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Television Businesses The Courts

Aereo Embraces Ruling, Tries To Re-Classify Itself As Cable Company 147

Posted by samzenpus from the bend-like-the-broadcast-reed dept.
An anonymous reader writes Rather than completely shuttering its TV-over-the-internet business, Aereo has decided to embrace the Supreme Court's recent decision against it. In a letter to the lower court overseeing the litigation between the company and network broadcasters, Aereo asks to be considered a cable company and to be allowed to pay royalties as such. Cable companies pay royalties to obtain a copyright statutory license under the Copyright Act to retransmit over-the-air programming, and the royalties are set by the government, not the broadcasters. The broadcasters are not happy with this move, of course, claiming that Aereo should not be allowed to flip-flop on how it defines itself.
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Aereo Embraces Ruling, Tries To Re-Classify Itself As Cable Company More

Aereo Embraces Ruling, Tries To Re-Classify Itself As Cable Company

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  • If it looks like a duck (Score:5, Funny)

    by Anonymous Coward on Friday July 11, 2014 @08:11AM (#47430267)

    Aereo to broadcasters: "quack".

  • It's only fair (Score:2, Insightful)

    by Anonymous Coward

    They weren't happy with the disruptive competition. Now they're still not happy with the disruptive competition. Quelle surprise.

    Given how the cable companies divied up the market into little monopolies for each, it might actually be best for their customers to let aereo do this, and not allow the multi-monopolies to devour an unwanted competitor.

    • Re:It's only fair (Score:4, Insightful)

      by DarkOx ( 621550 ) on Friday July 11, 2014 @08:25AM (#47430343) Journal

      Right, its a complex balance of power the networks have with the cable operators and what they really don't want is people making waves.
      Just looks at the fights CBS and ABC have been in lately (NBC is a little different given they are COMCAST subsidary ).

      On the one hand royalties from Areo might be a new revenue stream on the other hand premium cable seems to be where the eyeballs are going to the point the cable operators have started expressing less willingness pay to carry the networks. Its probably a smallish number of very vocal cable subscribers that push them to continue to pay CBS's extortion fees. If those folks could just pick up a cheap Areo subscription well it might actually weaken the hand of broadcast networks to charge the other cable operators. ABC has nothing to worry about though because their parent Disney will just make carrying ABC a condition of carrying ESPN which no cable operator would dare drop.

      • Re:It's only fair (Score:5, Interesting)

        by Mr D from 63 ( 3395377 ) on Friday July 11, 2014 @08:51AM (#47430449)
        If they are considered a cable company, then they won't need all those antennas. That should reduce their operating cost, and maybe offset some of the new re-transmission costs.

        • Re: (Score:3)

          by DarkOx ( 621550 )

          Oh definitely; and they or someone a little bigger ( Amazon? Netflix? ) who could potentially acquire them might be able to deliver profitably service dirt cheap like single digit dollars per month.

          I don't want pretend to understand all the dynamics involved with the network to cable co contracts, FCC must carry requirements, local monopolies granted to cable companies, etc.

          That last one was never hard to enforce, but how will $MUNICIPALITY enforce the cable monopoly agreement against a cable company like A

          • That's an interesting thought. Aereo goes from being a self-described game-changer to a Trojan horse for other content streaming concern. I can't see entrenched cablecos being happy about that either. Maybe someone on their side has figured that out?

        • I was also wondering about the relevance of Aereo's technology in this new business model. If it gets classified as cable carrier, which is what the SCOTUS decision requires, then why not pick up its signal in the same way as all the other cable companies? Then it can trump everyone by offering networks a la carte over the Internet.

          • They could still only deliver local OTA stations, and could not send them out of region. Making the stations available out of region would require a negotiated contract with the network/station.

            • Yes, I'm assuming that. My point is that Aereo would operate the same way as a conventional cable service, but because it offers its content over the Internet it could go totally a la carte. And if it did so, the competition could induce other cable providers to do the same, switching their existing cable capacity over to Internet service. This would happen first in markets where a large percentage of subscribers already had streaming boxes attached to their TV sets, this being a proxy for tech awareness.

      • Well also the networks want people to subscribe to cable specifically because the owners of the networks also own other cable channels.

