An Ignoble Experiment

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Aereo continues to live a charmed life. Multichannel video programmer distributors (MVPDs) of all stripes--including, but not limited to cable, satellite and IPTV service providers--are paying increasingly higher fees to retransmit over-the-air broadcasts of such stellar fare as Splash and Hell's Kitchen. Aereo, meanwhile, is allowed to grab those same signals off-air without a fee and present them to consumers for $8 a month.

Obviously, something's amiss.

This week's decision by the U.S. Court of Appeals for the Second Circuit in New York that Aereo's transmissions and recordings of broadcast programming are not "public performances" of copyrighted material hardly resolved anything--the broadcasters will make sure of that. Still, since this was an appeals case, it's important to note that the decision reinforced a previous court's decision to dismiss the broadcasters' plea for a preliminary injunction against Aereo.

Aereo came out on top of the 2-1 appeals ruling because the court decided its business model doesn't infringe on copyrights claimed by broadcasters. The decision basically said it was OK for Aereo to equip subscribers with a small off-air antenna and a 40-hour DVR, then charge $8 a month for off-air broadcast signals.

The broadcasters, cloaking themselves in copyright colors, disagreed, of course, and promised to continue the fight for however long it takes either to make Aereo stop what it's doing or, probably better, reinforce the content providers.

It's probably best to take a few steps back here. Despite what the broadcasters say, this is not about "truth, justice and the American way."

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Today's Top News

1. Aereo wins another round against broadcasters

By Jim Barthold

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2. Intel closes in on programming deals for OTT service with Viacom, NBCU, Time Warner

Aereo has again prevailed--at least for the moment--in its long-running battle with broadcasters that disagree with its business of receiving and retransmitting their signals without reimbursement. IPTV--and other pay TV providers--pay increasingly high fees to broadcasters for the rights to retransmit their over-the-air signals.

In a 2-1 decision, the Second Circuit Court of Appeals agreed with a previous decision by the U.S. District Court of Southern New York that Aereo did not infringe on copyrights claimed by over-the-air broadcasters CBS, NBC, ABC and Fox.

The broadcasters wanted an injunction against Aereo, which charges $8 a month for an antenna that can pick up broadcast signals and a cloud-based digital video recorder.

The court in the majority decision concluded that "Aereo's transmissions of unique copies of broadcast television programs created at its users' requests and transmitted while the programs are still airing on broadcast television (and) are not 'public performances' of the Plaintiffs' copyrighted works."

The ruling will likely be challenged because of the impact it could have across the pay TV universe where multichannel video programming distributors (MVPDs) must pay increasingly high retransmission fees to carry over-the-air content. Aereo's model appears skim past these fees, which caught the attention of dissenting Judge Denny Chin.

"They (MVPDs) capture over-the-air broadcasts and retransmit them to customers," he wrote. The big difference, Chin said, is that "those entities (MVPDs) are doing it legally, pursuant to statutory or negotiated licenses, for a fee."

While not touching on retransmission rights, Aereo CEO and Founder Chet Kanojia, said a press release that the decision "sends a powerful message that consumer access to free-to-air broadcast television is still meaningful in this country and that the promise and commitment made by the broadcasters to program in the public interest in exchange for the public's spectrum, remains an important part of our American fabric."

Aereo, which Kanojia called a "small start-up," has some powerful backers, headlined by media veteran Barry Diller.

Right now, at least as far as the broadcasters are concerned, Aereo's influence is minimal. The service is only available in the New York City area but is planning to launch in 22 cities, including Los Angeles, later this year.

A Chicago Tribune story said that the broadcasters would continue the legal fight to try to stop both the current service as well as its expansion.

"The court has ruled it is OK to steal copyrighted material and retransmit it with compensation," the broadcasters said in a statement carried by the newspaper. "We plan to move forward towards a trial on the merits of the case, and on claims that were not impacted by this appeal."

For more:
- Aereo issued this press release (.pdf)
- the Second Circuit Court of Appeals presented this decision
- and the Chicago Tribune had this story

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By Jim Barthold

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3. Consumer Reports confirms that bundles save money, cites Verizon FiOS, WOW as top services

Intel has reportedly made headway with some pretty big programming names--Viacom (NYSE: VIA), Comcast (Nasdaq: CMCSA)-owned NBCU and Time Warner (NYSE: TWX)--as it prepares to launch a competitive over-the-top pay TV service later this year.

According to a Bloomberg story, which quoted sources "with knowledge of the situation," the three media companies "have signed off on the broad outlines of the proposed service" but, of course, some aspects need to be settled so no one is talking from any of the parties. The deal would probably include Time Warner's CNN, NBCU's USA Network and Viacom's MTV and "would give Intel critical mass to offer consumers an alternative to established pay TV services," the story said.

