Broadband Cable Association of Pennsylvania

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November 21, 2013

Billionaire Barry Diller, the backer of Aereo Inc., said the online-television service may eventually get as much as 35 percent of U.S. households to subscribe if it overcomes legal challenges from broadcasters. People in their mid- to late-20s aren't willing to pay $100 a month for cable-TV packages, making Aereo's $8 service increasingly attractive, Diller said today at The Year Ahead: 2014, a two-day conference hosted by Bloomberg LP in Chicago.

Aereo, based in New York, offers broadcast channels such as CBS and NBC to subscribers over the Internet in nine U.S. cities. Media companies including Walt Disney Co. and 21st Century Fox Inc. have sued the startup, saying it's reselling their content without permission. Aereo argues that it doesn't need to compensate the networks because it receives television signals fairly using clusters of antennas. "This closed circle of broadcast and cable and satellite is going to break up," said Diller, 71. "It's not going to maintain itself in the next decade."

The broadcasters have asked the U.S. Supreme Court to rule that Aereo is an illegal operation. In the meantime, federal judges in Boston and New York have permitted the startup to operate during the legal fight, and the service continues to spread to new cities. "We are putting more money in," aiming to eventually roll out across the U.S., said Diller, who serves as chairman of the Internet holding company IAC/InterActiveCorp.

Aereo got a boost on Nov. 12 when U.S. Senator Jay Rockefeller introduced a bill to help online video services and Aereo's antenna-based system challenge cable providers and broadcasters. Rockefeller, a West Virginia Democrat who serves as chairman of the Commerce Committee, said he wants consumers to benefit from lower costs and increased choice. The bill would "give consumers the ability to watch the programming they want to watch, when they want to watch it, how they want to watch it, and pay only for what they actually watch," Rockefeller said in a statement last week.

Still, the legislation "is likely to face an uphill battle in this Congress," given the opposition of deep-pocketed media companies, said Jeffrey Silva, a Washington-based analyst with Medley Global Advisors. Diller, who spent decades in the television industry and helped create the Fox network, said he isn't surprised that media companies are challenging Aereo. If he were still a broadcast executive and encountered competitors like Aereo, "I'd sue 'em," he said. Bloomberg

When it lost a summary injunction back in September, the network said it wasn't done trying to get Dish Network's Hopper service shut down and today ABC took another swing at it.

In a brief dated November 12 and filed today (read it here) with the Second Circuit Court of Appeals, ABC and Disney Enterprises went after the satellite provider's ad-jumping DVR service again. The thrust of the network's new appeal is that U.S. District Judge Laura Taylor Swain not only misunderstood the market harm the service poses but misinterpreted copyright law in her ruling earlier this fall that it was not Dish but the consumers, by choosing what to record, who were actually engaged in the process of making copies of programming that they then could watch ad-free later. In its heavily redacted brief, ABC says that "by exercising exclusive control over the copying process and by operating the service to record" with the Hopper's Primetime Anywhere and AutoHop services, it is Dish who is really in control of the process not the consumer.

"In this copyright and breach of contract action, ABC seeks to halt DISH's ongoing copying of ABC's entire lineup of primetime programming for on-demand, commercial-free playback. This massive copying effort not only targets the advertising that generates revenue through normal DVR viewing; it also takes aim at the many platforms on which ABC authorizes the sale of on-demand and commercial-free versions of its programming," says the 72-page brief. "In short, at the same time that ABC has carefully constructed a distribution strategy to offer viewers nearly every on-demand and commercial-free viewing option that modern technology permits, DISH has set out to undermine each element of that strategy," it adds.

Across the country, the networks are the underdogs in this fight. The East Coast loss by ABC earlier this year was mirrored by another West Coast injunction loss by Fox in its battle against the Hopper back in November 2012. A federal appeals court reaffirmed that Fox loss in late July of this year and again in a separate rule by Judge Dolly M. Gee in late September. In this case, Williams & Connolly LLP's Kevin Baine, Stephen Fuzesi, William Vigen Stanley Fisher, Thomas Hentoff, and Julia Pudlin are representing ABC. While Dish is represented by Orrick Herrington & Sutcliffe LLP's Elyse D. Echtman, Peter Bicks, Lisa Simpson, E. Joshua Rosenkranz and Annette Hurst with Mark A. Lemley and Michael Page of Durie Tangri. deadline.com

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