The Issue with Aereo

Aereo is a video distribution service to be launched later this spring that essentially brings broadcast TV channels to smartphones, tablets, and other IP-capable devices.  At the heart of the service is a tiny antenna that picks up over-the-air (OTA) broadcast signals and translates the signal to a digital format playable on digital devices.  This is combined with a virtual DVR service capable of storing 40 hours of content.

  Barry Diller, who prior to building the Fox Network for News Corp. was a top executive at ABC and Paramount Pictures, called Aereo a "potentially transformative technology" and "revolutionary product."  Diller's IAC/InteractiveCorp is helping to fund Aereo's coming launch in NYC.

  Neither broadcasters nor cable/DBS operators are so positive, accusing Aereo of signal piracy.  Aereo argues that both parts of their service, format-shifting signals and using the cloud DVR for time-shifting and virtual storage, are activities allowed by US Courts under Fair Use doctrine.  The cable/DBS concern is that some customers may choose the $12/month Aereo service to capture local broadcast signals, rather than subscribing to their multichannel service with all of its additional channels.  And broadcasters, who should support any service that brings in viewers - particularly one that doesn't also bring in hundreds of competing cable channels - seems to be concerned that a drop in cable/DBS subs could reduce retransmission consent payments.

BTIG analyst Rich Greenfield said Aereo could be a game changer in the media industry that could radically alter the economic models of the business. It is "distribution at its finest" Greenfield wrote, before adding, "if Aereo is in fact legal."

And if there is sufficient public demand for the service.

Source - Aereo likely to face fight over its plans to distribute broadcast TV,  L.A. Times Company Town blog