The Media Calls Aereo “Disruptive” To Cable TV Because They Care About Headlines, Not Business Metrics

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:

- Aereo Announces More Funding, For A Service No One Really Wants (Jan. 2013)

- Aereo Has Less Than 2,000 Customers, No Shot At Surviving (Aug. 2012)

- Barry Diller’s OTT Service Aereo Is Dead On Arrival (Feb. 2012)

  • http://www.twitter.com/davezatz Dave Z

    I’d say it’s *potentially* disruptive. And actually not as a cable replacement but as a cable service – Aereo would be way cheaper than retransmission fees… Also, what exactly is “media” – does having this blog also make you a member of the media? Hm.

    • http://www.facebook.com/sjs.wilton Sjs Wilton

      “Way cheaper than retransmission fees”. Well of course if you don’t pay for the content it’s a great business model, a.k.a. piracy.

      • ChronoFish

        How long is the cable to your Antenna? What’s the longest length it can be? Can it be a wireless antenna? Can you pay someone to maintain it? That’s what Aereo is. It’s not re-broadcasting. It’s not interjecting it’s own ads. It’s not suppressing ads or content. It’s an Internet connected antenna, and every customer has its own. It’s essentially an antenna rental service. That’s not piracy. They are not stealing it and preventing others from receiving it. They are not offering something that you couldn’t get (for free, legally) on your own.

        They are offering an enhancement to an antenna and a service to take care of that antenna. Period.

    • danrayburn

      Hey Dave, I agree, media is a generic term and I would fall into that category. But you won’t ever find me saying one company will disrupt an entire market, unless we have some real data to show it is. My goal is not to create “panic” which is what some seem to want to do with their posts. I want to say “mainstream” media, but you and I both see niche blogs as well, writing about services/devices they have never even used before.

      It’s a bigger problem that has to do with the business of blogging in general. The model is broken as most, (but not all), write as many stories as possible, as short as possible, to try and generate as many page views as possible. That’s a bad business strategy. I wrote a post about that problem awhile back.

      The Business Of Blogging Is Ruining The Medium
      http://blog.streamingmedia.com/the_business_of_online_vi/2009/12/the-business-of-blogging-is-ruining-the-medium.html

      • ChronoFish

        With all due respect, blogging IS the medium. The Internet IS democratized publishing. The Internet IS the lowest common denominator. It’s not ruining the Internet, it IS the Internet. The frustration that professional writers and traditional media have is that this collective of amateurs, most of which never would have been able to survive in traditional print/broadcast media, rule the media that gathers the most eye-balls. Free/cheap/amateur/semi-pro writers become their own publisher in a matter of seconds. Groups like TechDirt are able to survive via the basic principles of the Long Tail.

        You DON’T have to like the Medium (the Internet), but you do have to understand that the Medium does not belong to traditional media – it belongs to the “bloggers” who have made it what it is today (an integral part of our lives).

  • http://www.facebook.com/people/Bruce-A-Johnson/100000241103493 Bruce A Johnson

    At this point Aereo has *nothing* to do with cable television. However, it only makes sense for broadcasters to make a deal with Aereo to be their mobile broadcast platform of choice. If you never watch local or network TV Aereo has nothing for you, but for people who do (and a majority of people do; that’s why the local stations get the best numbers on the cable system) this could make mobile DTV a reality *today.* The broadcasters are shooting themselves in the foot on this one…with a bazooka.

    • EdWill

      The whole point of Aero is “LIVE” local and network programming. If they will just add CNBC I have no use for cable. Everything is on Netflix, etc.

  • http://lairigmarketing.typepad.com Kevin

    Best blog post of 2013 (and maybe 2012 !) on the topic of Pay TV (and maybe any media topic !!!). Best of luck with the anti-illectual blow back…

  • http://twitter.com/pcsathy Peter D. Csathy

    Dan, the Aereo decision IS disruptive — but not for the reasons most press outlets address. As a former IP/media attorney, I actually likely was one of the few who wrote about the decision after reading the entire Court ruling — and its rationale. While it is open to debate whether Aereo’s technology is disruptive, the legal issues involved — and the precedent this Court’s ruling creates — are absolutely likely to be disruptive and used widely by other digital media companies as they too create their new technologies. And, these new technologies absolutely are disruptive (and certainly threats) to existing business models. That’s what I mean by the Aereo decision being disruptive. My full rationale can be found here in my own post about the subject — http://digitalmediaupdate.blogspot.com/2013/04/aereo-explained-why-court-rejected.html

    • danrayburn

      Hi Peter, your response is kind of my point of the article. People speak of Aereo of having already disrupted something, but then provide no metrics to show that. Disruptive how? Proven with what metric? You reference “these new technologies absolutely are disruptive”, which ones is Aereo impacting? What technologies? And again, disrupting them how? How has what Aereo’s done imapcted any other product on the market? You say “likely” to be disruptive, but that’s not disruptive now.

      I think you’re talking more about the legal ruling from the case being “disruptive”, which could happen. I’m staying out of what’s legal or not at that’s for the courts to decide. If when it’s all said and done the ruling stands, I would agree that there are probably going to be some impacts from that, but it’s too early to know what that would be.

      • http://twitter.com/pcsathy Peter D. Csathy

        Dan, my point is that the Aereo ruling — about which I and others reported — absolutely is disruptive. I think I state that pretty clearly that I am speaking about the impact of the ruling itself — and not on the underlying Aereo technology. But, that’s my point. The ruling in favor of Aereo is disruptive. The company already is disrupting existing business models and business content licensing. And, trust me on this one because I have seen this movie before — other new technologies absolutely will use this Aereo ruling — and others upon which it relied — to support their own disruptive business efforts (even if others debate the merits of how disruptive the underlying technology is). At the end of the day, whether or not Aereo’s underlying technology doesn’t matter. But, what DOES matter is whether Aereo (and future Aereos) make a dent (or more) in long-established content licensing models and overall broadcaster economics.

