Gadgetory

welcome to top shelf my name is David Pierce and this week we're talking about television TVs kind of like the car industry there's all these cool stuff we could be doing but we're really not there's all sorts of innovation and neat things out there but really the market is where it's always been so we're going to look at the future we're going to look at the past and we're going to try and figure out how this thing that we all sit on our couch and do every day is going to change TV is changing quickly and it's changing in more ways than ever but in some sense it's really still the same as it ever was network TV channels like ABC and CBS in the united states are broadcast over the air from huge powerful antennas more than anything that's what those companies are and while netflix and cable companies continue to make money hand over fist surveys show that between nine and nineteen percent of people still watch their TV this way over the end these OTA signals as they're called have gotten much better over time they're now in HD and they're all digital but they work really as they always have just set up an antenna or run your cable companies coaxial cable straight into the back of your TV or of course you can get these channels through your cable or satellite provider companies like Comcast and Verizon carry these broadcast channels through a process called retransmission basically the cable companies pay the broadcast companies for the right to show their content if they don't pay the broadcast companies have the option to then go to the cable networks and make them carry their content this is called must carry it means that in this case cable companies have to carry save Fox's content but Fox wouldn't get paid for it this back-and-forth leads to odd games of chicken whenever these deals expire which is how you see things like Time Warner dropping ABC in july of last year broadcasters and cable operators are kind of in tough shape broadcast operators are seeing that revenue go down because of companies like dish who ensures the hopper which literally just skips right over all of your ads and just DVR culture in general so that's led ABC CBS and others to jack up these transmission fees to try to make up the difference but through all these standoffs and regulatory complications one thing hasn't really changed it's still really really easy to watch TV over the air in your all you needs an antenna and honestly if you pay for internet from the cable company odds are pretty good that they're unencrypted channels flowing through that white wire coming out of your wall here's the odd thing though the internet you know the Internet is allowing us to watch almost anything we want online whenever and wherever we want it started with Netflix and Hulu and Amazon then products like I TV and boxy took the traditional idea and went a little further they give you better interfaces to watch broadcast channels and also add things like cloud storage and remote access then there's area Aereo is on one hand just the natural extension of over the air broadcasting the company runs you a tiny antenna which it uses to collect those broadcaster channels and stream them to any device via your browser you can record shows and watch them whenever you want it seems so smart so obvious but it's caused huge problems Fox threatened to polish channels from the OTA broadcasts a area is flat-out stealing its signal acting like a cable company but not paying the huge retransmission fees CBS followed suit and said it could go cable only in just a few days it's a weird time to be a broadcaster it seems like everyone's trying to steal your content and keep you from getting paved it's also a weird time to be a cable company as broadcasters lean heavily on retransmission fees to stay powerful and lucrative it's a weird time to be a consumer to there's more great things to watch than ever but how in the world are we going to watch them so we have a lot of questions and we figured area was actually a really good place to start asking some of them Sonia I Patel sat down with Aereo CEO Chet Kanojia to ask him why he thinks Aereo is legal how he thinks it can beat the broadcaster's and really what the future of TV looks like so we're sitting in Brooklyn right now this is kind of an abandoned it's not abandoned it's very empty building in Brooklyn the other building is actually an old tire factory area needs a lot of power bandwidth it's a good spot for us can you just a very high level describe what area is it's the first company that's figured out a way of creating an alternative for consumers outside of the cable bundle of the cable package for live television you've got really small antennas how will you manage to make those antennas provide reliable service and switch them from user user reliably without them having to be huge basically first and foremost a typical 80s antenna is designed to look at all parts of the spectrum at the same time since ours is this switch system meaning the consumer says I'm interested in watching ABC all of the channels that essentially six megahertz white so the area antennas are soft antennas in the sense their characteristics change depending on what channel you are looking at you said they were how many antennas are there on each of those little boards your giants so each board carries 160 in tennis ok and then how many boards how many people can you support from here that room that you saw is capable of serving several hundred thousand seven hundred several hundred thousand average it's come to area whether or not you guys wanted it or like it the idea of area is this life is literally an upstart company it's taking on the cable giants exists you've been in court you've been fighting the fight do you think of yourselves as renegades in that way areas so not i mean we spend so much time money resources in trying to figure out how to comply with the law right so that that's not renegade that's like the most compliant child in the room who is going through contortions to figure out how to comply there's all kinds of cable channels you can't get over the over the air right so if eventually your customers start demanding