Posts Tagged ‘Aereo’

Well, Whaddya Know!

It’s late July, and the summer doldrums have definitely arrived. The flow of press releases has slowed to a trickle, and all kinds of strange stuff arrives in my mailbox several times a day – most of it destined for the recycling bin. Even so, there are a few stories worth mentioning.  Let’s take a quick glance.

The tables have turned: Remember when your parents limited the number of hours of TV you could watch in a day? Well, it appears Millennials are self-regulating, when it comes to the boob tube.  According to a story on MediaPost from last Thursday, Nielsen has discovered that the number of hours spent viewing traditional TV continues to decline year-over-year for this demographic.

Nielsen’s current numbers show that the average Millennial watched a little less than 22 hours of traditional TV, per week, during the first quarter of this year. That’s a decline of 14 minutes per day from Q1 2013. In contrast, their parents (50 – 64 and 65+) watched more than twice that amount at 45 and 52 hours, respectively. (Well, us Baby Boomers grew up with television, so maybe that’s not surprising.)

Much ado about nothing? Aereo, the renegade broadcast TV-over-IP “antenna” service that lost a major ruling in the U. S. Supreme Court last month, flip-flopped in its assertion that it wasn’t a cable TV system and insisted it was, applying for a license to broadcast copyrighted content from the U.S. Copyright Office. But Aereo’s request was just turned down by that august body, putting its future into limbo.

Now, a story on the GigaOM Web site suggests that Aereo had maybe 100,000 subscribers at most. How do we know that? Well, as part of its application to the U.S. Copyright Office, Aereo submitted a payment of $5,310.74 to cover “royalty and filing fees” from January 2012 through the end of last year. Using some basic assumptions about Aereo (such as its monthly subscriber fee) and royalty payments of .33 to 1.064% of gross profits, law professor Bruce Boyden backed into a guess of around $1 million gross revenue for that time period.

That’s not a great ROI for the time and investments Aereo made, and the article stated that, even if all of the $1M in revenue came in 2013, it represents only 10,000 subscribers.  We’ll have to see what the next steps are, pending more hearings in court next month.

Not selling like hotcakes, Part I: Apple’s recent financial results show that the company sold 35.2 million iPhones in Q2 2014. That’s up over 12% Y-Y and was largely driven by a big jump in sales in Brazil, Russia, India, and China, a.k.a the BRIC countries. Good news, but offset by the fact that iPad sales dropped 9.2% in the same quarter. That follows a 16% decline in iPad sales in Q1 2014. What’s going on here?

One obvious answer is that consumers don’t turn over their tablets quite as often as their phones. I’ve seen other research that shows a retention rate of 2+ years for tablets, which implies satisfaction with these products. But that doesn’t help Apple’s bottom line, which is why they’re pushing into the “wearables” market – and just got a patent for a new smartwatch called iTime that features sensors, in-strap circuitry, and support for arm and wrist gestures, according to the ETCentric Web site. Will it offset declining iPad sales?

Not selling like hotcakes, Part II: Finally, from the Home Media Web site, we get a story that says “UHDTVs are underwhelming at the marketplace,” based on market research by HIS. The share of UHDTV shipments among the top 13 LCD brands reached 5% in May, up from 4% in April, 3% in March, and 2% in February. (Hmmm…so, they’ve increased by more than 100% in three months? That’s not too shoddy!)

IHS goes on to state that “UHDTV pricing remains too high to gain meaningful market share.” Well, duh! Until recently, all Japanese and Korean UHDTV sets in the 55-inch class were priced close to $3,000, and we know that’s a non-starter. But LG recently cut its 55-inch 4K LED TV to $1,999, and Vizio will be launching a 55-inch 4K LED for just $1,300 in the fourth quarter.

HIS analyst Jusy Hong was quoted in the story as saying that UHDTV shipments will increase to 14.5 million by the end of the year, up from a paltry 2 million in 2013 – and that’s nothing to sneeze at.  Samsung and LG are the kingmakers here, accounting for 46% of all UHDTV shipments in May. In contrast, the “big six” Chinese brands – Haier, Hisense, Skyworth, TCL, Konka, and Changhong – captured a combined total of 45% market share in UHDTVs.

