Aereo’s Last Stand

Aereo’s Last Stand

Bloomberg reports that the executives of Aereo, Inc., are exploring ways to continue offering their streaming service by operating more like a cable TV provider. The startup’s owners say that, by behaving more like a Comcast or a Time Warner, they will be able to reinstate their service.

There is, of course, a catch to any plan aimed at reviving Aereo–the cost:

To operate as a cable company, Aereo would have to get and pay fees for a compulsory copyright license, which gives permission to transmit broadcast channels. Then the startup would have to negotiate with broadcast companies over retransmission fees, which are paid to broadcasters for the right to air their content.

This would almost guarantee that Aereo would have to charge customers more to gain access to programming, said Neil Begley, an analyst at Moody’s Investors Service. For one, Aereo would most likely have to buy entire channel bundles to gain access to broadcast channels, he said.

Content companies haven’t been keen on selling the rights to transmit individual channels to cable companies, instead favoring bundling offerings like Walt Disney Co. (DIS)’s ABC broadcast network with ESPN. Companies like Apple Inc. (AAPL) have tried and failed to persuade cable networks to let it sell their channels a la carte.

The beauty of Aereo is that its streaming service provided basic channels at an extremely low cost–$8 per month, versus $70-$80 per month with a mainstream subscription service like those offered by major cable companies. Aereo’s selection was limited, but at under $10 per month, it was a good option for subscribers who weren’t interested in scrolling through 300 channels.

Last month, the Supreme Court ruled that Aereo’s streaming service violated copyright law because the near-real time delivery of the television show amounted to a public performance of private material. (Aereo had previously claimed that they were merely “equipment providers,” and were thus exempt from paying for copyright licenses and retransmission of the copyrighted material.) Now, lawyers on both sides are scrambling to respond to the Supreme Court’s ruling:

In a separate letter in a related case before Judge Nathan, the broadcasters said it will seek an order, consistent with the Supreme Court decision, blocking Aereo from violating its rights.

Determining other ways in which the litigation can move forward has been “rendered nearly impossible,” the broadcasters wrote, saying Aereo has refused to explain whether it can continue operating or how.

Aereo’s lawyer suggested July 1 that it has “rethought its entire legal strategy,” and will present a new defense, according to the letter. The broadcasters argued that the case should be halted until the Supreme Court’s order blocking Aereo from violating its rights is in place.

Even if Aereo’s executives find a way to save their company, it’s a near-certainty that television subscriptions for under $10 per month are a thing of the past.

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