Broadcasters Warn They May Reconsider Offering Free TV

Broadcasters Warn They May Reconsider Offering Free TV

Arguments Against Aereo Laid Out in Supreme Court Filing

AMOL SHARMA And SHALINI RAMACHANDRAN

Feb. 24, 2014 5:25 p.m. ET

Television broadcasters said in a filing with the Supreme Court that the continued operation of online-video service Aereo Inc. could force them to reconsider offering as much free, over-the-air TV programming as is now available.

In the filing, broadcasters laid out their arguments in their legal case against Aereo, which streams TV station signals to consumers for a monthly fee without the permission of broadcasters. The startup says its technology facilitates people’s legal right to watch over-the-air TV free of charge.

Broadcasters have sued Aereo in several U.S. courts over the past year in an attempt to put the startup out of business, with mixed results. The Supreme Court agreed in January to hear the case. Arguments will occur before the court on April 22.

The brief filed on Monday by broadcasters, including Walt Disney Co. DIS +0.75% ‘s ABC,MLABC.FR -26.32% CBS Corp.’s CBS +0.61% CBS, Comcast‘s CMCSA +0.20% NBC and 21st Century Fox‘s FOXA +0.70% Fox broadcast network, asked the Supreme Court to shut Aereo down. Until last June, 21st Century Fox was part of the same company as Wall Street Journal owner News CorpNWSA +1.47%

The case the Supreme Court will consider is the broadcasters’ appeal of a decision last year by the U.S. Second Circuit Court of Appeals, which denied the TV stations’ injunction request. Broadcasters said in the brief that the appellate court, in upholding Aereo’s legality, had “created a gaping hole in copyright law that threatens the very existence of broadcast television we know it.”

An Aereo spokeswoman declined to comment.

The briefs filed on Monday largely restated arguments the broadcasters have made before. Broadcasters say Aereo is stealing their content and could set a precedent that would greatly harm their ability to collect carriage revenues from pay TV operators for their TV stations—a growing and highly profitable source of revenue. The case has far-reaching implications for the future of online video and the TV business.

The warning that broadcasters could have to scale back programming made available free echoes threats made by broadcast executives over the past year to convert their broadcast networks to cable channels. That would be a complex process that would require sorting out how to avoid hurting the local broadcast stations that carry network programming. There could also be political pushback: some lawmakers see over the air TV, especially local news, as a vital conduit of news during emergencies.

The Supreme Court will assess whether Aereo is violating a provision of U.S. copyright law that grants content owners the exclusive right to perform their work “publicly”—meaning that others need permission to retransmit it. Aereo says its setup, which lets users tune antennae at its facilities and make personal recordings of broadcasts, facilitates private performances for each individual user.

Aereo, which is backed by media mogul Barry Diller, is available in 10 U.S. cities. The service lets users stream major broadcast channels such as CBS, NBC, ABC and Fox on laptops and mobile devices. Some broadcasters have begun making local stations’ signals available online but they generally restrict access to pay-TV subscribers, whereas Aereo doesn’t.

That makes the service potentially appealing to “cord cutters”—people who have dropped cable TV connections—but a major threat to content owners. Pay-TV providers spend significant sums for the rights to carry broadcast signals. Such “retransmission” revenues for TV stations were $3.3 billion in 2013 and are expected to grow to $7.6 billion by 2019, according to SNL Kagan.

Broadcasters noted that even as a market for online-video rights has developed through the likes of Netflix Inc. NFLX +3.42% and Hulu LLC, Aereo has made an effort to “circumvent that market and avoid paying for the same rights that others have paid for.” They repeated past statements that “nothing will stop” others like cable and satellite operators who currently pay for rights from “devising their own Aereo-like workarounds to achieve the same result.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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