Investors shouldn’t be worried about...
Investors shouldn’t be worried about online TV service Aereo disrupting the video “ecosystem” by using broadcast content without paying retransmission-consent fees, said Wells Fargo analyst Marci Ryvicker in an email to investors Wednesday. Although the outcome of the multiple court…
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cases involving Aereo and competitor FilmOn is unclear, even if court decisions went in those companies’ favor, it’s unlikely their business model would have a large impact on retran, she said. “It is extremely costly and technologically difficult for incumbent MVPDs to pursue an Aereo-type model, thus negotiating leverage might not tip as much in MVPD favor as investors fear.” A win for Aereo and FilmOn could initially be “a negative catalyst for media stocks,” wrote the analyst. She said broadcasters are “most likely to prevail” against FilmOn, and the outcome for Aereo in the 2nd U.S. Circuit Court of Appeals in New York is harder to determine. “The litigation is likely to take some time, which means that Aereo and FilmON will continue to launch market-by-market until they are stopped,” said the report. Ryvicker said a circuit split between the two cases would likely lead to the Supreme Court, but that this was unlikely to happen before 2015, since the court will wait for the other cases involving the companies to play out. The report said if Aereo being declared legal in some markets caused retrans fees to dip there, broadcasters would increase their rates in markets where Aereo remained illegal to offset the loss. Ryvicker also said that broadcasters might unveil their own mobile video products to “invalidate” Aereo’s business model or broadcast networks might “negotiate retransmission consent on behalf of all station groups and retain a portion as reverse” compensation. Although some broadcasters have threatened to change to a pay-TV model if Aereo’s system remains legal, the report said that would be a bad choice for their businesses, “given the complexities of sports contract negotiations, the difficulties of actually switching from broadcast to cable … the risk to advertising dollars; and the beauty of having three revenue streams.”