Financial Analysts Find OTT No Threat To Broadcasters

Watching-TV-ABC-4What's the real threat to broadcasters from over-the-top services like Aereo? Very little, according to a report from Barclays Capital.

Aereo is the over-the-air system that uses the Internet to deliver network stations/programming to consumers, costing $12 a month. Each consumer is assigned a digital "antenna," which Aereo claims in theory is similar to consumers using an analog antenna on their TV sets. Major broadcasters disagree and have sued for copyright infringement.

"While we tested the Aereo service and thought that it worked well," writes Anthony DiClemente, media analyst at Barclays, "we think that the overall value proposition of cutting the cord is still not overly compelling."

He says this is especially true when taking into account the increased cost of broadband after dropping cable TV service -- something U.S. consumers still need, which runs around $50 a month. Added to this is the monthly cost of over-the-top services, including Aereo, Netflix and a few a la carte purchases. That can total $30 or more.  For some, a current standard cable/broadband total package can be around $90 a month. So the current savings is minimal -- around $10.

Still, DiClemente believes the current court case against Aereo by the broadcasters will go Aereo's way. Even then, the court case could be bogged down in the legal system for some time -- which could siphon off financial resources for Aereo.

If Aereo does succeed, however, and growth of other services becomes more prevalent, TV networks would have options. He says media companies could move the content to the cable networks, "and demand higher affiliate fees as a result."

That said, DiClemente adds that it could be disruptive for advertisers, as it would be "logistically challenging to renegotiate all of the broadcast and cable advertising agreements."

He says "retransmission fees are not significantly at risk, in our view. The content owners bundle their broadcast and cable TV rights, meaning distributors could have a hard time disaggregating the two to save on retransmission fees."

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1 comment about "Financial Analysts Find OTT No Threat To Broadcasters".
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  1. Fred Hutton from Better Television, June 15, 2012 at 12:54 p.m.

    I am always amazed at how TV evolves.
    Cable used to be a delivery vehicle for viewers who lived out in the country and could not receive over the air signals.
    Now of course, it delivers alternative programming to what broadcast provides. Sometimes.
    Right now, without cable, without Dish or Direct, Fios, etc, a viewer can take a set of rabbit ears and connect them to their digital TV or analog TV and a converter box and pick up all the local channels in their area at NO CHARGE.
    Since MeTV, Antenna TV, This TV, Retro TV, AMGTV, Hot TV, and ALL YOUR LOCAL CHANNELS have surfaced on local over the air digital channels and sub-channels, a viewer can watch every TV show produced from 1948 until the present (from Milton Berle to Grey's Anatomy).
    Sure, you won't see Mad Men or a handful of the shows produced for cable, or the new Dallas, but you will see most of what is available on TV now.
    It appears, if a viewer purchased Hulu or Netflix and an antenna, TV would cost around $100 a year.
    However, if a viewer simply dropped cable, Dish, etc and simply watched over-the air tv, it would cost NOTHING.
    Television has always been free over the air and it is something lost on young folks today because cable and Dish have done such good marketing explaining why everybody NEEDS to PAY for TV.
    In the end, a viewer just dosen't have to pay to watch TV.
    Viewers choose to pay. I just don't get it.
    Its funny because when I explain this to people who are 40 and younger nearly All say "I don't know anybody who dosent have cable".
    It is worth noting that the programs watch on cable are shows like, Grey's, American Idol, etc.
    They could have watched for FREE.

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