Legal Issues

by Karl Bode


Filed Under:
banckruptcy, cloud, copyright, innovation

Companies:
aereo



Bludgeoned And Bleeding, Aereo Finally Files For Bankruptcy

from the it-was-fun-while-it-lasted dept

For a moment there, streaming video operator Aereo put on a brave face that it could continue despite last June's Supreme Court ruling against the company. While some interpretations of that ruling seemed to suggest that Aereo could be considered a cable company if it was willing to pay retransmission fees and effectively function as a delayed DVR service, those dreams were dashed in an October ruling that granted a pretty broad injunction by broadcasters. Judge Alison Nathan effectively stated at the time that Aereo should go ahead and die as the Supreme Court intended, and stop with all the postmortem twitching.

With no product on sale and legal costs mounting, Aereo earlier this month laid off the majority of its staff with the exception of a skeleton crew in their New York City office. This week, Aereo announced that the company would be filing for bankruptcy. In a blog post, Aereo CEO Chet Kanojia finally acknowledges the obvious -- that the Supreme Court ruling was simply too difficult to overcome:
"While we had significant victories in the federal district courts in New York and Boston and the Second Circuit Court of Appeals, the reversal of the Second Circuit decision in June by the U.S. Supreme Court has proven difficult to overcome. The U.S. Supreme Court decision effectively changed the laws that had governed Aereo’s technology, creating regulatory and legal uncertainty. And while our team has focused its energies on exploring every path forward available to us, without that clarity, the challenges have proven too difficult to overcome."
While the blog post is entitled "The Next Chapter," this is most likely game over for the disruptive upstart.

While the FCC is considering rule changes that would officially declare over the top streaming operators cable companies (giving them FCC-enforced access to vertically integrated programming), that would require that Aereo pay retransmission fees -- ruining Aereo's biggest appeal: the low price. But by the time Aereo gets any sort of fresh footing as a more traditional streaming operation, the market will likely be flooded with a variety of new, live over-the-top (OTT) services (from Dish, Sony, Verizon and more in 2015), and Aereo's window will have been slammed shut by larger players.

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  • icon
    got_runs? (profile), 21 Nov 2014 @ 4:22pm

    >

    Kill the competition through the court system. It's the American way.

    reply to this | link to this | view in chronology ]

    • identicon
      Andyroo, 22 Nov 2014 @ 12:55am

      Re: >

      Long Live Piracy

      Absolutely disgusting and something that needs to be fixed, they just destroyed the small competition they had and now have the market to themselves which is going to cause prices to be raised beyond the reach of most people.

      Sharing is caring , Long live piracy

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 21 Nov 2014 @ 4:37pm

    I was a satisfied Aereo customer and used the service from launch until travelling led me to suspend it. We subscribed because trees and buildings made over-the-air unworkable. Thanks Aereo for your efforts, it was fun while it lasted.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 21 Nov 2014 @ 5:00pm

      Re:

      So you say, but it's clear you were just too cheap to get the signal the legal way, by moving to another house with better reception. Or buying up and demolishing the surrounding buildings and trees in order to improve the signal strength to your house.

      There were plenty of perfectly reasonable ways you could have gotten the signal, you just chose not to use them in lieu of signing up for a clearly illegal service.

      /s

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 22 Nov 2014 @ 9:38am

        Re: Re:

        "Or buying up and demolishing the surrounding buildings and trees "

        You're right. I should have got together with the neighbors and pushed for a buyout of that huge AT&T building right in the direct path of one of the strongest transmitters in the area. And not only that, AT&T don't want to give me gigabit because of a hissy fit over net neutrality. They truly are against the little folk.

        reply to this | link to this | view in chronology ]

  • icon
    Mason Wheeler (profile), 21 Nov 2014 @ 5:10pm

    I still don't understand how retransmission fees make any sense in the first place. If a broadcaster is giving something away for free, by broadcasting it unencrypted over the air where anyone with the proper equipment can tune in at no cost, how do they then get to say "no, you have to pay us to use it"?

    If I ran a performance venue, and I had drinking fountains there, but I hung a sign at the gate saying "no taking water out of here without paying for it", how enforceable would that be?

    reply to this | link to this | view in chronology ]

    • icon
      Derek Kerton (profile), 21 Nov 2014 @ 5:53pm

      Re:

      Not a good enough analogy. In your story, the water is being consumed, and is not there for anybody else to use. In the case of TV signals, aereo used up none of a finite resource. They merely helped the broadcasters reach a wider audience by extending the range of the signals on a public airwave.

      Instead, for an analogy, try: running a performance venue, and having a large sculpture water fountain in front of it for art. Then saying "anybody who drives down the public street must pay me if they look at my water fountain".

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 22 Nov 2014 @ 11:02am

        Re: Re:

        Here where I live we have a Spacex model rocket on public property (in the middle of the boulevard). There are speakers around it that say something to the extent of you're not allowed to take pictures of it and anyone caught doing so maybe prosecuted to the fullest extent of the law.

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 22 Nov 2014 @ 12:07pm

        Re: Re:

        A closer analogy would be trying to force people to pay for you using their urinals.

        reply to this | link to this | view in chronology ]

    • icon
      Bergman (profile), 21 Nov 2014 @ 6:09pm

      Re:

      The broadcasters are not in business to broadcast content, that's the lure they use to get people to buy their actual product -- eyeballs watching screens. They then sell those watching eyeballs to advertisers, which is where they make their money.

