if an Internet-delivered video programming service could qualify as an MVPD. In the meantime, a 10th Circuit court decision suspending the service in Denver and Salt Lake City has provided the U.S. Supreme Court with several reasons to conclude Aereo’s offering of broadcast signals constitutes a public performance, making it subject to rules like retrains.

Regardless of how the Supreme Court decides, it’s important to consider Oxenford’s characterization of the dispute with Aereo and other OTT (over the top) services as being a battle royal for television and not just for broadcasters. It reminds those of us in the cable industry that there’s more at stake than exploiting a favorable ruling for Aereo in order to avoid retrans payments. After all, television is still a big part of what we do. It averages over $75 in ARPU (average revenue per user), according to SNL Kagan’s "Programming Costs Analysis For The Multichannel Universe" report.

Viewed from this perspective, Aereo and other OTT providers represent a major disruption to the cable industry’s business model, what Nassim Nicholas Taleb characterized as a “Black Swan” in his 2007 book of the same name. I actually learned about the “Black Swan Theory” when Scripps’ Ken Lowe keynoted our 2008 annual conference. Lowe, who was also on hand to receive our Avatar Award, MFM’s highest honor, in recognition outstanding contributions to the communications industry and exemplary community service leadership, talked about the need to identify such disruptive shifts and the business opportunities they provide.

As James McQuivey, a vice president and principal analyst at Forrester Group recently told attendees at NCTC’s Winter Educational Conference, companies like Amazon, Google and Facebook see video as the “bait” that will help them to create larger and stronger connections to the consumer, much in the same way that Apple iTunes originally used music to drive sales. Is it really in the cable industry’s best interest to support their drive to strengthen ties with the consumers we count on for our livelihoods?

When we consider the value of local TV stations, which continue to lead live television viewership and offer proven capabilities to sell products in their markets, we may want to think about the upside to supporting one another’s business models in this “battle royal” with OTT. There have been some great examples where retrans negotiations resulted in mutually beneficial partnerships that tapped into the local station’s ability to drive the sale of cable’s “triple-play” offerings in return for improved placement on the channel lineup, as well as initiatives involving collaboration on locally produced content and ad sales.

As head of an organization that brings together the financial leadership of cable, broadcasting and other forms of new and traditional media, it has been my experience that there is a lot more to gain from focusing on our common ground. And in this case, the common ground is a highly coveted market for video programming that is ours to retain or lose.

If you’d like a first-hand look at how broadcast and cable companies come together to collaborate on the future, I encourage you to join us for Media Finance Focus 2014, the 54th annual conference for MFM and BCCA, the media industry’s credit association. This year’s conference will be held in Miami Florida from May 19 – 21 and you can find more information on MFM’s Web site – www.mediafinance.org

Given this year’s location, our theme is “Radiate Success” which also speaks to the objective of our agenda. With the help of more than 150 experts, our attendees will come together to discuss how we can respond to disruptive challenges like OTT that threaten to cloud our future outlook and both anticipate and create our own “Black Swans” using strategies that will radiate continued success for our companies and industry.

(Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at mary.collins@mediafinance.org.)

 

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