Barry Diller plans to expand Aereo Inc. (0176218D:US)’s streaming-TV service into every major U.S. city if the startup prevails in its fight with broadcasters before the nation’s highest court.
The Supreme Court is weighing the legality of the service, which takes over-the-air TV signals and redistributes them through the Internet without paying fees for the programming. The odds of the court supporting Aereo are 50-50 at best, Diller said. The company, which is backed by Diller, is facing off this month in arguments against the biggest broadcasters, including CBS Corp. (CBS:US) and Walt Disney Co.’s ABC.
The issue is bigger than just Aereo, Diller, 72, said in an interview at Bloomberg’s headquarters in New York. It’s about the future of how TV is watched. At stake is an evolution of the TV industry that could give consumers more programming over the Internet and more opportunities to choose which channels they pay for and which they don’t. It’s akin to the court’s 1984 ruling that paved the way for VCRs, he said.
An Aereo win “allows technology and innovation to move forward, whoever benefits from it,” Diller said. If there’s a negative ruling, “it’s over” for Aereo.
Aereo is set up in 13 cities so far and operational in 11, using thousands of small antennas to capture free over-the-air TV signals and transmit them to subscribers on the Internet for $8 a month. Expansion is mostly on hold for now, Diller said.
“You can’t do it with an anvil over your head that is literally an off-on switch,” he said. The Supreme Court will hear arguments April 22 and rule before its nine-month term ends in late June or early July.
Media companies including CBS, ABC, 21st Century Fox Inc. (FOXA:US) and Comcast Corp.’s NBCUniversal are fighting to maintain their business models, in which cable providers pay the broadcasters for the right to distribute their programming, even though it’s available for free over the air with an antenna. Those payments are estimated to exceed $4 billion this year, according to research firm SNL Kagan.
“This has never been about stifling new video distribution technologies, but has always been about stopping a copyright violator who redistributes television programming without permission or compensation,” Fox, Tribune Co., Univision Communications Inc., the Public Broadcasting Service and WNET said in January.
Diller, chairman of the Internet company IAC/InterActiveCorp (IACI:US), has more than 40 years of experience in the media industry, including as chairman and chief executive officer of film studio Paramount Pictures Corp. and helping create the Fox broadcast network.
He likens Aereo’s challenge to a legal case three decades ago that disrupted the movie business.
The Supreme Court ruled in 1984, in a case involving Sony Corp.’s Betamax, that makers of videocassette recorders couldn’t be held liable for contributing to consumer copyright infringement. The ruling helped put VCRs -- and later digital video recorders -- in tens of millions of homes.
“Reverse the decision and tell me what you think,” he said. “We’ve had 30-some odd years of history in one area that would be wiped out. Look what it would have done to this incredible revolution that we have participated in -- that’s what I think really is at stake.”
This time, a ruling in favor of Aereo’s new technology could mean more programming delivered through an Internet version of cable TV.
While Diller said Aereo’s advanced technology would keep it ahead of competitors that might crop up after a verdict, a proliferation on online-TV offerings would be good for the consumer, he said. More shows may be offered individually in a subscription model similar to Netflix Inc. (NFLX:US), or for individual purchase, letting consumers pay only for what they want to watch, he said.
“It’d be much less of wholesalers who buy the programming and sell it to you in a package, and much more a la carte,” Diller said. “What’s important is that we have another distribution methodology that is not part of the closed system.”
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