Cablevision Sides With Sometime Enemies

by , Sep 24, 2012, 4:59 PM
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There’s a lot of irony going on here. In 2010, Cablevision had Fox off the air in a nasty fee dispute. Similarly, it now has New York’s CW affiliate (WPIX) blacked out, unwilling to meet its payment demands. And yet, it’s gone to court trying to help Fox and WPIX get the dollars it hates paying them.

The common villain is Aereo, the service backed by IAC Chairman Barry Diller that streams live broadcast channels to mobile devices and soon an array of PCs. Beyond the streaming with packages costing $1 a day or $80 a year, Aereo offers DVR-like functionality. On Friday, its CEO Chet Kanojia said Aereo has some deals to offer other programming beyond CBS, NBC etc. and expects to be in perhaps 15 markets in the next year.

The Big Four broadcast networks and others such as Univision and Tribune-owned WPIX have sought a preliminary injunction to stop what they view as a Diller Killer. Aereo, as they see it, would cost them ad dollars and cut them out of carriage fees, or retransmission consent payments.

Over the summer, a federal judge nixed their request. They’ve appealed and Cablevision has filed a brief expressing its support for the destruction of Aereo.

Here’s another irony: Aereo has based its defense on a Cablevision victory. But Cablevision says stop taking advantage of our success – that’s our money-maker, you don’t qualify.

Several years ago, Cablevision won the right to operate a remote-storage DVR on grounds that only one household could use it at a time. That made usage a private performance under the law.

Aereo has a farm of antennas, expressly to allow for the same protected private performances. Only a single person can use an antenna at once.

When Judge Alison J. Nathan declined to issue the injunction, she found “on the key points on which Cablevision actually relied … Aereo’s system is materially identical.”

In its brief filed with the appeals court, Cablevision argues even with the “one-at-a-time” antennas, the opportunity to use them is available to anyone, making Aereo a facilitator of public performances – a copyright violation.

Kind of like a Hampton Inn. “We all understand that hotels are ‘public accommodations’ because anyone willing to pay can get a room,” Cablevision writes in its filing. “The fact that rooms are used on a one-at-a-time basis, and are not available to others once occupied by a guest, does not change the fact that the hotel is offering the rooms ‘to the public.’”

With Aereo, Cablevision had two ways to go. It could have played offense or defense. By joining with the broadcasters, it chose defense.

In football terms, Cablevision’s chief Jim Dolan is dropping back in coverage. In contrast, Time Warner Cable CEO Glenn Britt has indicated he’s a running back interested in plowing through the line.

Both cable operators face two considerable threats: higher content costs and cord-cutting. Escalation in content fees is partly accentuated by having to pay to offer local stations, owned by the Big Four and others.

Two years ago, Cablevision balked at paying Fox what it wanted. So, the network was blacked out in New York for two weeks, depriving viewers of several World Series games. Now, the cable operator is in a current stand-off with Tribune that has WPIX off the air in New York. It recently reached a deal with CBS, however, without any public vitriol.

If the courts find in favor of Aereo, that could bring a precedent allowing the likes of Cablevision and Time Warner Cable (TWC) to circumvent the despised carriage fees. What’s to stop them from building services akin to Aereo to deliver the broadcast channels into homes without costing them there?

“Aereo, I think, is a very interesting idea,” TWC CEO Britt said in the spring. “I have no idea whether the courts will find it to be legal or not, but it's certainly something we're looking at. Obviously, we've been quite interested in the whole retransmission front, and so if it's found to be legal, not paying retransmission consent, it's a very interesting thing.”

Apparently, Cablevision has no interest in the build-and-dodge path. Even so, why would it just cede negotiating leverage?

Of course, Cablevision mostly operates in markets where local stations are owned by conglomerates that also control desirable cable channels. Disney owns the ABC station in New York and ESPN. News Corp. has Fox in Philadelphia and a slew of cable channels.

So, the conglomerates would tell Cablevision if you don’t pay for the local stations, you aren’t getting ESPN or Fox News. Still, Cablevision faces off with some stations not owned by Big Media that could hold it hostage that way.

TWC would face the same challenge in markets like New York and Los Angeles. But in other markets, an Aereo-like system could save it some big money.

TWC recently was in a stand-off with the Hearst station group, which owns no cable channels. Couldn’t it have used an Aereo clone – or similar technology -- to pluck the Hearst signals out of the sky with no carriage fees? The same option could be there with stations owned by Sinclair, Nexstar and many others.

Even in large markets, Cablevision and TWC might be able to spin the prospect of no carriage fees into saving a few bucks when taking on Big Media.

Then, there’s cord-cutting. Scanning Cablevision’s court filing, it appears to fear Aereo's potential role in helping that along mightily.

Aereo certainly offers an attractive alternative to a monthly cable bill. Aereo allows access to all the networks non-stop for as little as $80 a year. Or, a user could just tune in to favorite shows at $1 a day. And, there's those opportunities to record and watch later.

Aereo isn’t sure how much it may be inspiring cord-cutting, but says among its early user base, half don’t have pay TV.

What's Cablevision's take? In its court filing, it writes that Aereo subscribers buy the service “precisely to get access to live broadcast programming without having to rely on a working broadcast antenna or cable subscription.”

Also, that “in significant respects" Aereo "supplants rather than complements" cable systems and competes directly with them and broadcast networks.

Those who view Cablevision as somewhat pugnacious when dealing with the establishment might be surprised to learn it has come down on the side of the status quo. Revenues -- or the prospect of losing them -- can make on change channels.

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