Aereo, the troubled provider of broadband TV and cloud DVR services, announced Friday (November 21) that it has filed for a voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
In tandem, the company announced that it had appointed Lawton Bloom of Argus to serve as chief restructuring officer during this period.
Aereo said it was taking the Chapter 11 course “given the uncertain regulatory and legal climate” following a Supreme Court ruling that found that Aereo’s delivery of TV stations signals to subscribers without paying a copyright fee violates the law. Last month, a U.S. district judge granted a preliminary injunction barring Aereo from retransmitting live TV, though keeping the door open to its network-based DVR service.
Aereo said CEO Chet Kanojia and the company’s board determined that Chapter 11 reorganization “is the next logical step to ensure that the company’s core value is preserved while the company restructures,” adding that the decision will allow Aereo “to maximize the value of its business and assets without the extensive cost and distraction of defending drawn out litigation in several courts.”
Earlier this month, New York-based Aereo laid off most of its employees and confirmed that it was shutting down its Boston office on November 12. Aereo said the action was necessary in order to keep resources in check as the company pursued its next course of action, noting that a small executive team of about a dozen people were remaining with the company.
“Even with significant victories in the federal district courts in New York and Boston and the Second Circuit Court of Appeals, the reversal of the Second Circuit decision in June by the U.S. Supreme Court has proven difficult to overcome,” Kanojia said, in a statement. “The U.S. Supreme Court decision effectively changed the laws that had governed Aereo’s technology, creating regulatory and legal uncertainty for the company. And while our team has focused its energies on exploring every path forward available to us, without that clarity, those challenges have limited our options.
“We have traveled a long and challenging road," he continued. "We stayed true to our mission and we believe that we have played a significant part in pushing the conversation forward, helping force positive change in the industry for consumers. We feel incredibly lucky to have had the opportunity to build something as meaningful and special as Aereo.”
Aereo investor Barry Diller had said early on that he thought the service would not survive a Supreme Court defeat.
Aereo has been hopeful that it could qualify for a compulsory copyright license, rather than have to negotiate them individually. The Copyright Office has in the past said over-the-top providers did not qualify as MVPDs eligible for the license, but deferred a decision until the FCC or the courts weighed in. Aereo was hoping that the FCC's signal it was looking at defining linear over-the-top providers as MVPDS was one of those options.
FCC Chairman Tom Wheeler seemed sympathetic to Aereo's plight. In a speech to venture capitalists earlier this month, he referred to the over-the-top definition proposal, suggesting it could help entrepreneurs like Aereo. "By facilitating access to...content, we expect Internet-based linear programming services to develop as a competitor to cable and satellite. Consumers will be able to buy the channels they want instead of having to pay for channels they don’t want. As you know, a startup called Aereo has already proposed doing this, but the broadcasters were able to stop it in court, in part because of the old rules of the FCC. Aereo wasn’t the reason for the new rules, but the idea that entrepreneurs should be able to assemble programs to offer consumers choices is something that shouldn’t be hindered by the FCC."
Kanojia was hoping the FCC item would provide it that "much needed" regulatory clarity, and pressed the FCC to move quickly. But the over-the-top proposal, which was circulated to the commissioners last month, has not been scheduled for a vote, and even when it is would be followed by a comment and reply comment period of weeks, if not months, so no final action was imminent.
- John Eggerton of B&C/Multichannel News contributed to this report.