Copyright Office Rejects Aereo’s Request To Be Classified As A Cable Company
‘The Big Bang Theory’ Production Start In Limbo As Cast Contract Negotiations Drag On
SAG-AFTRA Posts 10 Reasons To Vote Yes On New Contract
DeadlineNow Morning Report: Aereo & The Copyright Office, ‘Big Bang Theory’ Limbo, SAG-AFTRA’s Top 10 (Video)
This is a setback for Aereo‘s effort to carry broadcasters’ programming for relatively low fees. The U.S. Copyright Office says it “does not believe Aereo qualifies” for a designation as a cable service, which would enable the streaming service to have what’s known as a compulsory license to offer broadcast signals with fees set by the government. Internet transmissions of over-the-air TV “fall outside the scope” of the copyright rules that apply to cable companies; they just apply to services “regulated as cable systems by the FCC,” the arm of the Library of Congress said in a letter sent to Aereo yesterday.
Last month the U.S. Supreme Court said that Aereo can’t stream broadcast signals without payment because it seemed to resemble a cable distributor — which would be legally bound to pay to retransmit local TV stations. Even so, the Copyright Office says that “We do not see anything in the Supreme Court’s recent decision…that would alter” its view that the rules just apply to companies that the FCC deems to be cable systems. That could backfire on Aereo: FCC-designated cable companies are governed by communications laws that require them to negotiate fees directly with broadcasters.
Business Briefs: DreamWorks Animation Stock Downgrade; Aereo Strategy Questions; Cable Nets Rocky Forecast
DreamWorks Animation Shares Touch 52-Week Low
The stock is down about 1% in early afternoon trading after taking a hit early this morning following B. Riley’s Eric Wold’s decision to abandon his “buy” recommendation. It touched $21.90, a 12-month low, after the analyst dropped his price target nearly 22% to $25. Wold acknowledged that his upgrade in March, when the stock value was 23% higher, “proved to be ill-timed and premature.” He calls the box office for How To Train Your Dragon 2 “disappointing” which “may turn DWA into a ‘show me’ stock and keep a ceiling on valuations until more consistent box office results develop.” The good news? Wold still likes DWA’s plans to diversify and expand its TV production. He also says that Dragon shouldn’t require a write-down.
Aereo’s Effort To Define Itself As A Cable Company Could Backfire At FCC: Analyst
Aereo may have bought some time with its attempt to redefine itself as a cable company, but it likely won’t succeed, Guggenheim Securities’ Paul Gallant says this morning. He figures that U.S. District Court Judge Amy Nathan — who’s overseeing broadcasters’ plea for an injunction to shutter the streaming service — will want to hear additional arguments after the U.S. Supreme Court recently ruled that Aereo could not take over-the-air signals without payment. Justices likened it to a cable company: Copyright law gives operators the right to a compulsory license, which enables them to carry broadcast signals if they pay a relatively low fee set by the Copyright Office. But if the FCC also deems Aereo to be a …
UPDATE: Aereo CEO Chet Kanojia has sent a message to “users and supporters” with a link to today’s letter to the court that outlines the company’s new position. “From the beginning, it has been our mission to build a lawful technology that would provide consumers with more choice and alternatives in how they watch television,” he says. The Supreme Court decision against Aereo resulted in “a challenging journey for our team, but your support has continued to lift and propel us forward. We remain committed to building great technologies that create real, meaningful alternatives for consumers.”
PREVIOUS, 4:14 PM: The Supreme Court‘s recent ruling against Aereo may have left an opening for it to stay in business — but now as a kind of cable service – its lawyers said today in a joint letter with broadcasters outlining their views to the U.S. District Court in New York. (Find it here.) The high court concluded that the streaming service was so similar to cable companies, which are required to negotiate a deal if they want to carry broadcasters’ programming, that it could not simply pluck signals from the airwaves without paying. That’s significant, Aereo says, because the classification also means that it’s “now entitled” to work out a deal — which broadcasters, in turn, must negotiate in good faith. Indeed, Aereo says, its eligibility for what’s known as a compulsory license “must be decided on an immediate basis or [its] survival as a company will be in jeopardy.” It suspended service shortly after the Supreme Court decision.
