Millions of Americans are the Real Losers in Last Week's Aereo DecisionMonday, June 30, 2014, 8:27 AM ET|Posted by Will Richmond
Aereo lost big at the Supreme Court last week. But millions of Americans, in particular those who do not consider themselves sports fans, are also the real losers from the ruling. Why? Because, as retransmission consent fee payments in the U.S. soar from $3.3 billion in 2013 to a projected $7.6 billion in 2019 (according to SNL Kagan), these fees will be used to help fund broadcasts of increasingly expensive sporting events in which many of these viewers have no interest.
As I explained on last week's podcast, pay-TV operators will continue to try as hard as possible to pass on as much of their hefty retransmission consent fees to their subscribers. So whether you watch these various sports broadcasts or not, you'll be paying for them via the billions in retransmission consent fees that will flow to broadcasters.
To put these mounting fees in perspective, if there are approximately 100 million U.S. pay-TV subscribers in 2019, every one of them could pay approximately $70/year or more to their pay-TV operator just to fund retrans fees.
I called this out 2 years ago, when I noticed that in NBCU's content distribution head's Aereo-related testimony, he described the risk that if Aereo succeeded, NBCU would not be able to fund its programming costs. He then cited just one single example of the kind of programming that was in potential jeopardy: the company's $9 billion NFL Sunday Night Football deal.
This has been a key broadcaster argument for retrans fees for years: that if they didn't materialize, sports on "free" broadcast TV would slowly migrate to cable TV. That has happened anyway, although broadcasters have spent billions to hang on to rights for certain marquee sporting events (e.g. NFL, Olympics, MLB, PGA golf, etc.).
The reality is that broadcasters have used - and now with the Aereo threat behind them - will continue to use, escalating retrans fees as the necessary firepower to fund competitive bidding for high-profile sports rights. But as their financial stakes have risen, virtually all of the digital enhancements to broadcast sports (and entertainment) have been made available only to authenticated pay-TV subscribers (a prime example is NBC's multi-device Olympics streaming).
This means that non-sports fans subscribing to pay-TV are now paying not only for expensive cable TV sports networks they don't watch, but also for broadcast TV networks' investments in sports rights and digital extensions that these people also don't watch or use.
Aereo offered the chance for consumers who want to readily enjoy the still very popular entertainment and news programming broadcasters offer, but to do so at a reasonable price point outside of the pay-TV bundle that has been inflated by expensive sports fees. Not that long ago, free over-the-air access to broadcast networks was sacrosanct. But now that the Supreme Court has essentially put its stamp of approval on broadcasters' copyright prerogatives in the digital age, the concept of "free" is a thing of the past.
Broadcast TV networks are betting that non-sports fans will continue to blithely subsidize expensive, sports-fueled pay-TV and broadcast TV, even as other, cheaper online alternatives abound. To date that bet has paid off. But, as monthly pay-TV subscription fees mount, the question of whether this bet will eventually backfire will become increasingly pressing.
Categories: Broadcasters, Startups