Analyst: Aereo Not Compelling, But Could Be Retrans Leverage
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
“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
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