As the man who built the Fox TV network 30 years ago, Barry Diller is used to battling conventional wisdom. But even he had to have been a bit surprised at the latest honor to come his way.
Last month, the Library of American Broadcasting honored Diller as a “Giant of Broadcasting” at a gala event in New York. Diller, as many of you know, is the financial backer of New York-based startup Aereo, which is in the midst of legal battles with broadcasters over its attempts to retransmit broadcast signals in violation of copyright law. Yes, folks, the man who many claim is trying to destroy the current broadcast business model, was honored by the some of the very folks who are fighting him in court.
Forget spectrum auctions or the Hopper. To say that Aereo could redefine the concept of copyright law (and broadcasting itself) is not an understatement. While there are some questions as to whether or not the antenna arrays actually perform to what Aereo claims they do, the main issue is one of retransmission fees, which bring in an estimated $3 billion annually, according to SNL Kagan, and are the financial lifeblood of TV broadcasters. If Aereo and similar services, including Filmon.org, survive legal challenges, it could lead to the collapse of broadcasting as we currently know it. It has even led one executive—from the network that Diller built—to announce that they would consider moving the network to the Internet if Aereo prevails. Aereo’s viability as a profitable company is not the issue here; so far its service has had limited success. Rather, it is the policy changes that could free not only services like Aereo but other pay TV providers from paying retransmission fees that constitutes the biggest threat to the financial underpinnings of the broadcast industry.
Aereo launched its service last year in New York and has since expanded to more than half a dozen cities. During this time, broadcasters have been challenging the company in several district courts, but after an initial victory last year, have lost several battles since. After its latest defeat in a Boston court, broadcasters decided to take its case to the Supreme Court. Although the issues surrounding the case are fairly complex, the question broadcasters posed to the court is simple: “Whether a company ‘publicly performs’ a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.”
Aereo bases its entire existence on the now-infamous Cablevision case in 2008 in which copyright holders in the television and film industries claimed that the New York cable provider’s hosted DVR service constituted a “public performance,” thereby violating copyright laws. The court disagreed, basically saying that automated copying or timeshifting of content from the cloud-based service did not. In its legal filings, Aereo claims that its service is no different than Cablevision’s.
So far, Aereo seems to be on the winning side in the lower courts but broadcasters want the issue settled sooner rather than later as the startup expands westward. Putting the issue in front of the Supreme Court is a gamble as the court may defer to previous decisions or even to Congress. Considering the unpredictability of the courts, broadcasters may have to pursue the legislative alternative.
As for Mr. Diller, this honor reminds us that perhaps he is not done having an impact on our business.