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Can Fox Use the Aereo Decision Against DISH Network?

Now that Aereo is officially illegal, Twenty-First Century Fox (NASDAQ: FOXA  ) plans to use the Supreme Court ruling to attack DISH Network (NASDAQ: DISH  ) .

Fox has been trying to shut down DISH's Hopper DVR service since its introduction with commercial-skipping, side-loading, and DISH Anywhere features. The two have been to court before, where Fox and other broadcasters failed to shut down DISH's commercial-skipping feature. Now, Fox claims that the Aereo case provides precedent to shut down the side-loading and DISH Anywhere features that rely on the Slingbox technology of EchoStar  (NASDAQ: SATS  ) .

Does Fox have a case now that the Supreme Court has ruled against Aereo?

The looks-like-Aereo argument
When it comes down to it, DISH Anywhere and Aereo are remarkably similar.

Aereo uses a personally assigned antenna to capture a broadcast. DISH uses a subscriber's home-mounted satellite and tuner to capture a broadcast.

Aereo then writes the data onto the hard drive of one of its servers. DISH writes that data to the hard drive of the subscriber's DVR.

Moments later, Aereo starts sending that stream of data saved to the hard drive over the Internet to its users. DISH sends the data saved to the DVR to its users.

Users access Aereo through its website or an app. DISH subscribers access DISH Anywhere through its website or an app.

There's one big point where the two businesses diverge: Aereo doesn't pay retransmission fees to Fox or any broadcasters to send the signal to its subscribers; DISH Network does. Even so, DISH's contract with Fox expressly forbids it from broadcasting the network over the Internet.

Now that the Aereo loophole is closed, DISH Anywhere might not hold up in court.

What's in it for Fox?
Fox, as a broadcast network, makes most of its money from advertising. Thus, it would seem like TV-everywhere services like DISH Anywhere would benefit the broadcaster by increasing the number of eyeballs on its programming.

But Fox and the other broadcasters are relying more and more on retransmission fees to fuel their revenue and profit growth. A key part of that, going forward, will be the rights to transmit content over the Internet, to which DISH Anywhere -- and the technology behind it -- is a threat.

At least one major broadcaster has already made an agreement with DISH to carry its channels over the Internet, which dismissed all legal proceedings between the two companies.

Fox will look to sign a similar deal, but with DISH Anywhere in its back pocket, DISH currently has the upper hand. If Fox can successfully shut down DISH Anywhere, it could negotiate better terms.

What about EchoStar?
EchoStar is in an interesting position as the company that provides the technology behind DISH Anywhere. If Fox wins a renewed court battle with DISH, that could hurt EchoStar's business with DISH. Considering, however, that the two work closely together -- EchoStar is a spinoff of DISH -- the relationship is unlikely to dissolve completely.

More important, regardless of how the court rules in a case against DISH, EchoStar has every right to keep selling Slingboxes and Sling technology. EchoStar is simply a hardware provider -- which is the case Aereo tried to make in court. Unlike Aereo or DISH, however, the company doesn't have subscribers, it just provides hardware and software to consumers and lets them use it as they see fit. As a result, the "public performance" argument that broadcasters brought against Aereo doesn't apply to the company.

The future of TV
TV is steadily moving toward over-the-Internet broadcasting. As such, it's important for Fox and other broadcasters to protect the rights to transmit their signals over the Internet. DISH has shown a willingness to negotiate with broadcasters for those rights, but Fox believes that taking the company to court might result in better terms. With the Aereo case ruling in favor of the broadcasters, Fox might be right.

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  • Report this Comment On July 08, 2014, at 10:21 AM, Iamore wrote:

    This looks likely to be tested in court as DISH can be expected to resist any attempt by Fox to reign in its current ability to shape content by screening out advertisement.

    The issue is both contractual and distinctions in copyright law under both the commercial agreements between DISH as the facilities based service and the broadcaster Fox. Among the difficulties Fox has is constraint of clients privileges to record and replay the content they subscribe impacts the reach and attractiveness of their broadcast media, which is the money-making vehicle that drives a large portion of broadcast revenue. The dam is already open to some extent: open content and less ad-heavy content competes with traditional broadcast content on the Internet regardless of the broadband network method of conveyance. Advertisement revenue depends on the number of eyes that gravitate to the content.

    Finer points of the contractual and transfer use of copyright to the end user are likely to be argued if this goes to court. A distinction between Hopper type service and Aereo is the user receives the content onto a device that he has taken ownership and that resides in his residence. The Aereo model intercepts content, interceding between the contractual relationship between broadcaster/content rights holder and the user.

    The user has rights under law and contract with the broadcaster that are separate and unique from

    the contractual and pass-through conveyance rights and privileges of the infrastructure based services provider.

    A detailed analysis of how each set of rights and obligations would be entertaining.

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Adam Levy

Adam has been writing for The Motley Fool since 2012 covering consumer goods and technology companies. He spends about as much time thinking about Facebook and Twitter's businesses as he does using their products. For some lighthearted stock commentary and occasional St. Louis Cardinal mania

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