< A New Incentive for Cord Cutters


Friday, May 17, 2013

BOB GARFIELD:  Now, another tale of troublesome technology, this one raising the hackles of broadcast and cable TV. Though most of their content can be accessed online after a few days or weeks, it’s still pretty hard to watch TV in real time on the Internet. Well, a company called Aereo seems to have solved that problem. For a small fee, users can watch and DVR network TV from any device, their phones, their laptops, whatever. But Aereo can’t just scoop up broadcast signals with a big antenna and redistribute them, like cable does, because without paying fat redistribution fees, they’d be in violation of copyright law.

So instead, Aereo uses thousands of tiny antennas, the logic being that a one-to-one connection between a user and an antenna doesn't violate copyright law. Last month, the courts weighed in.

FEMALE CORRESPONDENT:  Aereo can roll out its service without paying the broadcasters or cable or satellite TV providers. A federal appeals court upheld the legality of Aereo’s business model.

BOB GARFIELD:  After the ruling, the networks unleashed a volley of threats, including removing their content from the broadcast spectrum entirely.

FEMALE CORRESPONDENT:  …News Corp threatening to take Fox Broadcast off the air as part of this legal dispute, if the courts back Aereo.

BOB GARFIELD:  This week, Aereo, which previously operated only in New York, expanded to Boston, the first of some 22 cities on its list. In response, ABC has introduced a rival online real-time service in New York City and Philadelphia. Meanwhile, the networks plan to continue their legal fight against Aereo, arguing that its antenna system exploits a legal loophole. Not so, says CEO Chet Kanojia.

CHET KANOJIA:  We don't think of it as a loophole. This is what the expectation Congress has had. Hey, spectrum was granted to broadcasters to program in public interest free of charge. They make money in advertising and let the consumers have antennas so they can pick it up. We just basically took that and brought it into the modern age.

BOB GARFIELD:  Some things are legal but just strike you as being somehow unfair or wrong. And when I heard about your business model, I went, I can’t believe this is kosher. It just - seems so wrong. You know, I have a friend who goes to high end dress stores and will buy a dress on a Friday for an event, wear the dress and return it on Monday. [LAUGHS] I guess it's legal but it isn't right.

CHET KANOJIA:  Let me give you a different analogy. What about a library? A library buys books, without any permission, and is allowed to rent them out to anybody as a public service and build ancillary businesses supplying video services, all kinds of different things.

BOB GARFIELD:  Now, far be it from me to take the side of the cable companies who've been gouging consumers for decades. But it still seems to me you're exploiting a legal loophole to distribute stuff that just doesn't belong to you. Why am I, suddenly for the first time in my life, sympathizing with big cable?

CHET KANOJIA:  The question I would ask is do you think Radio Shack should be paying retransmission fees because they sell antennas? Do you think Sony, that has made billions of dollars selling televisions with tuners, should be big retransmission fees? Aereo is a technology company that just does the same things that Radio Shack and Sony do, slightly differently.

BOB GARFIELD:  There's almost no point in me quibbling with you over these issues because it's already been litigated. You’d won a very important decision that says that this is not a violation of copyright law. Is it all over but the cryin’?

CHET KANOJIA:  I don't know whether we will face more litigation or not, but we do think that the courts saw the technology, evaluated it on its merits, applied what Congress' intent was behind not only granting the spectrum but also how the copyright laws are written. And there is a real focus on preserving what is known as a private transmission on a private exhibition for the consumers. So far, we've been fortunate that we’ve had a legal system that’s been very fair, despite the atmospherics.

BOB GARFIELD:  So I've already expressed to you my sense of unfairness. Putting aside whether it's right or wrong, what if Congress has the same feeling?

CHET KANOJIA:  I believe that there are lawmakers that view competition and fairness as a very important fabric of American business and, as a result, are going to be encouraging alternative choices, competition because at the end of the day, the benefit is for the consumer.

BOB GARFIELD:  There’s already a big cord cutting problem, people using their broadband to get the kind of programming that otherwise they would be paying their cable stations a lot of money every month to provide. Is this a big nail in the coffin of the cable business model?

CHET KANOJIA:  A majority of the households watch seven or eight channels and a third of the country watches network television only, and the problem is just to get quality network television from a technological perspective, with modern conveniences like a DVR, you’re forced to take the entire package. So, from my perspective, I look at it and say, this is an opportunity to recast how consumers are going to consume for the future. There's absolutely no reason why you need 17 channels of MTV when all you really wanted to watch, The Daily Show.

BOB GARFIELD:  A big chunk of revenue that broadcast stations get is from cable companies paying retransmission fees for what the broadcast stations are putting over the air. At some point, it seems to me, the TV stations themselves go away and you've got nothin’ for Aereo to broadcast.

CHET KANOJIA:  You know, we don't think that's how this plays out. I mean, think about the following:  The median age for cable subscriptions has moved from 21 to 29. And if that trend continues, that’s already going to happen. The inverse is Aereo brings the younger demographic into the marketplace – any device, any place, any time. And tremendous opportunity can emerge on top of that in digital advertising. When the VCR came out, the exact same hyperbole was layered in – you know, studios are going to die and, you know, the world was gonna end. And everybody made billions of dollars in home video.

BOB GARFIELD:  Chet, thank you very much.

CHET KANOJIA:  My pleasure.

BOB GARFIELD:  Chet Kanojia is the CEO of Aereo.


BROOKE GLADSTONE:  Coming up, how some in the past imagined journalism in the future. We’ll fact-check their predictions of our present.

BOB GARFIELD:  This is On the Media.


Chet Kinojia

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Bob Garfield