In April, when the Supreme Court heard arguments in American Broadcasting Cos. v. Aereo, the justices seemed to think that Aereo, a service that let subscribers stream over-the-air broadcasts, was set up like a clever cheat. By presenting itself as an equipment-rental company rather than as a content company, Aereo hoped to avoid being dinged for violating copyright.
Or, as Chief Justice John Roberts put it at the time, “Your technological model is based solely on circumventing prohibitions that you don’t want to comply with, which is fine.”
Today, in its 6-3 ruling that Aereo broke the law, the justices confirmed that sense of their leanings, brushing aside worries that their ruling would limit the development of technologies such as cloud storage.
The reaction to the ruling is sharply divided. Aereo won many champions for flouting broadcasters and cable companies. Plenty of observers saw the legal campaign against it as a parochial move to preserve an antiquated business model that charges consumers very high prices in exchange for mediocre service. But that cable companies are hugely frustrating does not mean that Aereo was not a workaround, or a cable-like attempt to profit off content that is supposed to be available for free.
Broadcasters should not take their victory at the Supreme Court as a sign that they will be able to operate the same way forever. Instead, broadcast and cable companies should take the Aereo ruling as a stay before Congress acts to explicitly legalize competitors such as Aereo. In the time they have been given, they should move as fast as possible to respond to the clear customer demands that Aereo exposed.
Broadcasters and cable networks alike have made some positive moves in developing Web portals that customers can use to view their content on a delayed or real-time basis. Hulu, which launched in 2007, streams broadcast shows and some cable and foreign content. In 2010, the premium cable network launched HBO GO, a streaming portal available to HBO customers who can authenticate their subscriptions.
But they have been slow to develop new ways for consumers to access those portals, choosing to preserve legacy parts of their business model including cable subscriptions and cable box rentals rather than developing new ones, like set-top boxes or antenna sales.
What might the market have been like if Hulu had partnered with Roku to offer not just streaming subscriptions, but a set-top box, offering consumers a complete package as an alternative to a cable subscription? Similarly, it is remarkable that Apple and a cable company have not yet been able to come to terms to bake television subscriptions into Apple TVs. AmazonBasics, the electronics line from Amazon (the company’s chief executive, Jeff Bezos, owns The Washington Post), sells a range of relatively inexpensive television antennas, and the company El Gato makes a range of streaming television tuners that are not yet available in the United States.
Rather than leaving these innovations to others, cable companies and broadcasters should find ways to get on board and bring new products and services in-house.
Cable providers already offer a significant range of products and services, including cable boxes, digital video recorders, modems and wireless routers, Internet service of varying speeds, cable service in a number of tiers and premium cable channels. I understand the desire to preserve a core business model. But it seems foolish to try to hold back a tide of changing consumer behavior instead of trying to keep your customers even as the products and services that they want change.
The challenge that Aereo posed to cable and broadcasters may be over. Just because they won, though, cable companies and broadcasters would be wise not to mistake the justices’ decision for a vote of confidence or admiration in the job these organizations have done so far.