Monty Tayloe

Video streaming service Aereo has about $20 million in assets, including about $4.5 million in cash, and faces $4.2 million in liabilities, plus potential damage claims from broadcasters, the company said in a Chapter 11 bankruptcy filing Thursday in U.S. Bankruptcy Court in Manhattan.

A video industry shift toward over-the-top delivery could lead to unbundling of content and a decline in revenue for video providers, said Needham & Co. analyst Laura Martin at a Technology Policy Institute panel Friday. CBS's announced plan to offer OTT content (see 1410160058) will cause it to lose ad revenue and some of the money it receives as part of cable bundle, in exchange for the likely smaller amount of money customers will pay to watch its content online, Martin said. “It's a shitty trade.”

Aereo is cutting staff in its Boston and New York offices, Vice President-Communications and Government Relations Virginia Lam emailed us Thursday. “We are continuing to conserve resources while we chart our path,” Lam said. “This was a difficult, but necessary step in order to preserve the company.” In a letter to the company's Boston employees obtained by website Betaboston, Aereo CEO Chet Kanojia said the company has been unable to obtain outside investments since the recent nationwide injunction was granted against it by U.S. District Court in Manhattan Judge Alison Nathan. Lam said the company is looking for a way to continue. FCC Chairman Tom Wheeler and other commission officials have recently mentioned Aereo extensively in connection with a draft NPRM on classifying linear over-the-top video services as multichannel video programming distributors. The broadcasters' case against Aereo in New York has yet to be tried on the merits, and would likely continue in some form even if Aereo were to go out of business, Fletcher Heald attorneys Harry Cole and Kevin Goldberg told us. Though not involved in the case, Cole and Goldberg follow it for the firm's blog. Though broadcasters could pursue their case even if Aereo were to go out of business, the sort of default judgments that likely would occur with a defunct defendant are unlikely to further the broadcasters' legal agenda, said Cole and Goldberg. Fletcher Heald represents broadcasters, though not in any cases involving Aereo. Lam declined to comment further on the scope of the layoffs.

A draft rulemaking notice (NPRM) proposing classifying linear online video providers as multichannel video programming distributors wouldn’t immediately change much for over-the-top companies, said cable and content officials in interviews Wednesday. The NPRM, circulated late Tuesday according to an FCC official, would enable over-the-top services to take advantage of program access and retransmission consent rights to better offer competition to cable incumbents in the video market, said FCC Chairman Tom Wheeler in a blog post Tuesday (see 1410280053). Retrans rights would still leave OTT services unable to stream broadcast content without also negotiating for content rights, and program access rights apply only to negotiations with vertically integrated distributors, which in practice largely means Comcast, said industry officials.

The incentive auction is “interesting” to broadcasters even if the values for stations involved are half the amounts projected in the FCC’s Greenhill & Co. price estimates (see 1410020029), said Meredith Local Media Group President Paul Karpowicz on Meredith’s earnings call Thursday. Though Karpowicz said he believed the auction would happen “no question,” Meredith CEO Stephen Lacy said he doubted the auction would happen during his working career and he wouldn’t hold his breath waiting for “bags of money” from the auction to come to Meredith. According to Karpowicz, the Greenhill estimates show a Meredith station in Phoenix as worth in the auction a fraction of the value of another Meredith station in Springfield, Massachusetts. Phoenix at No. 12 is a much bigger Nielsen market than the designated market area including Springfield (http://bit.ly/1xenP5R).

Oral argument in the court challenge against the FCC incentive auction order by NAB and Sinclair could be heard as early as March, said the briefing schedule released by the U.S. Court of Appeals for the D.C. Circuit Thursday. Final briefs are due Jan. 27, and oral argument is typically heard at least 45 days after the last briefs are filed, the order said. In an expedited case such as this one, oral argument is typically heard very soon after the final brief, an attorney experienced in such matters told us. The court’s schedule is very close to the one requested by all three parties to the case in a joint filing (see 1410060045), designed to allow the case to wrap up before the mid-2015 incentive auction. NAB and Sinclair asked to brief their cases separately, since their objections are focused on different sections of the auction order. NAB raised issues about the commission’s use of updated OET-69 software, while Sinclair argued that the FCC violated the law by requiring displaced licensees to cease operating on their old channels within 39 months of the auction even if their replacement facilities aren’t usable. The D.C. Circuit said petitioners will file their briefs jointly, limiting the amount of space each argument will have. Their initial brief is due Nov. 7.

A draft NPRM that would seek comment on broadening the definition of what the FCC considers a multichannel video programming distributor to include linear over-the-top video providers (see 1410010086) is being shared among some offices on the FCC's eighth floor, and Media Bureau staff has been reaching out to OTT and cable companies to discuss it, said commission officials and industry officials in interviews. Remarks by FCC Chairman Tom Wheeler and a recent speech by General Counsel Jonathan Sallet (see 1410170039) indicated an interest in the item at the commission's highest levels. Officials at the FCC, in OTT video companies and in the cable industry told us it's not clear if the item is intended to bring online programming into the FCC's purview, provide regulatory certainty for OTT companies like Aereo or increase competition for large cable companies such as Comcast.

Rulemaking notices seeking comment on preserving white space channels and on the mechanics of the incentive auction are next “in the immediate pipeline” in the FCC’s march toward the auction, auction Task Force Chairman Gary Epstein said at an FCBA brown-bag lunch Thursday. Though Epstein and Incentive Auction Vice Chair Howard Symons said no specific dates are available for when the items would be issued, Epstein suggested the items would be out “this fall” and affirmed that they were still working toward holding the auction in 2015. The task force heads also discussed their upcoming “road show” outreach effort to induce broadcasters to participate in the auction, which is also expected to begin soon. “We won’t have an auction unless broadcasters come to participate,” Epstein said.

Aereo is likely to face some form of preliminary injunction against its streaming TV service, after oral argument on the matter in U.S. District Court in Manhattan Wednesday, said attorneys and attendees at the roughly hourlong hearing in interviews. U.S. District Court Judge Alison Nathan didn’t issue a decision on the nationwide preliminary injunction against Aereo requested by broadcasters, but said she would rule on the matter soon, noted officials connected with the case. Aereo some broadcaster plaintiffs declined to comment on the oral argument, which wasn't webcast.

Access to broadband Internet is critical to “full and fair participation” in society and the economy, and not having access to it is comparable with not having had access to broadcast TV in the 1960s, said FCC Chairman Tom Wheeler in the United Church of Christ’s 32nd Annual Everett C. Parker Ethics in Telecommunications Lecture Tuesday. The lecture is named for the UCC Office of Communication founder, who successfully battled with the FCC to increase access to the broadcasting industry for African Americans.