The nation’s TV networks were a big winner in the Supreme Court ruling on American Broadcasting Companies Inc. v. Aereo, Inc. on Wednesday — and that means that the NFL and Major League Baseball are celebrating as well.
The Supreme Court, by a 6-3 vote, ruled that Aereo, a two-year-old internet streaming service, must pay broadcasters when it takes programs from the airwaves and transfers them to subscribers who watch on phones and other devices. The ruling preserves the networks’ power to collect huge fees from cable and satellite systems. Aereo is available in 11 cities and uses small antenna farms to grab signals and transmit them to subscribers for a fee of $8-$12.
The NFL and MLB weren’t just nervous about Aereo, they were involved in the battle along with ABC, CBS, NBC, Fox and PBS, warning that Aereo could bring about the end of free game broadcasts. In a friend-of-the-court brief they filed last November, they wrote that Aereo’s business is “neither technologically efficient nor innovative. It has no purpose other than to avoid compensating the copyright owners whose programming Aereo exploits.”
The leagues also cited “important federal interest” in protecting over-the-air broadcasting.
“If copyright holders lose their exclusive retransmission licensing rights and the substantial benefits derived from those rights when they place programming on broadcast stations, those stations will become less attractive mediums for distributing copyrighted content,” the leagues’ brief stated. “The option for copyright holders will be to move that content to paid cable networks [like ESPN or TNT], where Aereo-like services cannot hijack and exploit their programming without authorization.”
The Supreme Court agreed, but the territorial tussle probably isn’t over. As Bloomberg Businessweek noted last fall:
[T]he sports leagues lay out a clever way that Aereo could wreak way more havoc. Because all pro football games are broadcast over the air in their local markets, the company could set up antennas across the country and then sell a service allowing subscribers to buy online access to games broadcast anywhere, including those that the NFL reserves for cable stations. By doing this, Aereo could offer a version of DirecTV’s (DTV) NFL Sunday Ticket without paying the NFL anything.
Aereo could also undermine the NFL’s plan to parcel out its content depending on how people watch it. The league recently began selling Verizon (VZ) the rights to show games on smartphones but not tablets, a distinction that isn’t exactly straightforward. But Aereo doesn’t have to honor those distinctions since it’s not doing business directly with the league. It could let people watch games on whatever device they want.
In their brief, the NFL and MLB admit that this prospect terrifies them:
The mere spectre [sic] of such offerings, sanctioned by an influential court of appeals, causes considerable uncertainty in the industry. And that uncertainty affects the ongoing negotiations and renegotiations between the Leagues and their telecast partners, such as those involving the NFL Sunday Ticket agreement with DirecTV that expires at the end of next season.
The Washington Post’s Cecelia Kang wrote last week of the dangers of holding firm to traditional TV models.
A recent survey of cable subscribers found that more than half of Americans would abandon their cable provider if they could. Other major sports leagues, such as Major League Baseball, have already found profitable ways to stream online live games directly to consumers, even those without cable. And fans are increasingly looking for ways — not always legal — to watch games online, sometimes through virtual private networks. Federal agents have shut down a number of Web sites that illegally stream sporting events live.
The history of media is littered with examples of industries and companies that kept milking profitable business models in the face of vast technological change, only to wait too long to adjust. The music industry, for instance, resisted embracing digital files for years, and it almost went under as a result.