Broadcasters say that Aereo, having lost once, is now raising “a brand-new defense” that it “never before pled (much less litigated).”
Can Aereo put enough pressure on lawmakers to reverse the Supreme Court? CEO Chet Kanojia is giving the strategy a try today, with a letter to consumers urging them to tell their representatives “how disappointed you are that the nation’s highest court issued a decision that could deny you the right to use the antenna of your choice to access live over-the-air broadcast television. Tell them your stories of why having access to a cloud-based antenna is important to you and your families. Show them you care about this issue.”
Last week the high court sided with broadcasters who said that Aereo violates their copyrights when it streams their over-the-air programming without their permission. On Saturday the Barry Diller backed operation suspended its service while it explores its legal alternatives.
Here’s Kanojia’s letter:
On Saturday, many of you received the news that we decided to pause our operations temporarily, as a result of the United States Supreme Court’s reversal of a lower court decision in favor of Aereo.
Your response in support of the Aereo team has been overwhelming and touching. Your tweets, emails and Facebook posts have made it clear how important it is for so many Americans to have access to a cloud-based antenna to watch live broadcast television. Many of you have asked, “What can we do?”
Today, I’m asking you to raise your hands and make your voices heard. Tell your lawmakers how disappointed you are that the nation’s highest court issued a decision that could
Aereo CEO Chet Kanojia tells subscribers in a note this morning that he has decided to “pause” the service beginning at 11:30 AM ET — even though “our journey is far from done.” The Barry Diller-backed company plans to consult with the U.S. District Court in New York hearing broadcasters’ complaint against it to “map out our next steps” after the U.S. Supreme Court ruled, in a 6-3 decision, that the service violates station owners” copyrights when it streams their over-the-air programming without permission. Users will receive a refund for their last paid month.
The CEO maintains that the airwaves belong to the public and “you should have a right to access that live programming whether your antenna sits on the roof of your home, on top of your television or in the cloud.” Following a “staggering” show of support, he urges supporters to “Keep your voices loud and sign up for updates at ProtectMyAntenna.org .”
Here’s the note:
A Letter to Our Consumers: Standing Together for Innovation, Progress and Technology – An Update on Aereo
“The world hates change, yet it is the only thing that has brought progress.” –Charles Kettering, inventor, entrepreneur, innovator & philanthropist
A little over three years ago, our team embarked on a journey to improve the consumer television experience, using technology to create a smart, cloud-based television antenna consumers could use to access live over the air broadcast television.
On Wednesday, the United States Supreme Court reversed a lower court decision
Many TV stations didn’t want to forge streaming alliances with the Iowa-based company while it looked like Aereo might dominate the market to take their over-the-air signals to the Internet — without any agreements. But that could change following this week’s Supreme Court’s ruling that Aereo’s business model violates copyright law. “With this decision behind us, you’ll see movement accelerate over the next few months” as stations leave the sidelines to deploy Syncbak’s technology, company founder and CEO Jack Perry tells me.
I know, that’s just what you’d expect him to say. But Syncbak‘s taken seriously: Investors include CBS, the National Association of Broadcasters, the Consumer Electronics Association, and former NBC execs Bill Bolster, Michael Gartner, and Ed Scanlon. About 150 stations already use its technology with Apple and Android apps. Fox’s WNYW New York is the largest, but Gray Television and Northwest Broadcasting also are on board. Small broadcasters have been most receptive: Perry says it only costs $3,000 to take a station’s signal online. They also have less to fear from Aereo. It has to build antenna farms to serve a market and, with the investment that entails, “I don’t think they could have gone beyond market No. 30,” Perry says.
“It certainly feels good to win as decisively as we did,” CBS chief Les Moonves told Bloomberg Television’s Trish Regan in a victory lap after the Supreme Court sided with broadcasters’ challenge against Aereo. The case “wasn’t about technology. It was about theft,” he says. Consumers will benefit from broadcasters’ ability to continue paying for entertainment, sports, and news. CBS expects to collect $2B in retransmission fees in 2020. “And all that’s important here is that broadcasters and cable content companies and everyone who’s involved with the content producing business gets paid appropriately for their content. And that somebody can’t come and take that content, charge for it, and not pay us back for that content. So it’s a very good day for our future.”
