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