Five months after the U.S. Supreme Court ruled against its method of streaming live television broadcasts online to individual subscribers, Aereo, Inc. sought Chapter 11 protection from creditors late last Thursday at the U.S. Bankruptcy Court in New York.
Aereo was founded four years ago with the support of equity backers that include Barry Diller’s IAC/InterActive Corp. Prior to suspending service in June, Aereo had charged customers between $8 and $12 per month to rent one of the company’s dime-size antennas to stream live broadcast programming to their smart phones, tablet PCs, laptops and other web-connected devices. Despite Aereo’s contention that its technology equates to “rabbit ears” and similar reception devices that have been used legally by TV viewers to receive free, over-the-air television programming, the Supreme Court agreed with the broadcast networks’ claim that Aereo’s method of streaming broadcast programming constitutes an illegal public performance for the purposes of the Copyright Act. Since June, Aereo has shifted its legal strategy and has sought (unsuccessfully thus far) to be reclassified as a cable operator that would give the company compulsory licensing rights under Section 211 of the Copyright Act. In a development that could lend substantial support to the Aereo business model, the FCC launched proceedings last month on proposed rules that would classify online video service providers as multichannel video program distributors.
Despite such evidence that “the legal and regulatory framework is shifting,” Aereo finance chief Ramon Rivera acknowledged in an affidavit that “the timing of a decision from the FCC is uncertain.” Citing “mounting legal costs,” Aereo told the court that it is seeking Chapter 11 protection to assist in “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.” According to Rivera, such assets include Aereo’s equipment and technology and its intellectual property portfolio. In a statement on his company’s website, Aereo CEO Chet Kanojia declared that the Supreme Court ruling “effectively changed the laws that had governed Aereo’s technology, creating regulatory and legal uncertainty.” Kanojia thus admitted: “while our team has focused its energies on exploring every path forward . . . without that clarity, the challenges have proven too difficult to overcome.”