Television was certainly worth watching last week, and not just the latest episode of “Mad Men.”
On Tuesday, the Supreme Court heard arguments in the case of Aereo, a company that transmits broadcast TV over the Internet without paying broadcasters for the privilege. If the high court rules that this is legal, it could devastate traditional TV companies.
On Wednesday, the premium cable network Home Box Office struck a deal with online retailer Amazon.com that means you won’t need a cable TV subscription to watch HBO programs on the Internet. And on Thursday Netflix, the company that pioneered Internet movie streaming, said it’ll make its service available through cable TV networks.
Whether you watch TV via cable, Internet, or rabbit-ear antenna, you’ll see the same thing — a massive industry-wide upheaval, as new technologies and business models reshape what we view, and how we view it.
“The television industry is in transformation,” said independent media analyst Jeffrey Kagan. “This entire space is going to be a completely different space in five years.”
The Aereo case carries the greatest risk of chaos. The company picks up broadcast TV shows, and displays them live on a personal computer or smartphone, or records them for later viewing.
Television broadcast networks such as CBS, ABC, NBC, and Fox say that Aereo is merely retransmitting their shows to the public and should have to pay retransmission fees, like the cable companies.
‘We’ve heard comments from them going both ways. They don’t like what Aereo is doing, but they don’t know whether they can or should stop it.’
But Aereo argues that it’s transmitting thousands of separate video streams, each to an individual user. That’s not public retransmission, the company claims, and so it owes no fees. If Aereo wins, cable and satellite TV companies could set up similar systems, costing broadcasters about $4 billion per year in lost retransmission fees.
Some federal judges have agreed with Aereo, others haven’t. How will the justices rule? After reviewing their remarks, Kagan’s not sure.
“We’ve heard comments from them going both ways,” Kagan said. “They don’t like what Aereo is doing, but they don’t know whether they can or should stop it.”
Industry analyst Michael Pachter of Wedbush Securities in Los Angeles predicts that Aereo will lose its case. And if it does prevail, Pachter believes Congress will pass legislation to ban its technology.
“All of Hollywood backs the Democrats,” said Pachter. “The Democrats will absolutely flip this if Aereo wins.”
By contrast, the titans of cable and Internet TV are shuffling the deck more cautiously. For instance, HBO will not let Amazon show current hit programs such as “Game of Thrones.”
Instead, only shows at least three years old will be available.
Still, Pachter thinks it’s a major shift for HBO. “I think that is probably the biggest news in the last couple of years,” he said, because it could help establish Amazon’s video streaming service as a serious rival to Netflix.
About 20 million people pay $99 a year — recently increased from $79 — for the Prime service. In exchange they get free shipping of their Amazon purchases and a host of other goodies, including streamed movies and TV shows. But it’s unclear how many Prime members use the video service, which is available on personal computers and tablets, smart TV sets and Amazon’s new video device, the Fire TV.
Meanwhile, market leader Netflix has 36 million subscribers for its video streams. Netflix not only shows Hollywood movies and TV shows, but has also found success producing original shows of its own, such as the popular “House of Cards.”
Amazon is moving to match Netflix with its own original TV series. But adding critically-acclaimed HBO programs to the inventory is a quick way to attract new viewers, particularly those who don’t want to subscribe to cable.
By offering only older programs, HBO is being careful not to alienate the cable TV companies. “HBO completely understands that it needs cable to sell its subscriptions,” said Pachter. “HBO cannot afford to antagonize their partners.”
Indeed, Jim Holanda, chief executive of cable company RCN Telecom Services LLC, said that even if his customers abandoned their HBO subscription for Amazon Prime, this would simply make them more dependent on RCN’s broadband Internet service in order to stream those shows into their homes.
“Companies need bandwidth to get that HBO over their Amazon Fire,” Holanda said.
Meanwhile, customers of RCN, Grande Communications Networks LLC., and Atlantic Broadband will be able to get Netflix access through their cable set-top box, instead of having to use a separate device. For instance, RCN customers in Boston who use one of the company’s TiVo set-top control boxes will find Netflix on channel 450. Subscribers will still have to pay a separate fee for Netflix service, but logging on will be considerably easier.
Netflix spokesman Joris Evers said the company hopes to strike similar deals with Comcast and other large cable companies. Evers said it shouldn’t matter whether a TV show arrives via cable or Internet.
“You just want it to be there,” said Evers, “and you want it to be beautiful.”