Intel's plan is to build a set-top box--with Intel inside, of course--then offer a modular programming package that's not quite a la carte but is less structured than a traditional pay TV service. It would then offer services across existing broadband pipes as less traditional, but still over-the-top content later this year.

According to Bloomberg, Intel is also readying financial negotiations with Fox's News Corp. (Nasdaq: NWSA) parent company and is in a "more preliminary stage" of talks with Walt Disney Co. (NYSE: DIS) and CBS.

Analysts, discussing the move with Bloomberg, thought it was a win-win for Intel and the content providers.

"It's great for the media companies," said RBC Capital's David Bank in an e-mail to Bloomberg. "Intel will have to pay a premium as the new kid on the block."

For more:
- Bloomberg carried this report

Read more about: Time Warner, Disney
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By Jim Barthold

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4. Data indicate Arris/Motorola gaining on Cisco

Venerable research magazine Consumer Reports has concluded what service providers have said for years: bundles are the best way to save money when buying telecom services. Of course service providers have also always added the proviso that bundling also glues subscribers to their services—but Consumer Reports really doesn't care about that.

"Our report (on telecom services) revealed that although rates for telecom services have been trending upward, there are proven ways to save for consumers who act boldly and tackle those costs head-on," CR Electronics Editor Paul Reynolds said in a press release.

The report also concluded, he said, that "most people have at least one decent choice in telecom."

Among those choices worth highlighting, the magazine said, are Verizon (NYSE: VZ) FiOS, which "received standout scores for its broadband speed and reliability, TV picture and reliability and even phone call quality and reliability" and Midwestern cable operator WOW, which, the magazine said, "merits serious consideration" thanks to the high markets it received for its bundled telecom service, "especially for billing and support coordination."

The benefits of bundling, the magazine suggested, are even more apparent to consumers who are willing to bargain with their providers.

"Only one in three survey respondents with a triple or quad play negotiated with their carrier, and many of them got a reduction in their monthly bill, fees waived, or an upgrade in service," the press release said, noting that approximately 44 percent of those who bargained saved up to $50 a month and 7 percent saved more than that.

The magazine also cautioned against the newest trend among service providers to drive consumers to higher speed levels with correspondingly higher broadband service fees, citing the example of Cablevision's (NYSE: CVC) Optimum service which offers a $15-a-month Boost Plus upgrade that drives broadband speeds from 15 Mbps to 50 Mbps. It's overkill, the magazine said.

"That (15 Mbps) download speed should be all the typical household needs, even if multiple users are simultaneously doing bandwidth-hungry tasks," the press release said.

For more:
- Consumer Reports issued this press release

Read more about: bundles, Consumer Reports
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By Jim Barthold

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5. Ericsson reportedly in line to buy Microsoft's IPTV biz

Perhaps all Motorola needed was a new home to flourish, or, perhaps all Arris (Nasdaq: ARRS) needed was a piece to add to its technology puzzle to supercharge its video infrastructure business. Whatever the case, it appears that the combination of the two cable equipment powerhouses, formed when Google (Nasdaq: GOOG) sold off the Motorola business late last year in a deal expected to be completed by the middle of this year, is cutting into Cisco's (Nasdaq: CSCO) market share.

Synergy Research Group has produced new data that it said showed the Arris/Motorola video infrastructure business achieving $8.8 billion in fourth quarter revenue, up 3 percent over the final quarter of 2011 and the third quarter of 2012. Cisco video infrastructure revenues, meanwhile, dropped off a bit--although they had hit an all-time high in the third quarter. It also said that the aggregate Arris/Motorola market share increasing to 12 percent. Cisco still leads all vendors with 21 percent market share.

Cisco was first to the acquisition game when it picked up NDS, a move that "saw it firmly cement its position as leader in the video acquisition market," said John Dinsdale, Synergy Research Group's managing director in a press release.

On the other hand, he said, the "bold acquisition of Motorola Home by Arris will see it leapfrog into a clear number two ranking position, well ahead of the chasing pack."

That pack is in pursuit of a pretty big pot of gold. Full year 2012 video infrastructure revenues were more than $34 billion--up 7 percent on the year--led by media data centers (up 15 percent), residential gateways (up 17 percent) IPTV set-top boxes (up 10 percent) and content delivery networks (up 7 percent) the research showed. Even software and middleware revenue grew by 7 percent year-over-year.

"If Arris can effectively manage the acquisition and the merger of activities, it will be in a good position to further consolidate its status in a market which remains highly fragmented," Dinsdale continued. "Going forward, I expect to see more M&A activity and a drive to broadband video portfolios and geographic footprint."

For more:
- see this press release

Read more about: Cisco, media gateways
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By Jim Barthold

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