NEW YORK—During the fortnight after Aereo Inc.
unveiled its plan to retransmit local broadcast TV channels via Internet
bandwidth to cord-cutting viewers in New York and other markets, curiosity
How would broadcasters seek to squelch the $12-per-month service, which
offers 20 local TV channels? Would they focus on copyright or retransmission
principles? Did the $20.5 million investment from Barry Diller’s IAC/InterActiveCorp.
give Aereo more credibility than earlier TV-via-Internet ventures? Would the
cable industry tacitly endorse Aereo’s approach, seeking a potential precedent
for its own future retransmission battles? Could Aereo’s plan to reach mobile
devices stymie broadcasters’ Mobile DTV initiatives?
When two groups of broadcasters sought an injunction to
prevent Aereo from launching its New York pilot service, they unleashed a new
array of questions. (The two groups include ABC/Disney, CBS, NBCUniversal, Telemundo
and WNJU-TV in one cluster; Fox, PBS, WNET and Univision in the other.)
Aereo claims that its dime-sized antennas receive HD over wireless broadband delivered via several large “antenna arrays” in the New York City area.
Would the two separate
filings be consolidated into one case in a single court, and would a judge rule
on the injunction request before Aereo’s target March 14 New York launch date?
Why did broadcasters pick copyright attorney Steven Fabrizio of the Jenner and
Block law firm to spearhead their case against Aereo? Was it because Fabrizio
led the recording industry’s successful effort to shut down Napster’s
file-sharing platform a decade ago?
In early March,
Diller said that he expects Aereo to be available in 75-100 cities within a
year. In a speech at the South by Southwest Interactive Festival, Diller said
he’s ready for a “great fight” with broadcasters, who he said are launching an
“absolutely predictable” opposition to the Internet TV venture, according to
Bloomberg news reports.
Analyses & Sabre-Rattling
The case stirs up a
slew of contextual questions. How will the pending legal case of ivi.tv, affect
the Aereo lawsuits? The ivi.tv case, dealing with a start-up’s intent to
transmit local TV channels via the Internet, has been languishing for months; a
mid-April court date is currently on the calendar (see “’Net Startups vs. Media
Titans,” Oct. 20, 2010). Digital video recording—always a dicey issue in the
video-on-demand environment—opens another set of challenges. Aereo’s proposal
to include up to 40 hours of DVR capability with the monthly subscription
piques the interests of advertisers and syndicators, although those issues are
not part of the current legal actions.
Even as the case took its first steps into court,
analyses and sabre-rattling began. Craig Moffett, the media/telecom analyst at
Sanford C. Bernstein & Co., LLC, characterized Aereo as “nowhere near as
simple as it appears.”
“The cable industry
is likely to play the role of interested observer while the broadcast industry
does the heavy lifting of testing Aereo’s premise in court,” Moffett told TV
Technology. “The cable industry could be a net winner if Aereo wins in the
court. Their leverage in retrans negotiations would dramatically improve.”
BTIG analyst Rich
Greenfield was quoted as calling Aereo a “retrans killer” and predicting that
the service could be a game changer that could radically alter the economic
models of the media business.
vice president of business development at BIA Kelsey, doubted that Aereo’s
plans would evolve quickly.
“It has taken broadcasters nearly 20 years since the
original Cable Act in 1992 and some hair-raising standoffs with MVPDs to
finally get access to some cash for content,” Passwaiter said. “Don’t expect
them to roll over on this one or immediately buy into the notion that they
stand to increase profits thanks to Aereo.”
Passwaiter questioned whether Aereo’s service can
increase a station’s viewership and ratings with “its limited over-the-air
“That math is a little complicated, and it’s going to be
a hard sell to television owners,” he said, using the example of WNBC-TV’s 2011
revenue. BIA/Kelsey’s data shows that the NBC flagship generated up to $51 per
year per viewing household based on ad revenues and retransmission fees.
“Should Aereo achieve
5 percent penetration of current MVPD households in New York, WNBC would stand
to lose a few million dollars a year as would every other New York broadcaster
getting retrans money,” Passwaiter explained.
initial injunction request laid out the basic battle plan. Bluntly asserting
that “Aereo’s conduct constitutes infringement of Plaintiff’s exclusive rights
of public performance and reproduction” under the Copyright Act, the lawyers
indicate they’ll focus on intellectual property rights issues as well as
Communications Act Section 325 retransmission policy.
“Simply put, Aereo is
an unauthorized Internet delivery service that is receiving, converting and
retransmitting broadcast signals to its subscribers for a fee,” the
broadcasters argue. Later in the legal papers, they contend that, “By
commercially exploiting Plaintiff’s programming and broadcasting infrastructure
without authorization, Aereo seeks to compete directly and unfairly with
[broadcasters and] …authorized retransmitters,” such as cable and satellite
carriers. Citing Aereo’s approach as “willfully, wantonly and unfairly
exploiting [TV content…] for Aereo’s own commercial benefit and in bad faith,”
the broadcasters threaten further action for monetary losses.
That leads to still more questions about the value of the
content. And the queries continue to gush forth.