The industry is weighing in on the Supreme Court’s ruling this morning that the Aereo streaming service violates broadcast companies’ copyrights. Refresh for latest…
Chet Kanojia, Aereo CEO and founder
“Today’s decision by the United States Supreme Court is a massive setback for the American consumer. We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry. It is troubling that the Court states in its decision that, ‘to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.’ (Majority, page 17) That begs the question: Are we moving towards a permission-based system for technology innovation?
“Consumer access to free-to-air broadcast television is an essential part of our country’s fabric. Using an antenna to access free-to-air broadcast television is still meaningful for more than 60 million Americans across the United States. And when new technology enables consumers to use a smarter, easier to use antenna, consumers and the marketplace win. Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle.”
“Justice Scalia’s dissent gets its right. He calls out the majority’s opinion as ‘built on the shakiest of foundations.’ (Dissent, page 7) Justice Scalia goes on to say that ‘The Court vows that its ruling will not affect cloud-storage providers and cable television systems, see ante, at 16-17, but it cannot deliver on that promise given the imprecision of its results-driven rule.’ (Dissent, page 11)”
“We are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”
Gordon Smith, National Association of Broadcasters president and CEO
“NAB is pleased the Supreme Court has upheld the concept of copyright protection that is enshrined in the Constitution by standing with free and local television. Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false. Broadcasters embrace innovation every day, as evidenced by our leadership in HDTV, social media, mobile apps, user-generated content, along with network TV backed ventures like Hulu.
“Television broadcasters will always welcome partnerships with companies who respect copyright law. Today’s decision sends an unmistakable message that businesses built on the theft of copyrighted material will not be tolerated.”
UPDATED WITH REACTIONS: Television broadcasters can breathe a sigh of relief after the Supreme Court ruled this morning that the Barry Diller-backed service violates their copyrights when it streams their transmissions without their permission. In a 6-3 opinion, the court reversed and remanded the decision of the 2nd Circuit in the broadcasters favor. The opinion equated Aereo to a cable company, thereby equaling its transmissions of the broadcasters’ material to a public performance under the Copyright Act. That remand means the broadcasters could get the injunction against Aereo they have long been seeking. As was expected, Associate Justice Stephen Breyer wrote the decision (read it here) released this morning; he asked the most questions by far of the lawyers during oral arguments in April. Saying Aereo does not constitute a public performance, Associate Justice Antonin Scalia dissented today’s opinion. He was joined by associate justices Clarence Thomas and Samuel Ailto.
The Court today also addressed concerns raised by Aereo and others that a loss for the streaming service could have grave implications for cloud technology, among others.“Given the limited nature of this holding, the Court does not believe its decision will discourage the emergence or use of different kinds of technologies,” said the 18-page opinion.
“Today’s decision is a victory for consumers,” the broadcasters’ lawyer Paul Clement said today. “The Court has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended.” Clement, a former Solicitor General, represented broadcasters during oral arguments.
This is a big loss for Aereo, which until now has prevailed in the majority of its legal battles with broadcasters including CBS, Disney, Fox, and Comcast’s NBCUniversal. On April 2, Diller sent shivers through Aereo CEO and founder Chet Kanojia and other execs when he said that the company “probably would not be able to continue in business” if it lost at SCOTUS. If Aereo had won, many industry watchers said broadcasters could lose their clout to force cable and satellite companies to pay billions for the right to retransmit their programming.
“It’s over,” Diller told CNBC this morning after the ruling was handed down. Kanojia had a different take: “We are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”
“We did try, but it’s over now,” Aereo investor Barry Diller told CNBC following this morning’s Supreme Court ruling that Aereo violates TV station copyrights when it streams their over-the-air signals without their permission. That has given a jolt to broadcast stocks: Sinclair Broadcasting leads the pack with shares up more than 15% But CBS is up 5.4% with E.W. Scripps +6.5% and Gannett +4.7%. The decision relieves a big concern for Wall Street: that Aereo or a service like it might endanger broadcasters’ ability to demand rising retransmission consent fees from pay TV providers.
