Personal Technology

The NFL Gives Aereo a Playbook for Spoiling Its TV Money Machine


Aereo’s antenna farms have been driving broadcasters crazy for some time, and now the National Football League and Major League Baseball have jumped in to do battle against the Internet-TV startup. The leagues last week asked the U.S. Supreme Court to rule that Aereo is illegal and warned that the young company’s continued operation could ultimately end free broadcasts of major sports on network television, which could lead to the leagues instead striking deals with cable-TV channels.

The friend-of-the-court brief from the NFL and MLB was filed last week—and first reported over the weekend by Variety—in a case brought by the major TV broadcasters. Aereo works by selling subscribers access to content captured by miniature antennas assigned specifically to each user, with the recordings streamed over the Internet. The argument laid out in the brief is similar to the one broadcasters have been making for a while: Aereo’s Rube Goldberg-esque scheme is “neither technologically efficient nor innovative,” the sports leagues assert. “It has no purpose other than to avoid compensating the copyright owners whose programming Aereo exploits.” The brief also says that a permissive attitude toward Aereo violates treaties in which the U.S. has agreed to prohibit Internet retransmissions of copyrighted broadcast material without the consent of the owners of that content.

Aereo, of course, disputes these arguments. The startup gets a lot of attention even though it’s somewhat limited as a tool for cutting the cord and dropping costly cable-TV subscriptions. Anyone with a television can buy an antenna and get free access to broadcast channels; Aereo’s innovation was just to beam those same channels over the Internet. The most sought-after channels, such as HBO (TWX) and ESPN (DIS), can’t be captured because they aren’t sent over the air. At the moment, Aereo remains just a more convenient way to watch local television.

But the sports leagues lay out a clever way that Aereo could wreak way more havoc. Because all pro football games are broadcast over the air in their local markets, the company could set up antennas across the country and then sell a service allowing subscribers to buy online access to games broadcast anywhere, including those that the NFL reserves for cable stations. By doing this, Aereo could offer a version of DirecTV’s (DTV) NFL Sunday Ticket without paying the NFL anything.

Aereo could also undermine the NFL’s plan to parcel out its content depending on how people watch it. The league recently began selling Verizon (VZ) the rights to show games on smartphones but not tablets, a distinction that isn’t exactly straightforward. But Aereo doesn’t have to honor those distinctions since it’s not doing business directly with the league. It could let people watch games on whatever device they want.

In their brief, the NFL and MLB admit that this prospect terrifies them:

The mere spectre [sic] of such offerings, sanctioned by an influential court of appeals, causes considerable uncertainty in the industry. And that uncertainty affects the ongoing negotiations and renegotiations between the Leagues and their telecast partners, such as those involving the NFL Sunday Ticket agreement with DirecTV that expires at the end of next season.

The stakes are high. Cable and satellite services pay $300 million to broadcasters for retransmission rights, and sports leagues say they get $100 million of that. It’s not clear how quickly the leagues could follow through if they decided they really were going to pull their content from broadcast television.

In the meantime, the leagues have presented a great new business Aereo should consider getting into.

Brustein is a writer for Businessweek.com in New York.

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  • TWX
    (Time Warner Inc)
    • $76.79 USD
    • -0.19
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  • DIS
    (Walt Disney Co/The)
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