TV Wars: Aveo Loses Supreme Court Decision – Follow Up

In a follow up to a previous piece I did on this blog entitled “TV Wars”, the Supreme Court ruled today that the service known as Aveo should be required to pay licensing fees to broadcasters in order to display copyrighted programming. Aveo is a service that transmits broadcasts of TV programming over the Internet via their technology, which subscribers pay a fee to utilize.

 

The argument from Aveo’s side was that their service did not broadcast the programming to everyone over the Internet that the programming was provided only to their subscribers, who paid a fee to receive the service. Since it is not a public broadcast, then they should not be required to pay the licensing fee. The argument continued that they merely rented a small broadcast antenna to each of their subscribers to access the copyrighted programming, which should not require that they (Aveo) pay a licensing fee to the broadcasters.

 

The Supreme Court disagreed, they ruled that the Aveo service was just like a cable television service, which under the current system, are required to pay licensing fees to broadcasters in order to display copyrighted programming. Therefore, Aveo will be required to pay licensing fees to the broadcasters, which they cannot afford to do.

 

It is important to note that if the Court had ruled in favor of the current setup of Aveo, it would have completely altered the landscape of the television industry. A favorable ruling for Aveo would most definitely trigger the major cable television players to develop Internet based antenna rental services similar to Aveo in order to circumnavigate the payment of licensing fees.

 

A favorable ruling for Aveo also would have created a situation where the network television broadcasters would stand to lose huge amounts of licensing fee revenues. It would have created an environment where many people would continue to cancel their cable television plans, known as “cord cutting”, which would have created losses of revenue for the big cable television service providers such as Comcast and Time Warner Cable.

 

Status Quo

 

Instead, the ruling today effectively retains the current system and most likely marks the end of the Aveo service. Their CEO essentially stated that the ruling makes their business model unviable moving forward. The technology that Aveo developed does have an inherent value, which the ownership of Aveo will have to determine if they are going to sell off to an interested party in the future.

 

The ruling today by the highest court in the land also purposefully went out of the way to create a distinguishable difference between the Aveo service and other Internet based entertainment providing services and cloud based services. It is unclear at this point if they went far enough to make that differentiation and only future judiciary activity will determine that scenario.

 

This portion of the ruling opinion of the high court would deal with only certain new technologies and not others that I had mentioned in my original article on this topic. The larger internet based entertainment programming services providers such as Netflix and Amazon already pay huge licensing fees to the broadcasters and movie production companies to obtain the rights to stream copyrighted programming to their subscribers.

 

Big Business

 

In fact, the recent agreement between Amazon and HBO which provides the Amazon Direct internet streaming service with the exclusive rights to a huge catalog of HBO produced series was a deal with significant impact for everyone involved. Those types of exclusive streaming rights deals will only continue in the future, as the popularity of services such as Netflix, Amazon, and now Google’s Fire TV will continue to increase their respective subscriber bases.

 

These types of exclusive rights deals with the big internet streaming services provide a huge injection of revenue dollars to the broadcasters and the networks involved such as HBO or CBS. In fact, CBS syndicates and produces so many different series across a variety of networks that their stock increased on the news of the favorable Supreme Court ruling today.

 

In my view, that is what I take away from the decision today by the Supreme Court that the consumer in some ways is the loser here too. The Aveo service, as the dissenting opinion of the Court explained, was not providing a public display of content rather the service was provided to subscribers. Therefore, the three dissenting and more conservative justices felt that the subscription fee negated the need for Aveo to pay licensing fees to the broadcasters.

 

The Dissent

 

I would tend to agree with the dissenting opinion, the Aveo service was providing the consumer with another option to view broadcast television programming. It was providing choice and fostering competition in the Internet subscription based entertainment space. This decision is going to dismantle Aveo, and in many ways destroys the very ingenuity and entrepreneurial spirit which America should espouse.

 

I think of all the time, money, and energy that the employees and developers at Aveo dedicated to designing and marketing their service, which is a unique technology, and I think the Court ruling sends the wrong message to the small business owner or the entrepreneur. This type of service should be promoted and not dismantled, other business owners could see this news today and decide not to move forward with a new product or an idea for a new service, and that can and will be detrimental to our collective best interest in American society.

 

However, it should also be noted that I am in no way in favor of a service that would infringe upon the copyright protections that these broadcasters and networks operate within. The networks and television broadcasting industry spends a significant amount of money on the production and the copyright legal protections for their programming. I am in no way promoting a service which would violate any copyrighted programming and broadcast these programs to a general public audience in violation of federal laws.

 

In relative terms, as a writer, if someone took my copyrighted written material and put it out into the general public in a way which misrepresented me and violated my rights that would be a huge issue. However, that was not the issue at hand here, because the subscription fee and the manner in which the programming was presented by Aveo with integrity made this case a difficult one for the judiciary system necessitating a ruling from the Supreme Court.

 

This decision effectively rewards the big broadcasting companies and eliminates a source of competition for the huge cable television operators. We should be fostering competition in the marketplace, yet between mergers and acquisitions and increased regulatory activity, the government is eliminating competition from our marketplace. This type of activity could prove ultimately detrimental, as we have seen in the course of history with monopolies in various industries in the past.

 

This ruling today is being reported by the media that it has moved the TV landscape into a state of clarity and removed some ambiguity. I disagree with that sentiment, I think the ruling today was only the beginning of another mountain of litigation driven by the broadcasters and networks and the groups which represent their collective interests with the goal of elimination of competition from the marketplace.

