March/April 2014
Volume 34 No. 3

April 2014
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My Two Cents

Aereo is a great, technologically innovative TV device, but it should be compared to other forms of digital delivery service with all the usual legal obligations, including retransmission fees.

By Dom Serafini

The dispute between the company that owns Aereo and the U.S. broadcasting TV industry reminds me of the debate I had with the late MPAA president Jack Valenti about “fair use” in the pages of VideoAge’s October 2000 Issue. But with a big difference.

Aereo is a device through which, for $8 per month (plus the cost of the Internet connection and, for big-screen viewing, devices such as Apple TV and Roku), subscribers receive the same digital programs available for free from home antennas. Broadcasters compare the service to a cable TV operator and demand retransmission fees.

The case went to court and Aereo won the first two rounds. Now the ruling will be reviewed by the U.S. Supreme Court, possibly later this month.

Ironically, the Brooklyn, NY-based Aereo, founded by 43-year-old Indian-born Chet Kanojia, is backed by former U.S. broadcaster Barry Diller.

My debate with Valenti in the year 2000 centered around “fair use,” and it is reflected in the “My 2¢” editorial of the October 2013 Issue that also applies to Aereo: “to justify ad-skipping technology, [U.S.] Judge [Sidney] Thomas cited the 1984 Supreme Court ruling that made VCRs legal. However, in that case VCRs created an industry (home video), while it looks like the [ad skipper] Hopper will destroy an industry. Big difference!”

Recently, we were contacted by a PR agent in Wisconsin to see if we would be interested in running an article written by Warren Grimes, a professor at Southwestern Law School in Los Angeles who teaches about antitrust and television distribution issues.

Since we at VideoAge weren’t sure how the Aereo device worked and if indeed it worked at all — having heard of a few technical glitches — we asked to receive a test service for a week, considering that Aereo is operating in 11 U.S. metropolitan areas, including New York, our home base. This was a request that the PR firm couldn’t fulfill because it represented Southwestern School and not Aereo. (We also reached out directly to Aereo, to no luck).

From what I can deduct from Grimes’ article, Aereo’s justification for picking up broadcasters’ TV signals without paying a retransmission fee is based on a technical assumption, rather than the spirit of copyright laws. To Grimes, “the legality of Aereo’s conduct turns on whether the retransmission of broadcasts constitutes a ‘public performance.’” “Public performance” can be explained with two examples: If I buy or rent a DVD or a digital video file and show the film or TV episode to some friends in my home, I’ve not violated copyright laws by an illegal “public performance.”

But if I took the same movie or TV episode and showed it to patrons at a club or bar, in that case I’ve infringed copyright laws.

In the article offered to VideoAge, Grimes makes, in my view, some incorrect assumptions: That the broadcasters will not abandon the airwaves, as they threaten to do if the Supreme Court rules in Aereo’s favor. Grimes’ argument is that the broadcasters will not be giving up “ad revenues that flows from the 57 million Americans who still get their television through the digital airwaves.”

To the contrary, since Aereo serves metro areas where almost all viewers get their broadcasts from cable or satellite, stations will rent their airwaves to Wi-Fi services in Aereo’s areas so as not to jeopardize their $4.3 billion-a-year retransmission fees by creating a precedent.
Grimes links Aereo to the unbundling issues associated with cable TV, without noting that unbundling concerns mostly small cable channels and not local TV stations that offer vital local emergency and warning services.

Now, without entering into the “prior performance” legal technicalities, I’m able to ascertain that Aereo’s service doesn’t constitute “fair use” since it makes money with someone else’s content without paying for the right. Plus, its operation rests on loopholes permitted by digital technology — Aereo captures broadcast television and retransmits it to subscribers over the Internet, but according to the lower Courts, it doesn’t constitute public performance because it uses mini-antennas (rather than one communal antenna) to capture the TV signals, and thus it is considered “private.”

Aereo’s hard-drive copies are not lawful. Subscribers have no fair use right to make copies so they can receive programming over an unlicensed television delivery service.