Investing in Mobile Television

Brian Hicks

Written By Brian Hicks

Posted October 14, 2013

In the midst of an ongoing legal battle with television networks, streaming television startup Aereo will launch on Android-based devices on October 22nd. The service, once only available on Apple’s iOS-based devices, will now let subscribers tune their Android smartphones and tablets into free, over-the-air television broadcasts by using Aereo’s cloud-based distribution network.

Aereo is similar to the “placeshifting” services offered by companies such as Slingbox, Hauppauge (NASDAQ: HAUP), and even Dish Network (NASDAQ: DISH). Placeshifting lets subscribers watch the television content from their home on other devices when they’re away from home. Yet these services differ slightly from Aereo in that its business model involves equipping subscribers with tiny antennas that grab OTA content and make it available online.

Legal Struggles

Broadcast mega-corporations such as Comcast (NYSE: CZZ), Fox, Disney, and CBS (NYSE: CBS) have twice hit Aereo with lawsuits since its debut in 2012, but the small company has successfully fended off these potential injunctions.

In response to the company’s most recent court victory, Aereo CEO and founder Chet Kanojia wrote:

“Today’s decision…shows that when you comply not only with the letter, but the spirit of the law, justice will prevail…Today’s victory belongs to the consumer and today’s decision, makes clear that that there is no reason that consumers should be limited to 1950s technology to access over-the-air broadcast television. Using Aereo, a consumer can simply and easily use an individual remote antenna and cloud DVR via the Internet to record and watch-over-the air programs.”

While Aereo has staved off injunction for long enough to launch in seven major markets, the big guns in the broadcast business are capable of waging a war of attrition. Over the decades, we’ve seen the broadcast industry swiftly take down lesser services like early DVR service ReplayTV, for disrupting the “fundamental economic underpinnings” of broadcast television (i.e. advertisements).

Android and Streaming Video

According to market research firm IDC, Google’s (NASDAQ: GOOG) Android operating system now commands a whopping 80% of the mobile OS market. Though application developers often launch and grow their services on iOS, it’s Android that cements them into mobile culture.

Availability on Android not only opens Aereo up to a large section of the smartphone-using mass market, but it also makes broadcast television available to a desirable demographic: those aged between 18 and 44 years.

According to Nielsen reports, the age of the average broadcast television consumer has crept above 50 years of age. Despite the lawsuits, Aereo might actually be doing broadcasters a favor by opening the door to younger viewers who have shown a preference for streaming on demand services such as Netflix (NASDAQ: NFLX), Hulu, Amazon on Demand (NASDAQ: AMZN), Vudu, and YouTube.

Netflix is king in this realm, with more subscribers than HBO and higher engagement than ANY U.S. cable network. But unlike Aereo, Netflix has to pay massive licensing fees just to have the content its users stream. Aereo exists in a somewhat grey area where different legalities affect the availability of content, and retransmission rules create tiny loopholes to slip through.

The bottom line for Aereo is that Android will open up a huge audience of potential new subscribers, but do nothing to diminish the major threat of litigation from broadcasters. 

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