Will CableVision System file a “friend of the court”
brief on behalf of Aereo, supporting Aereo’s remote DVR capability? To some
analysts, Aereo’s DVR features resemble Cablevision’s “Remote Storage Digital
Video Recorder” networked DVR service that was challenged by many of the same
networks now seeking the Aereo injunction.The Supreme Court ultimately refused to hear that challenge
On the other hand, what’s the precedent of Zediva? That
DVD streaming service was court-ordered late last year to shut down permanently
after being sued by the Motion Picture Association of America. Conceptually,
Zediva’s shared DVD-player set-up resembles Aereo’s shared antenna
architecture, although that analogy is still a work in progress.
Even more urgent is the marketplace question, as many
observers have noted.Will
cord-cutting viewers pay $12 per month for the 20-channel broadcast package
plus whatever sums they spend on Netflix or other over-the-top video sources to
fulfill their video needs?
Girding for a Long Legal Smackdown
One group that will
certainly benefit from the Aereo battle—as they usually do—is a cadre of
communications and copyright attorneys. Aereo, which acknowledged that it had
budgeted for a prolonged legal face-off, said in a statement that “it very much
looks forward to a full and fair airing of the issues.” The company expects “a
prompt resolution of these cases” and insists that Aereo’s technology “enables
consumers to use their cloud DVR and their remote antenna to record and watch
the broadcast television signal to which they are entitled anywhere they are.”
Aereo’s founder and
chief executive Chet Kanojia, at a February event unveiling the service, said
he expected the legal challenges and insisted that the customized/individualized
antennae and the cloud DVR are essentially usage licenses.“We understand that when you try to
take something meaningful on, you have to be prepared for challenges,” he
the day after the broadcast groups filed their injunction request, the Federal
Communications Bar Association ran an already-scheduled seminar in
Washington.Its topic was
“Internet Delivery of Television: Over the Top and IP.”
The broadcasters’ injunction requests in New York gave
the five dozen gathered attorneys even more discussion fodder than they had
expected. Among the FCBA speakers was Jack Perry, president of Syncbak, which
is launching a system that lets broadcasters and content owners deliver live
and on-demand programming to viewers on mobile phones, tablets, smart TVs and
gaming systems, (see “Protecting Local Broadcast Streaming,” Aug. 24, 2011).
His message: there are legal ways to deliver TV via the Internet with broadcasters’
Seth A. Davidson, a partner at the Edwards Wildman Palmer
law firm in Washington, thought the coincidental timeliness of the FCBA program
underscored the “dichotomy” presented by the Aereo venture. He called such
services either a “potential threat or a potential opportunity,” depending on
where you stand. Davidson predicted that the media communities will watch the
case “very closely” because of its “potential disruptive effect.”
“What a court says might have future
implications for other space-shifting applications,” said Davidson, who
represents cable TV clients. He cited the effect on other upcoming cases in the
courts and Congress “related to the status of technologies under copyright law
and the Communications Act.” In particular, he pointed to the Satellite
Television Extension and Localism Act, which expires at the end of 2014.Davidson expects the Aereo litigation
could affect the next round of congressional deliberation.
Hane, a media attorney with Pillsbury Winthrop Shaw Pittman who representsdigital video distributors including television stations,
agrees that,“Aereo raises a lot
of interesting questions” but observes that “even if they were to win in court,
it doesn't mean this particular business model will be a success.”
is no question that broadcast stations need to find secure ways to get their
signals to alternative devices both in the home and on the move,” Hane said.
“The program suppliers, though, have made it extremely difficult for stations
to do it on their own.”
at one level I like having inventive third parties out there pushing the
envelope,” Hane continued. “That doesn't mean I support back doors around
copyright and retransmission laws, of course. But a little motivation for the
networks to be less ham-handed in how they restrict affiliates' ability to
reach screens that don't hang on walls would be a good thing.”
also cited the Syncbak approach as one that shows “the sort of appreciation for
real world considerations that stations and their program suppliers might be
able to get comfortable with.“He
said that a service like Aereo is “not likely to build much of a business
unless it has the support of broadcasters and their program suppliers, and
that's going to require Syncbak-like respect for geographic exclusivity.”
well-defined case with some early victories might force networks and other
program suppliers to re-think their positions on whether to continue blocking
broadcasters from alternative distribution paths,” Hane said. “And that could
be a good thing, as long as territorial exclusivity can be maintained.”
When Aereo unveiled
its rollout plans and its investment, many observers were surprised by the
network’s sanguine response, especially since they were aware of the project
for at least a year.The company,
formerly known as Bamboom Labs, had teased its intent.In the days immediately after the Aereo
announcement, the networks, National Association of Broadcasters and others
declined any comment.For example,
even though the Aereo plan expects extensive access via handheld/portable
devices, an Open Mobile Video Coalition official declined to comment.The OMVC’s boilerplate response was
that Aereo appeared to be “an OTT residential cable competitor”and hence a “service…not part of the
Mobile DTV mission.”
as many subsequent reports pointed out, the Aereo signal could reach tablets
and smartphones or future handheld devices without the requirement of either a
broadcast-receiver chip in the device or an outboard dongle, such as the one
that the mDTV Dyle broadcaster consortium has proposed.
fundamental is the issue of wireless spectrum availability. While Aereo’s plan
to deliver video via wired broadband “merely” relies on bandwidth, the ability
to reach untethered devices is still unclear.Will it travel via WiFi or other unlicensed spectrum?
another of the Aereo questions still up in the air.