Gotta run! The reclining chair and an ice-cold glass of lemonade are calling…

Humpty Dumpty Strikes Again!

I’ve been on hiatus the past couple of weeks, recovering from a heavy teaching schedule at InfoComm and also celebrating the wedding of my son in late June.

Even so, I steal a glance at the daily headlines now and then. And it was impossible to ignore the 6-3 Supreme Court decision against Aereo in late June. Aereo, as has been well-documented in this space, was a cocky startup that attempted to get around copyright law and retransmission fees by constructing a Rube Goldberg-like system of antennas to receive and distribute broadcast TV signals to subscribers in New York, Boston, and other markets.

The initial court decisions against broadcasters and in favor of Aereo (1st and 2nd Circuits) were offset by an unfavorable decision in the 10th Circuit. So Aereo pushed to have the Supreme Court hear its case (ABC Television Networks vs. Aereo) in late April. And the majority of the Supremes ruled that Aereo was essentially a cable TV system in operation, even though it devised an elaborate technical work-around to avoid such classification.

After squealing like a stuck pig, Aereo execs pleaded with Congress to take up their case and called the SCOTUS decision “a blow against consumer’s rights to watch free television.” Actually, although none of the justices really understood what was going on here – despite their insistence that the Aereo decision had no impact on so-called “cloud” media storage and delivery systems –  they got it right.

Studying Aereo’s patent application showed their attempt to re-define science and established technical terminology, classifying everything in a TV channel receiver system from the antenna, receiver, decoder, and MPEG encoder as an “antenna” and the MPEG network interfaces moving signals from the roof of a building to H.264 encoders and multiplexers as an “antenna transport system.”

Nice try, but no cigar. That’s essentially what a cable TV system does. The converted signal formats might be different, but the process remains the same. So unwittingly, Aereo got called out. But now the story takes a decidedly different turn.

Last week, Aereo did an about-face and filed a petition to 2nd Circuit Judge Alison Nathan, asking that Aereo indeed be classified as a cable TV service provider under Section 111 of the Copyright Act: “If Aereo is a ‘cable system’ as that term is defined in the Copyright Act, it is eligible for a statutory license, and its transmissions may not be enjoined (preliminarily or otherwise).” In a nutshell, this means that Aereo would merely have to pay retransmission fees to all of the stations it carries and it could resume operations as before.

As expected, this filing brought an incredulous response from the likes of ABC and CBS, who expressed disbelief that Aereo, having made such strong arguments that they were not a cable TV system, would now petition the court to determine if they were eligible for a compulsory license – as a cable TV system.

Here’s a quote from the Forbes story: “… it is astonishing for Aereo to contend the Supreme Court’s decision automatically transformed Aereo into a ‘cable system’ under Section III, given its prior statements to this Court (United States 2nd Circuit) and the Supreme Court. It represented to this Court, for example, that it could not qualify as ‘a cable system’ and, therefore, that cases interpreting the application of Section III were ‘irrelevant to the issues here’.”

Two other interested parties, ivi.tv and FilmOn, are watching this part of the proceedings with great interest. Both companies also attempted to set up and operate Internet streaming services to carry broadcast TV channels, but out-of-market. And both were shut down by the courts. Even so, FilmOn has registered with the U.S. Copyright office as a cable TV company and paid for a license to retransmit copyrighted programs.

If nothing else, the Aereo case has provided us with some great theater and entertainment, and also raised valid questions about growing technical illiteracy in this country. But it’s clear that CEO Chet Kanojia and his backers (which include media mogul Barry Diller) aren’t going down without a fight. Hence, the 180 degree-turn in their court strategy.