      The thing is, they discovered they could get paid more than once for what they were already doing, by charging cable providers for showing people the broadcasts -- note that technically speaking, what a cable provider is buying is the lure, not the ads, although cable providers are usually prohibited from stripping out the ads by contract.

      As a result, the broadcasters get paid a third time -- because the cable company customers get to see the ads too.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 22 Nov 2014 @ 5:19am

      Re:

      Anent your last sentence, I believe you have just given Jet Blue an idea for yet another line item to charge its customers riding in the "cattle car" section.

      As for retransmission fees, these were initiated many decades ago, and the underlying reasons for such fees have been discussed ad nauseum. Agree or disagree, they are a long established practice in the broadcast industries and represent an ordinary cost of doing business, a cost that Aereo thought that by going "cutesy" it could avoid. It was a calculated gamble with an uncertain outcome. The rest is history, with Aereo sitting with egg on its face. Had it simply played by the rules, while its business model would likely been not as lucrative, it very well may have been able to make a go of it and create a profitable business providing a very useful and much appreciated service.

      reply to this | link to this | view in chronology ]

      • icon
        Mike Masnick (profile), 22 Nov 2014 @ 6:33am

        Re: Re:

        a cost that Aereo thought that by going "cutesy" it could avoid

        Funny how "following what was pretty clearly laid out in the Cablevision decision and the basics of copyright law" is suddenly "cutesy."

        Had it simply played by the rules

        It did. The Supreme Court changed 'em when it made up a brand new "looks like a duck" test.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 22 Nov 2014 @ 9:42am

          Re: Re: Re:

          The decision you mentioned was limited to the 2nd Circuiit, and was not to my knowledge ever addressed by the Supreme Court. Obviously the Supreme Court in Aereo did not warmly embrace the position that Cablevision should be deemed persuasive.

          reply to this | link to this | view in chronology ]

      • icon
        jupiterkansas (profile), 22 Nov 2014 @ 11:03am

        Re: Re:

        Stop trying to insist that Aereo was breaking the rules. There are no rules that let you take a freely available broadcast signal and transmit it over the internet to comptuers.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 22 Nov 2014 @ 12:21pm

          Re: Re: Re:

          I am bemused by what you said because it reflects agreement with Aereo having broken the rules. However, I do not believe this was your intent.

          I will agree that there was no existing decision squarely on all fours with the facts in Aereo. There was, however, a wealth of existing decisions clearly informing Aereo that its business model was operating perilously close to the line of demarcation between lawful and unlawful conduct. The company knew it was pushing the boundaries of copyright law, particularly given that the precise issue it was seeking to obviate with its system design was not as yet definitively answered by the Supreme Court. Well, it has its answer now, and no amount of lambasting the Supreme Court is going to change the fact that the company took what was clearly a gamble and lost.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 23 Nov 2014 @ 5:18pm

            Re: Re: Re: Re:

            "There's no law that says they're illegal! Throw the book at them! I don't care! Wah! Wah! Waaaaaaaah!"

            reply to this | link to this | view in chronology ]

      • icon
        JMT (profile), 25 Nov 2014 @ 5:03am

        Re: Re:

        "Had it simply played by the rules, while its business model would likely been not as lucrative, it very well may have been able to make a go of it and create a profitable business providing a very useful and much appreciated service."

        The fact that there's a complete dearth of Aereo-like services despite the clear demand for such a "a very useful and much appreciated service" is solid evidence that this is simply not true, the retransmission fees are an overwhelming hurdle to running a sustainable start-up.

        Just because these fees are a long established practice doesn't mean they are morally defensible and should just be brushed off as an ordinary cost of doing business.

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 22 Nov 2014 @ 4:19pm

    I hope they have all their patents in order , I'm sure all the big players that killed Aereo's innovation will be trying to recreate the same product as their own.

    reply to this | link to this | view in chronology ]

  • icon
    Uriel-238 (profile), 22 Nov 2014 @ 5:08pm

    Maybe in Europe.

    Given they were really innovating, and shot down much like Tucker, I hope they get a second chance in Europe or something.

    Has this not been a totally fine example of government failure?

    reply to this | link to this | view in chronology ]

  • identicon
    reencryption-tv, 22 Nov 2014 @ 5:27pm

    post-aereo

    Outline what's happening now for Post-Aereo is that consumers are allowed to set two legal choices via cloud license server to linearly transform themselves into "virtual" cable operator with section 111 license and/or "provable" fair user with section 107 defense to a claim of copyright infringement.

    reply to this | link to this | view in chronology ]

  • identicon
    Just Another Anonymous Troll, 24 Nov 2014 @ 5:05am

    I smell a rat

    Gotta love being a big ol' legacy player. New guy shows up? Sue him! Even if he wins the case, he'll be bankrupt anyway, and you can even influence the judge to make him lose!
    Seriously, that ruling just screams corruption. By ruling against Aereo by saying it looks like a duck but not actually declaring it a duck, they give broadcasters exactly what they want, that is a company whose innovative business model is now illegal but cannot switch over to the traditional business model.
    I'd ask to see the judges' financials, but I'm pretty sure that would compromise national security or something.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 28 Nov 2014 @ 9:47pm

    Aereo was simply a victim of thuggery.

    reply to this | link to this | view in chronology ]


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