Deborah D. McAdams /
07.12.2012 12:00PM
Analyst: Aereo Not Compelling, But Could Be Retrans Leverage
Denial of preliminary injunction doesn’t signal copyright determination
NEW YORK: The federal ruling not to block Aereo was more harsh than the analysts at Wells Fargo expected, but they’re still not too concerned about the long-term effect of the over-the-air rebroadcast service.

“While the ‘heart’ of this case is not over, the language was clearly more negative than we had anticipated,” wrote the team of analysts headed by Marci Ryvicker. “We do not believe that there is real risk to retrans dollars, but do think the headlines from last night's news could pressure some of the large market TV stocks.”

Judge Alison Nathan of the U.S. District Court for the Southern District of New York on Tuesday denied a motion for preliminary injunction filed against Aereo by several broadcasters. Fox, Univision, PBS, ABC, NBC, CBS, Telemundo, and a number of local TV stations sued Aereo for copyright infringement in March, when the service beta launched in New York without retransmission contracts.

Judge Nathan’s decision allows Aereo to continue operating while the court determines whether or not it violates copyright law. Ryvicker, et al, said the “language in this ruling indicates that Aereo could ultimately prevail in the overall copyright lawsuit—unexpected.” The analysts were particularly concerned with the judge’s declaration that “plaintiffs have not shown a likelihood of success on the merits.”

Aereo relies on an array of tiny antennae to retransmit live broadcast TV signals to personal devices (picture below, right). The service is backed by Barry Diller, who helped launch the Fox broadcast network. Diller claims Aereo is not subject to retransmission consent because it rents individual antennae to users, who control the service. Aereo’s defenders say this protects it under the 2008 Cablevision decision.

Cablevision was sued by several cable networks for copyright infringement when the provider launched a remote digital video recording service in 2006. The U.S. Court of Appeals for the Second Circuit determined that Cablevision’s DVR constituted a private, rather than a public performance, and therefore did not violate content copyright law.

The networks suing Aereo said the service should not fall under the Cablevision ruling because Aereo retransmits live TV. Judge Nathan disagreed.

“Plaintiffs
attempt to distinguish Cablevision based on time-shifting fails when confronted with the reasoning of that case, particularly considering that the Second Circuit’s analysis was directly focused on the significance of Cablevision’s copies but did not say one word to suggest that time-shifting played any part in its holding,” the judge said in her 52-page ruling. “This court finds that on the key points on which Cablevision actually relied… Aereo’s system is materially identical to that in Cablevision.”

Ryvicker’s team noted that Tuesday’s ruling was only a rejection of the preliminary injunction, and did not address copyright infringement. Fox and CBS have stated that they will appeal Judge Nathan’s decision.

“Our overall thoughts—Aereo is not a compelling product and therefore not a real threat to the TV ecosystem,” Ryvicker, Stephan Bisson and Eric Katz wrote. “Recall that in June, we tested the Aereo product and did not find it compelling due to limited product support and a cumbersome ‘remote.’ Therefore, we do not see this as a real threat to the TV ecosystem.

“That said, the bigger issue raised by this case has to do with retrans consent, as the larger multichannel video programming distributors are likely to argue that they, too, could provide individual antennas for their subscribers and thus forego the retrans fees. Truthfully, we find this impractical, given that this would require changes to the set-top box, which would cost money. But we do believe this concept could be used as negotiating leverage should Aereo ultimately prevail.”
 


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