Aereo Supreme Court Win Would Lead to More Court, Retrans Battle, Say Industry Observers
A Supreme Court win for Aereo would mean broadcasters continuing the battle in court and in Congress while cable companies strategize against retransmission consent, several attorneys told us in interviews. Though several observers think the court’s decision may be leaning toward broadcasters, the justices seemed conflicted at Tuesday’s oral arguments (CD April 23 p1). While some investors may have been poised to move money based on news from the court, the oral arguments didn’t show the court leaning convincingly enough in either direction to move markets, Guggenheim Partners analyst Paul Gallant told us. “We were warned not to put too much thought into the oral arguments given that it is never easy to ‘read’ the Supreme Court’s final decision during this part of the case,” said Wells Fargo analyst Marci Ryvicker in an email to investors. The high court decision is expected this summer.
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More litigation for the streaming TV service, rather than freedom to operate, would likely follow an Aereo win, several attorneys told us. Even if the court’s ruling leads to the end of Aereo’s numerous ongoing court cases, the broadcasters still have another tack to take, a broadcast attorney said. Their current challenges to Aereo have focused on the public performance right -- at the center of the Cablevision remote-DVR case -- rather than the reproduction right, which was at the center of the Betamax case that affirmed consumers’ right to make copies for private use. “Even if Aereo wins on public performance, they'll still have to defend themselves and keep fighting in lower courts on reproduction rights,” said Gallant. That would entail a wholly separate court battle on top of the ones Aereo is already embroiled in, several broadcast attorneys told us.
Pay-TV interests could strike at broadcasters’ retransmission consent regime through an Aereo win, several cable attorneys told us. To take advantage of the opening provided by an Aereo win, cable companies could potentially stop paying retrans fees and offer customers access to broadcast channels through a third-party service using technology similar to Aereo’s, said Davis Wright cable attorney Paul Glist. The system could be fed through the same wires as the cable content, making it appear the same to the end user, Glist said.
A less blatant tactic for pay-TV providers that would “keep their powder dry” involves using an Aereo win as leverage to pressure legislators into removing the retrans regime, said BakerHostetler cable attorney Gary Lutzker. Since Aereo doesn’t pay retransmission fees for the same content cable and direct-broadcast satellite providers pay for, the multichannel video programming distributors (MVPDs) would have a persuasive argument, Lutzker said. Increased lobbying from MVPDs would also be necessary after an Aereo win, because broadcasters would likely respond to their loss by applying their own legislative pressure, Glist said. “Broadcasters would seek legislative redress after an Aereo win,” he said.
Aereo might seek its own legislative solution if it loses the case, though CEO Chet Kanojia has said the company has no contingency plans for a loss. The company could try to have itself declared an MVPD, though it would then be subject to the same fees and obligations as other MVPDs, said Gallant. That would also be dangerous, because broadcasters aren’t obligated to provide content to MVPDs. Since Aereo already has an adversarial relationship with broadcasting, they could “starve Aereo out,” Gallant said.
Gallant and some other attorneys and analysts believe the oral arguments showed the court taking a slight lean in broadcasters’ favor. “The tilt still seems to remain in broadcasts’ favor, but this is NOT a slam dunk by any means,” said Ryvicker in her email. Justice Stephen Breyer’s concern about keeping an eventual opinion from affecting other industries and Chief Justice John Roberts’s questioning of the validity of Aereo’s technology are strong signs in broadcasters’ favor, several attorneys said. “It is fair to say that Aereo encountered some skepticism on its claim to be an innovator and not a copyright infringer,” said Pillsbury Winthrop attorney Paul Cicelski in a blog post (http://bit.ly/1nsBAfR).