Major Television Networks Turn to Courts Yet Again to Stifle Competition in Television Streaming Market

4 Min Read By: Ryan G. Baker, Scott Malzahn

Introduction

With the proliferation of YouTube TV, Apple TV, and Amazon Prime Video, one might think competition in the streaming television market is flourishing. However, the major television networks continue to block competition, and legal barriers to entry have stifled competition among would-be market players not sponsored by the world’s largest multimedia companies—companies that already have millions of eyeballs before they launch television services. The outdated and uncertain legal landscape forces courts to determine the legality of many innovative services. But the high costs associated with such litigation can be prohibitive, particularly for emerging technology companies. The net result of outdated law governing constantly evolving technology is a reduction in competition and fewer choices for consumers, who are also essentially forced to pay higher fees as companies pass on legal costs.

The Copyright Act

The legal architecture that governs the delivery of broadcast television in particular is sorely out of date and goes back more than four decades to the last major overhaul of the Copyright Act in 1976. At that time, “community antennas”—large hilltop antennas connecting rural communities by dedicated physical cables and wires—were new and disruptive technology. With the 1976 amendment, Congress created a statutory license for certain secondary transmissions made by “cable systems.”  

In drafting the 1976 Act, Congress recognized that “technical advances have generated new industries and new methods for the reproduction and dissemination of copyrighted works” and that there are “promises [of] even greater changes in the future.”[1] For this reason, Congress attempted to use technology-neutral language and defined the term “cable system” to allow for future advancements in the delivery of broadcast television, regardless of whether the system uses “wires, cables, microwave, or other communications channels[.]”[2]

In the 43 years since the Act’s last general update, television delivery methods have expanded to include cable, microwave, satellite, and now the internet. Typically, in response to court rulings, Congress has enacted limited updates to address specific technologies. For example, in 1988 Congress created a separate license for satellite providers.[3] And in 1994, Congress amended the definition of a “cable system” in the Copyright Act to expressly include “microwave” transmissions, another early form of wireless transmission.[4]

But none of these “band-aids” provides a comprehensive framework for market competition of constantly evolving technology. Since 1994, Congress has not modified the Copyright Act’s statutory definition of a cable system. As a result, the task of interpreting outdated statutes and regulations has been left to the courts, which do not offer an efficient solution.

The Courts

In 2014, the U.S. Supreme Court issued its decision in American Broad. Cos. v. Aereo, Inc.,[5] finding it engaged in public performance. At the time, certain amici argued Aereo met the Act’s definition of cable system. Although Aereo declined to pursue that argument, the Court seemed to embrace its logic, reasoning that Aereo is “substantially similar to” and “is for all practical purposes a traditional cable system[.]”[6]

In 2016, FilmOn X, LLC v. Fox Television Stations, Inc.[7] (FilmOn) was argued before the D.C. Federal Circuit Court of Appeals. FilmOn urged the court to find that companies providing film and television content over the internet (over-the-top or OTT) were within the Act’s definition of a “cable system.” The FilmOn case settled shortly after the two-hour argument, and another opportunity for the courts update the interpretation of outdated legislation passed.

On July 31, 2019, the major broadcast networks filed a copyright infringement lawsuit in the Southern District of New York[8] to shut down yet another new streaming service, “Locast.” Locast asserts that it fits within another statutory license for nonprofits that provide a public service by retransmitting broadcast television for free or at cost and without any commercial purpose.[9] Although the outcome of the Locast litigation is uncertain, it is certain that Locast must now bear the heavy expense of defending its model in court based on severely outdated law.

Conclusion

Unlike the Apples and Googles of the world, smaller emerging technology companies lack the established consumer bases and market power necessary to leverage their own content deals in the context of today’s outdated law. In the absence of legislative action, and in today’s chilled regulatory environment, the courts are left to interpret existing law in a fair, technologically neutral fashion. The right government action will provide consumers more choice, as well as more control over the content they receive and how they receive it.


[1] H.R. Rep. No. 94-1476, at 47.

[2] 17 U.S.C. § 111(f)(3) (emphasis added).

[3] 17 U.S.C. § 119.

[4] Satellite Home Viewer Act of 1994, Pub. L. 103-369, 108 Stat. 3477 (Oct. 18, 1994).

[5] 134 S. Ct. 2498 (2014).

[6] Id. at 2506-07.

[7] Case No. 16-7013.

[8] American Broadcast Cos., Inc. v. Goodfriend, Case No. 19-cv-7136, U.S. District Court, Southern District of New York.

[9] See 17 U.S.C. § 111(a)(5).

ABOUT THE AUTHORS

Ryan G. Baker

Ryan G. Baker is a co-founding partner of Baker Marquart, a boutique litigation firm known for winning trials and appeals across the U.S. for Fortune 500 companies, start-ups and high-net-worth ind…

Scott Malzahn

Scott Malzahn is a partner at Baker Marquart. He has successfully represented Fortune 100 companies and individual clients at all stages of litigation, ranging from pre-dispute resolution through trial…

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