Aereo Readies For Ruling, Broadcasters Should Be Very Concerned: BTIG

Aereo Readies For Ruling, Broadcasters Should Be Very Concerned: BTIG

Aereo filed its brief with the US Supreme Court in American Broadcasting Companies, Inc. v. Aereo, Inc. last week, persuading analysts that broadcasters will either have to come to terms with an online competitor that carries the court’s seal of approval or take their issue to Congress and attempt to update an outdated set of laws.

Broadcasters concede recording but contest Aereo Watch

Aereo provides two services to its subscribers that could be construed as copyright infringement. First, it has a Record feature that is exactly what it sounds like. Second, if an Aereo subscriber watches a show live, the Watch feature creates a temporary recording that allows the viewer to pause or rewind the show, and then dumps the recording when it is finished.

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“Broadcasters are not contesting Aereo’s ‘Record’ feature, which makes sense given that consumers have a legal reproduction right,” explains BTIG analyst Richard Greenfield in a March 31 report. “Broadcasters are suing, specifically, over the ‘Watch’ feature. They simply refuse to accept that the “Watch” feature is coming from a recording, versus a “technical link in the process of transmission.”

Aereo argues that geographic restrictions protect it

Up until now, this has been the core argument – that Aereo’s Watch feature acts like sophisticated VCR, not a rival cable service – but Aereo brought up another argument that will be even harder for broadcasters to refute. Under the 1976 Copyright Act, cable operators don’t have to pay copyright fees on content that is re-transmitting locally. So if a broadcaster airs a show in Cincinnati, cable operators don’t have to pay to transmit that station playing the same show in Cincinnati (though they would have to pay to transmit it in a different city). Congress set this rule at the time because of the role of advertising, since commercials were being re-transmitted along with the copyrighted material Congress figured there was no harm.

Aereo has geographic restrictions on it service, so it has argued that even if the Supreme Court rules that it is a cable service (which already seem unlikely), it would still be exempt from copyright fees under the 1976 Copyright Act.

“Rather than suing Aereo, broadcasters should be seeking to update woefully outdated laws that govern the media universe including a Cable Act from 1992 and a Copyright Act from 1976,” writes Greenfield. It’s absurd to expect a 1976 law to adequately cover the last 35 years of innovation, and even in 1992 the internet hardly existed. Instead of relying on makeshift interpretations from the courts, it’s time to push for something new.

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