“This… this is the instrument of your liberation!”

– Bane – Batman: The Dark Knight Rises

I’ve written previously on new technologies or services in the content distribution space that scream about how disruptive they are, the new found efficiency they bring, or my personal favorite – the “democratization” of content they unleash.  Unfortunately, when you strip away the made-for-TechCrunch adjectives, we are (in many cases) simply left with a Rube-Goldberg like contraption built for one thing and one thing only – stealing someone else’s content and monetizing it.

Early on we were confronted with companies such as Redlasso and Limewire, each of whom built their business off the distribution and monetization of 3rd party content that they had no rights to.  Their position was indefensible and in the end they either worked with the content owners to reach a mutually beneficial arrangement or simply shut down.

In 2010 we heard about IVI and FilmOn whose disregard of US Copyright, Retransmission consent and a host of other laws or rulings designed to protect both content owners and consumers, landed both in Court with IVI ceasing its operations and FilmOn simply “pivoting” to a new manner of content mis-appropriation.

Fast forward to today and courtesy of equally dubious interpretations of US Copyright and Retransmission Consent laws, the pirates have donned new clothes – this time in the form of master antenna farms that capture broadcast content – in order to deliver it to consumers over IP.  These companies – Aereo (backed by Barry Diller) and AereoKiller (formerly known as FilmOn… Yep the same one) – each claim that by assigning an individual antenna to each subscriber and then transmitting that signal to the individual, they do not run afoul of free-to-air broadcast rules and are not a cable system as that term is generally (and legally) defined.

“Theatricality and deception are powerful agents to the uninitiated…”

 – Bane – Batman: The Dark Knight Rises

The broadcaster’s obviously didn’t buy the argument and immediately sued on various grounds to stop both companies from broadcasting their signals without their consent.

In the case of Aereo it actually won round 1 in the courts when the 2nd Court of Appeals threw out broadcaster’s motion for a preliminary injunction – essentially the shut down of Aereo until the larger litigation can be settled in court.  Whereas AereoKiller was dealt a severe setback when, in December 2012 the U.S. District Court for the District of Central California, granted Fox a preliminary injunction, finding that WOULD violate copyright law by its planned retransmission of broadcast signals.

Two companies, same models… yet entirely different legal outcomes – so what gives?

Well, a couple of things.  First, Aereo has laid out a very compelling legal argument in the face of a less than perfect legal brief by broadcasters.  Second, AereoKiller and its outspoken billionaire founder Alki David, have taken a more combative, in your face stance, with little regard for the Copyright and Retransmission laws, that did not serve them well previously as FilmOn and clearly hasn’t done them any favors now.

While we all watch this story unfold in the courts, its’ important to understand what the companies are alleging and what the law is regarding copyright and retransmission.

To start with, each company claims they are not a cable company and are simply an enablement platform allowing individuals to “rent” an antenna to receive free, over-the-air broadcast signals directly on their IP devices – smartphones, tablets, computers, etc.  As such, they are not required to enter into re-transmission consent with the broadcasters as they are not “re-transmitting” the signal but allowing consumers to access their own antenna for content that is already offered for free.

Alternatively, should they be viewed as “re-transmitting” the signals, each company believes that US copyright law, specifically Section 111, allows them to make use of broadcast television content – provided certain criteria are met – under a compulsory license scheme.  The net result of which would be that both Aereo and AereoKiller would be able to pay less than fair market value for the broadcast content that it distributes.

Yet their analysis is flawed.

Copyright law is very clear and the exemptions from exclusivity for what are called “secondary transmissions” of broadcast content are essentially only available to Multi-Dwelling Unit (MDU) providers, satellite carriers, educational providers and non-profits.  The only real glimmer either company has in this section is sub-section a(3) that states:

“the secondary transmission is made by any carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others:  Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmissions;”

However, by virtue of their video players and grid guides, each falls short of this definition as they go well beyond being the “dumb pipe” and are actually the enablement platform and presentation layer of the content.  In essence, a cable company.

As I’ve stated in my previous post, the real ramifications here, other than companies like Aereo and AereoKiller giving legitimate content aggregators a bad reputation, is what this portends for content owners should either one be successful.

We all know that the broadcast industry needs to evolve with today’s changing technological and consumer environment.  But by stripping away the ability for a content owner or producer to negotiate in the open market a fair price for their wares and require them to accept a compulsory license fee (which is an infinitesimal fraction of what it actually costs to produce the content) the industry as a whole will fold in on itself.  Who cares if you can pay $8.00 for broadcast content if there’s nothing to watch?  Which may well be the case if NewsCorp and Univision make good on their threats to move their broadcast programming to cable should Aereo and its kind ultimately succeed.

While I don’t see believe that we going to see the death of broadcast content as we know it today, I do believe that Aereo’s approach, while ingenious, amounts to little more than a unique (and technologically savvy) way of avoiding the very real necessity of appropriately licensing content from the broadcasters.  I’ve negotiated numerous transactions at the national and local broadcast level for online and mobile distribution of video and these deals are not difficult to come by as nearly all broadcasters and cable programmers are open to working with online service providers.

I like the idea of Aereo and hope the company is able to find away to take its technology and marry it with an appropriate business model in partnership with broadcast programmers where everyone wins.  Until then, they’re just another pirate IMHO.