The Big Four broadcast networks have sued the creators of Locast, the non-profit TV station streaming service, claiming that Locast is helping satellite operators during retransmission consent disputes.
Locast streams local TV stations in some markets and is able to get around copyright regulations because it is a non-profit.
AT&T, which donated $500,000 to Locast, has integrated the streaming service into its DirecTV boxes so that subscribers can watch CBS stations without antennas despite the expiration of AT&T’s retransmission agreement with CBS.
In the lawsuit, filed in Federal court in the Southern District in New York, the broadcasters claim that Locast said it was created to extend the reach of local broadcast signals in places where they are difficult to receive for no charge.
But the suit said “Locast is nothing like the local booster services contemplated by Congress in creating this narrow exemption. Locast is not a public service devoted to viewers whose reception is affected by tall building[s]… instead, Locast’s founding, funding and operations reveal its decidedly commercial purposes.”
The suit noted that Locast was founded by a former executive of Dish Network, which is also in the midst of blackouts with broadcasters including Meredith and is airing Fox's broadcast and sports networks on a temporary extension of an expired retransmission agreement.
The suit also noted AT&T’s donation.
“Locast provides these two major distributors with commercial benefits that include the ability to avoid obtaining retransmission consent from local stations to include local stations in their pay-TV offerings by integrating the Locast app into their customers’ set-top boxes; to gain leverage in negotiations with broadcast stations over retransmission consent rights to offer their subscribers access to broadcast channels; and for Dish, to promote a version of its Sling TV internet television service.”
The suit seeks to enjoin Locast and collect damages to be determined.
Named as defendants in the suit are former Dish Network executive David R. Goodfriend and Sports Fans Coalition NY, which Goodfriend founded.
The National Association of Broadcasters applauded the suit.
"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 legitimize the theft of local TV broadcast signals,” said NAB executive VP of communications Dennis Wharton.
"Indeed, Locast is all about gaining a commercial advantage for its backers and others in violation of U.S. copyright law to the detriment of local broadcast TV viewers. The enterprise has benefitted from a $500,000 donation from AT&T along with contributions from other pay-TV providers, as well as Locast’s remarkably close relationship with pay-TV giant Dish Network,” Wharton said.
"We’re confident the courts will see through the AT&T/Dish/Locast ruse and uphold the integrity of U.S. copyright laws that sustain the economic viability of local broadcasting."
Locast has been relying on Title 17, Chapter 1, section 111 a)5 of the Copyright Act, which for those without a copy handy covers exemptions from exclusive rights to broadcast transmissions. That grants that exemption if "the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service."
That is the same provision under which TV translators already boost broadcast signals. Locast has said it is a nonprofit taking a broadcast signal and retransmitting it, period.
The service is geofenced, which means it is not available outside the relevant DMAs and thus does not run into contractual exclusivity issues.
With broadcasters finally spurred to legal action by the expansion of the service and its use as an alternative during recent retrans disputes, Locast will have to demonstrate that it is truly a nonprofit and gets no direct commercial advantage from the retransmissions, and that the statute indeed allows for retransmissions over the top in addition to over the air.
David Hosp, Locast’s outside counsel, reiterated that point in the wake of the suit.
“Locast is an independent, non-profit organization that provides a public service retransmitting free over-the-air broadcasts," he said. "Its activities are expressly permitted under the Copyright Act. The fact that no broadcasters have previously filed suit for more than a year and a half suggests that they recognize this. We look forward to defending the claims—and the public’s right to receive transmissions broadcast over the airwaves—in the litigation.”
A Dish spokesperson said: “Dish has no more links to Locast than we do with over-the-air antennas, but we continue to believe consumers deserve a choice when it comes to how they receive their local broadcast channels, whether through satellite retransmission, over-the-air antennas or through other legal means.”
And AT&T said in a statement that "Locast offers consumers an innovative new way to access free over-the-air signals. We support technologies that give consumers more choices and better access to this local content."
"Broadcasters have abused their free access to public airwaves to take coerce pay-TV companies to pay excessive 'retransmission fees," said Andrew Jay Schwartzman, senior counselor, Benton Foundation. "Understandably, they have passed on those fees to viewers like you and me...The broadcast industry is now attempting to shut down Locast with what will be an expensive and time-consuming lawsuit. Their legal argument is flawed, and the case should be promptly dismissed."
The Sports Fans Coalition has long argued that blackouts and escalating ticket prices and rights fees are sports-consumer unfriendly and needed some kind of redress. That was part of the impetus behind Locast.
Locast.org started in New York and has been growing steadily, adding top 20 markets as well as the most recent rural expansion, without heretofore any push back from broadcasters usually fiercely defensive about rights to their signals.
One theory is that with networks charging reverse comp while also striking deals to put their network programming on streaming services, arguably reducing its value to TV stations counting on the ads they place in their versions of the programming, some stations are OK with getting the extra eyeballs via Locast, which includes their local advertising.
Another theory is that broadcast lawyers recognize that Locast is on solid legal footing with the carveout so long as it remains a nonprofit. If so, a legal challenge would only be spending money on lawyers to get a court to declare the service is legal. Clearly, the networks aren't subscribing to that latter theory.
Locast has had no comment on whether and what size bump its service got from either the Nexstar or CBS blackouts on DirecTV.
John Eggerton contributed to this report.
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.