I’m reminded of a conversation Alice had with Humpty Dumpty in Alice in Wonderland: “When I use a word,” Humpty Dumpty said, in a rather scornful tone, “it means just what I choose it to mean, neither more nor less.” Apparently Aereo’s lawyers are big fans of Lewis Carroll..

Deconstructing Aereo

On April 22, the Supreme Court will hear arguments in the Aereo case. Broadcasters want the company’s unique “antenna to IP” service shut down, claiming it is avoiding retransmission fees by a clever legal/engineering system, and operates in violation of copyright laws.

Aereo and many other amicus briefs argue that Aereo is within its rights to deliver over-the-air broadcast signals to subscribers because each subscriber has, in effect, their own antenna and cloud DVR, which they control. In this interpretation, Aereo is only leasing space on an antenna to deliver a TV broadcast to subscribers, much the same way an electric company provides power to the home to operate a television.

There have been so many arguments for and against this service that it’s hard to keep up with them. Not only that, two U.S. district courts (1st and 2nd) have ruled in favor of Aereo, barring any injunctions, while a third (10th) has ruled against it, shutting down Aereo’s services in Denver and Salt Lake City.

In an unusual move, the United State Solicitor General has asked to present oral arguments in the case. This is significant because the Supreme Court often defers to the Solicitor General, who (it appears) is preparing to argue in favor of the plaintiffs (broadcasters).

You can find plenty of articles and coverage of the case, most focusing on the legal aspects and current copyright law. I don’t intend to discuss those, but instead will talk about a more obscure aspect of the case – the actual engineered antenna system, and if it actually does what Aereo claims it does.

Aereo Logo 300p

Before I get started, I want to emphasize that I have not seen the Aereo antenna system in person, nor any of the associated electronics. Nor have I had any conversation with company principals. (TechCrunch recently toured the NY Aereo facility and you can see a video of that tour here.) I only have photos of the individual antennas and the antenna array, and the patent applications to go by.

I should also mention my credentials to deliver the analysis you are about to read. I have been playing around with radio equipment since age 5 and actually had two pirate radio stations on the air – one AM, and one FM – while in high school, so many years ago. Not long after that, I studied for and got my first amateur radio license, and within 11 years qualified for the Amateur Extra Class license (KT2B).

Along the way, I spent hours building transmitters, receivers, converters, amplifiers and preamplifiers, and other gadgets, even etching my own circuit boards. At one time, I had a 65-foot antenna tower in my back yard with yagi beams for frequencies from 7 MHz to 2.3 GHz, and have backpacked homemade portable VHF/UHF/microwave stations into the Pocono, Kittatiny, Adirondack, Green, Berkshire, and Catskill mountains.

For about ten years, I wrote a monthly column on VHF/UHF signal theory and operation for the now-defunct 73 Magazine. I also contributed to QST and CQ magazines. When the digital TV transition started, I was the first person in my neighborhood to install rooftop antennas and set-top boxes to watch broadcast HDTV, and of course staged the infamous HDTV Super Bowl parties for ten years.

So I’d like to think I picked up a little knowledge about antennas and signal propagation during the past 45 years. With that in mind, let’s take a look at Aereo’s argument and the flaws I find in it.

THE BASICS – ANTENNA PHYSICS

To receive TV broadcasts, you need some sort of antenna. And that antenna can’t just be a paper clip or coat hanger (although both can work sometimes). The antenna must have some physical relationship to the wavelength of the signal being received. If it does, it approaches resonance and transfers the maximum level of signal to a receiver.

We know the relationship between wavelength and frequency. They’re inversely proportional to each other, and a quick way to determine the wavelength is to divide the frequency into 300. (Or vice-versa to determine the wavelength.) Example: The wavelength of a TV broadcast signal on channel 2, broadcasting at about 55 megahertz (MHz), is about 5.45 meters. If you could actually see the radio wave, one complete cycle of the signal would measure 5.45 meters, or almost 18 feet.

