The news: After months of battling broadcasters over its right to offer their over-the-air signals to its online subscribers--and losing a landmark Supreme Court decision in the process--OTA-over-OTT service provider Aereo filed for bankruptcy.
It was the right idea at the right time: For cord-cutting denizens of New York City, whose over-the-air reception was often fuzzy at best thanks to the surrounding concrete forest of high-rise buildings, Aereo created a way to receive local broadcast television stations in a highly accessible format: over the Internet.
But almost from the day that Aereo founder Chet Kanojia demoed the new service in 2012 at NYC startup incubator General Assembly, broadcasters including CBS, Fox, Univision, PBS and local networks lined up in opposition, filing an almost nonstop series of lawsuits to try to stop the company from launching and expanding. They were unsuccessful almost every single time. Almost.
Kanojia wagered that by working within the parameters of past court decisions that defined how copyrighted content could be used, Aereo could stay on the right side of the law.
Each subscriber to Aereo's service paid $8 to $12 monthly to rent an individual, dime-sized antenna (part of an array of antennas placed in a location that would pick up clear OTA signals) along with a cloud-based DVR that would allow them to record about 60 hours of linear programming. The setup, Aereo argued, was in line with rulings in both 2008 and 1985 that allowed individuals to record broadcast signals on their VCRs (and later, TiVo-type DVRs and, in the 2008 ruling, Cablevision's cloud-based DVR technology) for private use.
Taking that strategy--along with more than $12 million in startup funds provided by, among others, IAC investor Barry Diller--enabled Aereo to prevail in several federal court cases around the country.
But it was broadcasters' strategy at the Supreme Court that ended Aereo's winning streak, and (by all signs) its existence. Instead of determining whether the technology being used was legal--a decision that might have had extremely negative implications for the entire cloud DVR industry--justices made their ruling based on the Copyright Act of 1976. It was along those lines that the high court determined Aereo was violating broadcasters' copyrights. Interestingly, in his comments around the decision, Justice Antonin Scalia suggested that Aereo might actually be closer to a cable company.
Why was it significant? Although the company appears to have faded away, Aereo's gambit may ultimately have opened the gates for pure-play OTT providers to gain MVPD status.
Aereo's battle stands out over those of similar providers FilmOn and ivi.tv because it was the service that finally caught the FCC's attention about the potential of linear OTT. If commissioners weren't aware of or clear on the technology available to bring linear broadcast to Internet consumers before Aereo launched, they certainly were by the time the dust cleared at the Supreme Court.
The ruling provided further impetus for the idea that OTT services could mirror traditional MVPD services. Aereo's premise was based on the same idea cable companies had over 50 years ago: it was a way to bring television to populations that could not access broadcast TV over an antenna.
Indeed, on Dec. 19, FCC commissioners announced that they had voted unanimously--three in favor of, two concurring--on a Notice of Proposed Rulemaking that, if passed, would give some over-the-top providers status as multichannel video programming distributors (MVPDs). Pure-play OTT providers with that status would be able to negotiate with broadcasters to license their content--and broadcasters would have to negotiate with them.
Should the rulemaking make it all the way through the approval process, it will change the linear game just as pay-TV providers are beginning to wrap their heads around multiscreen services--and it will shake up the hidebound TV distribution market.