 

This ruling did not push our court system towards the end of the TV wars, in fact, I would argue, it is just the beginning.

 

 

(Some background information courtesy of Yahoo! News)

Television Wars: The Future of Home Entertainment

The rapid technological advancements in the mass media are causing a shift in the way in which the general public will utilize their home entertainment. The advent of Apple TV changed the landscape when it hit the market, and other streaming services and content providers are looking to continue to shape the market in the future.

 

In order to compete in the marketplace with Apple, Google launched their own product, Google TV, back in October 2010. In the years since then, the number of content providers and subscription services for the distribution of television programs and movies exploded. Google has since renamed their product after their “Chrome” product platform.

 

Now the landscape is crowded with systems such as Aveo, Roku, and Slingbox as well as subscription content providers in Netflix, Hulu, and Amazon Direct Video. These products and services coupled with the telecom companies’ movement into the television market with products such as Verizon’s FIOS, and AT&T’s UVerse, and the television wars have officially begun.

 

All of this content is transmitted by a signal today, and these companies and service providers are going to compete for the right to send their signal to your home. It happens every day if you have cable television service through a company such as Comcast, and you receive calls and emails from Verizon trying to entice you to switch to their FIOS service.

 

“Binge watching”

 

I have written about the evolution in the medium of television in the past, but I was thinking about all of these changes again over the Christmas/ New Year’s holidays when I had some time to unwind and watch a couple of movies.

 

It is still incredible to me that through a service such as, Amazon Direct, you can watch whatever movie you want in their catalog, or you could “binge watch” a television series you may have never seen before from the start of the series all the way through to the end, in sequence, with no commercials.

 

This approach to watching a series is the new trend in television viewing, and the broadcast networks as well as the cable, satellite, and telecom providers are increasingly aware of this viewer preference. They are providing their viewers or subscribers with several different ways to “binge watch” their favorite programs through video-on-demand services, streaming of both old and new episodes on the network website, and providing access to the show via subscription content providers such as Netflix or Hulu.

 

This method of viewing an entire season or an entire series run of episodes is very appealing to Americans, who like the freedom to watch whatever they want, at whatever time they want to watch it. The days of “appointment TV,” when you had to be home at a certain time on a certain night because the show was something the viewer could not miss, are over. The average person is too busy today with all of the new technology and the demands of their respective careers or families for that approach to be viable anymore.

 

In this case the network and cable television broadcast companies got it right to capitalize on the marketing of these new platforms available to stream content and expand the viewership of their programming. These same executives have missed the mark at other points and have alienated viewers in the past. The networks, at another point in time, would have considered restricting access to their programming to their own detriment; though they continue to favor subscription services rather than Aveo and some other services that tend to provide the content for less money.

 

Some say the networks were smart to provide their programming content via the Internet and other platforms. However, I think they really had no choice because if they did not provide the content, they would have lost many viewers, so they did so for their own survival.

 

In fact, some people have already “cut the cable cord” and are using these other devices and services rather than paying for a cable or satellite service for television in their homes.

 

Original Programming

 

The other trend which will also serve to further accentuate the competition for viewers is the push toward the development of more original programming for the new age outlets such as Netflix, Amazon Direct, and Chrome TV.   The appeal for the high profile actors and actresses in Hollywood to sign on for original programs on these new formats is two-fold:

  1. The content providers have lots of cash to shell out to produce their own programming and pay the stars associated – so money is a key factor
  2. The rules for the content they can produce are different than if they did a mainstream show on a major network or a basic cable program. The rules for what they can display are similar to a series produced for a premium tier cable channel such as HBO or Showtime. That freedom from normal regulatory constraints is very compelling to certain stars to be able to work on a show that is unvarnished and bold.

 

Some of these programs have been successful already in their limited runs, which has only served to fill the pipeline with more concepts for future development. Netflix recently announced that they are developing original programming for children, which opens up a whole new avenue to market their service to families.  Amazon is working a few new original programming concepts as well.

 

The two other recent developments that have further continued this trend of original programming is the news of the Disney deal with Netflix, and the potential for exclusive sports programming moving to these new media service providers.

 

The Disney deal with Netflix will eventually provide for Disney movies to be available exclusively through a subscription to Netflix in probably about four years from now. However, Disney owns Marvel Studios and the rights to most of their comic book characters. Marvel and Netflix will be producing at least four original series, each focused on a single character, for release in the near future (www.usatoday.com).

 

The recent announcement by the NFL that they are strongly considering the addition of another tier of playoffs is rumored to be driven by the strong interest and deep pockets of Apple TV and Google to land the digital rights to sporting events, particularly the NFL (www.money.cnn.com).

 

These types of digital rights deals are going to be the future of professional sports viewing as well, and it serves as another reminder that the world is rapidly changing. The business activity and marketing campaigns have also made it abundantly clear: these changes are here to stay.

 

In addition, as these properties continue to advance they will get monetized differently, and as some have seen with certain programs on Hulu, you will have commercial interruptions on certain programs. The advertising agencies and the networks will find ways to deliver their sponsor’s message as these services grow more prevalent in the future.

 

So whether you have Netflix, Hulu, Amazon Direct, or all three services; I hope you enjoy the viewing options for content that they provide because in the future it is only going to get bigger and better.