Fox threatens to leave network TV in protest over Aereo lawsuit

A court has sided with Internet TV start-up Aereo over the big networks. Now, Fox threatening to cut its broadcast signals.

A US Court of Appeals delivered a blow to TV networks in their case against online start-up Aereo. In what was viewed as a major win for the small company, the court ruled that Aereo may continue to stream broadcast TV shows via the Internet. Such transmissions do not constitute as “public performances” of copyrighted work, much to the chagrin of television networks like Fox.

The New York-based start-up came up with a clever end run around normal copyright laws. Aereo has hundreds on TV antennas in New York, each picking up broadcast TV and posting live feeds to the Internet. Aereo subscribers are then assigned to two antennas, one for recording (like TiVo) and one for streaming, which they may tap into from any computer, but will not be shared with anyone else.

The television networks’s battle with Aereo deals with the idea of re-transmission. When networks sell their programming to services like Hulu, the Web company pays the networks a re-transmission fee. Aereo, however, does not pay re-transmission fees. The idea is that consumers with antennas do not normally pay for the programming; Aereo is simply extending the reach of people's antennas to a place outside of their homes and allowing the same families to view the free programming. 

When Aereo began to gain traction, Fox, CBS, ABC, and other networks sued.

The court filing states: “No amount of technological gimmickey by Aereo – or claims that it is simply providing a set of sophisticated ‘rabbit ears’ ­– changes the fundamental principle of copyright law....”

Earlier, the courts dismissed a motion to have an injunction on the star- up. After the motion was dismissed, Fox indicated that it would consider shutting its doors to broadcast signals and switch to a subscription-only business model.

“While advertising was once the life's blood for broadcast TV, over the last few years, cable and satellite operator retransmission fees has become vital to their business,” writes ZDNet’s Steven J. Vaughan-Nichols.

Jonathan Handel, a lawyer for TroyGould Attorneys in Los Angeles, is doubtful that the networks will switch to a subscription-based business model.

“There’s still revenue to be had in broadcast,” says Mr. Handel. “If they did shut down, where does that leave the local stations?”

Handel says that this is a “high stakes game of chicken” because the networks are probably limited due to their affiliates. He mentioned the possibility of a two-tiered model where there would be a “Fox Lite” and then a regular Fox for subscribers. However, Handel is quick to explain that the networks already have subscription channels.

“The same ABC that doesn’t want you getting signals for free makes you pay for ESPN, even if you don’t like sports,” says Handel. “They’re making money by forcing a combined palate down people’s throat.”

Aereo, on the other hand, has been celebrating the court’s decision. CEO and founder Chet Kanojia expressed gratitude and confidence in a press release.

“Today’s decision from the Second Circuit Court of Appeals again validates that Aereo’s technology falls squarely within the law and that’s a great thing for consumers who want more choice and flexibility in how, when and where they can watch television,” says Mr. Kanojia in the press release. “We may be a small start-up, but we’ve always believed in standing up and fighting for our consumers.”

The next few days might reveal more about the future of broadcast. It was reported on Monday that Fox executives are “on board” with the threat.

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