Can Fox Use the Aereo Decision Against DISH Network?

Fox is looking to renew its case against DISH's Hopper and DISH Anywhere.

Jul 7, 2014 at 6:40PM

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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Adam Levy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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