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Cable Technology Feature Article

November 20, 2013

Eyeing Aereo, NFL and MLB Threaten to Ditch Local Broadcast for Cable

By Tara Seals, TMCnet Contributor

If you’re, say, a San Francisco 49ers fan living in Maine, chances are that you’ll miss most of your team’s season in terms of live viewing, unless you shell out for DirecTV’s (News - Alert) Sunday Ticket package or are willing to spend much of the fall at sports bars. Far-flung fans may not like it, but the existing exclusivity arrangements for sports broadcast rights are a delicately (and expensively) negotiated construct that media companies and their local TV affiliates rely on to draw advertisers and ratings and to command big retransmission fees from pay-TV distributors.

Looking to protect that existing business model, the NFL and MLB (News - Alert) have filed an amicus brief with the Supreme Court to support broadcaster efforts to have Barry Diller-backed over-the-top (OTT) TV service Aereo shut down. And they’re considering ditching local broadcasting altogether if it is not.

Aereo, which offers local free-to-air broadcasts of local TV feeds via the Internet, is a threat to the leagues given that it doesn’t pay retrans fees—and that threatens to take big money out of various pockets if it gains consumer momentum at scale.

The brief explains that the leagues get a $100 million cut of the $300 million that cable, satellite and IPTV (News - Alert) pay in retrans. But if sports content is available via other outlets, suddenly broadcasters lose some of the leverage they have to command that kind of capital for carriage rights. And, it affects the amount of money that broadcasters themselves pay to leagues for exclusive broadcast rights.

"If copyright holders lose their exclusive retransmission licensing rights and the substantial benefits derived from those rights when they place programming on broadcast stations, those stations will become less attractive mediums for distributing copyrighted content," they wrote to the court.

And, the leagues threatened to effectively move their content behind a pay wall by ditching local broadcast distribution entirely. "The option for copyright holders will be to move that content to paid cable networks (such as ESPN (News - Alert) and TNT) where Aereo-like services cannot hijack and exploit their programming without authorization,” the brief said.

The other issue is that Aereo, in theory, has the capacity to turn the out-of-market viewing construct on its ear by aggregating live sports being shown on networks and pushing it out in a “feed-on-demand” scheme accessible across its markets, regardless of geography.

"The Court’s intervention is now necessary to restore clarity and certainty in this area and to prevent the unraveling of a marketplace built upon the licensing of rights rather than the expropriation of such rights through technological chicanery," the leagues said.

That scenario is for now unlikely. The Second Circuit court of Appeals recently concluded that Aereo did not violate copyright laws by not paying for the TV station signals that it collects, but one of the reasons Aereo has survived its court challenges to date is because it claims to be nothing more than a souped up over-the-air antennae-rental service—a protective argument that goes away if it moves away from local-only broadcast. But nonetheless, the leagues raise the possibility to the highest court, noting that court decisions to date "judicially empower Aereo and similar services to destroy marketplace-negotiated exclusivity."

Broadcasters like CBS and News Corp (News - Alert). have both threatened in the past to move from a broadcast model to becoming cable networks—threats that would take some major overhauling of their lucrative TV affiliate systems to put into practice. CBS for one is moving away from that stance, though. "I don't think we are looking to do that," said CBS COO Joe Ianniello said earlier this month at an investor conference. “We like to preserve the current ecosystem."

However, "we are not going to allow the consumption of our content without getting paid for it," he said, noting that CBS will continue to litigate in the matter. It has a back-up plan however to boost its TV Everywhere options to competitively block Aereo should consumers demand that model en masse. "We're not sitting on our hands,” he said.



Edited by Cassandra Tucker





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