The NFL and Major League Baseball are threatening to take their ball and go home if Aereo is allowed to continue streaming broadcast TV signals to subscribers without paying retransmission fees to broadcasters. In an amicus brief filed with the Supreme Court last week urging the court to agree to hear the broadcaster’s appeal of the Second Circuit’s ruling in favor of Aereo, the leagues claim that allowing Aereo and similar services to operate could leave them no choice but to stop televising their games on over-the-air broadcast channels and move all their programming to pay-TV networks:
If copyright holders lose their exclusive retransmission licensing rights and the substantial benefits derived from those rights when they place programming on broadcast stations, those stations will become less attractive mediums for distributing copyrighted content. The option for copyright holders will be to move that content to paid cable networks (such as ESPN and TNT) where Aereo-like services cannot hijack and exploit their programming without authorization.
The leagues are careful to note in a footnote at the top of their brief that no one (i.e. the broadcast networks) paid them to file it of contributed to the costs of preparing it. Rather, they claim to be injured parties by the Second Circuit’s ruling because in addition to not paying retransmission fees to broadcasters, Aereo also does not pay the compulsory licensing fees that cable and satellite service providers must pay to copyright owners whose content is included in the network signals they retransmit.
As the leagues note, cable and satellite operators “currently pay more than $300 million annually in ‘compulsory licensing’ fees for the right to retransmit broadcast programming. The copyright owners of sports programming (including the NFL and MLB) collectively receive about $100 million of that $300 million annually.”
Yet the leagues’ real concern, of course, is not their share of that $100 kitty but their share of the far bigger pot of the retransmission consent fees the broadcasters — armed in part with exclusive live sports content — are able to squeeze from those same cable and satellite operators, a point the leagues allude to in their brief without going into the messy details:
In addition, the Leagues and other content owners indirectly receive a share of the several billion dollars that cable systems and satellite carriers pay broadcasters for the right to retransmit broadcast signals. Those retransmission consent fees help fund the license fees that broadcasters pay content owners.
Not for nothing, after all, did Time Warner Cable finally cave in its retransmission fight with CBS on the eve of the NFL season getting underway.
The Second Circuit’s opinion, the leagues warn, “provides cable systems and satellite carriers with a roadmap to avoid paying these retransmission royalties. Cable systems and satellite carriers already have signaled their interest in following Aereo’s lead, should Aereo prevail…Even without cloning Aereo’s technological contrivance, cable systems and satellite carriers might seek to leverage the decision below in efforts to avoid paying (or at least reducing) retransmission royalties. In that way, the decision below injects further uncertainty and confusion into the marketplace.
The irony, of course, to which the leagues do not allude in their brief, is that the retransmission consent regime by which broadcasters are able to demand those fees from cable and satellite providers was never intended by Congress to provide a financial windfall for the broadcast networks, and by extension for rights owners. It was meant to ensure funding for local broadcast programming, such as local news.
And it is the skyrocketing cost of live sports programming, as much as anything else, driving broadcasters’ demands for ever-higher retransmission fees, that has thrown the regime out of whack. If cable and satellite providers are indeed looking to “leverage the [Aereo] decision…to avoid paying (or at least reducing) retransmission fees,” it’s because sports-rights owners are leveraging a system designed to boost local broadcasters to produce a windfall for themselves.