In order for our antenna to resonate – i.e., have gain at the desired frequency – it needs to have some fractional relationship to the wavelength. So, a full-wave loop for channel 2 would measure 18 feet. A  ½-wave dipole would then measure 9 feet, while a ¼-wave whip antenna would measure about 4.5 – about 54 inches.

That’s not to say that our channel 2 antenna wouldn’t work at other frequencies. It could also pull in signals at channel 3, or 4, or even 5 and 6. But it wouldn’t be as efficient at those frequencies as it would on channel 2.

The same principle holds true for high band VHF channels (7-13). To pull in channel 7, broadcasting at about 176 MHz, we’d like to have an antenna with a full wavelength of 5.6 feet. A ½- wave antenna would then measure about 2.8 feet, and a ¼-wave whip antenna would measure about 1.4 feet, or 17 inches.

For UHF TV channels, let’s pick 600 MHz (TV channel 36) for our example. A full wavelength here is 1/2 meter, or about 19 inches. A ½-wave antenna would then be 9.5 inches and a ¼-wave whip antenna, such as you’d find on wireless microphone systems, would measure slightly less than 5 inches.

Again, that’s not to say the ¼-wave or ½-wave antennas mentioned wouldn’t work on higher or lower UHF TV channels. It’s just that they’re most efficient at 600 MHz. All of this is just basic physics and innate knowledge to anyone who has worked with RF antenna and transmission systems, amateur or professional.

Each individual "antenna" in the Aereo system is about the size of a dime.

Each individual “antenna” in the Aereo system is about the size of a dime.

Here is a cross-sectional view of the tiny antenna elements in place.

Here is a cross-sectional view of the tiny antenna elements in place.

Now, let’s look at the Aereo antenna. It’s about the size of a dime and resembles a small loop antenna. Just looking at it in a photo and keeping in mind the science you just read, it would be impossible for such a small antenna to have ANY resonance or gain on low-band VHF TV channels, let alone high-band TV channels.

Yet, that is precisely what Aereo seems to be claiming: One subscriber can activate one of these antennas to watch WABC on channel 7 in New York, or WNET on channel 13. And I don’t see how these tiny little pieces of metal can even work on UHF TV channels: They’re just too small.

Granted, if they were close enough to the transmitting antenna atop the Empire State Building – like a few hundred feet away – the signal levels would be so strong that they would “brute force” their way through the antenna system. But functioning as standalone antennas a few miles away? Not very likely.

Now, here’s where things get tricky and the boundaries between engineering and law become blurred. Aereo installs these tiny antennas in close-spaced arrays on circuit boards. Thanks to the laws of antenna physics, that close spacing guarantees that adjacent antennas interact with each other. That’s due to the principles of inductive and capacitive coupling.

And that means the thousands of smaller, individual antennas couple energy together to act like a larger antenna; one that will approach resonance and have some gain at the desired reception frequencies.

No matter how you switch the antennas, they do interact; it is simple science. And that appears to be the secret sauce behind what Aereo is doing: Creating large “virtual” antenna arrays made up of thousands of tiny, individual antenna elements that, taken together, make up a large, directional antenna array.

According to the patent application, the individual antennas can be switched on the fly to individual receivers, depending on which ones are in use and which aren’t. So the company can claim that each tiny segment of the antenna is actually a stand-alone antenna, assigned to one subscriber.  (Note that, in some earlier Aereo press releases and news stories, they do mention that subscribers can “lease” one or more antennas as needed to pull in a signal. )

THE BASICS – RF, VIDEO, AND MPEG DISTRIBUTION SYSTEMS

Now, if all Aereo was doing was providing thousands of tiny antennas that actually interact to form a large, steerable antenna array, that would be interesting enough. But an Aereo subscription also comes with a “personal” cloud DVR, sitting on a server somewhere on Aereo property.

That means the following must happen for you and me to watch Aereo’s service on our iPhones. (a) A signal must be received from a TV station – say, WABC on channel 7 in New York. (b) That RF signal on channel 7 must then be demodulated by a receiver and converted from the 8VSB modulation format to a baseband video signal, or at least an MPEG2 stream with video, audio, and metadata. (c) The baseband video signal or MPEG2 stream has to be re-encoded or transcoded to MPEG4 H.264 for transport. (d) The H.264 signal is then encapsulated with IP headers and travels to your home network and device.

