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Aereo Fights for Its Life

Jeff Baumgartner
5/31/2012

Here's what's pushing cable's buttons this morning.

  • Aereo Inc. CEO Chet Kanojia realizes that his company faces almost certain death if major broadcasters are successful in pinning down the startup's service, which uses small, thumb-sized antennas to capture free over-the-air digital TV signals and shuttle them along via broadband to subscribers who are paying $12 per month. While a preliminary injunction would certainly be damaging, extended litigation "would be the end of the company," the exec conceded in court on Wednesday, according to Business Week. Major U.S. broadcasters are suing the Barry Diller-backed startup over claims that Aereo's service, which also bundles in a network DVR, violates copyright laws. (See Aereo's Service Wins a Reprieve (for Now), Diller Says Aereo Doesn't Sell Content and Diller's Aereo Under Legal Attack.)

  • TiVo Inc. (Nasdaq: TIVO) posted a first-quarter net loss of $20.8 million (17 cents per share) thanks to rising litigation and marketing costs on revenues of $67.8 million, up 48 percent year-on-year. The DVR pioneer did add a net 206,000 subscribers in the quarter, versus a loss of 88,000 a year-ago, thanks in large part to continued solid results from U.K.-based operator partner Virgin Media Inc. (Nasdaq: VMED). TiVo is forecasting a second-quarter loss of $28 million to $30 million as litigation costs tied to its lawsuit with Verizon Communications Inc. (NYSE: VZ) start to accelerate. (See TiVo Suit Targets AT&T & Verizon.)

  • In Demand LLC , the cable operator-backed distributor of on-demand content and pay-per-view events, has inked a deal to deliver thousands of licensed titles, including a menu of niche long-tail content, via HITS On Demand, a content delivery network (CDN) operated by the Comcast Media Center (CMC) in Centennial, Colo. In February, the CMC announced plans to open up its CDN, which forms the foundation of Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s Project Infinity VoD initiative, to other cable operators. (See Comcast Opens Up Its Video Cloud and Comcast's 'Project Infinity' Takes Flight .)

  • Comcast's business services unit has launched VoiceEdge, its new cloud-based voice and communications platform, in Michigan. Comcast debuted the hosted, BroadSoft Inc. -powered PBX service in March, targeting it to businesses with up to 250 employees. Comcast expects to have VoiceEdge launched in all markets by year's end. (See Comcast Rolls Business Voice Into the Cloud.)

    — Jeff Baumgartner, Site Editor, Light Reading Cable

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    Pete Baldwin
    Pete Baldwin
    12/5/2012 | 5:31:28 PM
    re: Aereo Fights for Its Life


    Why do we (meaning the media in general) keep treating Aereo's "fight for its life" as something extraordinary?


    Look, they founded the company knowing exactly, precisely, that this lawsuit would happen. They came out looking to start a fight.


    The article even says so:


    "On cross-examination, Kanojia conceded that he and his investors were aware all along that litigation was likely and that he had even set aside funds to defend the company in court. ... 'I think investors fully understood that there was a chance that could happen,' he said when asked about the specter of a suit.


    So, yeah, it's true Aereo is fighting for its life, but that's obviously been the business plan from day 1.


    Now, it's true a lot is at stake, regarding the possible futures of TV delivery. That's the real story, but the lawsuit hasn't gotten to that point yet.

    craigleddy
    craigleddy
    12/5/2012 | 5:31:25 PM
    re: Aereo Fights for Its Life


    Yes, Diller's no dummy, he's the former head of Fox Broadcasting, so they knew full well what they were getting into. I wonder how deep their legal warchest is and what they plan next.


    In the best of all worlds, I suppose they're hoping for the Internet TV equivalent of the Betamax court decision, some type of ruling that would provide legal standing or cover to continue their service. It actually could be a good thing for everyone if higher courts provide a clearer legal roadmap for Internet video rights.   


    But odds are they're going to lose. So then maybe they take their case to Congress, which already has given Diller a hearing. Or they eat crow, figure out a business arrangement with the broadcasters, and try to get value out of those mini antennas. 


    Any other guesses? This will make for a fun summer!


     


     


     


     

    Jeff Baumgartner
    Jeff Baumgartner
    12/5/2012 | 5:31:12 PM
    re: Aereo Fights for Its Life


    This is a tough one to place odds on; the arguments on each side of this one look fairly decent... or at least it doesn't appear to be a cut and dry case. While even a preliminary injunction could prove fatal for Aereo, a win would set a significant precedent not just because it would allow Aereo to survive and help to establish the model it's proposing, but because it would cause cable operators and other pay-TV operators to think twice about paying handsome retransmission fees.  If Aereo is allowed to, in a sense, redistribute OTA signals without paying, then the cable operators will have some pretty good leverage the next time they need to negotiate carriage.  That's a big reason why the broadcasters are so worried about this; their business model factors in these fees, which aren't insignificant.  And it would be ironically problematic for Comcast because it's a cable operator that also happens to own a broadcaster -- if one side wins, the other side loses. JB


     




     
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