Barron’s editorial page editor considers change transforming the TV industry

Thomas Donlan explains in his latest Barron’s editorial commentary why an upcoming U.S. Supreme Court decision could give “big broadcast networks, cable system operators, and TV producers” a result they might not have anticipated.

The broadcasters are asking the Supreme Court to prevent disruption of the whole television industry and its reliance on decades of confused copyright law. The result could be different.

A start-up called Aereo invented their problem by making a clever and cynical end run around a special-interest law protecting television broadcasts.

The Copyright Act of 1976 was generally a mess of bad ideas and special gifts to media companies, but the TV-recording provision was particularly misbegotten. Congress was trying to please its constituents and placate powerful TV broadcasters at the same time.

The 1976 law said that broadcasters could control their programming and protect it from commercial rebroadcast by cable systems — unless the cable operators paid the broadcasters. At the same time, private individuals retained the right to record programming off the air without paying, as long as they didn’t sell the recording or let the public watch it.

Unlike the two women in the story of King Solomon’s judgment, corporate interests and consumer advocates were equally happy to see the baby sliced this way. The TV industry preserved its profits; the cable industry grew to become the dominant force in distribution; producers retained control over content; consumers retained the right to record programs.

Decades later, television broadcasting now is just another obsolete middleman industry, waiting for some inventor — if not Aereo then another — to disrupt it with a clever use of the Internet. It’s a well-known path, trodden by other inventors, who are disposing of most travel agents, encyclopedia publishers, booksellers, and others specializing in the control of information and communication.

What’s worse for the broadcasters, regulators have given their programming valuable space on the electronic spectrum that could be better used for popular mobile services and other gadgets still to be invented. Weak and vulnerable, they are also envied.

Few consumers would notice the passing of over-the-air broadcasting if cable companies would provide everything they now retransmit from that source. But the cable companies have shown little interest in the expense of re-inventing the broadcasters’ local programming, including news and sports. An important reason is that cable companies are also succumbing to disruption from the Internet.

More and more consumers are taking their entertainment directly from producers, over the Internet, without going through broadcasters or cable networks. Instead, they use intermediaries like Netflix, Amazon, Hulu, YouTube, and Aereo. When they do, they pay a la carte, for only what they watch, not for the prix-fixe menus of channels that the cable companies offer.

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