      • Another company is quietly doing its own shaking these days and I find its approach very interesting. ION [iontelevision.com] has local stations in most of the large metropolitan markets. It has started leveraging those stations by selling a set top box [airbox.com] that decodes sub channels on its local broadcast to deliver premium channels from Showtime and Starz as well as PPV content. It uses your existing antenna and you still get all the local channels. If Aero were to offer something like that for ~$30-$40 like ION does I'd be very

        • Re: (Score:3)

          by ZipK ( 1051658 )

          It has started leveraging those stations by selling a set top box [airbox.com] that decodes sub channels on its local broadcast to deliver premium channels from Showtime and Starz as well as PPV content.

          It's surprising to find that the FCC has no rule against the broadcast of encrypted PPV content on public television channel allotments. Or maybe it's not surprising at all.

      • If those folks could just pick up a cheap Areo subscription

        There won't be any such thing as a cheap Aereo subscription though.

        Once Aereo starts paying broadcasters their requested fees their product will cost as much as any basic cable subscription, because the bulk of the cost of the service is the content, and Aereo needs to cover service costs and make a profit on top of that. Aereo's entire business plan (from a revenue standpoint) was based on using OTA provisions to cut out the content costs, making

        • I hate to wrench your argument but I live in Houston. The basic basic Comcast tier is $20. Thats $8 more than they were offering. My quess is without all the cruft that we as cable subscribers are forced to pay the bill would be the same as that.

      • They're scared of Aereo because it will just increase the number of people cutting the cord with traditional media vendors. They want to keep the $80/month entertainment tax rather than let people have a $20/month alternative.

        Normally you would expect broadcaster to not mind where their royalties come from, except that most of the broadcasters are owned by the cable companies.

    • Wait until they start talking to Verizon, and learn how to swap their definition to get multi-billion-dollar government grants, then reclassify to avoid all regulatory statutes tied to the grants.

  • Idiots (Score:4)

    by qbast ( 1265706 ) on Friday July 11, 2014 @08:18AM (#47430293)
    What the hell they are complaining about now? If court ruled that how Aereo previously defined itself was illegal, then obviously it has to change it. First they win now they complain about it?

    • Re: (Score:3)

      by cdrudge ( 68377 )

      Networks don't want Aereo as it will rock the boat and introduce competition in markets that have long been dominated by oligopolies. In most areas, you have one cable company that services the area, and if you're lucky, the local telco might also offer television service. You also have Dish and DirecTV.

      Most networks opt to charge the cable/telco/satellite company a fee instead of forcing them to be carried as a must-carry station. If a more convenient or alternate source of locals were available, it could

    • Re:Idiots (Score:5, Insightful)

      by fuzzyfuzzyfungus ( 1223518 ) on Friday July 11, 2014 @08:41AM (#47430413) Journal

      What the hell they are complaining about now? If court ruled that how Aereo previously defined itself was illegal, then obviously it has to change it. First they win now they complain about it?

      As best I can tell, they are whining because they preferred the imaginary world where the lawsuit against Aereo was actually over whether the filthy, disruptive, upstarts shoudl be burned to the ground and have the earth beneath them salted, rather than whether they were more like an antenna rental service or more like a cable company.

      Aereo obviously didn't want to be a cable company, hence its ongoing defense; but the tone of the rhetoric against them was never "Yeah, because of a raft of tedious reasons, Aereo ought to be classified as a cable company for regulatory purposes"; but rather a bunch of fire and brimstone nonsense about the signal-stealing piratepocalypse.

      • but rather a bunch of fire and brimstone nonsense about the signal-stealing piratepocalypse.

        And I think you're implying this, but all of the pirateocalypse nonsense, whether it's regarding Aereo or Bittorrent-- all of it really comes down to "we want to maintain our current extremely profitable business model in the face of changing technology which renders it obsolete." Like record labels and news organizations and all the other forms of media and information-related industries, they will need to be dragged kicking and screaming into the Internet age.

        • No, they do not need to be dragged kicking and screaming into the Internet age. They need to be dragged into the street, forced to kneel then shot with ar-15 so many times you can see light through them. They are actively destroying innovation that could have made them money, us more content and convenience as well as promoted our culture. So the best thing at this point is destruction and replacement. If Aereo finally forces them to offer ala carte then so be it.
    • The networks would love to end free OTA broadcasting, anything that makes it harder to do so is an enemy of the networks.

