I don’t know what it is about Aereo’s streaming service that makes so many members of the media herald it as such a big “disruptor” to cable TV, but it seems a week doesn’t go by with yet another blog post praising Aereo as a cable TV “killer”, without any actual metrics or data to back it up. Last night I was reading a post on Gigaom about Aereo’s streaming service and like many in the media, the author implies that Aereo is impacting the current cable TV business – yet provides no data of any kind to prove the point. The post called Aereo’s court ruling from yesterday as the “biggest blow yet to the existing TV business,” which in reality, is simple not the case.
In the past Gigaom has called Aereo, “one of the most disruptive forces in television today.” Really? Disruptive? Based on what metric? Just because a company gets sued by the broadcasters doesn’t make their service/business “disruptive”. Aereo has done nothing to show they can compete in this market, with any large number of subscribers, yet the media still wants to hype it. And Gigaom’s not the only one guilty of that.
It’s clear that talking or blogging about cable TV is a touchy subject with many because as a general rule, people don’t like how much they spend on cable TV each month. No one can blame them as no one likes to spend money, but talking about how much your cable bill is is like talking about taxes. No one likes paying them, but the vast majority of people pay their taxes and also continue to pay for cable TV each month. In the U.S. alone, there are more than 100 million households that pay for monthly cable/satellite TV programming. And while reports predict that number could drop to around 96 million by 2017, losing 1% of your market per year is no threat. Especially since we’ve seen these numbers predicted before and they’ve never been right. But touchy subject or not, the media has a responsibility to compare video content distribution services fairly, accurately and from a real apples-to-apples standpoint, which rarely happens when they talk about Aereo.
Whenever I write about Aereo, people always comment that we know Aereo is “disruptive” simply due to the fact that they are being sued by the major broadcasters. But the point they are missing is that the broadcasters aren’t suing Aereo because they are scared of the company, they are scared of the idea and precedent it could set. Aereo doesn’t have the means to disrupt cable TV, but in the hands of some like Amazon, it could cause a threat. I’m not saying Amazon is getting into that business, but if Aereo gets away with it, what happens if someone like an Amazon, who actually has the means and resources to disrupt markets, takes Aereo’s idea and runs with it? Companies don’t threaten the traditional cable TV business, ideas do. For years we heard that Netflix was going to disrupt cable TV, yet years later we know that didn’t happen. In reality, most services never replace one another, it’s simply a complement to it, just as we have seen with Netflix.
I’ve been very vocal that Aereo’s business model is dead because the fact is, not a large enough percentage of cable TV subscribers want a limited service like Aereo’s. Some argue that to date, Aereo’s only been available in the NYC market and is just now being rolled out to multiple cities, so we have to wait to see what the demand is, but that’s not a valid argument. NYC has one of the most dense population of potential consumers around, yet the service has so few users Aereo won’t even go on record to say how many. They won’t talk adoption rates, the number of hours of video being consumed or any kind of user metrics. Rolling the service out to additional cities only means they will burn through more money which will keep them from having a profitable business on a service that averages $10 a month. They only way to have any chance at making such a low-cost service work, and turn into a profitable business, is to sign up subscribers in huge volume, like Netflix has done. But Aereo won’t be able to do that, because as Netflix has taught us, consumers want choice, a large catalog of content, wide device support, and high-quality video. Aereo doesn’t have any of those.
The argument people will come back to me with is that this all takes time, the technology and Aereo’s service is new, streaming media users are now a younger generation and I have to “give it a few years” to work out. The problem is, every five years these people say the same thing, “give it a few years”. As an industry, many have been talking about streaming media services disrupting cable TV since 2000 and to date, it hasn’t happened. Cable TV providers make more profits now than ever before. And even with all the new devices and the changing landscape of how content is consumed, these cable/satellite providers have found a way to continue to still make a lot of money. That’s not going to change. Whether they charge more for Internet only or charge consumers more for dropping the TV portion of their bill, the MSOs are in control. Say all you want about Aereo, Netflix, YouTube or anyone else, but they are not taking any large share of revenue away from the pay TV providers.
When multicasting was first deployed, people were sure it was going to replace cable TV as the main distribution medium for video. Then when the Apple TV streaming box came out, Apple’s hardware and iTunes was supposedly going to kill cable. When Netflix got big, we heard that was going to create a lot of cord cutters. Then it was the non-existent all-in-one Apple TV that we have been hearing about for years, that was going to disrupt the cable TV business. Now, supposedly Aereo is challenging the MSOs. Every time something new comes out, the media proclaims one thing will kill off the other when usually it’s a complement to it, not a replacement for it. It’s one of the biggest reasons why members of the media don’t use numbers when they talk about these services/platforms/devices. We see services compared every day to one another, yet 99% of the time, the author never says how many are sold, used, adopted or consumed when compared to the service it’s supposedly going to kill off. It easier for them to create panic and foster the idea of disruption, when in fact, the adoption numbers prove otherwise.
Also, post after post comes out talking about Aereo’s service, but in most cases, you can tell these writers haven’t even tried the service out for themselves. Few have, but most haven’t. Why don’t they mention how few channels Aereo has? How few devices they are on? The lack of Android support? The limit on the video quality? Or how when you turn on your TV it works, but many times, Aereo doesn’t. Where are the details? Where are the adoption numbers? The metrics? Why is this industry ok with comparing one service to another without looking at the real, tangible data that every business has, which dictates what the adoption really is and how the business is doing? For many, it’s easier to write something more vague, generic and imply disruption because they think it’s a good story to read. In reality, the good story is one that exposes the weakness of any product or service that is supposed to be a disruptor so that you can see if there are any faults in the service or technology. Because if there isn’t, then that’s the story. Then you have something real. But without that, it’s all fluff.
It’s really easy to say service A is better than service B, anyone can do that. But when the person saying it doesn’t use the service, doesn’t know how it really works and doesn’t know the weakness of the service, it’s not a valid argument. So all we keep hearing many in the media say is that Aereo will or is “disrupting” cable TV. Based on what metrics? Content choice? No. Video quality? No. Device support? No. Revenue generation? No. Profitability? No. Look at the service for what it is today, not what some think/hope/predict it can or should be years from now.
The biggest disruptor to cable TV isn’t Aereo, Netflix or some other content service. The biggest disruptor to cable TV is themselves and the content owners who continue to raise their content licensing rates to the MSOs. At some point, cable TV operators will lose subscribers if they continue to raise rates every year like clockwork. And if they don’t learn and don’t realize that consumers are only willing to pay so much, then they will lose subscribers over time. And while streaming media content services like Aereo, Netflix, Amazon or others would pick up new users as a result, they aren’t the ones who have caused the disruption, their businesses would grow as a byproduct of the cable TV companies being too greedy.
This industry already has too much hype in it, expectations are being set wrong and far too many bloggers are writing about products and services they have never even used. In the past, I’ve written about how Aereo’s service has worked for me, but I will have a full, in-depth review online in the next few days, after having used the service for the past four months.
And for those who are going to write in the comments section that I am wrong because they have cut the cord, that’s great it worked for you, but you are the minority, not the majority.
My other Aereo posts:
– Barry Diller’s OTT Service Aereo Is Dead On Arrival (Feb. 2012)