That takes a lot of hardware. In a conventional master antenna TV system (MATV), one or more antennas are installed on an apartment building or office and one or more amplifiers go with it to distribute the RF signals from the antenna to multiple users. Is this a public performance? From my perspective, no, as the antenna system is merely passing along whatever channels can be received with it. The end-user determines what channels to watch and when. This is a perfect example of a “rented” or “leased” antenna system.

In contrast, a community antenna TV system (CATV, or cable TV) uses large antennas to capture broadcast signals and subsequently demodulates then to baseband video or MPEG, then re-broadcasts them on the same or different channels with a new program guide. In today’s digital world, your cable TV provider has encrypted these local channels, meaning you must lease or buy a compatible set-top box to watch them.

That is indeed a retransmission and a “public performance” in the eyes of copyright law. The CATV company charges for its service and sometimes inserts local ads on those channels. So they provide not only a remote antenna system, they also add in a DVR service, their own program guide, and encryption.

This is why broadcast TV stations and networks have largely given up on the old FCC “must carry” rules and now demand a retransmission fee for their content, just the same way HBO, Showtime, and ESPN do. It’s today’s business model, and it is threatened by what Aereo is doing.

For Aereo to have a 100% true-blue, subscriber-controlled “antenna system,” they would need individual antennas, receiver/decoders, and encoders for every subscriber. That would amount to thousands of discrete pieces of hardware and an enormous capital outlay they’d never hope to recover at $8 per month. Their patent describes a way to assign each antenna to a separate tuner to demodulate the video stream to MPEG2. That might work fine for a handful of viewers. But what if 10,000, 20,000, or 100,000 subscribers are watching at once?

There’s a reason why cable TV companies use single receivers for each channel at their head ends: It’s the only cost-effective way to provide service. And they use multiplexers to route more than one IP video stream to customers for the same reason. It is a classic “one serving many” model and  a cash cow for the likes of Comcast, Time Warner, and Cablevision.

This diagram from the Aereo patent filinhg clearly shows that, at some point, multiple streams of decoded MPEG2 video programs are mixed together and transmitted from the rooftop antenna systems to the MPEG4 transcoders in the basement.

This diagram from the Aereo patent filing clearly shows that, at some point, multiple streams of decoded MPEG2 video programs are mixed together and transmitted from the rooftop antenna systems to the MPEG4 transcoders in the basement.

OK, so let’s buy the argument that Aereo uses a few receivers as needed for each subscriber to pull in TV channels and perform the usual RF-to-video-MPEG conversion. But then, according to their patent application, they combine multiple MPEG2 streams into a multiplex (or “mux”) to send them from the roof of the building to the basement for transcoding to MPEG4 H.264 and ultimately, transmission to each subscriber over an Internet connection.

Combining those MPEG2 streams is really no different than multiplexing TV channels in a piece of coaxial cable delivered to your home. Note that, unlike our MATV example, the TV channels don’t exist in their original 8VSB format. They’ve been converted (altered) to another format for delivery to the viewer.

Note also, in the area between the MPEG-2 Mux and Demux, the words “Antenna Transport (N x 10GBase)”. Here is where Aereo’s entire argument falls apart: You can’t receive an MPEG2 stream with an antenna; only a modulated RF channel. Calling a 10 Gigabit Ethernet connection that streams MPEG2 digital video an “antenna transport” is disingenuous. The signal has to be converted to a new format to travel over this part of the network, and as I just pointed out, it is now a bunch of MPEG2 video programs combined together in one stream for efficiency…just like a CATV or DBS service provider would do at their head end.

In contrast, an MATV system simply receives, amplifies, and distributes RF channels intact to two or more viewers. Those RF signals aren’t demodulated or transcoded – they are delivered in their original state to the viewer. The actual demodulation and decoding happens in each individual TV set.

