OPEN MIKE BY LEE SPIECKERMAN

Judge Got It All Wrong With Aereo Decision

Incredibly, Judge Alison 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.

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.

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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.

BRAND CONNECTIONS

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.”

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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.


 

Lee Spieckerman is CEO of SpieckermanMedia LLC, a Dallas-based strategic communications consultancy and cable television network company. You can contact him at l[email protected].


Comments (40)

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David Speicher says:

July 13, 2012 at 8:37 am

You kind of missed the point right off the bat.

You said…”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 if the warehouse wasn’t full of stuff to be sold, it was free for everyone to use? You could have as much as you want without paying a dime for any of the contents. All you had to do was truck it out yourself. You’re thinking, wow, what a deal until you realize that the warehouse folks have put all these obstacles in your way. Just trying to get through the maze of obstacles is almost impossible because they put everything just out of reach. And the warehouse isn’t even air conditioned. You’re sweating, stretching, fussing and lugging crap on a hot summer day. Really unpleasant.

Conveniently, the Warehouse folks will remove all the obstacles and give you clear access but that willll cost serious money. Lots of people do that because, for various reasons beyond the scope of this metaphor, there aren’t any options.

Then one day, along comes a cherubic guy and he rents you a handtruck to get the merchandise out to your car, a ladder to help you reach the stuff on the shelves and little cool(ing) device. Suddenly your life is much easier and well worth a few bucks for the convenience. Certainly it’s cheaper than what the Warehouse folks are were charging. What was all kinds of trouble and unnecessary cost is now easy peasy.

That’s what Aereo is doing.

Broadcast TV is FREE…BY LAW. The entire country is duped into thinking they have to pay exhorbitant fees for the content that is legally obligated to be provided to the American public. Stop playing into the mindset that broadcast TV is something you have to pay for. By law, it’s supposed to be advertising supported (vs PBS which is supposed to be public supported). Somehow, the broadcasters have essentially put up their very own toll-booth on a freeway that they don’t own.

Further, your conclusion that this will hurt the content community is ludicrous. Yes, existing players, meaning the media conglomerates, will have to evolve or die. However, individual artists have never had a better opportunity to create AND distribute their work. The models are still evolving but some of today’s biggest names weren’t around 10 years ago and the monsters of a decade ago are long forgotten. This will continue until we reach a new plateau.

    Ellen Samrock says:

    July 13, 2012 at 4:24 pm

    The only legal obligation broadcasters have is to provide one free OTA signal. It is up to the viewer to hook up an antenna, indoor or out, to their tuner in order to watch it. The minute a 3rd party is involved in that process, be it cable, satellite or in this case Aereo, that signal is being resold to the viewer and a retrans fee becomes applicable. For any company to make millions if not billions on content they haven’t paid a dime for is nothing short of stealing. Lee has it right. The judge made not just a bad ruling but an idiotic one.

    Wil Roddy says:

    July 13, 2012 at 4:43 pm

    So I hire a local handyman to install an antenna on my rooftop. He also runs a cable from the antenna to my living room and I pay him $100 for materials and labor. The cable runs outside so is exposed to the elements, and occasionally needs troubleshooting or the antenna needs to be adjusted, so I also pay him ~ $50 every few months to keep my picture looking good. Which specific law makes this 3rd party involvement reselling?

    Ellen Samrock says:

    July 13, 2012 at 5:07 pm

    Using your line of reasoning any technician or engineer who is even remotely involved in the receiving or transmitting of a TV signal is liable for retrans fees. Re-read the 5th paragraph of Lee’s essay. An antenna installer is not an intermediary provider.

    Tanya Pavluchuk says:

    July 13, 2012 at 5:27 pm

    $50 every few months to keep the picture looking good? If done correctly an antenna system should last many, many years. Handyman or professional antenna installer?

    Angie McClimon says:

    July 13, 2012 at 5:48 pm

    They are trying to make it sound that an antenna installer should also be considered an MVPD since they charge something to build out the antenna. They failed miserably.

    David Speicher says:

    July 14, 2012 at 3:57 pm

    Your view is as distorted as Spiekerman’s. What you’re describing is wholly inaccurate. By your own words any third party involvement and it becomes retrans. You clearly are unfamiliar with the Aereo technology. It maintained a true 1:1 relationship through the entire process which has legal precedent with the Betamax and Cablevision rulings which are both well accepted precedents. The Judge’s ruling was accurate, fair and extremely clear on the legal thought process behind the decision. The ruling went so far as to state the Aereo actually EXCEEDED the guidelines that were set forth in the Cablevision case…it was more in line with that decision then that actual case!

