Can Aereo Survive a Broadcaster Assault?
"Someone will sue them; it's just a matter of time," says Colin Dixon, senior partner at The Diffusion Group (TDG) .
And if that "someone" gets an injunction to shut down the service for the duration of the case, well ...
"Then Aereo is effectively dead," Dixon says.
Aereo, which plans to deliver local TV channels via the Internet to New York City customers for $12 per month, has raised $25 million from backers including Barry Diller. But it might not be enough to survive an injunction. "These cases can take years," Dixon says. (See Aereo Makes Cord-Cutting Bid in NYC.)
A lawsuit would probably come from the broadcasters, which are eager to protect a business model that's reliant on lucrative retransmission fees from cable operators and other pay-TV providers.
Fox Broadcasting Co. could be first, Dixon predicts. "They've been among the most aggressive with retrans." (See Fox to TW Cable: Stop Streaming Our Stuff .)
No broadcaster has made a move yet. Their big pressure group, the National Association of Broadcasters (NAB) , has so far declined to comment about Aereo.
Aereo almost expects to be sued but doesn't word it that way. "I'm sure there will be challenges," CEO Chet Kanojia said at the company's launch event Tuesday in New York. "We'll deal with it."
Mounting a defense
Dixon actually likes Aereo's chances of defending itself, short of a being hobbled by an injunction, since he believes there's precedent for every component of its service.
For example, Cablevision Systems Corp. (NYSE: CVC)'s successful defense of its remote-storage DVR has already seemingly cleared the way for network DVRs such as Aereo's. (See Supremes Stand Clear of RS-DVR Case.)
Programmers could try to hit Aereo on copyright grounds, arguing that it doesn't have permission to transmit their signals across a wire. However, Sling Media Inc. already does this with its place-shifting device and has yet to run into any legal challenges. (See Why Is Sling Getting a Free Pass? )
The story's different with ivi Inc. , a company that tried to redistribute broadcast TV channels over the Internet for $4.95 per month. Ivi was shut down because it did not qualify as a cable system, a designation that would have allowed it to offer programming for a $100 per year compulsory license. Company founder Todd Weaver has been asking for handouts to help ivi stay alive as it mounts its defense. (See Court Cuts Ivi's Web TV Signal.)
A big difference between ivi and Aereo has to do with signal limitations. While ivi customers tended to receive broadcast feeds from distant markets, Aereo is taking special care to ensure that its customers reside in the NYC demographic market area (DMA).
On possible trouble spot for Aereo is its reliance on a large array of dime-sized antennas that receive the broadcast signals before sending them along to customers via the Internet. Each customer is assigned to one and essentially rents it -- a model that would seem to fit well with a network DVR that rents out storage. However, Zediva, a startup that tried to rent out DVD titles by streaming them over the Internet, was slapped with a preliminary injunction last August when a federal judge found that the service didn't stand up to copyright laws.
But Aereo believes its use of individual antennas rather than a master antenna puts it on the right legal footing. "Until you essentially eliminate your membership to our technology, that antenna remains with you," Kanojia told Light Reading Cable last May, when Aereo was still known as Bamboom Labs.
— Jeff Baumgartner, Site Editor, Light Reading Cable