Jessell | Court Should Quash Retrans-Killer Locast

Locast is a retrans killer — conceived and executed to give viewers a place to watch Big Four affiliates so that the MVPDs can cut them out of their bundles and no longer pay retransmission consent fees.

When you see “Locast,” think locust, eating away at the financial innards of TV broadcasting.

Since its launch in January 2018, it has been gradually rolling out its service, providing cord cutters and cord nevers with smart phones and TVs access to the broadcasters’ primo programming — primetime and the best of professional sports — without compensating the broadcasters a single dollar.

It is now in 13 markets and threatening to enter more.

Last week, the corporate owners of the Big Four networks — Comcast (NBC), Fox, Disney (ABC) and CBS — finally said “enough.”

They sued Locast, asking a federal court in New York to shut it down and award them damages.

Having read the complaint, I’d say they have a good case.

The law says that MPVDs may retransmit broadcast signals to their subscribers, but only if they have the consent of the broadcasters. Over the years, broadcasters have shown their willingness to grant consent, but only if the MVPDs pay them for it. And they have. This year, it’s estimated that they will pay more than $10 billion in retrans fees.

So, how does Locast think it can get away with stiffing the broadcasters?

By claiming to be a nonprofit. The law exempts government entities and nonprofits from having to get consent.

The authors of the law were not stupid, however. The law also says that such nonprofits must operate “without any purpose of direct or indirect commercial advantage.”

And that is where Locast is legally vulnerable.

There is plenty of evidence that Locast is operating for the “commercial advantage” of two of the nation’s biggest MVPDs — Dish Network and AT&T’s DirecTV.

According to the complaint, the whole scheme was cooked up by defendant David Goodfriend, a former Dish executive who now works as a hired-gun lobbyist for Dish in Washington. Among his issues: retrans “reform” — that it, hobbling broadcasters’ ability to negotiate for retrans fees.

“Locast serves as the direct action complement to Dish’s and Mr. Goodfriend’s lobbying efforts,” the complaint says.

Locast got off the ground thanks to a big loan from IOT Broadband LLC, whose chairman and CEO, Michael Kelly, is a former Dish executive vice president, it says.

And when Locast recently needed more capital, it says, AT&T stepped up with a “donation” of $500,000. In addition to DirecTV, AT&T owns virtual MVPD DirecTV Now and U-Verse, which also are looking for ways to evade retrans fees.

What’s more, it says, Dish has integrated Locast into its internet-connected set-top satellite boxes and uses the service in marketing Sling TV, its virtual MVPD that doesn’t offer broadcast signals. It tells consumers that if you subscribe to Sling, you can get broadcast signals for free via Locast, but, if you subscribe to any of its rivals, you have to pay for them as part of the program bundle.

Adding insult to injury, it says, Locast has failed to restrict the distribution of broadcast signals to their home markets. “[I]ts limits are easily circumvented by users. In addition, Locast itself often retransmits broadcast signals to users located hundreds of miles outside originating stations’ local DMAs.”

I expect that the evidence of collusion between Locast and the satellite operators will mount during the discovery process as broadcasters drag in DirecTV and Dish executives for sworn depositions and plunge into company records and correspondence.

By the way, it will be interesting to see who will pay for Locast’s attorneys. This litigation, if it proceeds into an appeal, could cost each side hundreds for thousands of dollars. Find out who’s paying the legal bills and you’ll see who the real parties of interests are.

If Locast were the invention of a bunch of sports fans frustrated by retrans blackout or young hackers simply trying to screw big corporations and get something for free, I might be more sympathetic.

But that is not what Locast is.

What it is is two giant media corporations with combined annual revenue of around $185 billion trying to weasel out of paying somebody else for copyrighted programming.

It’s particularly unseemly for AT&T to be involved since it is — since its acquisition of WarnerMedia last year — a major producer of programming and certain to squawk loudly if anybody were to tread on its copyrights. Image AT&T’s reaction if I were to start streaming CNN and HBO for free and, when sent a cease and desist, said, oh, it’s OK, because I’m a nonprofit and I think you overcharging my cable operator.

Everybody who has looked at Locast knows what it is, and that includes Goodfriend, his corporate patrons and those who have read the news articles here and elsewhere about the service. I cannot see how a federal judge could fail to recognize Locast for what it is, too.

My great hope is that the broadcast networks expand their action by making the case that Dish and AT&T conspired with Goodfriend to steal their intellectual property so if they are awarded damages they have someone with deep pockets to collect them from.

P.S. After news of the lawsuit broke, longtime liberal media activist Andrew Jay Schwartzman issued a statement lending his support to Locast, charging that broadcasters have “abused their free access to public airwaves” with demands for “excessive” retrans frees. I noticed too that when Rep. Steve Scalise (R-La.) and Anna Eshoo (D-Calif.) introduced their anti-retrans legislation last month, another liberal activist and former Tom Wheeler FCC aide Gigi Sohn wrote in support of the measure.

Having contributed to the destruction of the newspaper industry by defending the broadcast-newspaper ban long after it had any justification (did it ever?), Schwartzman and Sohn now seem hell-bent on choking off broadcasting’s only signficantly growing revenue stream and sending it into the same downward trajectory as newspaper publishing. If again successful, their legacy will be the deaths or crippling of two once-great media.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.