What’s even stranger is that Aereo is now calling everything ahead of the mux an “antenna.” Horsefeathers! Antennas are antennas; receivers and demodulators are receivers and demodulators. Separate and distinct. That’s as absurd as calling a car an “engine,” or a house a “roof.”

For Aereo to truly provide the service they claim they do, they’d need individual hardware and software processing for every subscriber. No more than one TV channel could travel at the same time to a tuner, and no more than one video program at a time could pass to an encoder, especially not in a multiplexed stream. That improbable and wildly expensive set-up would be a true “leased” antenna and reception system, controlled by the subscriber.

If at any time TV channels, baseband video, or MPEG streams are combined together during the process, then it’s a a CATV system. Pure and simple.

SUMMING UP

Again, let me say that I don’t want to delve into the copyright and business model issues with regards to Aereo. I’ll leave that to the lawyers. Instead, I’m solely focusing on the science of what Aereo does, and to me, it’s overly clever engineering, attempting to re-define the term “antenna” and parse legal terminology.

Their entire argument for getting away with retransmitting broadcast TV content rests on those thousands of individual antennas, which as we’ve learned, unquestionably interact with each other and are separate antennas in name only. The rest of the system appears to be more conventional, with receivers, MPEG streams mixed together, and MPEG transcoding – just like a cable TV does, or even an IPTV multichannel provider, like AT&Ts U-Verse.

The puzzler is why the plaintiffs (TV stations and networks) didn’t pursue this technical angle more aggressively in the first place. In the first court case (2nd Circuit in NY), at least one judge (Denny Chin) called Aereo’s system a “Rube Goldberg” approach, cleverly designed to circumvent copyright law. He hit the nail on the head. There was some testimony from an RF expert at the first hearing, but either the testimony wasn’t presented correctly or contained technical flaws. So the copyright violation angle has been pursued exclusively  by plaintiffs since then.

The judge for the 10th Circuit in Salt Lake City, Dale Kimball, stated in his February decision that “Aereo’s retransmission of plaintiffs’ copyrighted programs is indistinguishable from a cable company.” Kimball got it right as well, as did the three-judge panel that subsequently upheld Kimball’s injunction.

And off we go to the Supreme Court next week. How will this case turn out? No one can say for certain, but the odds appear to favor broadcasters with the Solicitor General seemingly arguing against Aereo.

Stay tuned!

Aereo And The Law Of Unintended Consequences

For readers who aren’t up to speed, Aereo is a new service that receives terrestrial digital TV broadcasts in major markets and re-transmits them over the Internet, using AVC coding with IP headers. The concept is to provide local reception for those who can’t pick up these signals for one reason or another on their regular TV.

Now, the devil in the details: Ever since Aereo launched a couple of years ago, it has been in court, fighting off challenges by the major broadcast networks who are crying “foul!” and saying that Aereo’s retransmission is a violation of copyright laws. They also claim that Aereo owes them retransmission fees.

Aereo’s rebuttal and defense centers around a flimsy (to me) technical argument: Each subscriber gains access to an individual antenna about the size of a dime, which then is connected to an individual receiver, decoder, DVR, and encoder. It’s as if the subscriber built his or her own TV antenna system, which is certainly within their rights.

I remain skeptical because the cost of actually setting up thousands of individual antennas, terrestrial receivers, video decoders, and video encoders would be prohibitively expensive and never be recovered by the $8 monthly subscriber fee (for 20 hours of recording time, $12 for 40 hours).

And anyone who has ever taken a modicum of courses in electrical physics and RF theory knows that (a) the tiny antennas Aereo assigns to each subscriber can’t possibly have enough gain to work for high band VHF reception, let along UHF reception, and (b) the close spacing of those antennas – as seen from earlier PR photos released by the service – means they interact with each other to form a larger array, based on the principles of inductive and capacitive coupling. That, in essence, is a master antenna TV system – delivering TV channels to many viewers, not one.

