The plaintiffs claimed that Locast, a non-profit organisation backed by AT&T, has infringed the rule of copyrights by distributing and providing pay-TV content for free over-the-air without paying re-transmission fees and gaining consent.
Conventionally, re-transmission and distribution of content from cable and satellite pay-TV require a fee. Wall Street estimates that re-transmission fees made up about 11% of CBS’ revenue for 2018.
Locast was founded by Goodfriend, a lawyer and executive who formerly worked in Clinton’s Administration, Federal Communications Commission and Dish Satellite TV. Since its launch in 2018, the service has covered 31% of US TV households, including 13 cities and up to 35 million households.
In the filing, the “Big Four” claimed that Locast is not a public service devoted to benefit the public and under the façade of Robin Hood, its funding and operations reveal a commercial purpose. Last May, AT&T added Locast app to DirecTV and U-verse set-top boxes and donated US$500,000 to SFCNY.
The lawsuit is a reminiscence of the lawsuit against Aereo — a provider of antennas to receive pay-TV programmes. In 2014, a consortium of broadcasters had tackled Aereo in supreme courts over similar issues — and CBS stock spiked by 5.9% after the victory.
However, Locast may have a trump card up its sleeve which Aereo did not. The card is that under US Copyright Act 1976, a non-profit organisation is legally allowed to re-broadcast for free, as it serves a public service by extending signal reach.
Five days ago, the National Association of Broadcasters (NAB) released a statement in support of the lawsuit. NAB executive vice-president of Communications Dennis Wharton said: "NAB wholeheartedly backs today’s lawsuit against Locast.
“This firm is thinly disguised as a not-for-profit entity that mirrors failed predecessors Aereo and FilmOn in its bid to legitimise the theft of local TV broadcast signals.”