MTV or AMC or HBO the way that you would provide them is by doing license deals not building thousands of tight little you know I'm not sure what's going to happen I would rather focus on making the customer base that understands the value proposition which is you for ten percent of the price you get fifty percent of the value out of the large bundle and then you have a myriad of other options whether you rent movies from itunes whether you have netflix for a lot of library shows a lot of cable shows end up on netflix i would rather serve those people than to go recreate the cable bundle because I just personally as a consumer I've never find appropriate balance of value and price in that and I don't think that's the future I think the future is a smaller number of what I call skinny live and deep libraries people like on demand they like to be ability to say I'm interested in four of these episodes I'm going to watch him back to back and you know I got six hours to kill and that's what I'm going to do what's the next step prayer I mean what's interesting to me is that it really does seem like if you're going even if your goal isn't to recreate the traditional cable model nutritional bundle and company where you are recreating is your the company people will buy live video from what's the next step along that path for you I don't know yet I think it's too early here's the one thing that I more and more that sort of concluded if you can put the consumer in the forefront and say I'm willing to forego everything else for this particular customer or these sets of customers you're gonna win you're absolutely going to be no irrespective of what they call you or don't call it you're gonna win the system is set up that nobody cares about these customers it's purely about creating more and more profits for the companies and I think that's just it may be right for them but it creates an opportunity to dialogue me to come in and say the five pick that guy and I just support them and I just support him to the nth degree I'll win he'll make sure I went but so what i want a net like if you prove this model works and you prove that there's consumer demand for this product and you prove that the legal precedent for this product need to be allowed is there what happens when comcast builds a data center with thousands of tiny little antennas and says hey xfinity customers you know watch it on your smartphone how do you compete with that mean this is exactly what happened to Eva the the biggest issue in aught that the sacred cow in the mix of all of this thing is the bundle the question is when is that go away and individuals have the ability to pick and choose the question I have is when you're in that world the best technology the best experience is going to win and I think I've got a shot at that I like my chances so this is all very confusing and there's a lot going on so I brought two people to help me talk about it nilay patel and greg sandoval welcome both of you thank you thank you so I'm gonna start with the opposite side of this we sort of heard what area thinks why they think they're great why think they could think they could work what's the argument against Aereo why should Ariel go away from the network's perspective it makes a lot I mean if you run a broadcast network and you have to revenue streams one is you sell ads against whatever broadcast television and the other one is you sell your content to comcast so what's the breakdown of those suits like where does all this we're so originally it was all ads right and now it's like all comcast which is why it's actually why comcast bought NBC like if you're a Comcast look man we pay a lot of money IM you see every day every year billions and billions of dollars hundreds of go into dollars right it's like we should just most you just buy and vcn and that's exactly are just vertically integrated of business so if that if you have those two revenue streams and Aereo shows up and says we're going to take away that cable string we're going to take your content we're going to do instead of having one big antenna which is what you know your cable company in the boondocks has we're going to have lots of little antennas and whereas in Brooklyn I can't mean that's basically that's basically the trick that they called it's a good trick I've been I like it and it makes a lot of sense because I mean it's basically just by putting some slim boxes in there no data center right and did we ever have this fight with slingbox like did this did this come up yeah if I was Sun box with a fight with tivo you're the fight with cablevision like Cablevision was instead of giving everybody a cable box will virtualize your cable box and just put it in our data sign right and they were they were paying the money and the networks were not so for cablevision to write and it was literally the same fight it was instead of giving everybody the box and doing everything in your home we're going to move it to a datacenter an area is doing the exact same thing only they're not paying money I mean that's basically you've heard as well right exactly yeah so they said then I mean who do you put it like that it seems really obvious that like Aereo is illegal and has to go away and they're fighting all these fights but then so Aereo just took these huge antennas and just knock them down into tiny antennas yeah and sold in every Chet interview Chet told me I think he was during that interviewer just after I don't who made it in but uh he was like are the primary thing that we developed was this antenna which is like this tiny little antenna and he's like you know we could have probably made it even have kept it helping to make it even smaller but the goal for us was to develop this like Ritu nabol antenna because that's the key but we can make this intent to pick up any channel where as regular people with with those kind of stick antennas everybody knows like we move them around your house like you get better reception on 4chan it goes horse so I mean like really and you know this is like we have all these devices here and I my like theory about all of these devices after having covered a lot of them is it anything