      • Re:Idiots (Score:4, Informative)

        by Simozene ( 899342 ) on Friday July 11, 2014 @08:54AM (#47430469)
        They can end free OTA broadcasting... they just need to give the wireless spectrum back to the US Government. Not going to happen.

        • Re: (Score:2)

          by grahammm ( 9083 )

          Or they could encrypt the OTA transmissions and require viewers to use a CAM [wikipedia.org] to decode them.

    • What the networks fear is delivery of TV content over the Internet. Now that everyone is getting streaming boxes of one make or another, this would invalidate their entire business model.

    • The US taxpayer gave away airwaves to broadcasters in exchange from free service. The broadcaster can recoup costs and make a profit through advertising. Cable companies pay because they collect all signals and transmit to everyone. Aero rents an antenna and a DVD and records specific shows. I think the SCOTUS only looked at present revenue, no the long term impact of limiting broadcaster viability in the age of the internet. I have the right to place an antenna anywhere and receive a personal signal or r

  • Not Flip Flopping (Score:3, Insightful)

    by Anonymous Coward on Friday July 11, 2014 @08:21AM (#47430307)

    They aren't flip flopping at all. They're accepting the ruling against them and adjusting how they do business to remain in accordance with the court ruling.

    Tough shit broadcasters. Deal with it.

    • That all hinges on whether Aereo changes the way it does business so it qualifies for the requisite cable licence, and the channels it wants to rebroadcast give it permission to carry their content, which after months of arguing that it isn't a cable company, and directly antagonising said channels, is probably not terribly likely.

  • Simplified summary (Score:5, Funny)

    by cdrudge ( 68377 ) on Friday July 11, 2014 @08:23AM (#47430321) Homepage

    So a simplified summary of the issue is:

    Aereo: We're not a cable company, we don't have to pay royalties.
    Networks: Yes you are, you have to pay us
    Aereo: No we aren't. Sue us.
    Networks: Ok
    Lower Courts:You're like a cable company.
    Aereo: Are you sure?
    SCOTUS: Yes.
    Aereo: Crap. We'll be a cable company and pay the royalties then.
    Networks: You're not a cable company
    Aereo: C'mon man!

    • Looks like you got this in just before robbak [slashdot.org]

    • Networks: Your honors, if it pleases the Court, we would like to offer a political bribe to Congress.
      SCOTUS: We'll allow it.

    • Re:Simplified summary (Score:4, Insightful)

      by Solandri ( 704621 ) on Friday July 11, 2014 @10:11AM (#47430923)
      Close, but what's happening here is similar to what happened with Pandora and online music broadcasters. They tried to get by by paying the same royalty rates as radio stations, which are negotiated between the RIAA and all radio broadcasters en masse. The RIAA smelled an opportunity and finangled the courts so Internet radio got defined as something new and different, and thus they could negotiate rates against a much smaller and less established entity. Consequently, Internet radio pays much higher royalties than broadcast radio.

      I suspect the TV stations are trying for a similar play here. It's completely illogical (like saying you're not buying the movie, you're just buying a license to view it; but then saying you need to buy a new one at full price if you're upgrading from VHS to DVD to Blu-ray), but logic is secondary to them if there's an opportunity to extract more money from people. I think that's my biggest gripe with Copyright law - since it's a completely artificial monopoly I think the rules governing it must make logical sense in order for supply and demand to work as with natural property. But instead the copyright holders are twisting that artificiality to completely illogical means that break how markets naturally work.

    • > Lower Courts:You're like a cable company.

      Not exactly. Every lower court agreed entirely with Aero. It was only the Supreme Court that said "You look like a cable company, so the copyright that was written just for cable companies applies to you."

  • So, how does this go? (Score:5, Insightful)

    by robbak ( 775424 ) on Friday July 11, 2014 @08:23AM (#47430327) Homepage

    Companies: Hey Courts, Aero is a cable company!
    Aero: We really aren't.
    Courts: I agree with the Companies. Aero is a cable company.
    Aero: Sigh, I guess we'll have to become a cable company then.
    Companies: I Object! Aero isn't a cable company!

