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Aereo Files For Bankruptcy - Broadcasting & Cable

Aereo Files For Bankruptcy

Says legal uncertainty was too tough an obstacle to overcome
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Aereo, whose hopes of providing a new model for TV station delivery that did not require it to pay broadcasters for carriage, filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, citing the legal and regulatory uncertainty following the Supreme Court decision against it.

It has also named a chief restructuring officer, Lawton Bloom of Argus.

“Even with significant victories in the federal district courts in New York and Boston and the Second Circuit Court of Appeals, the reversal of the Second Circuit decision in June by the U.S. Supreme Court has proven difficult to overcome,” Aereo CEO Chet Kanojia said in a blog post about the move. “The U.S. Supreme Court decision effectively changed the laws that had governed Aereo’s technology, creating regulatory and legal uncertainty for the company."

In that blog, which was labeled "The Next Chapter"—which turns out to be chapter 11—Kanojia said the restructuring "will permit Aereo to maximize the value of its business and assets without the extensive cost and distraction of defending drawn out litigation in several courts." But it was clear he felt Aereo had run out of options, saying "while our team has focused its energies on exploring every path forward available to us, without [legal] clarity, the challenges have proven too difficult to overcome."

Aereo investor Barry Diller had said early on that he thought the service would not survive a Supreme Court defeat.

Aereo suspended operations earlier this year following a decision by the Supreme Court that it violated copyright law by not paying content owners for delivering TV station signals over the Internet to subscribers, and pending a decision by the Copyright Office on whether Aereo could qualify for a compulsory copyright license, rather than have to negotiate them individually.

The Copyright Office has in the past said over-the-top providers did not qualify as MVPD's eligible for the license, but deferred a decision until the FCC or the courts weighed in.

Aereo was hoping that the FCC's signal it was looking at defining linear over-the-top providers as MVPDS was one of those options.

FCC Chairman Tom Wheeler seemed sympathetic to Aereo's plight. In a speech to venture capitalists earlier this month, he referred to the over-the-top definition proposal, suggesting it could help entrepreneurs like Aereo. "By facilitating access to...content, we expect Internet-based linear programming services to develop as a competitor to cable and satellite. Consumers will be able to buy the channels they want instead of having to pay for channels they don’t want.As you know, a startup called Aereo has already proposed doing this, but the broadcasters were able to stop it in court, in part because of the old rules of the FCC. Aereo wasn’t the reason for the new rules, but the idea that entrepreneurs should be able to assemble programs to offer consumers choices is something that shouldn’t be hindered by the FCC."

Kanojia was hoping the FCC item would provide it that "much needed" regulatory clarity, and pressed the FCC to move quickly. But the over-the-top proposal, which was circulated to the commissioners last month, has not been scheduled for a vote, and even when it is would be followed by a comment and reply comment period of weeks, if not months, so no final action was imminent.

Earlier this month, Aereo laid off most of its employees and shut down its Boston office.

The National Association of Broadcasters had no comment, but it was clearly a victory for broadcasters, who sued Aereo arguing it was illegally taking their signals and jeopardizing their business model.

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