    Fine, even ruling that out, what about media extenders? What about home media systems? What about USB video capture cards? What about Tivo To Go? Slingbox? Even going old school, it’s perfectly legal for an apartment building to rent access to the top of the building for antenna/dish, common practice in NYC. What you are alleging is that the only legal installation is an actual television attached directly to a set of rabbit ears. Clearly that is not reality.

    Your understanding of the law, the marketplace, Aereo’s technology and the history behind the current state of copyright and distribution models is woefully lacking.

    Ellen Samrock says:

    July 14, 2012 at 6:27 pm

    If only Aereo’s technology were as simple as you describe. According to TechCrunch, “Aereo essentially uses arrays of tiny TV antennas to capture broadcasts over the public airwaves…and then transmits the signal to customers, who can rent out their own individual (tiny!) antennas.” Now substitute ‘individual tiny antennas’ with an individual wire going into a house or an individual tiny dish on top of a roof and you’ll see that Aereo’s service isn’t much different from cable or satellite. In all three cases, the signal emanates from a 3rd party central source, not directly from the broadcast station to the end viewer. It’s a clever legal dodge that doesn’t quite make it.

    David Speicher says:

    July 14, 2012 at 8:09 pm

    You are correct “Individual tiny antenna, individual wire to a house.” That’s the very definition of Public vs. Private Performance. The legal issue isn’t transcoding, it’s copyright infringement and irreparable harm. What you said Aereo is doing, is the completely legal method to capture broadcast television signals…no matter how you slice it.

    David Speicher says:

    July 14, 2012 at 8:14 pm

    And the central facility was decided with Cablevision ruling…

    Wil Roddy says:

    July 15, 2012 at 9:26 am

    I was actually following your line of reasoning, which the 5th paragraph does not illuminate. Cable providers perform two primary functions where the cable consumer is concerned: they build and maintain infrastructure in order to facilitate the delivery of video and data to households, and they license content that consumers can access over that infrastructure. Each month consumers pay them to have built and maintained the infrastructure and for the content they want to access. In the case of broadcast TV, everyone has the right to that content, all they need is the infrastructure to access it. In NYC, as in many other urban centers, most people don’t have the right to put an antenna up on the roof of their apartment buildings. If I put one antenna in Queens and run a long cable so that one person can view broadcast TV, is that okay? Am I allowed to charge for the copper cable, construction permits etc. I needed to complete the installation? What if I do this for a dozen people, each with their own antenna? Now I move the transport to the internet, does that change the nature of the business? When are you saying that the signal is no longer “free” and retrans applies? I know what the Cable Act says. I’m trying to understand what your position is.

    David Speicher says:

    July 15, 2012 at 4:08 pm

    My position, as opposed to the author of this opinion piece, is that Aereo is on solid legal footing and the judge made the right call. It’s important to note, the “wire,” either real or IP based, isn’t the issue. It has ZERO bearing on the case. It was never called into question. The technology questions revolved solely around the idea of individual or shared antennas. That’s because the suit was about copyright infringement and irreparable harm. The Broadcasters are saying that Aereo is violating the Public v. Private Performance aspect of Copyright. Aereo, according to the ruling, is maintaining a private performance through a variety of technical mechanisms including those tiny individual antennas. Therefore there has been no copyright infringement. The judge found irreparable harm on both sides and effectively balanced each other out.

    Here is why the “wire” is meaningless. There is no legislation, that I am aware of, that limits the length of a wire between the antenna and tuner. There are laws of electrical resistance that will prevent it from travelling too far but fortunately those aren’t governed under juris prudence. There are no laws stating that you, as a business, can’t facilitate someone from receiving a television signal (other than standard business laws). Obviously laws regarding construction and right of way are another issue but not germane to this conversation. There are no laws preventing someone from renting space at a separate physical location to place an antenna – an actually common practice. Place shifting via the the internet, exchanging the wire for the web, has never been legally challenged vis a vis Slingbox. At some future point that may be declared illegal but today it is unchallenged. Transcoding the broadcast signal, under the guise of personal recording, is legal under Betamax. Recording and storing are legal under Betamax. Preparing and storing said transcode at a central facility is legal under Cablevision. Transport of the transcode has never been legally challenged (but I suspect would not be successful). Viewing on a personal device is legal under Betamax.

