In 19th century England, during the Industrial Revolution, a group of textile artisans labelled Luddites protested against new technology in their industry by smashing the new machines to pieces. This led to bloodshed, economic and social unrest and rioting, all because technology threatened to take away the livelihoods of a large part of the country’s workforce.
Today’s technology industry doesn’t contend with this same manner of opposition, but there are still many who are wary of the change that it represents. In fact, the modern tech industry has become so disruptive that it can now infringe not just on the jobs of the working classes, as it did in England in the 1830s, but also on some of the world’s largest corporations. The broadcasting, taxi and limousine, and hospitality sectors are among the latest to face significant upheaval from new players with fresh ideas.
None of the incumbents in these industries have quite reached the point of destroying machinery, but they have each battled the newcomers in their own different ways. Will history judge them in the same way as the Luddites, standing in the way of inevitable technological progress, or do they have a just claim to defend their positions any way they can?
Broadcasters enlist help of the courts
The television broadcasting industry is no stranger to competition. For yearsthe free, over-the-air channels like Fox and CBS have struggled with the trends towards digital cable and satellite TV. The threat posed by Aereo, however, proved to be something different. Aereo was founded in 2012 as a way to view and record live TV using an Internet connection. For a fraction of the cost of a traditional broadcast connection (between $8 and $12 per month), subscribers leased tiny, individual antennas stored in an Aereo-owned warehouse and gained access to the major broadcast networks. At the beginning of the year, the service had expanded beyond New York to other major cities such as Boston, Dallas, Detroit, and Miami. But in order to continue to grow, Aereo needed to do more than just win customers; it needed to win a court case.
On March 1st, 2012, a group of major broadcasters that included Fox (whose parent company is 21st Century Fox), CBS (CBS Corporation), NBC (Comcast), and ABC (Disney) sued Aereo for copyright infringement, and by June of 2014, the dispute had reached the Supreme Court. The specific point of contention was the issue of retransmission consent. Retransmission consent is a provision of the Cable Television Consumer Protection and Competition Act, which was passed in 1992 and requires cable companies to obtain permission, for a fee, from broadcasting companies before airing their content. According to National Association of Broadcasters spokesman Dennis Wharton, these “copyright and TV signal protections promote a robust local broadcasting system that serves tens of millions of Americans every day with high quality news, entertainment, sports, and emergency weather information.”
In the June 25th Supreme Court decision, Justice Stephen Breyer struck down Aereo’s claim that it was merely an equipment provider. “Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast,” he wrote in the court’s 6-3 majority opinion. Bloomberg estimates that the decision protected $4 billion in fees that cable providers currently pay broadcasters to play their content. The diffused threat from Aereo also ensured that TV contracts, especially those between broadcast networks and the NFL and MLB, would remain intact.
Responding to the decision on the company’s website, Aereo CEO Chet Kanojia wrote, “The spectrum that the broadcasters use to transmit over the air programming belongs to the American public and we believe you should have a right to access that live programming whether your antenna sits on the roof of your home, on top of your television, or in the cloud.” At the same time, he went on record to say that the company had no Plan B in light of the decision that will otherwise force the company to change the way it operates.
The New York Times estimates that television is currently a $167 billion market, but there is less consumer choice than the market’s size would suggest. In providing only basic cable, Aereo offered a cheaper solution to TV viewers content with a few, major channels, especially when bundled with a streaming service like Netflix, Hulu, or Amazon Prime. According to the research firm SNL Kagan, 101 million U.S. households currently pay to watch TV, either through cable, satellite, or telecom providers, down 7 percent from 2013.
The decline reflects a rise in “cord cutters,” who favor streaming TV on computers and tablets, rather than a decrease in the popularity of shows and live programming. Many of these people have opted for hardware providers like Simple.TV and Roku, which are stored within the household, do not stream live programming, and have not encountered the same legal obstacles as Aereo. But there are countless others who use services that are perfectly content to operate outside the law. Broadcasters chose the legal route to halt Aereo, but even with the Supreme Court on its side, the problems presented by video streaming will persist.
Taxi drivers take to the streets in protest
On June 11th, a coordinated effort of over 30,000 taxi and limousine drivers successfully blocked major tourist attractions in London, Berlin, Madrid, and Paris to protest the ride-sharing mobile app Uber. The blockade brought traffic to a standstill, but it has not dissuaded people from using the service. In fact, that day the company announced an 850% increase in sign-ups compared with the Wednesday before.
The European protests are just the latest speed bump designed by the notoriously stodgy cab industry to slow Uber. Since its founding in 2009, Uber has been subject to a number of objections, including a “cease-and-desist” letter from the San Francisco Municipal Transportation Agency, a lawsuit from a group of Chicago-based cab and livery companies, and a cap on the number of cars it can have on the road by the Seattle City Council. However, these legal roadblocks have not dissuaded investors. In early June, Uber raised an additional $1.2 billion in venture capital, giving the company an estimated valuation of $18.2 billion. The cash has allowed the company to be even more aggressive in its pricing structure. On July 1st, it alerted its Bay Area users via e-mail that it would be cutting “uberX fares by 25%, making it 45% cheaper than a taxi.”
Thanks to Uber’s sophisticated technology and deep pockets, cab companies are being forced to do something they are largely unfamiliar with. Speaking to the Atlantic, Atlanta Mayor Kasim Reed predicted that the battle between Uber and the taxi industry will be “a fifteen round fight, and I think that Uber’s going to win…But in the interim, they’re going to flat out fight it out, and mayors are going to be in the middle of it, because the taxicab industry is so old and staid and never had real competition, and now it’s being forced to innovate.”
Whether the fifteen round fight features more political lobbying or the adoption of the tools that have made Uber successful, one thing seems fairly clear: another protest appears destined to fail.
Hospitality disruptors tied up in regulation
Like Uber, Airbnb has played a lead role in the development of the “sharing economy” by helping thousands of entrepreneurially-minded people optimize their resources. Also like Uber, AirBnB has faced stern opposition from the industry and the cities in which it operates, whose revenues the new businesses are cutting into.
After offering an air mattress in a San Francisco apartment to its first customer in 2008, AirBnB now has 600,000 listings in 34,000 cities and 190 countries. Its latest round of venture funding, meanwhile, values the company at $10 billion. But if the company is to realize its full potential, it must overcome a set of regulatory challenges. Opposition is strongest in New York City, where a 2010 state law prohibits residents from renting out their apartments for less than 30 days in their absence.
According to reporting by Bloomberg, Airbnb has hired the New York white shoe law firm Paul Weiss to fight a legal battle with the state’s Attorney General Andrew Schneiderman. Last month, the company was forced to turn over personal data that could be used by Schneiderman in a legal case against certain Airbnb users who might have acted in violation of the aforementioned state law. The company is also paying Bolton-St. John’s and Risa Heller Communications, politically connected lobbying and PR firms, to positively shape its public image. Some of the pressures might be relieved by the recent announcement that Airbnb will begin paying the hotel tax in cities like Portland, San Francisco, and New York. That being said, as with the ongoing discussions surrounding Aereo and Uber, many more challenges to the status quo remain unresolved.
The hospitality, transportation and broadcast industries have all been rocked by the changes technology has thrust upon them, and as expected, all of the main players have fought back in their own ways. In some of these industries newcomers will be temporarily halted and some may even be stopped completely. Nevertheless, as Marc Andreessen is fond of saying, “software is eating the world.” Those not at the forefront of this wave should be warned – change is right around the corner.