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Aereo Files For Bankruptcy, Says Supreme Court "Changed Laws"

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Aereo, a for-profit media company that rebroadcast copyrighted programming without compensating the content creators, has filed for bankruptcy protection after a court ruling.

Aereo violated broadcasters’ copyrights

Thursday’s Chapter 11 filing was announced five months after the U.S. Supreme Court said Aereo violated broadcasters’ copyrights by capturing live and recorded programs. Aereo worked by capturing broadcast television and re-transmitting it to paying subscribers on small antennas.

The Supreme Court’s 6-3 decision was a victory for content creators such as powerful broadcasters CBS Corporation (NYSE:CBS), Comcast Corporation (NASDAQ:CMCSA)’s NBC, Walt Disney Co (NYSE:DIS)’s ABC and Twenty-First Century Fox Inc (NASDAQ:FOXA)’s Fox network, whose content was rebroadcast without compensation.  After the decision, Aereo to quick action, suspending its streaming service and laying off 74 employees, leaving 14 remaining.  At the time of the bankruptcy, Aereo claimed it had nearly $20.5 million of assets and $4.2 million of debts.

“Regulatory and legal uncertainty” that couldn’t be overcome was the reason for the firm’s downfall, Aereo Chief Executive Officer Chet Kanojia, who owns 42.32 percent of the company, was quoted as saying in a Reuters article. Barry Diller owned 23.3 percent of the privately held company.

Aereo was created based on frustration

In a blog post explaining the bankruptcy, Kanojia explains the company was created based on frustration.  The engineering team created the first cloud-based, individual antenna and DVR that enabled consumers to record and watch live television on the device of your choice, all via the Internet. The company started as “drawings on a napkin” and quickly ramped to be offered “in more than a dozen cities across the country.”

Taking a swipe at the U.S. Supreme Court decision that essentially put it out of business, Kanojia noted in the blog post that the ruling “changed the laws that had governed Aereo’s technology.” It was this regulatory uncertainty that led to the downfall. “Without that clarity, the challenges have proven too difficult to overcome.”

In a filing with the U.S. Bankruptcy Court in Manhattan, Aereo filed bankruptcy to receive “necessary breathing room” from creditors so it could sell its assets, recapitalize or restructure, Chief Financial Officer Ramon Rivera was quoted as saying. In regards to the “restructure” opportunity, Aereo was reported to have been trying to persuade federal regulators to determine it eligible for a license available to cable systems, but Rivera said the timing was “uncertain.”

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