    In short, just about everything has been legally sussed out. Does that help?

    David Speicher says:

    July 15, 2012 at 4:35 pm

    Re-reading the 5th paragraph, it’s clear where the confusion is coming from. Spiekerman was wrong on this point as well. The intermediary being referred to is known as an MVPD. The media industry is attempting to challenge that definition with the FCC but they won’t get very far. Hulu and Netflix don’t fit under the definition, not sure why Aereo would either. Ivi, whom Aereo is often compared, declared themselves an MVPD and paid franchise fees (not retrans) and attempted the 1:1 ratio. There were two key differences, Ivi was working with DVD’s which have different licensing agreements from broadcast signals and they couldn’t sufficiently support their claims of private performance for various technical and operational reasons.

    Once again, that has nothing to do with the issue. The broadcasters weren’t challenging Aereo as an MVPD in wolf’s clothing, they claimed copyright infringement and irreparable harm.

    Ellen Samrock says:

    July 15, 2012 at 11:05 pm

    The Cablevision ruling only covers remote DVR recording not live broadcast. The issue here is: does one antenna distributing a live TV signal to a million households (cable) mean the same as a million antennas from a central location sending an individual signal to each household (the Aereo way)? I think a case can be built against Aereo that this could be construed as copyright infringement.

    Wagner Pereira says:

    July 16, 2012 at 12:02 pm

    Using your statements, a Slingbox would also be illegal and that has never been implied. Also using all the examples for retransmission that the Industry has made in the past, this would also be found legal. I was worried about this in the early days, but then realized it would be technically impossible for a MVPD to supply a 1:1 stream for every STB to avoid retransmission fees, thus meaning this will be a one off that a few will use, but it will never be mainstream.

Bob Dowden says:

July 13, 2012 at 9:03 am

Well all those $5 adjectives are mighty impressive – the writer needs to relax with a Margarita – broadcasters built big businesses with free spectrum on the backs of taxpayers and are now trying to save their dying business on the backs of cable and satellite subscribers… Let’s deal with facts for a moment – the Communications Act needs to be rewritten – laws rooted in geographically defined market protection are irrelevant…retrans payments rooted in deep pockets lobbying are handouts subsidized by cable and satellite customers…social media, technology and old people dying make broadcasting out of fashion, out of touch and out of time. Before all those digital sticks on the highways and byways turn into billboard platforms, the broadcasting leadership needs to come to the table with their counterparts and – here is where I get squeamish – the legislators to take humpty dumpty apart and then put him back together again (the Comm Act)…. Not likely to happen anytime soon, but it needs to happen before things get worse…and they are getting worse for the broadcasters by the minute.

Anthony Danna says:

July 13, 2012 at 9:04 am

What exactly are you talking about here? I’m totally on Aereo’s side. How is using their antenna to send the TV signal to a computer ANY different than using someone else’s antenna to send the signal to a home TV????? That’s how it’s always been done. It’s like you’re too young to even remember a time without cable. The networks have no ground to stand on here. Any antenna can pick up broadcast signals. That’s what makes them BROADCAST signals! What difference does it make whether that antenna is sending the signal to a TV or a computer?

Any other decision would have been a disgusting and clearly corporate-based decision to circumvent the very definition of broadcast. It’s already sickening that the big nets are getting away with raping cable companies charging fees they have no right to. The VERY idea of the broadcast stations is that they can go out to EVERYONE regardless of whether they can pay the extravagant fees of cable, made even more extravagant by the broadcast networks charging exorbitant fees to cable companies just because no one has stopped them.

    Angie McClimon says:

    July 13, 2012 at 12:36 pm

    The problem is that Aereo is charging $12/mo for the opportunity to receive those signals to computers, tablets, whatever. That technically puts them in the re-trans category like cable and satellite. If they were going to feed these signals free of charge, broadcast stations probably wouldn’t have an issue.

