As Broadcast TV Prepares for Its Last Stand, Aereo Suffers a Setback

A federal court grants the networks a preliminary injunction in six western states.

Feb 23, 2014 at 4:45PM

Courts are making it tough for would-be Rule Breaker Aereo to fight the broadcast TV establishment, Fool contributor Tim Beyers says in the following video.

Earlier this week, a federal judge in Utah granted a preliminary injunction preventing Aereo, which rebroadcasts open-air TV signals via the Internet, from operating in six western states: Colorado, Montana, New Mexico, Oklahoma, Wyoming, and Utah.

Tim says the ruling is a win for the major broadcasters who object to Aereo's business. CBS (NYSE:CBS), Comcast's (NASDAQ:CMCSA) NBCUniversal, Twenty-First Century Fox (NASDAQ:FOXA), and Walt Disney's (NYSE:DIS) ABC have joined other broadcasters in filing suit to challenge the legality of the service. The Utah ruling prevents Aereo from pushing for further growth in the Rocky Mountain region while the U.S. Supreme Court prepares to begin hearing oral arguments in April.

At stake is the future of TV distribution. In filing suit, the broadcasters call into question their ability to compete on the quality of the content they bring to the airwaves. Does that mean investors should short these stocks? No, Tim says, if only because of the growing diversity of each underlying business. For example, Disney has a thriving studio and cable network to cover for its laggardly ABC television network.

Now it's your turn to weigh in. Have you tried Aereo's service? Do you want to see it continue, or do you favor the broadcasters' position? Please watch the video to get Tim's full take and then leave a comment to let us know where you stand.

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Walt Disney at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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