DirecTV, TWC, Charter looking at Aereo knockoffs


Time Warner CableThe three MVPDs, emboldened by Aereo’s nearly nationwide rollout, are considering retransmitting free broadcast-TV signals (like Aereo) online with tiny antennas. The move would hope to avoid retransmission fees to broadcasters in any market they were offered.

Aereo, which charges $8 a month for online access to broadcast TV, is locked in a court battle with CBS, Fox, ABC and other broadcasters over the legality of its service.

If Aereo ultimately wins—which would mean a Supreme Court ruling over the current climate of conflicing court rulings for Aereo and copycat service FilmOn X–MVPDs could use the same approach to bypass the fees they now pay for network signals, said a Bloomberg story. Time Warner Cable has even considered buying Aereo, a source told Bloomberg.

“If found to be legal, the Aereo concept is very interesting, especially as it relates to retransmission consent fees,” Maureen Huff, a spokeswoman for New York-based Time Warner Cable, told Bloomberg.

We assume that the MVPDs—if they move forward with or without a Supreme Court ruling–would have to redistribute local broadcast signals via an internet/mobile platform like Aereo.

Marci Ryvicker, Wells Fargo Senior Analyst, says the latest news that MVPDs are looking at an Aereo-type option, doesn’t see it as a simple solution, as it might force the FCC to get involved, among other things:

“The definition of MVPD is the single biggest obstacle to incumbents converting to an Aereo-type model. The Telecommunications Act of 1996 defines an MVPD, or Multichannel Video Program Distributor, as ‘[a] person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming.’

Importantly, an entity that falls under this definition is subject to both benefits, such as program access rules and legal obligations, such as retransmission consent – meaning that unless the incumbent MVPDs give up a substantial amount of rights, we don’t see how they avoid retransmission consent requirements.

Some quick background here:

Back in March of 2012, the FCC issued a public notice asking for input regarding the interpretation of the terms “multichannel video programming distributor/MVPD” and “channel” as used in the definition of the term “MVPD” with the underlying question being whether or not Over-The-Top providers (such as Aereo, Netflix, etc.) should fit this definition. While this issue seems to have fallen by the wayside (there have been no updates since May of 2012), we do think the FCC might be forced to revisit. One big important take away here is that IF OTT providers are eventually considered to be MVPDs, then the question of Aereo’s legality becomes moot – since as an MVPD, it would be required to pay retransmission consent to every broadcaster in every market. We wonder what Aereo’s business model might look like then?

–MANY long-term carriage/retrans agreements have just been signed. While the MVPDs are clearly trying to stem the growth of retransmission consent, we wonder just how quickly the benefits of an Aereo-type service could even be realized. Recall that most MVPDs are at the beginning of newly signed retransmission consent deals, with a bunch around the corner. To us, we don’t think an Aereo-type implementation would be viable until 2017 or even later – given the number of contracts being signed today coupled with time it would take for an incumbent MVPD to roll out such a service. (Plus we find it hard to believe that any incumbent would consider Aereo until/unless it is found to be legal).

–The NFL might have a say here. TV rights to NFL games are the most expensive of any American entertainment property – with the broadcast nets & ESPN about to pay the NFL roughly $5B/yr in the ’14 to ‘22 pd. (up ~66% from the current ~$3B/yr). We wonder how the NFL might feel with both Aereo & MVPDs retransmitting its games without payment – our gut says not so good.

–Our view is that the faster the Supreme Court weighs in on Aereo, the better (it would alleviate a potential overhang). And we think this weekend’s news (again, real or not) might accelerate this process, bringing clarity to many of the issues we raise above.”

See the Bloomberg story here

RBR-TVBR observation: It would definitely accelerate the process of clarifying ground rules for the industry if some MVPDs started offering Aereo-like services. The FCC would probably be compelled to revisit its public notice about these OTT services and the Supreme Court would be pressured more as well to step in. One thing is for sure—the situation would get even more messy in the meantime.