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Mobile TV app could upend the cable-broadcast business

Chief Executive Officer of IAC/InterActiveCorp Barry Diller, who is also behind the disruptive TV app Aereo, attends the Allen & Co Media Conference in Sun Valley, Idaho July 12, 2012.


Barry Diller, the consummate Hollywood deal maker who revamped the TV business in the 1980s, is back in the media spotlight after a federal judge threw out an injunction against Aereo, the online TV service he backs.

Broadcasters including ABC, CBS, NBC and Fox had sought to stop Aereo from streaming free-to-air programs to phones, tablet computers and other devices for $12 a month. But on Wednesday the judge rejected the bid, setting the stage for a trial.

On Thursday the broadcasters filed notices of appeal at the United States Court of Appeals for the Second Circuit.

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The concern for TV industry executives and media investors is that if new services like Aereo are a success it could disrupt the $100-billion dollar pay-television industry for programmers and distributors as customers drop cable for more affordable services.

U.S. District Judge Alison Nathan said on Wednesday that while the had broadcasters demonstrated that they faced irreparable financial damage if the venture were allowed to continue, Aereo also showed it would face severe harm if the requested preliminary injunction were granted.

The decision makes Mr. Diller, IAC/InterActiveCorp chairman and veteran dealmaker, a controversial media player once again.

Mr. Diller is attending the Allen & Co event with fellow executives who are also plaintiffs against Aereo, including News Corp chair Rupert Murdoch, Walt Disney CEO Bob Iger and CBS Corp CEO Les Moonves.

In an interview with Reuters, Mr. Diller insisted that Aereo would not change the television landscape he helped establish while at Hollywood companies like Paramount and Fox.

"The next step is we now offer the service to consumers as an alternative," he said.

Mr. Diller said he does not expect anyone with a vested interest like the traditional TV business to like it.

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"If you're a consumer and you'd like an alternative to paying for cable or paying for satellite and you want to receive free broadcast signals, which is your kind of native American right given that the public owns the airwaves, then you will (like it)."

The broadcasters said the decision was one step in a long process and that they were confident they would prevail in the end. "It's not even the first inning," CBS CEO Les Moonves told reporters.

Mr. Diller said the networks had not reached out to him. He said in response to Mr. Moonves comments: "It's over."

Another danger for the TV business was raised by Time Warner Cable CEO Glenn Britt, who pointed out that the case could have significant implications for the requirement of "retransmission consent," when cable operators must pay broadcasters to send their signals.

"If (Aereo) is found to be legal, then the idea of consumers having to pay for otherwise free broadcast signals is called into question," Mr. Britt said.

Retrans fees have been a lucrative new source of revenue for broadcasters like CBS and Fox in recent years, and also a source of contention for cable and satellite companies that have had to pay, leading to blackouts for consumers.

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Liberty Media Chairman John Malone cheered the ruling and his former partner and adversary. "Good for Barry. I love the concept because it will ultimately defang broadcast retransmission, which I always thought was one of the worst decisions of the government. It gave way too much power to the broadcast network owners," he said.

But he added: "Unfortunately I think the net effect of it, if it really does get implemented will be to cause the broadcast guys to just take the important programming off their broadcast networks and put them on their cable networks. I think it's a whole lot of noise which ultimately won't change things much."

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