TV Industry Disruption: Aereo’s Threat and Promise

So, what is Aereo all about? Well, it’s a brand new idea, a Web TV service. The days of the US$200 TV bill are numbered, said the CEO of Aereo in an interview with Ad Age.

This sounds like a good idea, right? Well, the cable television model is old and broken, and the need for lower-cost alternatives is growing. The timing may be right for companies like Aereo to transform cable television the way Apple and Google changed wireless. Can they succeed?

We have always loved to complain about how our cable television companies don’t care. How they charge more every year, yet don’t provide more programming we want to watch. How there are so many channels to flip through, yet there is never anything good on. How customer care and service leave so much to be desired. To make matters worse, there are just no low-cost alternatives.

Scary Times

Until relatively recently, cable television providers like Comcast, Time Warner and Cox really had no competition, so they grew. Satellite companies like Dish Network and DirecTV entered the field and chipped away a little bit of their business. Then local phone companies entered with services like AT&T’s U-verse and Verizon’s FiOS. Now it appears Apple and Google are getting ready to transform television the way they did wireless.

In fact, watching television is moving beyond the TV set to our computers, tablets and smartphones.

We are now entering the scariest time ever for cable TV company executives. They lie in bed at night, stare at the ceiling, and wonder how they can continue to keep their business stable and encourage growth. Many won’t. Some will fail. However, innovation will burst through like a flower in the springtime.

Out with the old and in with the new. That’s the new charge that Aereo wants to lead.

So, what is Aereo? It is a Web TV service that announced a multi-city expansion at CES a couple of weeks ago. Barry Diller is one key name backing this new service. Aereo was in the sites of the cable television industry several months back, but it won that battle in the courts. Now this innovative service is going to try to take on the massive cable television world. Will it succeed?

Sounds a little like MCI, the long distance company that shook things up in the 1980s. Aereo wants to do the same today in cable television. Working with MCI as a consultant really opened my eyes as to what indeed is possible in transforming industries and competitors. The executives of that company were among the best and most exciting around.

Aereo has the right idea, and the timing is right, but does it have a strong team and leadership? Does it have creative ideas for marketing and positioning itself in the marketplace against the heavy hitters? That will make all the difference.

Go With the Flow

Aereo uses a variety of technologies to get all the channels you want to watch. It uses antennas to capture local TV signals and store the broadcast content in the cloud. It makes other channels available over the Web. It provides live TV on smartphones, computers and tablets, in addition to your television, through a set-top box.

Its secret ingredient may be its plan to offer lower-cost choices to customers as it rolls into market after market. This is an important piece of the puzzle for Aereo. If it can do this, it will put enormous pressure on the main providers like Comcast to lower its prices as well. Actually, that sounds like what Comcast did in offering phone service using VoIP. That is in fact what MCI did to AT&T 30 years ago.

Broadcasters should embrace tech, not fight it, said Aereo CEO Chet Kanojia.

Aereo wants to expand television, not kill it, he emphasized. Of course, maybe those are the same words Steve Jobs used when talking to the music industry back in the 1990s.

Very few young customers are signing up and paying for expensive television from traditional providers like the cable television industry, Kanojia pointed out. The market is changing. When the VCR came out, there was the same kind of concern about it killing television. Yet it created an entirely new era of innovation and success in the industry. There were winners and losers, but the industry changed.

We may indeed be about to step into a new universe of ideas and products in the television industry — at entirely new pricing models. This change will sweep the industry and affect us all. Many new companies will pressure existing market leaders. Those that can change can continue to lead. Those that can’t will wither and die the way the long-distance industry did a decade ago.

Remember, as Earth-shaking as MCI was, it is no longer around. So what does the near and long term future hold for the cable television industry and Aereo? Stay tuned.

Jeff Kagan

E-Commerce Times columnist Jeff Kagan is an industry analyst and consultant who enjoys sharing his colorful perspectives on the changing industry he's been watching for 25 years. Email him at [email protected].

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