that has a coax port and an Ethernet port is doomed to fail but they're just different worlds like they just they're entirely different networks and they to make the two of them like work together in a seamless way for the consumer is has never been accomplished like a cable box is like bad at the internet right and all these internet devices are bad at television and the only one I think the only company that's ever like made a real effort out of this Tebow and Tebow suck like I have one I love it I think it's the best k walks you can buy these are the antennas tiny little antenna yes well so Greg you've been you've been tracking this as much as anybody so Islam at this point what's changed over the last couple of years like Aereo just showed up and kind of did this thing and was were things changing that led up to like Ariel being able to do this or did they just sort of show up no well there was a bunch of other what was it is a diva and like gumbo is the one to try to play dvds over the Internet right exactly like a DVD player in their warehouse was kind of similar but arrow had the approach going over the air right you know when I tried anymore and it kind of makes sense right we all have a right to watch TV via these antennas it's all been regulated forever right the exact the FCC is has said basically flat out like you have to provide the channels over the air and you have the right any individual has the right to watch this stuff so they came on and they they took care of this and they made some kind of interesting arguments essentially saying because of that right doesn't change that these antennas are on our warehouse nothing changes and I was in the courtroom I thought they were going to lose really yeah because the judge was looking for the copyright owner CBS NBC fox their attorneys please tell me how this is you know different than cable vision and they couldn't do it I couldn't do it and her decision was like she was looking searching hoping essentially she was definitely she said this is like kind of a backdoor way they're kind of slithering in and those are my words but that's how she saw it it's kind of a novel way to kind of circumvent the law but at the end of the day they didn't break the law right and that's really what hereos at least illegal yeah when you say is that so this will just make the win for ABC and CBS and whoever is that they get Aereo to be recognized like Cablevision who then has to pay them a ton of money to broadcast their content is that right essentially what they want at this point they're like area you can exist I just want a crapload of money from the area to exist really I I was at the D conference last month and a woman from ABC was like area i was completely legal and they're stealing our content and we won't stand for it because if your ABC you're looking at areas to any like man what it mean just at a super big conceptual level right there's like television there's like a series of hacks and there's you watch TV right which is fine and i think this is like a brilliant this antenna is like a brilliant hack as opposed to like this is opposed to that yeah right but if you're a bc you're like why every one of those hacks is like a revenue opportunity for you right so if you're a bc you're like why and they're doing now you can download the watch ABC app and like watch live ABC a phone and that's they get to control that and they get to sell the advertising its and they they get to collect all the revenue so is that i'm curious for both of you is that where we're going basically is that like did Aereo sort of inadvertently like break this channel model cuz right the the you know CBS and was it Fox that also came out and was like we can pull our stuff off broadcast area whenever we want that answers your first question which is which one of these revenue streams is more important right now like they're not saying we're gonna pull our stuff off a round cast right and I they're they're saying this is worrying about the writer saying that if we allow area to do this then then comcast or Time Warner Cable aren't going to want to pay for our right ok so then there's that but they're also worried too this is a threat against the the cable guys right that's what chad has said he wants to break up the cable bundle he doesn't see any value it as a consumer he says hey well why do I want to pay for the few channels that i watch I have to pay for the 500 that forced me to watch we've everybody's been saying that for forever his his objective his goal is to get people that are sick of you know all the would-be cord cutters to say you know what I got netflix i got hulu i'll use area for my live TV and sports I don't need these guys really he said that I think he said to you is like I can give you fifty percent of the bundle for ten percent of the price that's a Canada and Sons up in the reality is the most people watch like network television right well I mean most shows people watch are on network TV and like you can record them Ontario and it's like having a DVR and less what you wanted yeah you know there's nothing they have it so they have all the networks on Bloomberg TV right there's nothing stopping them from getting an AMC or an a you know like the cable networks like if you're a cable network I why wouldn't you get area on say like we sell it to comcast your cell from Warner and Alice off area and you can stream it the only thing there is all those companies they all make their own app they all want to have a direct billing relationship with a consumer and I don't know that there any of them is eager to like what a start-up ongoing relationship right and that is that's like that right there is that's why you see a hundred different apps with like bad you eyes right side of one unified well that's question so what does this mean for how we watch TV both from sort of a legal standpoint and just like a here's the technology what the products are like how are we going to continue to watch TV over time like it is Ariel going to eventually just break up all of the networks and they're all going to either be on cable or have their apps or whatever or are things like you know so we have