Is Aereo a Major Disruptive Force in the TV Industry?

It seems that the broadcast networks are scared. Two, anyway, have proclaimed that they might give up their access to the broadcast airwaves and retreat to paid television models. What would lead networks to consider -- or more likely, threaten -- such a drastic move?

This, it turns out:

Image from Aereo press kit. (aereo.com)

No, not the dime, the television antenna that it is next to and smaller than. A service called Aereo has thousands of these tiny antennae and is selling remote access to them as a way to deliver television content over the internet.

Now restreaming and selling someone else's copyrighted content is generally illegal, but Aereo has employed some conceptual brilliance here. By dedicating a tiny antenna to each paying subscriber, the product being sold is more like a computer peripheral, linking a personal antenna to a device, than it is illegal resale, or public performance, of content. That logic prevailed with a federal appeals court last week, where a dissenting judge described the service as "a Rube Goldberg-like contrivance, overengineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.”

The service is currently only available in New York City, and it seems like paid mobile access to broadcast channels would have limited appeal. After all, a lot of people don't bother to plug in antennas for free access to broadcast TV. The New York Times report on the court decision suggests that Aereo might see its future in deals with cable networks, like that penned with Bloomberg TV. If so, the service could develop into a paid TV provider, like a cable or satellite system for mobile devices. The success of such a system would limit broadcasters' own ability to profit from mobile distribution of their programming through services like Hulu Plus or Netflix.

Another major threat to the broadcast networks is the possibility of existing cable or satellite systems beginning to use technology like Aereo's for retransmission of network content. As the Times reports, these carriers pay to distribute network content, and they might be interested in an alternative that legally allows them to opt out of such payments. I'm not sure, though, how such a move would comport with must-carry restrictions. Cable operators are required by law to carry the content of local broadcasters, and it is through this system that payments are being made. It seems like an effort to circumvent that system could violate the must-carry rules.

In any case, we should expect broadcasters to be talking with Congress about Aereo soon.