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What Happens to Traditional TV When Technology Creates New Ways to Watch?

September 12, 2013 at 12:00 AM EST
The technology of television is rapidly evolving, but the latest way to watch has raised legal questions about copyright. Aereo is a subscription service that lets viewers stream free-to-air TV live on mobile devices and computers. Hari Sreenivasan speaks with Aereo chief Chet Kanojia about where the medium is headed next.
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TRANSCRIPT

JUDY WOODRUFF: The new fall TV season is getting under way, a critical time for broadcast networks and the industry. But it’s a business that’s evolving faster than ever, with new players hungry for eyeballs and dollars and established veterans seeking to hold on to their turf, while often trying to remake themselves along the way.

We begin an occasional series tonight about what’s at stake for the future of TV.

Hari Sreenivasan kicks it off.

HARI SREENIVASAN: You can still shop for a TV at your local electronics store. And you can still use it to watch network and cable TV.

But that traditional model is just one in a dizzying array of options these days. On larger, thinner and, increasingly, HDTVs, viewers set their DVRs or TiVos to record their favorite cable and network shows. Or, using devices like a Roku box, Apple TV, or a gaming console like Xbox, consumers stream video from online subscription services like Netflix, Amazon and Hulu, which increasingly are creating their own shows.

By one estimate, the online video market attracts an average of 75 million viewers every day and streams nearly 40 billion videos each month in the U.S. alone. In fact, the future of TV increasingly doesn’t even involve a TV, as more people turn to cell phones, tablets and laptops to view content.

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DAVE ROZZELLE, Suddenlink Communications: The state of video has never been stronger.

HARI SREENIVASAN: At a House hearing yesterday on innovation and regulation, executives from companies operating in this rapidly changing environment spoke to both the opportunities and challenges it presents.

Dave Rozzelle is with Suddenlink Communications, a regional cable and Internet provider.

DAVE ROZZELLE: The path to continued growth for cable is to enhance and expand its customers’ use and enjoyment of our networks. Cable is investing billions annually to ensure that this potential can be realized.

HARI SREENIVASAN: But, as consumers change what they watch and how, new fault lines are emerging over who produces and distributes content, how it’s delivered, and what happens to the old economic models of the business.

This summer, a dispute between Time Warner Cable and CBS led to a blackout of CBS for millions of customers. The argument was over retransmission fees, payments that networks charge cable companies to carry their shows. Those fees are also now at the heart of a fight over a new company called Aereo.

For as little as $8 a month, Aereo offers subscribers the ability to watch and record free broadcast TV live, without having an antenna or a cable connection. Aereo streams live TV to phones, tablets and computers.

To do that, Aereo has millions of dime-sized antennas that capture freely available broadcasts and then transmit them to the customer.

NARRATOR: Live broadcast TV off the air wherever you are whenever you want.

HARI SREENIVASAN: The company says it is perfectly legal. But networks, including NBC, CBS, ABC, FOX and PBS, are suing Aereo. They say it’s stealing content and depriving them of revenue, since Aereo doesn’t pay the retransmission fees.

So far, Aereo which also provides service in Boston, Atlanta, Miami, and Salt Lake City, and hopes to be in nearly 18 more cities within the year, has won a pair of decisions from federal judges. This week, another federal judge shut down a similar streaming service called FilmOn.

I recently spoke with the chief of Aereo in our New York studio.

 We’re joined by chief Chet Kanojia.

Thanks for being with us.

CHET KANOJIA, Aereo: My pleasure.

HARI SREENIVASAN: So, why start Aereo? Why was this technology necessary?

CHET KANOJIA: Well, the goal of Aereo was to create an alternative, to create a parallel system almost, if you will, because the current system in which you get television is a highly integrated, monopoly-based sort of system.

The goal was to create an alternative, so we can do more things later on that may be better user interfaces. Additional content may come in. All kinds of different things are — could be possibilities.

HARI SREENIVASAN: So, the people who are profiting from the traditional systems, including the broadcasters, are fighting back pretty aggressively.

A huge consortium in the New York market, including the PBS station that is hosting this program, sued you, saying, hey, listen, you are giving away our content. You are making money off of it, and we don’t have any control.

Is it copyright infringement?

CHET KANOJIA: Well, three federal courts have said it’s not.

So, Aereo has been validated by three courts. And it’s an important distinction that I want to make, that is Aereo is a technology provider, and, as such, since broadcasting started, companies have sold antennas, television, VCRs, all manner of equipment, and made money doing that, and it’s perfectly legitimate and permitted by law.

And just because it’s a new way of doing things, I mean, there’s no — there’s no reason why technology should stand still to respect all business models.

