CBS Corporation (CBS), Comcast Corporation (CMCSA): Will a Little Startup Cause the Death of Broadcast TV?

Either separately or in a joint venture, the major networks could offer live Internet streaming of their programming in a manner that would be totally under their control. The networks could make this service available for free or they could implement a modest charge (or have a mix of free and subscription content, like Hulu). With this infrastructure in place, the networks would be in better position to stop broadcasting over the air. This setup could potentially safeguard the pay-TV retransmission fee revenue stream without giving up lots of advertising revenue by locking out households without pay TV.

Foolish conclusion
I think the Aereo service was a great idea, but I don’t have high hopes for this little start-up. Rightly or wrongly, the networks are out to kill it. Unfortunately, since Aereo seems likely to win the battle in court, its death may coincide with the death of free broadcast TV. At least two of the four major networks have already threatened to move to cable/satellite. One way that they could potentially do this without losing lots of advertising revenue is by offering their own live Internet streaming services.

I do not expect the networks to feel much financial impact one way or the other from the ongoing lawsuits. In a worst-case scenario, pay-TV subscriber fees would be cut back, but this is a less important revenue stream for them than ad sales. In a best-case scenario, the networks could improve their profitability if Aereo drives them to create better Internet viewing platforms and they are able to monetize this online viewing effectively. Either way, the long era of free broadcast TV may finally be coming to an end, courtesy of Aereo.

The article Aereo: Will a Little Start-Up Cause the Death of Broadcast TV? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Netflix. The Motley Fool recommends Netflix and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney.

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