  • http://twitter.com/ference ference

    I’m surprised you failed to mention the 4 patents (barrier to entry for competition). These patents are foundational to why they keep winning in the courts. Judging whether the service is disruptive or not, based on early adopter subscriber numbers, frankly isn’t persuasive. The fact that so many in the industry are fearful since judges rulings, tells me Aereo is already disruptive. One thing I would ask you to investigate… What are the ramifications if the Over The Air Broadcasters just stop offering content (or at least offering top tier content) over these frequencies?

  • reryro

    You need to look up the definition of compliment.

    • danrayburn

      Thanks, corrected to complement.

  • Bob Zeryunkel

    Oh Dan, you’re at it again single-handely trying to kill something that is succeeding despite your proclamations to the contrary. You claim it’s not disruptive because it may, or may not, be making money but refuse to discuss the legal wins but do mention the dissenting opinion. You are talking out of both sides of your mouth in order to support your salacious opinions. Ironically, you bash the media for generating attention grabbing headlines but here you are flogging Aereo again (and frankly not quite as coherently as the last few posts) which can only be attributed to the success you saw with page views and media appearances the last few times you played the contrarian.

    Let me explain why it’s disruptive without even once mentioning some future element…

    1) No big company (Netflix, Amazon or Apple) would ever go down the rats nest of legislation, regulation and corporate ownership to try and change the model of broadcast tv, which has gone from a congressionally mandated free public service to a de facto cable consumer subsidized business (Broadcasters are claiming irreparable harm due to lost retransmission…meaning that cable subs are footing the bill for free OTA). The simple truth that Aereo is tackling that Herculean task is disruptive by it’s very nature.

    2) For fear of raising a long dead meme…WINNING! I can’t think of another OTT upstart that has managed to successfully rout the broadcast legal dream teams TWICE. I have an idea, let’s make DISRUPTION! the meme du jour.

    3) The Cablevision ruling not only laid the groundwork for Aereo but also cloud computing services, specifically the iTunes and Amazon music locker services. The Appellate panel referenced that in their opinion…a ruling against Aereo would substantially change the legality surrounding the other services and result in economic leverages that were not in place at their inception. Those business models were at jeopardy with a ruling against Aereo. DISRUPTION!

    4) Simplicity. Say what you will about Aereo’s somewhat hit or miss QOS, the idea that all you need is an iPad or laptop and it just works is amazing. No dongles, special phones, STB, authentication gateways or other doohickey is nothing short of brilliant. The iPad wasn’t the first tablet computer, it was the first brilliant one. Aereo isn’t Apple, but that doesn’t mean that their design isn’t the standard to beat. DISRUPTION!

    5) The idea that a cord-less consumer can buy a single-days worth of service, completely upending the never-ending monthly cable billing cycle is so simple but makes complete sense for that segment of the market. DISRUPTION!

    6) In your post, and harkening back to my first bullet, you state that Aereo would pave the way for other services to take advantage of the legal ruling. All of a sudden retransmission is put back from whence it came. This would put billions of dollars back on the table completely upending the economics of the industry. DISRUPTION!

    So, there you have it Dan. Aereo is already DISRUPTION! incarnate and your cherry-picking arguments really can’t change that fact. I don’t know if they’ll be ultimately successful, but neither do you. Your griping that the media is ignoring “facts” is truly ironic as you are doing exactly the same in your analysis of Aereo. I think I would have more respect for your opinion if you didn’t consistently display such egregious confirmation bias in your posts.

    I really could go on much longer but I have some TV to watch…

    • danrayburn

      “something that is succeeding”
      you never defined what metric is being used to show “success”. revenue? no. subscribers? no. quality video? no. large content choice? no.

      “refuse to discuss the legal wins”
      that’s because aereo hasn’t won. the case is still active, it is still going to trial and the only thing that was ruled on was an injunction.

      “the success you saw with page views and media appearances the last few times you played the contrarian.”
      my posts on aereo aren’t getting huge page views. they would not even be in the top 50. most have never heard of aereo.

      “no big company (Netflix, Amazon or Apple) would ever go down the rats
      nest of legislation, regulation and corporate ownership to try and
      change the model of broadcast tv,”
      Of course they wouldn’t, there is no business model for it. they are smart.

      “the idea that all you need is an iPad or laptop and it just works is amazing.”
      why is that amazing? that’s how all video works. aereo didn’t invent streaming or even improve on it.

      “their design isn’t the standard to beat”
      design of what? they didn’t design or invent streaming.

      “incarnate and your cherry-picking arguments really can’t change that fact”
      you imply that it is a fact that aereo has won a court ruling. they haven’t. they have only won an injunction. that’s it.

    • MM

      Aereo will need to build out capacity around the country.

  • Alexander Harrowell

    What’s the point of taking content from the most efficient TV distribution system we have – broadcast – and stuffing it into the least efficient we have – unicast – and hoping to compete with cable, which is multicast?

  • Dennis McDonald

    This is why I hope Aereo succeeds: “Comcast Must Die” http://www.ddmcd.com/die.html

  • ChronoFish

    The very fact that your trying to claim that it’s “not disruptive” means
    that it is. If it wasn’t, it wouldn’t be on your radar, and this blog
    post wouldn’t exist.

  • raju singh

    cheap calls app

    I use Smartgroschen app for cheap calls, which provides calls with high quality voice calls. We can also use this apps for voip calls, chat with video clips, pictures and your current position on the map. Smartgroschen is an instant messenger that allows you to connect with any Smartgroschen-user worldwide for free.Signup and get 0.50 euro.