  • Go Aereo! (Score:3, Insightful)

    by Simozene ( 899342 ) on Friday July 11, 2014 @08:23AM (#47430333)
    The cable companies simply want to put Aereo out of business using whatever means necessary. The SCOTUS ruling might actually be a blessing in disguise. If they can legally be classified as a cable company, and therefore obtain a compulsory license to the content, they will be able to rearchitect their entire system to make it more efficiently able to serve a large number of customers. Even after paying for the compulsory license I believe they will still be able to keep the costs way down and provide a great and inexpensive service to their users.

    • If the companies raise a suit in the opposite direction, Aereo can point back at prior suits, enter in prior arguments against them as evidence, and try to classify the whole tirade as a SLAPP.

      That is to say: Aereo can reference back that the same people suing them "because they're not a cable company" made arguments and successfully sued them "because they are a cable company." It can show the same entities suing them, successfully, with arguments diametrically opposed to the premise of the current ca

      • I'm not sure it would fall under SLAPP [wikipedia.org] (perhaps something else, though)

        Regardless, the idea of a "gotcha" moment does not work in US courts. The evidence would be shared with the other side well in advance of the court date, and arguments would be tailored accordingly.

        • If you sue someone for putting a fence on their lawn and screwing up your nice, pretty neighborhood with a fence--because fences are universally visually disruptive--and then sue them for not having a fence, something else is going on.

          In this case, there are obvious business dynamics in play here. What those dynamics imply may not be obvious, but that the dynamics exist is blatant. A business raising conflicting lawsuits is obviously trying to play some kind of legal three card monty, and forcing the co

    • Yeah, this could lead to the demise of the cable companies as we know them. For a long time I've said cable TV/Internet needs to be regulated as a utility. With a utility like gas or electricity, the utility company owns the pipes but is prohibited from selling the content that's carried over the pipes. They can set up a subsidiary to sell the content, but they must also allow other gas/electric suppliers to sell to customers at the same transport rates they charge their subsidiary. Those transport rate

  • Why not? Learn from Verizon.. (Score:3)

    by i_want_you_to_throw_ ( 559379 ) on Friday July 11, 2014 @09:04AM (#47430507) Journal
    The broadcasters are not happy with this move, of course, claiming that Aereo should not be allowed to flip-flop on how it defines itself.

    Verizon has been on a tear to get itself reclassified as a common carrier [gizmodo.com] for a while.

    Loopholes: not just for big companies anymore.

  • The Television networks really like bullet holes in their feet don't they? I'm always amazed by their insane drive to live in the 1960s while the rest of us have moved on. If Aereo has wanted to really play unfair, they'd have moved to a country without copyright law, hid their Antenna arrays and VPN's the signal overseas to redistribute it. There'd be nothing the networks could do. Instead they offered them cash and are getting frowned on... pfft.

  • If Aereo is now considered a cable company then presumably it will be paying the same fees to, say, WABC7 in New York as any other cable company operating in New York. So why would WABC7 (or any other station) be unhappy with that?

    They get more eyeballs watching their ads and they get the same money from Aereo as they do from cable companies.

    • Re: (Score:2)

      by Imagix ( 695350 )
      Because the people paying for ads to show on WABC7 in NY are expecting viewership in NY to be the ones consuming the ads. If the audience is now nationwide, then the value per eyeball goes way down since now a smaller percentage of the eyeballs matter. So actually both sides of the equation don't like it. The advertisers aren't advertising to the demographic they want, and since the demographic is now much wider, WABC7 can't charge as much per eyeball since many of them are useless to the advertiser.
      • Aereo never showed content outside the broadcast coverage area and I don't see evidence they intend to now. This has been pointed out slightly less than a million times so far in similar threads, and is blatantly obvious if one visits the company site.

        • Re: (Score:2)

          by AK Marc ( 707885 )
          https://www.aereo.com/ [aereo.com]

          Well, their site doesn't say anything like that anymore, as it's mostly down because of the ruling.
          • Good point.

            It's a fact however that they didn't do that, and it's been discussed ad nauseum.

            • Re: (Score:2)

              by AK Marc ( 707885 )
              How did they verify home address? by billing address, or statement by the subscriber?
              • I never had the service but I think it was billing address, any location services available on the platform and IP geolocation. Nothing is perfect but they did seem serious about restricting access to the market a person was in.

