The contract dispute between CBS and Time Warner Cable is the first to unfold in the New York metropolitan area since Aereo came to market there last year. Last week, the companies warned that if the dispute was not resolved by Wednesday, CBS could be taken away from three million of Time Warner Cable’s 12 million subscribers.
Enter Aereo. The service, backed by Barry Diller and a number of other venture capitalists, uses giant arrays of antennas to pick up freely available television signals and stream them to the phones, computers and other screens of paying subscribers. By relying on the antennas, Aereo does not pay the kinds of retransmission fees that distributors like Time Warner Cable pay to broadcasters like CBS — an approach that Aereo says is legal, but that the broadcasters say is not.
Analysts have theorized that distributors could exploit Aereo, or a service like it, to avoid paying increasingly steep retransmission fees. Such fees are at the heart of the current fight with CBS.
While Time Warner Cable does not seem ready or willing to deploy Aereo-like technology, a spokeswoman, Maureen Huff, said Sunday that it would recommend Aereo to its New York subscribers if CBS was blacked out. The distributor may also underline the fact that Aereo, which normally costs $8 a month, offers a 30-day free trial. (Ms. Huff also pointed out that many CBS shows are available online on a delayed basis, and that “all of CBS’s broadcast TV programming is available free over-the-air,” so subscribers can use antennas.)
Time Warner Cable is treading carefully because Aereo is the subject of several lawsuits filed by major media companies. In this case, its invocation of Aereo might be particularly corrosive because CBS has helped lead the charge against Aereo in the courts.
To date, the service has been upheld by the Court of Appeals for the Second Circuit in New York; last week, in its third victory there, the appeals court declined to hear the broadcasters’ appeal.
Emboldened by the rulings, Aereo, which is so small that it has not shared any New York subscriber data, recently expanded to Boston and Atlanta; its next market is Chicago, it says, with many more to come. But it has not announced any plans in the West Coast markets covered by the Ninth Circuit Court, where a service similar to Aereo was rejected in December. Given the uncertain state of play, Aereo is of limited use to Time Warner Cable currently; along with New York, the fight with CBS affects subscribers in Los Angeles, Dallas and several smaller markets.
David Bank, a media analyst for RBC Capital Markets, said he would not be shocked if the distributor somehow used Aereo to skirt the blackout, or encouraged subscribers to do so. But he wrote in an e-mail message: “I think it would be more of ‘negotiating tactic’ than a real business solution.”
A CBS spokesman declined to comment. In a statement last week about the potential blackout, the company, whose broadcast network is the highest-rated network in the United States, said it “remains committed to working towards a mutually agreeable contract.”
“This conflict just further highlights the importance of having alternatives in the marketplace,” Chet Kanojia, the chief of Aereo, said in a statement. “It’s also a great reminder that consumers have the right to watch over-the-air television using an antenna. Whether they use Aereo or some other type of antenna, it’s their choice. That’s the beauty of having alternatives.”
