Lawyers for Aereo went to court this week seeking sensitive documents from Big Media ranging from carriage deals to NBCUniversal Olympic research to contracts with Netflix. The hearing came as Aereo preps its defense for a likely trial, where broadcast entities have charged it with copyright infringement, leading to irreparable harm.
A trial will deal with intricacies of copyright law. But Aereo will also seek to counter arguments that its service hurts networks sizably in their quest to collect retransmission consent payments; advertising dollars; and licensing fees from subscription video-on-demand (SVOD) providers.
Fronted by Barry Diller, the well-publicized Aereo streams live TV online, while offering DVR functionality. The subscription service is available in New York, but plans call for expansion to more than 20 cities this year. Various entities affiliated with ABC, CBS, Fox, NBCU and others have sued looking to shutter it and lost a ruling last summer that is under appeal.
In federal court Thursday, Aereo sought to persuade Magistrate Judge Henry B. Pitman partly that if it is accused of causing financial harm, it is entitled to certain documents from networks showing how they are determining the alleged damages – current and future.
So, it fought for copies of retrans deals between network owners and cable, satellite and telco TV providers. It prevailed there. The judge granted the request dating back to June 2011, just after Aereo announced it would be launching.
Aereo was also granted rights to correspondence that mentioned it, which was exchanged during carriage negotiations. The implication is Aereo will look to show that if it posed such a threat to networks, why didn’t cable operators argue they should pay lower fees?
A lawyer for ABC, Bruce Keller of Debevoise & Plimpton, said most documents from the talks don’t mention Aereo. Network owners also contend Aereo has the ones that do.
Aereo faces accusations that it will hurt ad revenues by taking viewers away from networks. But Aereo may look to flip that argument completely -- making a case that its streaming on digital devices actually can help broadcasters.
So, it wants documents from NBCUniversal related to its Billion Dollar Research Lab, where it has conducted research on Olympic viewing across multiple platforms. NBCU has suggested that viewing on tablets, smartphones and other devices does not cannibalize TV viewing, but can help increase it.
Similarly, networks have argued that DVRs can help boost viewing. Aereo might find documents at networks making that point, helping it assert that its DVR capabilities do the same.
Judge Pitman gave it that opportunity. In a broad ruling, he said network owners have to turn over documents that touch on consumer research regarding home DVRs; unlicensed remote DVRs; and unlicensed technologies that provide for the transmission of broadcasters’ copyrighted works over the Internet -- all going back to January 2010.
Aereo lawyer David Hosp from Fish & Richardson asked if that included material from the Billion Dollar Research Lab. The judge seemed to turn that over to both sides to work through out of court. (Much of the Olympic research is widely available.)
Regarding any impact it may have on SVOD revenues, Aereo sought additional contracts between network owners and Netflix, Amazon and Hulu. The information likely shows content providers are profiting handsomely -- they’ve said so publicly. Aereo could use the agreements to claim it’s not hurting the revenue stream and won’t going forward.
Netflix, Amazon and Hulu have been brought into the litigation as third parties. On Thursday, it became clear that -- like the networks -- they wouldn’t mind if Aereo just went away. A lawyer for the three online companies, Bobbie Wilson of Perkins Coie, said Aereo is “a direct competitor.” (Hulu’s antagonism isn't surprising since all three of its owners are suing Aereo.)
Attorney Wilson came seeking to place limits on Aereo’s access to highly confidential contracts. Even though Aereo’s outside lawyers are prohibited from sharing the terms of, say, a Netflix-CBS deal with Aereo executives, the judge ruled that Netflix, Amazon and Hulu have rights to make certain redactions.
Aereo did not win every request for internal documents Thursday. Apparently, it believes network owners may be encouraging viewers to subscribe to cable TV – where they receive a carriage payment – instead of using over-the-air reception. But the judge denied its request for any strategy documents there.
Judge Pitman further denied a request for a program-by-program breakdown of expenses and profits. In other words, the particulars of financials for “The Big Bang Theory.” He agreed network owners aren’t claiming damages at that level of specificity.
As a private company, Aereo has declined to release subscriber numbers. Repeatedly at the hearing, Big Media lawyers indicated the figure is around 3,000.
At one point as he sought to determine whether Aereo was entitled to some financial information, he grew interested. Aereo lawyer Hosp said he didn’t know. Judge Pitman asked for a range: above or below 5,000?
Hosp said no one in the room knows the answer. After conferring with his client, he also said provisions are in place to keep that confidential and sought to move on to another matter.
In a trial, though, Aereo might consider releasing the numbers if the amount is minimal. The company then might have a better chance convincing a jury that it’s not much of a threat to Big Media.
Of course it's not thinking that way. With advertising having launched in New York and expansion into new markets coming, it wants to grow swiftly.
No matter its size, though, a jury could find it is violating copyright law and illegally transmitting programming over the Internet. And, that may cause it to close its doors, marking one bad bet among all the winning hands Barry Diller has played.