Broadcasters want Supreme Court to shut down Aereo

(James Hood @ ConsumerAffairs) Once you throw message in a bottle into the water, you have no control over what happens to it. It may sink. It may wash up on an uninhabited island. Or it may be scooped out by someone who finds a way to sell it to millions of people at a profit.

Should you have any control over the bottle once it leaves your hand? That's the question the over-the-air TV industry wants the Supreme Court to consider.

Major broadcasters including ABC, CBS, NBC and Fox are appealing a ruling earlier this year by the U.S. Second Circuit Court of Appeals, which denied their request to shut down Aereo, a streaming video service that is built on a technicality.

The technicality is this: You can't legally record a TV show and redistribute it to others for profit, because the show is intellectual property covered by copyright laws. Ah, but can you build an equipment rack just crammed with little tiny antennas that pull in the over-the-air signal -- the broadcasters' message in a bottle -- and sell the streaming video of that signal for profit?

That's what a start-up called Aereo has been doing with great success. And is driving broadcasters and cable companies insane. Worse than that, it's eating into their profits.

Threatening the fundamentals

Aereo antennas on a circuit board

In their petition to the Supreme Court, the broadcasters say Aereo and the appeals court's decision are "already transforming the industry and threatening the very fundamentals of broadcast television."

But how can Aereo be threatening the TV industry when all it is doing is making it easier for consumers to get a decent signal without paying $100 or more per month for a cable TV feed from the likes of Comcast?

After all, in much of the country, it's difficult at best to get a decent over-the-air signal. Many people live too far away from the local station's transmitter. Others live in apartments or condos that don't allow big, bulky TV antennas.

Community antenna

Enter Aereo. The company is doing exactly what cable TV did in its early days, back when it was known as Community Antenna TV, or CATV. Back in the day, small towns were desperate for someone to come in and build a CATV system that would haul in signals from the ABC, CBS and NBC stations so taxpayers could watch "I Love Lucy," baseball and other staples of American life.

Although it does not say so in so many words, Aereo basically is doing the same thing -- simply acting as an antenna for folks who don't have their own.

Consumers rate Comcast Cable Service

For a mere $8 per month -- chump change by almost any definition -- Aereo delivers local TV signals in New York, Boston, Atlanta and other major markets. It plans to reach 22 cities by year's end and will unveil an Android mobile app this month.

You would think that broadcasters would be grateful. Aereo, after all, is helping them get viewers they might not otherwise have. Ah, but not so fast, say the broadcasters. They argue that Aereo is skimming off the handsome royalties that TV stations get from cable systems that carry their signal.

After all, if a majority of viewers cancel their cable contract and switch to Aereo, the cable systems won't want to pay those fat royalties to the TV stations anymore.

"Free TV"

This, of course, has not always been the case. Within living memory, over-the-air broadcasters called themselves "Free TV." Of course, that was when they were fighting the -- you guessed it -- cable industry.

Broadcasters back then said it would ruin them financially if those rotten cable systems took their precious signals and bundled them in a cable feed to consumers. They said this with a straight face long enough and loud enough to strong-arm Congress and the courts into letting broadcasters put their hands into cable's pocket and extract some of the money placed there by consumers.

Now the cable systems that broadcasters said just a few decades ago were killing them are their partners in crime and it's Aereo that's killing them -- killing them! -- by not giving them even more money to produce the crap that we all watch every night.

Ring of truth?

It doesn't really sound like a very convincing argument, does it? No, and so far the nation's judges don't think so either. Just last week, a federal judge in Boston refused to grant an injunction to stop Aereo from distributing WCVB-TV's signal, turning aside the station's argument that Aereo puts its "entire business model at risk."

That, of course, is not a matter for the courts. Business models rise and fall with consumer demand. If consumers stop buying your product, your business model is toast.

Despite all their bleating about business models, freedom of information and so on, about all that broadcasters have to stand on legally is their claim that Aereo is violating copyright law, a fairly feeble argument when all Aereo is doing is the same thing as a piece of dipole cable hung out your window could do if your window faces the right way.

As it stands now, broadcasters -- and the cable industry, for that matter -- just may be on the wrong side of history. Consumer sentiment appears to be tiling towards getting TV the same way consumers get just about everything else now -- over the Internet, at a fraction of the former cost.

Filing a petition with the U.S. Supreme Court sounds good but it doesn't mean the court will hear the case, or that it will rule in the broadcasters' favor. No one else has, why should they?

So, while we have no opinion on the matter and would never think of giving investment advice, we would just say that we are examining our threadbare stock portfolio and will be dumping anything that remotely resembles TV broadcasting.

The guys with the puffy hair had a fun decade or so laughing at the newspaper industry's troubles. Let's say how they like it when it's their turn.