• Here Are Aereo's Legal, Policy and Business Paths Forward

    Today, I'm pleased to introduce Howard Homonoff as the newest VideoNuze contributor. Howard is Principal/Managing Director of Homonoff Media Group LLC, a management consulting firm focused on traditional and digital media content distribution, social media analytics and regulatory strategy. He is a frequent industry speaker and producer/host of Media Reporter, starting soon on cable systems throughout New York City.

    Here Are Aereo's Legal, Policy and Business Paths Forward
    By Howard Homonoff

    If you're an Aereo follower, then no doubt you're aware of the ruling by the U.S. Court of Appeals for the Second Circuit in favor of the company in the WNET v. Aereo case.  So now that the court has spoken, we can all be happy to have that legal stuff out of the way, right? Well…sorry, but at best, we’re at the end of the beginning (and maybe not even that) of the legal, policy and business confusion surrounding Aereo and its implications.  Having seen the music business lowered as a canary into the mine of digital content disputes years ago, we should be prepared for a long, complex, multi-jurisdictional battle on these issues.  

    So what might we expect now in the post-2d Circuit environment? Let’s look at this through the 3 key venues where this will play out: the courts, the policy arena, and the negotiating table:

    No one just accepts a decision like this and moves on, least of all the media giants involved in this case.  The 2d Circuit merely rejected the broadcasters’ motion for a preliminary injunction – in effect, refusing to immediately halt Aereo in its tracks.  The broadcasters could now choose to litigate this case on its merits at the district (trial) court level. This is not too appealing given the 2d Circuit’s initial ruling in favor of Aereo, but it would at least provide them more extensive discovery into Aereo’s business and could certainly divert its resources into that lengthy and expensive process (between discovery, motions and trial, count on another year in this scenario at least).  In the alternative, broadcasters may seek to have this ruling reviewed by the entire 2d Circuit (en banc).  Even starting that process tomorrow would take months to file briefs and replies and set a date for re-hearing, and months more before the court would issue its opinion.   

    And it gets worse.  The 2d Circuit’s opinion is arguably inconsistent with the December 2012 decision of the U.S. District Court for the District of Central California, which granted Fox a preliminary injunction, finding that Aereokiller (aka Barry Driller Content Systems (yes, actual name)) WOULD violate copyright law by its planned retransmission of broadcast signals.  That court looked to the law of its own 9th Circuit rather than the 2d Circuit.  Such conflicts can ultimately only be resolved by the U.S. Supreme Court.  In the event that such an appeal was pursued, tack on a potential 6 more months to a year from the time of any final decisions at the appellate level.  The battle against Napster took at least 18 months in the courts and was ultimately a simpler case.

    Policy arena
    The first shot on this battlefield has been fired not by policymakers, but at them.  Chase Carey, President of News Corp., stated last week that Fox would consider moving from a broadcast station to a cable channel if the Aereo ruling stood and that company and others could begin retransmitting broadcast signals without compensating station owners.  Haim Saban of Univision quickly joined Carey on this.  But this is not a quick fix (or threat).  Typical big four broadcast affiliate agreements won’t likely permit a short-term wholesale programming shift out of broadcast to cable, and if such a shift occurred today, it would immediately reduce the distribution for broadcast network programming (American Idol, X Factor, NFL Football, etc.) by roughly 15 million homes - meaning a very significant hit to advertising revenues.  The best way to view Carey’s shot is where it is really aimed – at the FCC and Congress to “fix” the Aereo decision or suffer the potential consequences for “free” broadcast television.   

    Despite some logic to Carey’s entreaty for action, don’t count on a solution emerging from either the FCC or congressional petri dish any time soon. The FCC would arguably be able to amend the definition of a multichannel video provider to encompass OTT players such as Aereo, but that would be huge battle before an agency whose Chairman and longest standing Republican have just announced they are stepping down.  In the midst of a very different membership composition, don’t count on quick, bold or easy steps.  

    Of course Congress could step in and legislatively define new retransmission consent and/or copyright rules. Certainly this is a path at least some media players will pursue.  But this would require a significant level of cooperation between the White House and Congress, between the House and the Senate, and between the Commerce and Judiciary Committees (at least) of each house.  For an institution that can’t forge a consensus on background checks on gun purchases in the aftermath of Newtown, I wouldn’t look for quick (or very possibly any) ultimate resolution on these issues in Congress.

    Negotiating table
    We’ve already seen reports that before the 2d Circuit decision came down DISH and Aereo were involved in discussions, and I would not be surprised to see, no matter what the public postures may be, such discussions involving a host of other industry players.  In his book "Free Ride," former Billboard and Wired journalist Robert Levine details negotiations involving Napster and the music industry in the midst of their titanic court and legislative battles.  In the end, most companies will act as pragmatists. But none of any such discussions will be concluded in any type of quick time frame.

    The bottom line – settle in, stay tuned, and cozy up to your favorite legal armchair analyst. The Aereo ride will be going for the foreseeable future - and beyond.