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Cable Technology Feature Article

March 13, 2014

Legal Eagles and 'Court TV': Aereo, Comcast and Blackout Rules

By Bob Wallace, VP of Content

Lawyer jokes aside, to survive and thrive in the ever-changing TV world, you’d better have top-shelf counsel on hand and current, as there’s nothing funny about litigation, laws and decisions that could freeze or kill your business and technology plans, products, services, patents and mergers.

Next month, innovator Aereo and broadcasters plead their cases to the Supreme Court; with CBS saying on March 12 it will stop its broadcasting model if the upstart wins. Comcast awaits a decision from the feds on its contested bid to merge with rival Time Warner (News - Alert) Cable. Politicians have introduced legislation to wipe out sports blackout rules. And the net neutrality beat goes on.

In the video world, courts can have more power than content, legislation can trump FCC (News - Alert) policy to reshape industry landscape and legal decisions often determine the complexion of competition in an industry that prides itself on technology and business model-fueled innovation.

Law & Order?

The Main event is Broadcasters vs. Aereo. Facing a legal challenge in virtually every launch market, upstart Aereo, which streams the over-the-air signals of broadcast TV stations to users for $8 a month, actually pushed to have the Supreme Court hear its rivals’ (ABC et al) case that it’s illegally retransmitting its content without compensation.

 “We said from the beginning that it was our hope that this case would be decided on the merits and not through a wasteful war of attrition,” said Aereo CEO and Founder Chet Kanojia in a prepared statement. The High Court agreed to hear arguments earlier than expected, starting next month, instead of this fall.

“We look forward to presenting our case to the Supreme Court and we have every confidence that the Court will validate and preserve a consumer’s right to access local over-the-air television with an individual antenna, make a personal recording with a DVR, and watch that recording on a device of their choice,” added Kanojia.

Since these words, Aereo suffered its first legal defeat, resulting in a service shutdown in Salt Lake City and Denver. In several launch cities, consumer demand for the streaming service has at least temporarily outstripped supply/capacity. Not surprisingly, the National Association of Broadcasters (NAB) filed a brief in support. Both the NFL and Major League Baseball have also backed their plaintiffs in the case against a company whose innovation threatens the broadcasters’ long-time business and technology model.

One aspect has been resolved: ABC, DISH Networks and The Hopper. In perhaps the best evidence of win-win for legal combatants, a year-old lawsuit between ABC and DISH where the former wanted the satellite TV providers’ Hopper DVR ad-skipping technology shut down, ended in a case where all, including customers, could claim a win.

Just last week, the two parties announced that DISH would dilute (some users say cripple) its appealing ad-skipping in turn for a groundbreaking content deal that delivers ABC/Disney (News - Alert) (including ESPN) live-streamed programming to DISH for a TBD Over-The Top (OTT) service designed to be far cheaper than traditional pay-TV service. Key ingredient/differentiator: live pro sports match and regional sports networks. This offering portends to help reshape the near and long-term future of TV, whether others follow suit or not. Stay tuned.

Sports Blackout Rules are still up in the air. Is this a case of policy-gone-wild, or just old and ineffective? When politicians and the FCC “interact” it could be both. U.S. senators from opposing parties Richard Blumenthal (D-Conn.) and John McCain (R-Ariz.) introduced the Furthering Access and Networks for Sports (FANS) Act of 2013 legislation in the middle of last year’s NFL regular season.

The FANS Act, they asserted, would decrease the frequency of sports blackouts by requiring leagues to meet basic obligations to fans if they wish to continue receiving substantial benefits from the public. “Unfortunately, as a result of outdated and overly broad league blackout policies, fans across the country are often unable to watch their favorite teams because games are blacked out on broadcast stations, cable networks, and Internet-streaming platforms,” said a statement from Blumenthal’s office at the time.

The senators noted that the Sports Broadcasting Act of 1961 (SBA) provides broad exemptions from federal antitrust law to the leagues. The FANS Act would eliminate the FCC blackout rules. Eliminated would be original language in the SBA that allows leagues such as the NFL to require local broadcasters to black out home games when local teams fail to sell out most or all tickets 72 hours before game time. “While this policy may have helped increase ticket sales years ago, there is no longer any evidence that it helps to drive fans to stadiums,” the statement read. “Rather, current data indicates that stadium sales are much more closely correlated to the size of the stadium, the population of metropolitan area, and the cost of the ticket.”

In January, the FCC began work toward a rule to address the matter that some say wouldn’t eliminate blackouts as proposed by the FANS Act. The NFL said it strongly opposes changing the original rules.

What seems conspicuously absent here is that the FANS Act also benefits the broadcasters and their advertising partners whose ads don’t air (and they’re in stadium signage) in the local market of the Sunday NFL matchup if the game is blacked out. Also ticket sales are also tied to the performance of the teams. While demand for poor performing teams has an impact, blacking out the games on TV creates further damage, especially with more viewers than ever in sports history watching games from big screen TVs than from stadium seats, especially in challenging winter weather conditions.

Awaiting Ruling: Comcast (News - Alert) to Merge with Time Warner Cable

Comcast is awaiting word from the Feds on its $45 billion proposed merger with closest cable rival Time Warner Cable (TWC), which a few consumer groups, media execs and politicians have opposed. The issue’s not so much about fewer competitors for consumers in the markets TWC serves as the two don’t have overlapping network footprints. It’s more about an envisioned “monopoly broadband” position in the markets the merged entity would serve and in the overall cable industry as a whole. Bigger isn’t always viewed as better when one firm portends to emerge as the clear leader of a resource as vital to society as Internet access.

This feeds directly into debate on the never-ending topic of net neutrality, which is tightly tied to the broadband economy. Comcast cutting a special access deal with Netflix a few weeks ago rekindled the fire, again.

Many of the age-old questions that follow a big merger/acquisition appear to be at issue. They are regarding potential layoffs, customer service vanishing, pricing and overall service strategy.

Size clearly matters to some consumers as Comcast also owns content owner and broadcaster NBC Universal (News - Alert) (a deal one year old this month) and this week announced it completed the purchase of ad-serving vendor Freewheel for $350 million.

On Deck

Expect more moves from Comcast as it strives to become a more completely-stocked and resourced media power.

And what could follow in the merger department? DISH Networks and DIRECTV?

Aereo will get into more homes through traditional TV coverage of its pending Supreme Court case. If it wins, will threats from broadcasters such as CBS to move from their over-the-air transmission to cable network delivery turn into action?

Also expect sports blackout rules to finally fall. All affected parties want to get back to the present (and future). The FCC doesn’t want to get in the way of the business, political and fan masses.

Net neutrality and the broadband economy? Stay tuned.

Edited by Rory J. Thompson

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