Station owners are expected to collect $7.1B in retransmission payments in 2018, up from $3.3B last year. CBS chief Les Moonves has predicted that his company will collect at least $2B in retransmission revenues in 2020. And the revenues could account for nearly 20% of cash flow growth this year at the major broadcast network owners — CBS, Fox, Disney, and Comcast — MoffettNathanson Research estimates.
CBS had the most at stake among Big Media companies because it has few cable channels or other businesses to offset any threat to its broadcast network and stations. The court ruling “validates CBS’ investment in expensive and high-quality programming,” Guggenheim Securities’ Michael Morris says. Janney Capital Markets’ Tony Wible says the decision “effectively increases broadcaster’s negotiating leverage over [cable and satellite companies] in retrans discussions, which is critical given the weaker ad market and …
Shares for broadcast companies and CBS likely will take a hit if the conventional wisdom is wrong and justices uphold Aereo’s right to stream TV signals without payment, Wells Fargo Securities’ Marci Ryvicker forecasts this morning. Justices should make their decision before June 30, when the current term ends. If they agree with Aereo — which says it merely leases antennas so consumers can access free TV — then many on Wall Street say stations will lose leverage to demand rising retransmission payments from pay TV providers. Broadcast company stocks could fall as much as 20%, and CBS could drop 7%, Ryvicker figures.
Investors shouldn’t worry: an Aereo win wouldn’t change things for the short to mid term, she says. Still, “we do acknowledge that sentiment will drive these stocks lower” referring to a group that includes TV station owners Sinclair, Media General, Nexstar, Gray Television, and Journal Communications. The broadcast companies’ shares “seemed to be somewhat ‘rocked’ by the Supreme Court’s decision to review” the Aereo case. As for CBS, Ryvicker says investors might decide it’s just worth 12.7 times expected per share earnings — down from its current trading price at 13.7 times — which would cut the price by 7%. But “we don’t anticipate it staying there for long,” in part because “CBS can pursue its option to go straight to cable or figure out some sort of other business model that would lessen any potential long term impact of Aereo.” …
The CBS chief called the streaming service “the lovely Aereo,” in a conference call with analysts. And he continues to insist that he’s “not losing any sleep” over it. But it seems that Les Moonves has spent several waking hours considering what he might do if the U.S. Supreme Court upholds Aereo’s right to stream broadcasters’ free, over-the-air transmissions — which he and other TV companies insist is a form of theft. “We have deals with most of our [pay TV distributors] for a long, long time to deliver our content,” he says. In addition “we’re thinking about over the top, delivering directly to our consumers [via the Internet]. We’re talking about doing Aereo among ourselves if it became viable.” Analysts didn’t follow up to ask how that might affect CBS affiliates. In any case, Moonves says, the tiny company has attracted “way more attention than it deserves” adding that he has “confidence that the Court will find Aereo to be illegal.”
On other matters, Moonves says that the late night transition from David Letterman to Stephen Colbert will be “a bittersweet moment for CBS.” He calls Letterman “the greatest ever in late night comedy” but adds that Colbert “can be the best of his generation as well.” The late night show currently runs in 200 global markets, and by the time Colbert takes over it could be in 220.
The CBS chief says he’s optimistic about the upfront …
It was legal matters and late-night that Les Moonves wanted to talk about today at the Milken Institute’s Global Conference. “I feel good about our chances in the Supreme Court,” said the CBS chief about last week’s hearing on the legality of the Aereo streaming service. Not that Moonves wasn’t prepared for a loss in the nine Justices’ upcoming ruling. “I’ll stand by my statement that we have another alternative if we lose,” Moonves added. Last year at the same conference, Moonves said he could move CBS to cable in “a few days” if the situation with the streaming service could not be resolved in the courts – and that was before the broadcasters petitioned SCOTUS late last year. “Aereo takes our content,” the network exec told the conference crowd, “and doesn’t pay for it – that’s theft.” Moonves added today, “I think our case is very strong.” A decision from the Supreme Court is expected in late June. On a more personal note, Moonves said that though he and Aereo backer Barry Diller are close friends he decided to never speak about the streaming service with the IAC boss after one conversation for the betterment of their relationship. That practical advice drew a big laugh from the suit-and-tie crowd in the ballroom this morning.