Why Aereo's legal battle is important to Intel and Sky Angel

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Josh Wein

Last week, attention in the pay-TV and online video world was drawn to the agreements between major pay-TV distributors and TV networks. Some of those agreements, it was reported, may limit the networks' ability to do business with would-be over-the-top providers such as Intel (Nasdaq: INTC).

The issue mirrors one that has been playing out in a New York courthouse over the past year in the Aereo case. Aereo, an online video distributor that delivers local TV station signals by leasing tiny, remote TV antennas and DVRs to its subscribers, was sued by the major broadcast networks last year.

The court allowed Aereo to continue operating during a trial over its legality. Though Aereo has asked the court to dismiss the lawsuit, it has also sought access to a wide swath of retransmission consent agreements and online video licensing agreements among the major media companies, pay-TV distributors and online video providers such as Netflix (Nasdaq: NFLX), Hulu, Amazon (Nasdaq: AMZN) and Syncbak.

The court has granted Aereo access to some of those documents, including retransmission consent agreements that were revised or renegotiated after Aereo announced its business plan and that specifically mention Aereo or similar services.

At a hearing on the matter in March, an attorney for the broadcasters framed the question this way: "Are they [Aereo] entering into distribution channels that we otherwise have the right to exploit for ourselves?"

While antitrust regulators and others looking for big-media bogeymen may hope to find evidence in those agreements of a concerted effort to block upstart online video providers from licensing programming, it appears Aereo's attorneys are looking for evidence of the opposite.

They're doing this because those media companies have argued Aereo's existence has and will continue to hurt their own ability to license programming to traditional and online distributors.

Aereo wants "to shoot holes in that by showing that their retransmission agreements or their negotiations have not been affected by Aereo's presence on the scene," the magistrate in charge of resolving disputes over document production said at that same hearing in March, according to a transcript filed with the court.

In fact, Aereo has subpoenaed many more retransmission and licensing agreements that specifically do not mention Aereo in order to bolster its arguments that Aereo does not harm the major media companies' business prospects.

Among those are deals with other online video distributors. The contents of those agreements remain confidential and may never be discussed openly in court.

Whatever the agreements say, it seems odd that an upstart online video distributor's lawyers would be searching for evidence that pay-TV distribution agreements are not affected by services like Aereo. Perhaps that's because in a separate dispute involving unrelated parties, an online video distributor is arguing just the opposite.

Sky Angel has been seeking licenses to pay-TV programming for years and has sued C-SPAN in federal court on antitrust grounds. Sky Angel claimed that it had an agreement with C-SPAN to distribute its programming though Sky Angel's service that was abruptly terminated when C-SPAN's cable executive board members got wind of the deal.

Though a judge dismissed Sky Angel's initial complaint, the online video distributor has asked the court to force C-SPAN to provide certain documents and witnesses related to C-SPAN's board authorizing the public affairs network to end its relationship with Sky Angel.

Sky Angel cited Time Warner Cable (NYSE: TWC) CEO Glenn Britt's statement at The Cable Show last week that the company "may well" have contracts that prohibit its program suppliers from dealing with online video distributors.

It's unclear whether Sky Angel's discovery request can move forward now that the judge in the case has dismissed its complaint. Either way, the two disputes highlight the different business and legal strategies online video distributors have taken as they try to establish themselves in this fledgling industry. -- Josh