HARI SREENIVASAN: So, you have got the antenna farms that you’re building, essentially. If I’m a customer, I have one particular antenna inside of the Aereo room, so to speak.

But does it seem like a technicality, when you actually don’t need 5,000 antennas in a room? You’re saying it’s to be by the letter of the law. Are you violating the spirit of the law?

CHET KANOJIA: Not at all. I think Congress always intended that consumers to have the ability to have an antenna.

And it’s a simple manifestation of that, saying, well, that’s what the intent was, the consumer can have an antenna. So, whether I put it in my window or my roof or my neighbor’s roof, those aren’t restrictions that Congress ever intended or proposed.

So, I think it complies with actually the spirit of the law as well, and perhaps more so, because the idea that consumers should have that choice was always intended by Congress.

HARI SREENIVASAN: So, let’s talk a little bit bigger picture about the future of TV and television as we know it. Let’s look at the revenue model that this is challenging. Right?

So, if you have a DVR that allows people to skip advertising, advertisers are upset. If you have this ability to go around retransmission fees, the broadcasters say that’s another huge revenue stream. You can see why they’re fighting back. But what are technologies like this going to do or doing to television as we know it?

CHET KANOJIA: We firmly believe that these are going to be — they’re going to increase audiences.

They’re going to more people in different modalities, use, cases, tremendous opportunities in different types of ad models. Let’s not forget in the ’70s, the same broadcaster fought cable television, who now they sometimes embrace, although currently they’re still fighting them.

VCR, same thing. And all these industries created billions of dollars for everybody involved.

HARI SREENIVASAN: So, is what is happening to TV now what happened to print or newspapers in the last 10 years? Is that the kind of disruption we’re seeing?

CHET KANOJIA: I think there is certainly a transformation under way. And it’s a function of the Internet bandwidth is really how I look at it, that when you have sufficient bandwidth, and consumers have the flexibility and choice, change is forced upon the system.

HARI SREENIVASAN: So, how do you see this shaking out? Are we going to be successful — let’s say in a perfect Aereo world, there is a disaggregation, an unbundling of channels, people are allowed to choose exactly which channels they want. What does that do to the way that television is packaged and distributed to people today?

CHET KANOJIA: I think our belief — and I think any rational person would agree that there is absolutely no need for 500 or 700 channels. There’s no justification for that.

It’s a legacy model that’s been — because, back then, when these models were developed, there were no digital on-demand technologies. So, majority of content that is in the — what I call — we will call scripted categories, people like on demand.

Netflix is a great example of what is going on. We think the evolution is going to be a live, a separation between live and libraries. And live technologies are going to — or live access is going to be a function of technology, how great the signal quality is, picture quality, availability on any device, any time, social features, shareability.

All those things are going to be important. And libraries are going to be distinguished by proprietary, unique content that those libraries create. So, we think that’s the way the future is.

HARI SREENIVASAN: So, what happens to that communal, shared, live event, the Super Bowl or the end of some Dancing with the Stars show, where people are actually — or let’s say the elections, where they’re watching it together at the same time?

What does a disruption like this do?

CHET KANOJIA: Well, I think it just creates — it creates the ability for them to be able to be freed up, so they can consume on any device, anywhere.

And there’s absolutely — today, those consumers can do that today with an antenna. I think NAB cites a statistic somewhere around 54 million people use an antenna in some way, shape, or form. I think there’s sort of this obsession or disruption, which I don’t think is necessarily true here. This is evolution of where a modern consumer wants things to be. It’s inevitable. It’s going to happen, with or without Aereo.

HARI SREENIVASAN: What about the idea of control that distributors say they would like to have? They create the content, they package the content, they figure out how it should be, and essentially we’re ceding that to a distributor that we don’t have a relationship with.

CHET KANOJIA: Well, I think, just to be very clear, Aereo’s technologies only apply to free-to-air broadcast television.

That’s the equivalent of saying an antenna manufacturer is somehow bound by control. We’re an equipment supplier to the consumer. This is not applied to ESPN or HBO or any of those kind of things. Right? Those are separate types. They’re cable networks or cable channels. This is applied to free-to-broadcast.

HARI SREENIVASAN: So, do we have a future where Aereo complements existing television as we know it?

CHET KANOJIA: I think Aereo is a wedge in to start the discussion on where the evolution is likely to go.

I think an open platform in which technology and programming are decoupled, so the platform is purely about how consumers may use programming, is where we think the future is going to be. So, I — today, we don’t know what the future is or not. It’s not written, obviously. But we certainly think that it’s going to be highly complementary to a lot of people in this ecosystem.

HARI SREENIVASAN: All right, Chet Kanojia, thanks so much for your time.

CHET KANOJIA: My pleasure.