For a mogul as only old Hollywood could make them, not to mention a practicing plutocrat nonpareil, Barry Diller certainly relishes disruption. The studios didn't like it when, in 1969, he launched "ABC Movie of the Week" to dispense 90 minutes of viewing fare made expressly for television rather than the silver screen. And the TV firmament didn't cotton to his creating, in 1987, a fourth network by the name of Fox.
On May 30, however, those transgressions stand to pale next to the disruption instigated by current Diller project Aereo Inc. That's the start date for hearings on whether the media establishment as we know it, including former Diller employers ABC and Fox, can obtain a preliminary injunction to stop Aereo's TV streaming operation.
Diller, whose IAC/InterActiveCorp contributed more than $20 million of Aereo's $25 million in funding, acknowledged while at the South by Southwest conference in March that "it's going to be a great fight." Making it more contentious was a court decision on May 21 to dismiss the "unfair competition" claim filed by the broadcasting group of plaintiffs against Aereo.
That still leaves two infringement charges -- rights of public performance and rights of reproduction -- for U.S. District Judge Alison J. Nathan to adjudicate. Although Nathan recognized in her unfair-competition opinion that Aereo's broadcasting plaintiffs consider the two charges still outstanding sturdier than the one she dismissed, legal precedents fall short of rendering an unequivocal interpretation. All that's certain is, whatever the court's decision, it will trigger upheaval in a media ecosystem already reeling from disruption.
First, though, a techno-free primer: For $12 a month, customers in New York gain access to all 28 over-the-air channels (no cable) that Aereo receives at its Brooklyn headquarters. They can view these channels live or later through Aereo-provided DVRs. They're no longer tethered to their TVs, either, but can stream Aereo's HD offerings to their computers, tablets and smartphones.
On testifying before the Senate Commerce Committee in April, Diller called for the preservation of the "right to access free over-the-air broadcast television." About 15% of the country still receives video this way, he said, and the percentage would be higher were it not for "the difficulty of installing a rooftop antenna or problems with reception due to signal interference."
Then the pitch: "Aereo reminds consumers that they have a right to access over-the-air broadcasts," Diller told the committee. "And Aereo provides a technology solution that brings together the simplicity of the antenna and the convenience of locating equipment remotely."
The comments were so self-serving it's easy to see why they sent the media establishment over the edge. TV broadcasters long ago won the right to be paid for the retransmission of their signals by cable and satellite providers. Time Warner Cable Inc., from which Aereo has been siphoning customers since its March launch, has a bone to pick, too. Where's the level playing field when an upstart like Aereo, incurring not a cent in content costs, distributes the same programming that drives the lion's share of U.S. viewing?
As Diller himself noted in his testimony, "The four largest broadcast networks attract 8 to 12 million viewers each, whereas the most popular cable networks typically attract approximately 2 million viewers each."
The establishment's handwringing over Aereo may never go away. Indeed, if not legally restrained, Diller said at SXSW that his cord-cutting enabler would need only a year to expand from New York to between 75 and 100 cities.
Such a move would, in turn, put most of television in play. The four largest broadcast networks so opposed to Aereo could give up their over-the-air status and transform themselves into cable networks, thereby limiting retransmission to those cable and satellite providers legally obligated to pay. Or, for the over-the-air broadcasts they carry, cable and satellite providers could adopt the same distribution system used by Aereo and eliminate the retransmission fees their new competitor has never paid.
The fallout would be extreme either way, potentially undermining local TV stations and the entire affiliate system. It would be disruption of an order Diller might publicly condemn but, if past is prologue, privately commend.
Richard Morgan covers media for The Deal magazine.