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Disney Sues Locast for Providing Local Television Stations Online

Disney, ABC, Fox, CBS, NBC, and others have just sued Sports Fans Coalition NY, Inc. (“SFCN,” the parent company of Locast) for allowing consumers to watch local television affiliates online through the Locast service. You can read the lawsuit here. The lawsuit revolves around the issue of local network television affiliates. Although most local network affiliates are available for free over-the-air, consumers already paying for satellite and cable subscriptions would rather not have to deal with an antenna and all of the problems associated with receiving over-the-air transmissions.

Satellite and cable providers are happy to provide the local affiliates to consumers. Indeed, The Telecommunications Act of 1996 actually requires that local television stations give cable systems or other multichannel video programming distributors (MVPD) consent to rebroadcast the local television stations’ signals. Satellite and cable providers negotiate with local television stations for this consent to rebroadcast, typically in exchange for cash or other consideration. If the satellite or cable provider is unwilling to pay the price dictated by the local affiliate, however, the consumer ends up not being able to view the local affiliate. This happens more than you might think. Currently, due to an apparent breakdown of such negotiations the ABC affiliate in my own market is unavailable through my DirecTV subscription.

With consumers bearing the brunt of these negotiation breakdowns, both in terms of unavailable local channels and the costs of available local channels passed along by their subscription providers, a new service entered the scene. As I detailed back in February is a service that offers local broadcast television stations online. Locast argues that since it is adhering to a loophole in copyright law that allows nonprofits to rebroadcast local affiliates to extend their reach, it is not infringing anyone’s copyright. The law in question, 17 U.S.C. § 111, states “The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if [….] the secondary transmission [….] is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.” When Congress wrote 17 U.S.C. § 111, the theory was to protect local nonprofits that simply installed repeater antennae to boost local affiliate signals for consumers with poor or obstructed signal.

How has Locast succeeded in exploiting 17 U.S.C. § 111 to offer local affiliate transmissions online where others have failed? First, to comport with 17 U.S.C. § 111, a rebroadcaster must be a nonprofit. Second, the rebroadcaster must be rebroadcasting without the purpose of commercial advantage. Those two requirements are fairly large hurdles for most rebroadcasters to overcome. So how is Locast surviving? Where is it getting its money?

When I wrote about Locast back in February of this year, it did not appear clear that Locast had very deep pockets. According to today’s lawsuit, however, the Plaintiffs assert that SFCN, through Locast, is receiving large donations from pay-TV distributor AT&T. Why would AT&T want to pay to see a rebroadcaster like Locast to succeed? One reason may be that if Locast succeeds, that will provide consumers with an option to receive local affiliates directly without an antenna. If consumers can receive local affiliates directly online, the inability to receive local affiliates through their satellite or cable provider may not cause consumers to drop their satellite or cable provider. This dramatically reduces the incentive of satellite and cable providers to pay the large amounts of money demanded by local affiliates to rebroadcast their stations through the satellite or cable provider.

Ten years ago asking a consumer to get out of their satellite or cable package and open another package to watch their local affiliates might have been a big ask. Today, with consumers accustomed to getting in and out of packages to view content on HBO, Netflix, Hulu, etc, the ask is not so big. As a result, if Locast were to go nationwide, the market for local affiliates selling rebroadcast rights to satellite and cable providers could disappear.

With that background in mind, it is not difficult to see why Disney et al. is worried about Locast and why Disney is suing Locast’s parent company SFCN. This is far from the first time Disney has aggressively asserted copyright law to its advantage, and it will likely not be its last.

The court in this case will have the difficult job of applying old law to new technology. Did Congress intend 17 U.S.C. § 111 to apply to nonprofits that rebroadcast local network affiliates online? Does receiving money from AT&T and removing ads in return for consumer payment constitute “commercial advantage”? Does collecting consumer data constitute “commercial advantage”? These are the issues that the district court, and most likely an appellate court, will have to decide.

Regardless of how this lawsuit resolves, it is unlikely the broader issue of online rebroadcasting of local television affiliates will resolve without congressional intervention. Given the technological and legal complexities inherent in the issue, it is hard to see Congress passing a new law in this area without substantial help from lobbyists on both sides of the issue. If Disney’s past copyright lobbying efforts are any indication, things do not bode well for consumers.

Brett Trout

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Posted in Copyright Law, Internet Law.