Aereo is not a Betamax moment

But pro wrestling could give us one

vcr-displayAll eyes were on the US Supreme Court this week when arguments were heard in American Broadcasting Companies, Inc. v. Aereo, Inc.  While an interesting legal exercise, it’s hard to imagine any outcome that would upend the broadcast television industry as we know it is highly unlikely. The court that gave us the Citizen’s United ruling is not predisposed to ruling against large business interests. The justices’ questions hinted they were looking for a way to rule against Aereo without affecting other cloud business models, and they appeared to find it. Don’t expect the vote will be close. It might even be unanimous.

In the unlikely event the court were to rule in favor of Aereo, the broadcasters have threatened to power down their transmitters and morph into cable networks. Virtually no one watches television over the air these days, so few prime time viewers would notice. David Carr of the New York Times explains the numbers and the disruption to local broadcasters’ business models. For viewers tuning in to local broadcasters for news, weather, and sports, the TV world will look very different. But no one seems to be concerned about that right now, though they should. Do we really want the large swaths of the populace being informed solely by cable news outlets?

Even assuming Aereo goes away, for broadcast and cable television the status quo remains untenable. The sea change has begun. “Cord cutting” and “binge viewing” are now part of the vernacular. Netflix and Amazon Prime are established players already going at it for top spot in the post cable universe, but unless each becomes a content owner in its own right, they are fighting today’s war with yesterday’s weapons. You either own the content or the infrastructure that delivers it to the end consumer, or you are relegated to a shrinking role.  This is because content owners like Major League Baseball (MLB.tv) and the WWE Network (soon to be launched)  have decided to cut out the middle man and go directly to customer.

After seriously considering launching its own cable network, WWE changed course.

From Forbes April 14, 2014:

[WWE CEO Vince McMahon] roostered onto the stage at Las Vegas’ Consumer Electronics Show in January to announce a bold new venture: the WWE Network. McMahon told the cheering audience that the WWE Network would not be broadcast on cable television, where Monday Night RAW has consistently been a top-rated program each week, nor would it be another pay-per-view (PPV) play. Rather, the WWE network will stream content 24/7 directly to viewers on the Internet or what’s known in the entertainment industry as going over the top. It’s a move that directly endangers both WWE’s PPV revenues ($82.5 million) and its potential new TV deals, a huge gamble that according to some estimates could double the size of the WWE’s business in two years–or fall flat on its face…

WWE estimates it needs a million subscribers at $10/month to reach breakeven. Considering that watching all 12 WWE pay-per-view events each year costs over $600, another $120 per year for the complete WWE archive will seem like a bargain to its rabid fanbase.

An over the top, a la carte future is what consumers have been pining for. Content owners salivate over the opportunity to sell directly to customer, letting the customer pick up the tab for a good portion of the delivery costs through wireless and broadband access fees. What’s not to like? Well, for both the content owner and the consumer it can start with the FCC’s decision to abandon the concept of net neutrality. With so many Americans receiving broadband services from the cable providers, the cable providers will have the pricing power to keep themselves in the game for a while to come. If they have to pony up for access to the Internet’s express lane, the barrier to entry into the new over the top world will be prohibitive to all but the largest content owners. Plus ça change…

One Thought on “Aereo is not a Betamax moment

  1. Adam Oas on April 28, 2014 at 9:53 am said:

    Broadcast going away because of cord cutters? Half the reason that people are willing to cut the cord is because the are realizing that they can still get all the major networks (plus a few other channels that they don’t necessarily care about) for the cost of a cheap antenna.
    Combined with $20/ month for Netflix and Prime (or whatever you choose) and people see value there.

    I assume that the WWE has done enough actuarial study to determine that they can make their numbers, but $10/month is a rather steep amount for what effectively becomes a single cable TV channel. Having access to the complete archives is a great thing, but I can see the number of subscribers dwindle rather quickly due to a couple factors.

    1) At $120/year it’s enough cash to show up on a lot of people’s “TV Budget” and thrown on top of 3, 4 or 5 other $10/month subscriptions (our collective OTT future) to equal up the CableTV portion of one’s monthly bill currently and be an easy one to trim out.

    2) Burn out. People love Hulu/Netflx and whatnot because they are able to binge on an entire season of the new hottest show, but those shows come and go, and have varied stoylines. Yes WWE has many talented scriptwriters, but the core of the product is still ostensibly the action in the ring. I can see the subscriber base finding that they have watched the ‘classics’ that they care about and spending less and less time on that ‘channel’.

    3) Social islandism. People still crave ‘watercooler’ discussions in the office or with friends. I’m a pretty rabid ‘forums’ kind of person but as we further segment and fracture the media landscape I wonder about the offline/real world interactions and implications of being disjointed from a centralized social core.

    I’m guessing that people that are vastly smarter than I am are hard at work on figuring out a lot of these things, but it’s a fun topic to discuss if you ask me.

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