Aereo's Loss Shifts Goal Posts for Networks

[Commentary] The digital upstart enemy has been vanquished and TV content remains secure upon its throne. Broadcast content, that is.

The US Supreme Court said Aereo was effectively no different from a cable company and thus must pay broadcasters for the right to distribute their signals. For broadcasters, the ruling removes what might have become a major threat to margins. With the ad market still relatively weak, the rapidly growing, high-margin business of charging retransmission fees to pay-TV providers is essential to keep pace with mounting programming costs, particularly for sports. For pay-TV providers, which will be shelling out an estimated $5.95 billion in retransmission fees by 2017 -- up 70% from 2013 -- according to Janney, something may have to give. Given the growing number of online alternatives, they can't very well pass all of that on to subscribers. And barring any further threat from an online rival, companies that own broadcast networks or other networks that hold sports rights will likely be seen as indispensable. Against this backdrop, cable networks that lack major sports content such as Viacom, AMC Networks, Discovery Communications and Scripps Networks Interactive look vulnerable. These companies could have less leverage to negotiate affiliate fees as distributors try to protect their margins, particularly as pay-TV companies consolidate. As broadcasters celebrate Aereo's loss, stand-alone cable networks may have lost an unlikely ally.