    David Speicher says:

    July 14, 2012 at 4:43 pm

    I understand that at first blush it would appear so but there is no actual legal basis for your point. First off, Broadcasters didn’t sue for retrans. Legally they couldn’t because Aereo isn’t a cable FRANCHISE and therefore not subject to MUST CARRY. That’s another argument entirely about the definition of an MVPD. Currently, Aereo does meet the definition of an MVPD. Simply, the laws don’t apply. Kind of like if you got sued for not having car insurance when you don’t own a car or have a driver’s license. These are well established legal terms and concepts (nouns, not adjectives). Broadcasters actually argued copyright infringement and irreparable harm because they would lose advertising revenue because Aereo wasn’t metered through Nielsen. They would lose the ratings regardless of Aereo charging $12 or giving it away for free. The retrans hoopla applies to the MVPD that may take advantage of this ruling to avoid paying. The actual legal issue regarding Aereo is about public performance and personal recording, both of which Aereo is on solid legal footing.

Steven Mendel says:

July 13, 2012 at 9:08 am

Bob, would you mind citing the specific law that states Broadcasters must provide their content free? I thought the entire premise of retransmission consent was to allow broadcasters to be paid for content to those that wish to retransmit their signal.

mike tomasino says:

July 13, 2012 at 11:24 am

I have to agree that the judge got it wrong. Aereo is simply attempting to jump through a loop hole created by a 20 year old law. Aereo, in my opinion is a MVPD and should be treated as such. On the otherhand, I don’t think it’s as big of deal as the broadcasters want to make it. Especially if Aereo agrees to provide viewing metrics (which they easily could). Traditional multichannel video service is dead in the water. As the MVPD industry continues to infight, the 45-65 crowd that have “always had cable” die off, and the younger generation becomes more educated about their options this will become more and more apparent.

David Speicher says:

July 13, 2012 at 12:10 pm

http://en.wikipedia.org/wiki/Broadcast_license. In exchange for the broadcast spectrum at very little to zero cost the broadcasters have to provide information in the public interest. The quantities they have to broadcast are actually listed which is why you see all the public interest shows buried on Sunday morning.

Retransmission fees are a separate issue having to do with Must Carry. Before I begin you need to understand these were different times with different revenue streams to protect. At the time it was all about ratings and there weren’t any options other than newspaper and radio.

In the early days you couldn’t get a good TV picture. You were always futzing with your “rabbit ears” to make the picture better. Some smart folks determined that they could build an ideal antenna, place it at some central location, and then just have everyone share that antenna. They were so happy with the results they gave it a name Community Access TV…or CATV. What was great about this is that they could build their antennas to get channels from just about anywhere that the frequency would reach. So markets that traditionally only had 3 channels now had many more. This pissed off the 3 channels because their ratings would theoretically slip and they would lose advertising revenue.

There was another issue as well. Because all this crazy newfangled CATV gear wasn’t cheap there weren’t a lot of these central facilities and the systems themselves were very limited in capability. Smaller stations wouldn’t be able to get onto the limited channel lineup – most CATV systems could only offer a handful of channels (when I first got cable there were only 26 channels). This was an even bigger problem because it wasn’t just a ratings decline, it was decimation.

So the broadcasters, ahem, sued and the Must Carry ruling was established which said an MSO must carry any and all channels in their given market coverage area. However, due to bad blood and other negotiating tactics like channel placement and such, there was an out provided for the broadcasters that said they could opt out of Must Carry setting the possibility for negotiations. These negotiations evolved into the retrans battles we all know and love.

Scott Cote says:

July 13, 2012 at 2:59 pm

all of this will tear a whole in the

Joel Ordesky says:

July 13, 2012 at 3:13 pm

Consider that everyone within a given DMA is effectively “licensed” to view a broadcaster’s copyrighted material without any payment. Does it matter how a person who is already entitled to view the material receives it? Broadcasters think so and have been extracting retrans payments from the MVPD crowd. But what about the manufacturer of the antenna on your roof? Or the person who installed it? Or the owner of the apartment building providing the signal to all units? Is everyone who makes money delivering the broadcaster’s signal to you required to pay? The Aereo case is about to open up some very basic issues about copyright thanks to this clever new technology called the internet. It wouldn’t surprise me if a court ruled that the copyright is not violated until someone attempts to deliver a program to someone else who is NOT entitled to view it (outside of the DMA). That would put the entire issue of retrans up for review, in my opinion.