these boxes like the boxing TV takes is super interesting I think they do not a great job of putting it together but it's super interesting to have like you put the antenna out it grabs a live TV puts it into a DVR on the cloud and you can watch it from anywhere and then there's the this guy the simple TV which is also a weird I vegetation point out but you see this there's like nothing in here you look at you can literally XE through it there's nothing here but so it is show you what that does is it takes over-the-air signals to and transcodes them so you can watch them online you can watch them on the iPad you can watch them on your TV and that's what I'm saying like this if you see this on a device it's a bad experience like it just is i mean like why do you I don't think you should give the consumer the responsibility like transcode signals from one legacy network so who say bandwagon use the rant upstream bandwidth hood like yeah but it meant all that social a two of the entertainment center I had all these set-top boxes right you go over people's house and they have like stacks of set-top boxes now people solves this problem where are we going I think the problem is the the solution is it's already out there right like the Roku is out there the xbox is out there that apple TV is out there right they're the ones they're collecting all the content into unified interfaces and extreme it all over the Internet um I mean I think it's funny because yeah my theory about coax tracks and ethernet jacks is like Microsoft couldn't get all the way there so they had to build in this like hack but you I mean if you look at the rope if I mean I have like a lots of channel this area which is so while that's right yeah like let's put you know let's take it put on the internet and put it back on your TV in a way that works slightly better with I just I mean I see consumers going after that anything like this is where we want to live like we just want one interface we don't want to like deal with this stuff we don't want to deal with time warner cable right nobody wants to look at market but even that was sort of its own huge messy you wrote a whole piece i think a week ago or two weeks ago about apple TV & HBO go and that was that seemed like a whole sort of fiasco getting that put together with all sorts of that goes between the two companies so well how did that go down like that seems like a big win for Apple TV so how did that well HBO is trying to build out right we're talking about media companies and now they've got to hire engineers and internet guys are experts at that so it's it's a slow process so they're trying to get better we're going to see a blending of these companies and with these kinds of skill sets and it's not natural for them but the thing I'd tell them you know you know when we meet and they're just up the street here I'm like you got to get off cable everybody right everybody wants HBO alucard and everybody telling and just burn all of your boy yeah exactly I mean I just look at it and I say no the problem why HBO you won't see that for a while is because the cable companies and the carriers do all the marketing for them they don't have to do anything right yeah wait and Allah billing and people get mad and that's a big deal that's a lot of money and right but eventually you keep seeing Aereo you know these kinds of operations and the cord cutting numbers keep growing yeah they're gonna have to decide to make a change eventually and so are there what from a you know I spent a lot of time this week reading like the FCC's website which is just horrible I haven't slept Oh week it's been awful but so what in in terms of like regulations and sort of what's controlling these two forces what prevents us from doing that now is it just money is that the only thing preventing us from I only do it when the FCC can say until they're blue in the face right we should all put cable cards or halo boxes and you know you should be able to buy them a retail and it just didn't work you know the FCC has they're a weird institution in that they're supposed to regulate this industry but then they also have to like dole out the spectrum and work with the industry and like figure out standards so like they're there in bed with the people that they're trying to regulate and that's just by nature of their existence right right like that's what they're supposed to do so like I don't know that they're ever going to they've been more active right like they impose some fake restrictions on the comcast merger they you know they block ATT and tmobile like you know they've been more active and that sort of thing but they're never going to be like do this thing that we want they're never going to be the consumer advocate that way I don't know that it's even fair to ask them to be because that's not what they're supposed to do is like manage or spectra and manager communication you can bet the CBS and Fox and they're all going to you know their lobbyists are going to go to Congress and say these guys are taking on content without getting permission or without paying this for it so lost in the courts and now they're gonna go and try to get their own legislative run on there and you see another route there's not much unless they cut deals right this I said this today I tell my friends I'm like this is gonna be one of those things just like he said tivo & with VHS where they were going to fight fight and then they're gonna realize oh wait we can make my office yes we do what's what's the VHS connection well you know they try to block the HS right like really compared to the Boston Strangler that's right yeah so yeah they said like I was Jack Valenti around a motion picture association said the VCR is going to kill at the movie business and that went well two years later like home video sales for the biggest right this is true and it's the nature of any business it's not just it I think we are all because we're consumers of entertainment and we all understand how we want to consume things things that seem obvious to us like you're so stupid why isn't this obvious but any business when like if you're faced with your primary revenue stream changing