Saturday, July 14, 2012

Judge Got It All Wrong With Aereo Decision

Originally published in July 13, 2012

Following U.S. District Court Judge Alison Nathan’s decision denying TV broadcasters’ request for a preliminary injunction against Aereo, the online video startup that picks up local TV station signals and sends them to subscribers’ computers, Aereo CEO Chet Kanojia said: "Today's decision shows that when you are on the right side of the law, you can stand up, fight the Goliath and win."

A more authentic quote from Kanojia would have been: “Today’s decision shows that if you can find a judge ignorant as to the basics of intellectual property law and willing to disregard the long history of television retransmission precedents, you can build a whole new business on stealing billions of dollars worth of video content.”

Aereo brazenly asserts that because it picks up local TV channels with a tiny, separate TV antenna for each Aereo subscriber, it’s not in the same business as cable TV systems and DBS providers like DirecTV and Dish, which are required to make licensing deals with TV stations to retransmit their signals. Incredibly, Judge Nathan bought into Aereo’s laughable argument that the company was merely “renting antennas” to its subscribers.

That would be like a store claiming that, because it pilfers merchandise from a distributor’s warehouse one item at a time, instead of by the truckload, it should be allowed to sell the goods without paying for them.

What Nathan blithely ignored is that the copyright rubric governing retransmission of television stations has never been in any way predicated on the method used to capture the stations’ signals. Whether those broadcasts are received via one master antenna, multiple antennas or, as is increasingly common with cable and DBS providers, through fiber optic connection to the local TV stations, is irrelevant. The video service provider is an intermediary that must forge a contract with a TV station in order to deliver the station’s content to subscribers.

So Aereo is no different from Comcast, Time Warner, Cablevision, DirecTV, Dish, Verizon FiOS and every other multichannel video provider: it charges subscribers a monthly fee to receive local TV stations for live viewing or personal recording. The only material distinction between Aereo and the cable and DBS companies is that Aereo’s service doesn’t also include cable networks like ESPN, Fox News and AMC.

Nathan speciously cited the precedent of a 2008 case involving Cablevision Systems Corp., the largest cable system in the New York City market, regarding its “network DVR.” That court decision allowed Cablevision subscribers to record TV shows using Cablevision servers, not just in-home DVRs. Nathan wrote: "The overall factual similarity of Aereo's service to Cablevision … suggests that Aereo’s service falls within the core of what [the] Cablevision [precedent] held lawful."

Unbelievably, the obvious difference between Cablevision and Aereo escaped Judge Nathan: Cablevision has retransmission licensing agreements with every TV station on its system. So Cablevision subscribers can only use the “network DVR” to record and play back content from TV stations with which Cablevision has a contract.

Aereo’s backer, IAC CEO Barry Diller, is the brilliant former broadcast executive who helped launch the Fox Network. He’s obviously well aware that Aereo has fabricated a fig leaf to mask systematic intellectual property theft. In Nathan, Diller lucked into a judge without a clue, eager to abet Aereo’s audacious subterfuge.

This court decision invites — indeed impels — cable systems and DBS providers to circumvent broadcast retransmission agreements with Aereo-like schemes. Even Nathan’s ridiculous opinion acknowledges that this will inflict “irreparable harm” to broadcasters. She should have included the entire American video content industry — one of the few relatively robust sectors in this very weak economy.

In his current capacity, Mr. Diller is insulated from the havoc this travesty will wreak. Sadly, America’s television broadcasters, film producers, writers, actors and local TV journalists are not.


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