Jeff Kagan: Aereo Lost, But Broadcasters Should Not Think They Won Either

Jeff Kagan |

Aereo Video, Comcast, cable TV losing, Time Warner Cable, Netflix, Broadcast televsionThe idea of a small upstart called Aereo challenging the traditional television and broadcast model was struck down by the Supreme Court. However broadcasters and traditional cable TV companies shouldn’t think the battle is over. In fact the battle has just begun, and is already raging.

The customer is now aware of new ideas, innovation and ways to cut costs. Competitors with new ideas are also coming to market. These are threats to the traditional business model we all know so well. Whether they like it or not, things are changing.

The next two questions are what will Aereo do next, and how will traditional TV answer this call?

We don’t yet know what the future holds for video-sharing platform Aereo. Do they have a plan B? Will they pay licensing fees, stay in business and grow or will they just close up shop?

Regardless of whether Aereo is a competitor going forward or not, the door is now open and other new ideas and competitors will start coming through, one after the other in a relentless battle for the customer and market share.

Some ideas will be competitive and others will be cooperative. That means companies will start doing business with other companies and competing with those same companies on other fronts.

This makes for a confusing, but rapidly growing and changing marketplace. We have seen this in several other industries over the years. Broadcast television and cable TV is next.

Aereo Defeat Does Not Mean Cable TV is Problem-Free

So what’s the problem with the television broadcast and cable TV model? There are many. These problems came from the way the industry was set up a long time ago. Back then there was not the new technology or competition we see bursting out today. So while there were problems, there was no competition and no threat yesterday.

Prices continue to rise, year after year. Customers pay roughly twice as much this year as they paid ten years ago. The problem comes from the cable television industry, who users are customers of, and the networks and broadcasters who cable TV is a customer of.

The pricing model is broken and the industry keeps finding new ways to raise prices year after year. That’s fine for customers who don’t mind paying more, but many do have a problem.

Unfortunately that segment of the user marketplace keeps getting run over year after year by the runaway television bill.

That’s one of the sources of customer demand for lower priced services. Innovation is another source. Cable television companies like Comcast (CMCSA) , Time Warner Cable (TWC) , Cox and others never really innovated. They never had to. They had no competition.

However now they are starting to see competition. Now cable TV is losing customers. Now they have to reinvent how they do business. They must improve customer service and customer care. They must improve reliability of their service. They must be innovative with new services so they can compete with the newcomers.

Traditional television and cable TV will both compete with and cooperate with others in the field like Apple (AAPL) TV, Google (GOOG) TV, Amazon.com (AMZN) TV, Netflix (NFLX) and countless other smaller, but rapidly growing companies.

The Door is Already Open for Change

The television world is changing. In fact if we look backwards a decade we can see it has changed quite a bit. And if we look forward another decade it will be unrecognizable. We’ll be watching live or taped television on all our devices including television, computer, tablet, smartwatches, screens on our refrigerators, car dashboards and more.

We’ll still have geographic restrictions for some tech like TV’s in our homes, but a national ability to watch on our mobile devices. Things continue to change.

This is the fast changing and growing world in which Aereo was a player. Will they still be a player under different rules going forward? We’ll have to wait and see.

Either way however the door is opened and new technology and innovation and competition is coming.

In this new world the traditional businesses like television networks and broadcasters as well as traditional cable television companies face a big threat. These industries will be forced to reinvent themselves just to stay relevant going forward.

Who will be the winners and losers long term are impossible to say today. Let’s just keep our eyes open as the ride will be fast and rapidly changing.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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AAPL Apple Inc. 109.90 0.41 0.37 26,527,997
AMZN Amazon.com Inc. 740.34 -3.31 -0.45 3,561,307
NFLX Netflix Inc. 120.81 3.59 3.06 8,953,590
CMCSA Comcast Corporation Class A Common Stock 68.78 -1.08 -1.55 13,361,365
NLIR Natl Invst Corp Re Hldgs n/a n/a n/a 0

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