As the decision on the legal battle between the broadcast networks like CBS Corporation (NYSE:CBS) and Aero draws near, there is a lingering question whether the existing model of broadcast television could change? Before that, it would be necessary to understand the model established by the broadcast networks that now stands questioned by Aereo.
The Root Of Case
Several years ago, CBS Corporation (NYSE:CBS) and others had entered into an agreement with the cable companies to allow the latter to distribute its content. Through this arrangement, broadcast networks derived billions of dollars of revenues every year.
But, two years ago, the broadcast networks were pulled out from their comfort zone, when Aereo, a video streaming service provider, questioned their model. What Aereo did was, it placed several HDTV antennas, one for each of its subscribers, to receive broadcast channels and retransmit it to subscribers for a fee. Later on, broadcast networks filed a lawsuit against Aereo, alleging it of copyright infringement as its model amounts to rebroadcasting. While so far Aereo has secured decision in its favor from an appeals court, followed by the High Court, all eyes are now closely watching for the Supreme Court verdict.
Model To Stay
If CBS Corporation (NYSE:CBS)’s rival wins in the court, then other cable companies could also replicate the move, which could be a big hole in broadcast network’s pocket. CNBC.com‘s Senior Writer John Jannarone, holds the opinion that the existing model will continue to be the same for the next several years. Jannarone said that
“It won’t happen for a few years because as agreements are already in place for a while. But, what may occur is that cable companies will say alright, we could if we want to, create an Aereo-like model, where we pick up your signals for free, and we give it to our subscribers along with Pay-TV package.”
But, Jannarone states that as hinted by broadcast networks earlier, such move could force them to pull off the signals altogether, which will be very expensive and disruptive for both the parties. Thus, he finds the present model to work as it is for considerable years to come.
Naya Capital, managed by Masroor Siddiqui and Bruce Emery raised its stake in CBS Corporation (NYSE:CBS) by 30% in the first quarter of 2014 to 1.87 million shares. Naya Capital has 12.77% of its equity portfolio invested in CBS Corporation (NYSE:CBS). Philippe Laffont’s hedge fund Coatue Management sliced its position by 50% during the same quarter to 6.76 million shares.
Disclosure: none
