Locast, the service that provides free streaming access to local broadcast TV channels in several major markets, is in the fight of its life.
After launching the service about 18 months ago without much in the way of legal static, the US Big 4 broadcasters (ABC, NBC, CBS and Fox) brought the hammer down last month in a lawsuit claiming that Locast is retransmitting their local TV station signals without authorization and is, therefore, violating copyright law.
Locast claims it's on solid legal ground as a non-profit with a copyright exemption. The Big 4 argues that the non-profit defense is a misdirection play aimed at helping pay-TV providers like Dish Network and AT&T gain leverage in typically testy retransmission deal negotiations.
Before the suit was filed, speculation was rampant that there was some sort of direct financial relationship between Locast and Dish and its chairman, Charlie Ergen, who has never shied away from a fight with the broadcasters over surging retrans fees.
While Dish has enabled the integration of the Locast app on its receivers, Ergen denied being one of Locast's money guys during Dish's earnings call in February 2019.
David Goodfriend, Locast's founder and a former Dish exec, put forth a similar denial in January 2019, telling The New York Times that Ergen has not put forth any financing in Locast, even though Goodfriend had sought it out. "No, Charlie hasn't given me any money," Goodfriend told the paper. "Charlie just said, 'Good luck.' He's been very encouraging. I'm still working on him to get some funding."
I think Locast will need more than luck to win this battle and avoid going the way of Aereo and Ivi Inc. -- that is to say, as extinct as the Dodo.
Locast's approach isn't a direct apples-to-apples comparison to ivi or Aereo, which captured over-the-air TV signals and distributed them over the Internet as a subscription service. Locast is free and uses geo-fencing to make sure that access to local TV signals stays local, but it does encourage users to donate at least $5 per month toward the cause.
Granted, Locast needs money to operate the service and continue its US expansion, but its attempts to shield itself as a non-profit, do-gooder could fall short -- its linkages to Dish (with the integrated app) and AT&T's support (with an integrated app and a $500,000 investment in Locast) only seem to help the case being brought against it by the broadcasters.
Both Dish and AT&T attempted to downplay their respective associations with Locast. Dish told Variety that it "has no more links to Locast than we do with over-the-air antennas, but we continue to believe consumers deserve a choice when it comes to how they receive their local broadcast channels, whether through satellite retransmission, over-the-air antennas or through other legal means." AT&T continued to show its support, holding that "Locast offers consumers an innovative new way to access free over-the-air signals."
Still, those relationships just look bad because they appear to aid the agendas of well-heeled pay-TV providers that are sick and a tired of a broken retrans regime. And the broadcasters, which view Locast as a way for certain pay-TV providers to wriggle out of sticky retrans jams, are seizing on that.
The broadcasters argue that AT&T and Dish, two for-profit businesses, are providing Locast with valuable distribution by integrating the Locast app on their set-tops. They further claim that Locast also puts Dish and AT&T in position to avoid obtaining retransmission consent from local stations, which gives them leverage on those retrans discussions.
Per the suit, Locast was able to get off the ground thanks to a "sizable loan" from IOT Broadband, a company run by a former Dish exec named Michael Kelly.
With all of that rolled up, Locast, the broadcasters argue, can't "maintain the pretense that it is operating without any purpose of direct or indirect commercial advantage… It is operating for its own commercial benefit and for the commercial benefit of companies that are among the largest commercial pay-TV distributors in the country."
The suit also claims that Goodfriend, after leaving Dish, soon became a paid lobbyist for Dish, advancing the company's case for retrans consent. It also argues that Locast "serves as the direct action complement" to those lobbying efforts.
"Locast is nothing like the local booster services contemplated by Congress in creating this narrow exemption," the broadcasters claim in the lawsuit. "Locast is not the Robin Hood of television; instead, Locast's founding, funding, and operations reveal its decidedly commercial purposes."
Now, the broadcasters aren't free of fault, either. MVPDs certainly could use a bit more leverage at the negotiation table as programming costs continue to skyrocket and cut further into their thinning margins. And the broadcasters are still getting their share -- US TV station owner retrans fees from pay-TV providers reached a staggering $11.72 billion in 2019, up 11% from 2018, according to SNL Kagan. The research firm predicts that retrans and virtual MVPD subscriber fees will jump to $16.26 billion by 2024.
It's obvious that, by fighting Locast now as they did against Aereo a few years ago, the broadcasters are hell-bent on protecting this critical part of their business.
And it's questionable whether Locast's mere presence will wreak havoc on retrans deals, as the vast majority of them still get done. Depending on how the court case goes, we may never know if Locast will have any sort of near-term or long-lasting impact on the retrans market.
Maybe I'll be proved wrong, but the track record of failure established by Aereo and ivi and Locast's linkages to two major US pay-TV providers with significant retrans agendas suggests to me that the deck is already stacked against Locast.
And with all due respect to Charlie Ergen, a card player himself, Locast will need a lot more than wishes of good luck to come out of this with a winning hand.
- US Broadcasters Attack Locast
- AT&T Donates $500K to Locast
- Locast's Scorecard: 250,000+ People Registered, 0 Lawsuits
- AT&T Adds Locast App to DirecTV, U-verse
- Last Chapter (11) for Aereo
- Q&A: ivi Inc. Founder & CEO Todd Weaver
- Court Cuts Ivi's Web TV Signal
— Jeff Baumgartner, Senior Editor, Light Reading