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End of the Road for Aereo? Embattled Video Streaming Startup Files for Bankruptcy

video streaming startupIn a prior post we reported that in June the U.S. Supreme Court ruled that streaming television service, Aereo, violated U.S. copyright law in connection with its business and legal battle with the major broadcast networks. At the time, we posed the question of whether, despite losing the lawsuit, Aereo had a future as a cable company?

The answer, it seems, is no. On November 20, Aereo filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for for the Southern District of New York, listing assets of $20.5 million and debt of $4.2 million.

Aereo, while operational, allowed subscribers to view television programs over the Internet. Subscribers could view broadcast television programming as the programs were being broadcast with a minor delay. Aereo’s system was made up of thousands of dime-sized antennas stored in warehouses that captured local broadcast signals. Subscribers would visit Aereo's website, select a show, then an antenna would capture the show from the airwaves. An individual copy of the show would then be made on a remote hard drive and, once a few seconds of the show were saved, it would then be streamed to the subscriber's digital devices over the Internet.

In its June decision, the Supreme Court ruled that Aereo was “substantially similar” to a cable system and therefore required broadcasters’ permission to air their content. Since then Aereo has pushed for regulatory changes that would allow it to be classified as a cable system, including being able to qualify for a compulsory copyright license permitting it to pay limited royalties for the rights to broadcast content.

But change didn't come fast enough.

In an affidavit filed in the bankruptcy case, Aereo finance chief Ramon Rivera said that while “the legal and regulatory framework is shifting” in Aereo’s favor, “the timing of a decision from the FCC is uncertain.” The goal of the bankruptcy filing, therefore, is “consummating a sale of substantially all of its assets, recapitalizing or entering into some other reorganization transaction for the benefit of its creditors and shareholders.”

Aereo posted a statement from its founder, Chet Kanojia, on its website stating that  “Chapter 11 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.”

The fact that the company filed under Chapter 11 (reorganization), rather than Chapter 7 (liquidation), suggests that the company and its financial backers believe that there is value in its assets and technology. We will continue to monitor Aereo's bankruptcy case.

Categories: Copyright

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John brings a unique perspective to Foster Swift with his practical experience as an entrepreneur, business owner, and manager.  He focuses in the areas of business, tax, intellectual property and entertainment.

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