you freak out so right now is just like an awkward transition time between they have they still have all this money coming because right everybody tries to compare it to the music industry so it's just imploded and this has we haven't this hasn't imploded so they don't necessarily need anything else well then I guess they will be i'm going to show you it's like the business wall so radically different music industry succeeds on selling you stuff at retail right so if piracy like came and like took all of the business right it's like okay now we're not selling anything anyone we've got to get on the internet and start selling things tonight because once I have the music I have the music and that's sort of the end right but like Comcast and Time Warner Cable & rcn they're not gonna pirate the shows right and lex there's a forensic though right they didn't take care of their customer they forced us remember to buy two songs that we liked it was nice to buy 12 um right cable people haven't taken care of their customers I don't know anybody that likes her cable right there would always on the top of the list with most hated companies and now there's people that are gonna use that Chet kenosha aerial you're gonna get in you just like they did and what Chad said to me was you can't buy a seat at this table right because we're not the customers of the content companies that the cable companies are the customers right and then they resell stand so like no one's taking care of a final customer because there's a monopoly we're not a monopoly but it's a closed system and they know how it works and I know how the money flows that comfortable with it and chat was like you can't buy seat at that table and be disrupted so they like literally engineered their way to like hack in to that door with this little time it was just fine I think that's cool but like I asked was like this can't be your business like engineering little antennas can't be your end game and he was like you just like smiled at me because it can't like his end game is really going to he's going to be the next generation cable network right with a next-generation like multi-platform video distributor which is he takes all the content in cells you an interface sells you a package and it's funny oh it's funny that he keeps on talking about breaking up the cable bundle because he still sells you a bundle you know you don't buy channels right you're still paying area you're doing less so like it doesn't sound like you got friends bad right I mean I'm sure as time goes on like the pricing will change right but that fundamental thing that they do where they collect all the content they sell you an interface I know in a way to bundle to wash it I think that's a good model I don't think anyone's complaining with that I think they're complaining about what channels are in the bundle and how much it costs and I think that stuff is going to change radically yeah so how long does this take I guess I'm sort of less tapped into this like on a day to day basis than you guys are but it seems like this is all happening really slowly because this are we does this change drastically a year from now or does it take like 20 years or like a thousand years look at netflix it's taking netflix 10 years to get where they are right now right and they're still like on the trenches fighting it out for streaming so who's to say it could take a long time yeah I mean I think in terms of like hardware launches I think the xbox the ps4 I'm fairly certain that when fall comes Apple will do something with the Apple TV like they'll have api's and apps and stuff like you know it's funny because they have the thing I am a 74 the game controller choice yeah yeah but like you know they added HBO GO they added watch ESPN but they added like four other insane crappy channels the Apple to you know day like what I'm is called qello I've never heard well oh well oh it's a live concert but it's okay and I was like what is this like how are you on the apple TV like it took HBO a year yeah I think like that they're starting to like release their control of the platform a little bit I think that even if they don't do something in the fall what because I you know they said they're gonna filter products on the fall they don't do something in the fall pay apple TV it's like yeah goodbye opportunity I'm saying that he lifts the telly everybody in Hollywood tells me they think it's a big ipad right the thing is yeah but whatever it is it's not going to have like the kind of it doesn't look like at this point that is going to have the kind of revolutionary faculty that they had a lot the cell phone or yeah computerization rio on the apple TV well let me live the iphone right there is no absolute launch like they made a thing it was totally self-contained it the only people they need to talk to you about it was ATT right now what they said 18 he was get out of her way yeah you cannot build a TV that way you just can't do it like you don't have any you need yeah you don't have anything probably you need a hundred different companies to support you and then you need comcast to say like we're gonna let you have this bandwidth with this product and I one of people using that bandwidth are not going to buy your television product that's like too many people you mean they have to go slowly and they have to start by like adding more channels to the current product they have certainty I'm gonna have to continue to drink too much while I sit in bars and watch worse because really that's basically my problem and even the liquor companies are at the table too yeah what you're just so I did this math forever though it's like way more expensive to do with my way please I gets a treat for so it's good that's good I will thank you both so much really appreciate you being here I've learned something I'm gonna go back to FCC website now I'll feel better after I right back there I'll see you later all right that's our show for the week thanks to greg sandoval and nilay patel for being here and thanks to Chet Kanojia from Aereo we will be back in two weeks we're off next week for the fourth july have a good holiday and we'll see you after that