Barry Diller: the legal battle is over


Barry DillerThe IAC Chairman and Aereo head honcho told a crowd at the Milken Institute’s Global Conference in Beverly Hills 4/29 that Aereo’s recent legal victories make it clear that networks and studios suing to stop his streaming service are fighting a losing battle: “No incumbent ever wants to see its territory invaded. That makes them angry if you invade the territory of a closed system…We think the lawsuit is over, but what we think is broadcasters are doing is saying this is a terrible threat and they want get Congress to act. I don’t think it will happen, but it’s up for grabs.”

Diller he’s not trying to disrupt the cable and broadcast industry. Aereo is just part of the changes in business models being brought about by technology: “The reason it interested me was not that I wanted to go into the newly enabled business of technology with antennas. We’re just starting on video…It’s just beginning and it’s going to absolutely change most things. It will break up the closed and bundled system of cable and satellite distribution because I think it has gotten unwieldy,” The Hollywood Reporter quoted him as saying.

When asked about the threat by broadcasters to move their prime programming to cable TV to protect it from Aereo, Diller said “there is literally no chance. I think they are doing it so enough people will say that would be terrible ‘Let’s get Congress to change the law’. The networks most profitable business are their local stations. The idea they can rip the primetime programming from the local stations and the stations will survive is kind of silly… These companies — and I used to be one of them — have for years resisted any kind of change. What fool wouldn’t resist change if change might take away their neat little situation?”

Diller later joined Willow Bay live from the conference on Bloomberg TV’s “Lunch Money”. With Bloomberg TV’s permission, here’s what he said:

Diller on Aereo’s big picture:

“The big picture is to change the centricity of what has been closed systems to an open internet system. The platform allows you to get free over the air broadcasts. If you don’t like cable, paying $150 a month or so for services, if you don’t happen to not live without ESPN, if those are true for you as a consumer, being able to watch all free broadcast, all the events all of the local television for $8 a month is an alternative.”

On whether Aereo will create content and channels of its own:

“We are not in that long, a radical revolution. We’re only beginning it in video. It started a few years ago. The bandwidth was not enough until a few years ago. The centricities will shift to the internet. What would you rather have, a satellite connection with a cable box and another box or would you rather have one wire that connects you to high speed bandwidth and able to get the enormous optionality of the internet?”

On whether Aereo’s business is worth the continual hassle of litigation:

“I do not know. I cannot answer that. There are conditions where if a certain amount, 10 million, 20 million U.S. households utilize the platform that will be very profitable. This is not done because I think here is a gold mine I can plant my flag on it. I am doing it because to me the ability to get the world to utilize the internet for all its information, entertainment, news, video to me it is a big shift. I understand broadcasting, no incumbent wants anyone in. That is an unbreakable rule.”

On broadcasters want to be compensated for the broadcasting signals:

“The law of the U.S. is that if you have an antenna, broadcasters must provide a signal that you can receive without any interference. That is the right of Americans who gave licenses to broadcasters. That is the covenant. We are providing a technological method for them to receive them. In 1972 or 1973, [broadcasters said] the video recorder was an illegal thing. They went to the supreme court. And of course we all enjoy video records.”

On whether Rupert Murdoch is taking this threat seriously:

“I think what they are doing is making a lot of noise in the hopes they will get relief from Congress. I do not think they see Aereo as a “threat” but what they are nervous about is the shifting ground underneath them. As it becomes more and more difficult to justify ever increasing cable fees, satellite fees, as programmers and operators want more and more money and there are more and more programs, as that closed circle becomes ever more pricey there are going to be chinks in that armor if the technology which now allows it, will allow it. My attitude has been to jump into something that looks difficult and is against what people think will succeed…”

On Newsweek going digital only:

Printing a single magazine is a fool’s errand if that magazine is a news weekly. There are some magazines that have no competition essentially in their field, luxury magazines. For a news magazine, which is a bit of an odd phrase today, it was not possible to print it any longer. We said we will offer digital products. We have a very solid newsroom. We will see. I do not have great expectations. I wish I had not brought Newsweek. It was a mistake.”

On why he purchased Brightline:

“We are a publisher, not a distributor. Amazon is a distributor. We looked at publishing controlled by five old line publishing hoses, honorable, very deep in their histories and all of that. They have no clue about online. It is an area between author and publisher that is very troubled. It is difficult to totally get rid of incumbents – old line incumbents – I am sure some publishing companies will survive. But if there is a competitor who has plenty of resources that comes in with an understanding of internet distribution and understanding of how you get subscribers and people to buy things on the internet and the company has a good editor who can publish good stuff, that company, I think, has a very open window to succeed.”

Aereo takes signals from over the air broadcasters without paying royalties or retransmission fees and delivers them online to viewers for $9/month in NYC and Boston. 20 other markets are expected to be rolled out.

Aereo offers consumers a full lineup of broadcast stations. That includes the ability to fast-forward commercials and DVR programs for later use.

On 4/1, The Second Circuit Court of Appeals declined to issue an injunction against the service in a legal battle with broadcasters, networks and film studios who say Aereo is the same as a cable network, so it falls under the 1976 Copyright Act which bans unlicensed communications with the public by means of any device or process.

The three-judge panel ruled that by providing individual streams to consumers Aereo was similar to a consumer streaming a TV show from a Slingbox in one room to a TV set in another room. The judges said Aereo has one TV antenna and one recording device for each subscriber, so it is not the same as a cable system.

RBR-TVBR observation: What may end up being the biggest problem for Aereo is the redistribution of broadcasters’ signals over the Internet. No one is allowed to do that—why should Aereo? We get that there is a bit of legal ground here with the little antennas for each subscriber, but the fact that the signal is sent via the internet and charged a fee is highway robbery, so to speak. If the courts rule in favor of Aereo, then why bother with copyright law at all? Let’s rebroadcast AMC, MTV and Showtime live to subscribers over the internet—laws don’t apply anymore!