                When I initially checked I wasn't in a serviced area and getting around the restrictions seemed possible but not worth the effort due to the physical address validation. Paying for a mail forwarding service in NYC just to watch NBC? Nah. Then they came to my town, and then they got
  • According to Ars:

    the royalties are set by the government, not the broadcasters

    --> Is the above true, does someone know this for certain?

    --> If so, what would the marginal cost be per user?

    One other thing to consider is that Aereo has pretty good software developed right now and if they don't need farms of antenna's with local presence anymore, they could theoretically be located anywhere if they are, effectively, a retransmission service and would no longer need to build out local infrastructur

    • The FCC disagrees: http://www.fcc.gov/encyclopedia/retransmission-consent [fcc.gov]

      Also, everything I could find about statutory royalties only applied to audio recordings.

      • I emailed the author of the Ars article, this is what he said though I can't opine as to whether or not it is truly applicable (though I'm certain Aereo's attorney's would know for sure though it seems too low to me intuitively...):

        The fee is (more or less) 1% of gross revenue if you're a cable system.

        See section 111 here:

        http://www.copyright.gov/title... [copyright.gov]


        (F) If the actual gross receipts paid by subscribers to a cable system for the period covered by the statement for the basic service of providing

    • My understanding is that the license would cost at most 1.064% of their gross revenues, and potentially less as there are preferential rates for cable companies with smaller revenue amounts (and I'm unclear if it's done on a per-market basis)

  • Good for them for not giving up. Now they don't really have to stick with just local channels either. It will be interesting to see what the cable companies do to compete if Aereo starts doing well.

  • What about the ads (Score:5, Interesting)

    by jandrese ( 485 ) <kensama@vt.edu> on Friday July 11, 2014 @10:45AM (#47431213) Homepage Journal
    As I understand it, if they get classified as a cable company Aero will be legally allowed to put their own ads into the stream, overwriting the ads the original broadcaster put in there or maybe removing them entirely if they still want to be an entirely subscription driven service. They could really seriously piss off some OTA broadcasters with this approach.

    • Re: (Score:2)

      by cdrudge ( 68377 )

      Where do you understand that from? AFAIK cable companies don't insert ads into the local networks (ABC, CBS, NBC, Fox, etc). They do insert ads into "cable channels" but those ad slots are specifically designed for the cable companies to sell ad space for. There may be a default commercial that plays for the national feed, but it can be overlaid with a local ad if the slot sells.

      • Re: (Score:2)

        by jandrese ( 485 )
        I understood it to be the entire reason they have to pay fees to rebroadcast the material: because they were denying ad revenue to the broadcasters.

        • Re: What about the ads (Score:2, Interesting)

          by Anonymous Coward

          You understood wrong. Multichannel providers pay the local stations who wish to be paid, and don't pay the ones who request their must-carry rights. Never does a cable company insert their own programming over a local station (except in the case of sports blackouts, and this is often done by literally blacking out the station instead of replacing it with other programming).

  • The broadcasters are not happy with this move, of course, claiming that Aereo should not be allowed to flip-flop on how it defines itself.

    Which, of course, Aereo didn't. The broadcasters and the supreme court defined Aereo, and Aereo's is just working within the space in which they were confined by the law.

  • Does not matter to me (Score:3)

    by paiute ( 550198 ) on Friday July 11, 2014 @11:41AM (#47431639)
    The reason I subscribed to Aereo was that it was cheap enough that those few times I wanted to watch local TV on my tablet were reasonable. If they raise their rates, I will just go out and buy an HD antenna of my own and not pay them anymore.

    • HD antennas are just UHF antennas. Don't be a sucker.

    • Re: (Score:2)

      by GTRacer ( 234395 )
      I tried two antennas, one powered and the other not. Neither picks up squat, even though I live in a large city (>1mil population in the MSA) and I'm supposedly within good range of the major affiliate towers. I was seriously jonesing for something like Aereo as local channels are all I really watch. I was so ready to cut the cord...

    • Re: (Score:2)

      by antdude ( 79039 )

      Why didn't you get an antenna and avoid paying at all?

      • Re: (Score:2)

        by paiute ( 550198 )

        Why didn't you get an antenna and avoid paying at all?

        I built an HD antenna out of scrap, but the cost of Aereo was so low that it won out in the laziness contest over connecting cables, siting the antenna, etc. If the price of Aereo goes up, the antenna option will win out.

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