Thanks to a sub-par presentation by expert witnesses called by broadcasters at the first hearing, the 2nd Circuit Court (New York City) ruled 2-1 that Aereo didn’t infringe on copyrights and cited the earlier Cablevision “cloud” DVR decision as precedent. Aereo’s right to operate was subsequently upheld in the 1st Circuit (Boston). Service is active in both cities now.

However; two weeks ago, Aereo was rebuffed by a 10th Circuit judge in Salt Lake City, who unequivocally stated that “The plain language of the 1976 Copyright Act supports the plaintiffs’ position. Aereo’s retransmission of plaintiffs’ copyrighted programs is indistinguishable from a cable company.” As a result, Aereo had to shut down its service in Salt Lake City and Denver for the time being.

While this case winds its way on to the Supreme Court, another twist in the story has surfaced. Apparently subscribers in New York City had massive problems with the Aereo stream of the Oscars telecast on WABC-TV a week ago Sunday. Consequently, the company’s Twitter feed was lit up with complaints about “buffering” and “locked-up pictures.”

Here are some of the dozens of tweets I found: “Awful service, bad image quality & not recording scheduled shows but it sad you treat ORIGINAL customers the way you do.” “It goes out now and then requiring me to select Oscars all over again. Common? I have it on auto quality.”  “Thanks for doing work on the site tonight. It’s not like I wanted to watch the Oscars. No big deal.” (Gotta LOVE that sarcasm!)

And more: “C’mon Aereo. Get your s–t together.” “Anyone else watching the Oscars using Aereo like me? S–t keeps buffering every 30 seconds. Frustrating the hell out of me.” “Hmm is Aereo down for anyone else? Is it just an East Village or Roku thing? #CordCutting fail during the Oscars” “@Aereo Support I keep getting the message “The Oscars has ended.” A total of 8 seconds recorded. Worst. Oscars. Ever.”

This one was my personal favorite: “@Aereo I don’t have time to run to Best Buy and buy some rabbit ears right now.” Well, maybe that would have been the best thing to do.

A couple of observations are in order. First, I don’t know how exactly Aereo has its front end configured, but if they’ve actually tried to keep every single subscriber’s hardware separate by various technical tricks to pass legal review, then they might have run out of server capacity and brought this service failure on themselves. (Apparently this also happened during the Golden Globes, according to a story on the Quartz Web site.)

There is a reason why cable and satellite companies use a single receiver for each broadcast and premium channel they carry, and multiplex (copy and repeat) those channels on their outgoing RF and IP channels: It’s WAY more cost-effective and less troublesome! So they have to pay a retransmission fee: Big deal! What will the cost be now to Aereo in dropped subscriptions, not to mention bad publicity from these service problems?

Second, I’ll bet that more than a few Aereo subscribers could actually pick up the HD broadcasts from New York City stations if they tried. Over the years, I’ve tested numerous indoor TV antennas and there have been some real winners out there like the Mohu Leaf Ultimate series and Winegard’s amplified FlatWave antenna.

Both are reasonably priced and perform adequately on VHF channels and very well on UHF channels, which in New York City means you can also use them to watch WNBC, WCBS, and WNYW among the major networks. (By the way, those are the three networks that carry NFL games in the New York City metro area.)

Third; if you can pick up local TV broadcasts with one of the aforementioned antennas, there are terrestrial DVR products that will let you record those channels, like Channel Master’s new DVR+. It has dual tuners, built-in capacity for about 2 hours of HD recording (expandable with any external hard drives or solid state drives through USB ports), plus Wi-Fi connectivity and support for Internet video services like Vudu.

Or you can pick up one of Hauppauge’s WinTV receivers that plug directly into a USB port on your computer and provide terrestrial digital TV reception, letting you use your hard drive as a DVR. I carry around a few of the Hauppauge Aero-M stick receivers and a Mohu Leaf for reception on the road, and they work great.

