Little Aereo vs. Big TV: Aereo’s business model may be a gimmick, but its legal case could change the media landscape

Little Aereo vs. Big TV

Aereo’s business model may be a gimmick, but its legal case could change the media landscape.

HOLMAN W. JENKINS, JR.

Jan. 10, 2014 6:36 p.m. ET

Now that the Supreme Court has agreed to consider the case of Barry Diller‘s Aereo, there’s one question the court probably won’t ask but someone should. Does Aereo really, truly assign a teensy TV aerial to each individual customer so he or she can watch a broadcast TV signal plucked from the air and retransmitted over the Web?This is Aereo’s avowed legal-cum-business model, though some suspect its antenna farm is a Potemkin ruse, designed to let the company claim it simply gives subscribers a longer antenna with which to do what they are entitled to do anyway. Aereo really just collects broadcast TV from the air using a single antenna, then runs a stream off its servers that every subscriber taps into. Or so cynics like to speculate. But even if a shocking betrayal of legal pretense is taking place, another question is, so what?

In fact, “so what?” is a question bound to weigh on the Supremes in many ways as they consider the TV industry’s legal war against Aereo.

If Aereo is allowed to take free TV from the air and resell it over the Web, so what?

If this leads to shrinking cable subscribership and a smaller bite of cable retransmission fees for broadcasters and networks, so what?

If cable operators decide to do as Aereo does and stop paying retransmission fees altogether, so what?

If Aereo were to go further and make ABC’s New York affiliate available to viewers in Biloxi, thereby detonating the entire network-and-affiliate relationship founded on geographic exclusivity, so what?

If broadcasters were to respond by taking their content off the air and recasting themselves as cable or Web channels, so what?

If the whole cable bundle then began to unravel and cable operators were reduced to serving as dumb pipes, so what? If consumers started buying all their content directly fromNetflix, NFLX -1.46% the NFL, Hollywood studios and other purveyors, so what?

Aereo is the brainchild of founder Chet Kanojia, and Mr. Diller, a creator of the Fox network and Hollywood legend, has become its superintending patron. Since 2012, when it began offering local TV stations over the Web to viewers in New York City and Boston, Aereo has raised millions and plans to take its proposition to dozens of markets. Meanwhile, the legality of Aereo’s business model has divided the lower courts, and Aereo says it welcomes a Supreme clarification. An irony is that whatever the court decides, it might sink Aereo’s business because, if Aereo wins, broadcasters might yank their signals from the air.

Then again, Mr. Diller perhaps just takes a mischievous delight in a business model aimed like a smart bomb at the absurdities and contradictions of the TV business in the digital age. Aereo could reshape the media industry out of all proportion to Aereo’s own rather gimmicky strategy.

For one thing, the Supremes might decide the problem here is Congress’s. The law as written assumes the existence of geographical broadcast exclusivity. It assumes retransmission negotiations between broadcasters and cable guys. But unless the law categorically says digital innovators must pursue only those innovations that don’t upset the existing apple cart, little Aereo may be free to blow up the entire structure that Congress and the industry’s regulators and lobbyists have carefully fitted over TVdom’s diverse, clamoring and powerful interest groups in recent decades

Tough noogies, the Supreme Court might well decide. It’s the job of TV executives and studio heads and broadcasters to adapt their businesses to the competitive and technological realities that exist. It’s not the court’s job to adapt the law to preserve the cash flows and comfy environment that they’ve become accustomed to.

Who knows? The court might even conclude that the real plaintiff here is the consumer who is growing impatient waiting for the TV business to adapt its business model to supply the reasonably-priced digital nirvana that consumers have been told to covet.

Of course, a question for another day is whether that nirvana—whatever you want, whenever you want it—is even realistic. Blowing up the existing cable bundle and broadcast TV business, some might tell you, will have the surprising and perverse effect of leaving consumers with fewer and more expensive choices than they have now. Just saying.