Karen Matthews says:

July 13, 2012 at 3:23 pm

There was a service in Portland, Ore. called “Skittle”, I think. They used DSL to send programming from OTA to a subscriber box. They had retrans agreements with some of the local stations, but were forced to turn it off due to copyright infringement, IIRC. Why is Aereo any different?

    Wil Roddy says:

    July 13, 2012 at 4:55 pm

    Skitter. Their agreements were pulled. They wanted to multicast – one signal shared with all consumers, which is illegal unless you negotiate an agreement with the content owners.

Tanya Pavluchuk says:

July 13, 2012 at 4:37 pm

So what is stopping broadcasters from developing a similar system in each market and just undercut Aereo with lower prices?

Angie McClimon says:

July 13, 2012 at 5:44 pm

The basic problem is, Aereo is doing this wrong. Instead of going to the consumer for this, they really should be on the broadcasters end. For a license fee or barter, Aereo could provide the stations with all the software and hardware access needed to stream their signal to computers, laptops, tablets, etc. Software could be configured to allow stations to feed specific commercial inventory only to the devices. In this way, Aereo would have the right to the signal to stream. But the way they are going about it, it makes them no better than Dish, Comcast, or Verizon because they are doing precisely what those MVPDs do: target the consumer and have them pay a premium each month to watch OTA TV, regardless if it is TV, computer , or phone.

    David Speicher says:

    July 14, 2012 at 4:13 pm

    Not sure I completely agree nor would I compare Aereo to the entrenched distribution behemoth. The point is to develop a new, more modern way to do business, not prop up the old one. To that end, I bet if the cable pioneers were starting today it would look much like Aereo. CATV started under a similar premise, provide a clean signal where you couldn’t normally get one, but the paths diverge pretty quickly. The pure virtual play means that Aereo isn’t charging consumers for a massive physical plant. Imagine how much cost is involved in maintaining/updating the facilities. It’s in the billions per year territory. Since that cost doesn’t have to be passed on to consumers it’s significantly more affordable and extensible. Further, the software nature of the product allows it to turn on a dime. New channels, capabilities, markets are all just a a few lines of code. Cable takes years, decades sometimes, to make a change in architecture. From an Aereo perspective, just cutting a deal with the dinosaurs doesn’t make much sense.

Bob Dowden says:

July 13, 2012 at 10:37 pm

…when nimbleTV launches this fall, you will see how to do it right within the current ecosystem….

    David Speicher says:

    July 14, 2012 at 4:00 pm

    Nimble requires a hardware purchase and a cable subscription. This certainly protects the ecosystem but how does it protect consumers?

    Bob Dowden says:

    July 16, 2012 at 11:02 am

    nimbleTV does not require a hardware purchase… not sure what you mean by protecting the consumer?

freddy hayashi says:

July 15, 2012 at 11:42 pm

If a user is really using an individually assigned antenna in the array as Aereo indicates, it would naturally follow that disabling that single antenna should result in a loss of service to the assigned user and no one else. For that to be the case each antenna must separately feed a receiver to demodulate the signal received by the assigned antenna. It would follow that they will need thousands of receivers because one is required for every user. It would seem that if for example five thousand people are watching a given channel that five thousand receivers must be tuned to the same channel no matter how inefficient this would be. I seriously doubt that any of this is the case. It would follow that the entire premise of Aereo’s argument that users are renting an antenna is a fiction. If users were each renting a dedicated receiver Aereo would have at least a valid engineering argument.

    David Speicher says:

    July 17, 2012 at 10:24 pm

    If you read the Judges findings you would know that the Aereo platform works EXACTLY as advertised. Inefficient, or not, they have truly built a 1:1 system.

    David Speicher says:

    July 17, 2012 at 10:26 pm

    Read the courts decision. The platform was exhaustively researched and Aereo is functioning EXACTLY as advertised.

Michal Campbell says:

July 17, 2012 at 10:40 am

It’s very simple: turn off the transmitter, return the spectrum to the people and distribute via broadband, cable and satellite.

    Wagner Pereira says:

    July 17, 2012 at 1:52 pm

    You mean give it back to Verizon, AT&T et al so they can use it to charge you more for data usage?

Michal Campbell says:

July 17, 2012 at 3:56 pm

At least they pay for their content.

    Wagner Pereira says:

    July 17, 2012 at 4:37 pm

    So do broadcasters

    Michal Campbell says:

    July 18, 2012 at 11:45 am

    Correct. But not pirates.


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