We’ll never know the actual reason for Aereo’s system failures during the Golden Globes and Oscars, but it’s entirely possible that the company was too clever for its own good by engineering and building a system that was designed to neatly parse and side-step copyright laws.

It’s funny how the law of unintended consequences works, isn’t it?

A La Carte TV: No Blue Plate Special?

As the winds of change push more and more consumers away from conventional pay TV packages and toward streaming, “over the top” video, an interesting report has just arrived from Needham and Co. analyst Laura Martin.

The report, detailed in the Los Angeles Times, says that moving to an “a la carte” model for delivery of TV programming would result in higher costs for consumers and possibly knock the foundation out from under media companies.

According to Martin, a la carte delivery of pay TV channels would cause at least 124 smaller channels to disappear altogether, taking with them 1.4 million jobs and at least $45B in advertising.

Martin has calculated that a typical entertainment cable channel costs about $280 million per year to operate and requires (with current retransmission and rights fees) about 165,000 viewers annually just to break even. As a result, only 50 or so channels would be likely to survive out of the nearly 200 channels of programming currently available across a multitude of pay TV outlets.

Martin also notes that the typical subscriber watches perhaps 20 channels at most out of an average selection of 180 channels. I think that number is high; anecdotal evidence from friends and colleagues suggest the number is much lower and close to 10 – 15 channels.

The Needham study states that, in addition to the economic cost of a move to a la carte pay TV – pegged at $80B to $113B of “U.S. consumer value” – the costs to subscribe to existing channels would also increase, as they would inevitably lose subscribers as well.

I’ve previously detailed the growing calls for moving sports channels to their own tier, given the additional cost burden they add to the average monthly cable bill (about 10% to 12%). Not surprisingly, companies like Disney (ABC, ESPN), Fox, Comcast (NBC), and CBS oppose a move like this.

But the fact is; consumers are increasingly voting to switch off pay TV services and instead rely on the likes of Comcast and Time Warner to deliver broadband connectivity, and nothing more. This “cutting the cord” trend finally gained the recognition it deserved earlier this year when it was revealed that pay TV subscriptions went into decline for the first year ever.

Aereo, the disruptive “remote antenna” service that is rolling out nationwide and faces continued court challenges, charges about $10 to stream over-the-air broadcasts through the Internet to connected TVs, tablets, and phones, and is another approach to OTT delivery. Yesterday, the company petitioned the 2nd Circuit of the U.S. Court of Appeals for a Writ of Certiorari – in essence, forcing the issue to the Supreme Court for review.

If Aereo wins here – and it could – then the floodgates will surely open for other, competing OTT services that could cherry-pick channels and deliver them to the home in an attempt to lower monthly subscription costs. And even the cable companies are paying attention: Comcast announced in October a limited entry-level pay TV channel bundle that also includes fast Internet and HBO Go for about $60 – $70/month.

Even so, Netflix is still the largest pay TV service in the world, closing in on 30 million subscribers. And all you need to watch it is a fast Internet connection (if it’s fast enough, you might even be able to watch Netflix’ 4K movie service that is scheduled to roll out next year). In many markets, all you really need as a Roku or Apple TV box plus an antenna to get a nice selection of free and premium programming.

Granted, you won’t get as many sporting events, but studies have shown that only about 4% of pay TV subscribers watch sports channels on a regular basis to begin with. And many big-ticket events like NFL games, major league baseball, college football and basketball, and (of course) the Olympics are still available on broadcast TV channels.

While Martin’s study is interesting, it discounts the “free market” effect of consumers voting to save money and find other ways to access TV programming.  There are always winners and losers in a free market system, and the fact is; pay TV subscriptions continue to rise annually at rates above inflation. Consequently, consumers are making necessary economic decisions about the price paid versus the value received, which is why interest in OTT video is slowly growing.

Starting next year, Canada will require pay TV services to “unbundle” TV channel packages as a way to rein in expensive monthly bills. So we have the perfect test lab north of the border to see just how a la carte pay TV will work, or won’t work. Stay tuned!