Coming off a fresh victory in Boston, Aereo may soon find itself battling the broadcasters in front of the US Supreme Court to determine the fate of online broadcast streaming. Major broadcasters filed the petition to the US Supreme Court to appeal the Second Circuit Court of Appeal's decision in favor of Aereo that has kept the startup streaming service alive, and to settle conflicting district court rulings coming from Aereo and Filmon X.
Meanwhile, the Aereo-like service, FilmOn X, has announced that it will go ahead with expansion into Boston, despite a preliminary injunction against it laid on by the DC District Court in September. FilmOn X had been asking the DC Court to revise its earlier injunction, with a filing on 11 October, which banned the service nationwide except in the Second Circuit - four days later FilmOn X was firmly rebuffed by the court. Questions of contempt have been raised because of its Boston operations which were in direct violation of the initial injunction.
Aereo and Filmon X have seen mixed results from the courts, with Aereo having more success than FilmonX, but between them, the two similar services have caught a moderate amount of wind as they prepare for the final showdown - a decision at the Supreme Court that will settle the question of Aereo and FilmOn X. The appeal to the highest court comes as no surprise especially as lower courts seem divided upon the subject.
If the companies obtain the highest court's seal of approval, the dynamics of the broadcast TV business are not likely to suffer to a dramatic disruption. While making no opinion about the legality or lack thereof of Aereo and FilmOn X, IHS believes that the services are likely to not be a root cause for significant cord-cutting activity. Rather, the services are likely to be adopted by cord-never households as a supplement to existing content acquisition strategies like Netflix and Hulu +.
On the other side of the argument, broadcasters are ultimately expressing concern for their nascent but growing revenue stream, retransmission fees. It's not surprising that broadcasters have been aggressive in challenging Aereo and Filmon X in the courts, recent retransmission fee deals have been pegged between $1.50 and $2.00 per subscriber per month. The fear is that if significant numbers of households cut the cord and defect to Aereo and FilmOn X, that the perceived value of the networks will be diminished.
Additionally, pay TV providers may be inclined to partner with Aereo and FIlmOn X or pursue simliar services to sidestep any retransmissions fee payments or as a leverage during any retransmission fee showdowns. During the Time Warner Cable (TWC) and CBS dispute in August 2013 that resulted in a blackout, TWC was promoting Aereo so customers could watch CBS during the blackout.
Forgoing a subscription to pay TV is something that the majority of US TV households are not going to undertake in the near-term future. Small amounts of cord-cutting that are expected in the coming years, but the amount is predicted to be small enough that organic growth in ARPU will likely ensure positive margins for pay TV video products.