Streaming broadcast television service Locast announced on Thursday it would immediately suspend its operation in the three dozen regional markets where it offers service.
The announcement marked a stunning reversal of business for the not-for-profit streamer, which had previously affirmed it would continue operating despite an unfavorable court ruling in a federal copyright infringement lawsuit brought by the four largest networks in the country.
“As a non-profit, Locast was designed from the very beginning to operate in accordance with the strict letter of the law,” a spokesperson for Locast wrote in a letter to customers on Thursday. “But in response to the court’s recent rulings, with which we respectfully disagree, we are hereby suspending operations, effective immediately.”
On Tuesday, District Court Judge Louis Stanton rejected Locast’s affirmative defense and motion for summary judgment in the copyright suit brought by the parent companies of ABC, CBS, Fox and NBC, noting Locast’s decision to use funds raised through donations to expand its service did not fall within exemptions of the U.S. Copyright Act for so-called “secondary transmitters” of broadcast signals.
As a not-for-profit, Locast captured over-the-air television signals of those networks plus others who affiliate with PBS, Ion and CW, then re-distributed those signals over the Internet in the form of free-to-access web streams that were available in three dozen metropolitan areas.
Though the content was free to access, Locast interrupted a viewer’s stream four times an hour until they agreed to donate at least $5 a month, something Locast said was necessary to cover both the operational costs of its current service and its plans for expansion into other markets.
Stanton said the tactic amounted to a charge on users, which put Locast in a similar category as commercial enterprises. He also noted Locast used around half of the $4 million the service raised last year to actually cover its operating expenses. It was not clear from court documents reviewed by The Desk what Locast did with the other half of the money.
Immediately after the court’s ruling, attorneys representing Locast said they were disappointed with how things went in court, but vowed the service would continue forward. One day later, Locast issued an update to customers announcing their decision to stop interrupting the streams of non-paying customers with donation requests.
That decision was made by David Goodfriend, Locast’s founder and chief executive, according to a source close to the company who asked not to be identified. Attorneys representing Locast in the copyright infringement case were blindsided by the move, with some expressing concern that it could be used against the company as the proceedings move forward, the source said.
On Thursday, Locast announced it would immediately suspend its service, but stopped short of saying the company would shut down completely. The source familiar with the company’s strategy said Locast executives are “evaluating all options,” but also “want to limit additional financial liability” should they ultimately lose the case.
“[Locast is] in a tough spot — every day they continue to operate, both before and after the judge’s ruling, is another day the networks get to argue they’re losing revenue,” the source said. “But by dropping the donation requests, and then stopping service, it isn’t necessarily a declaration that [Locast has] done something wrong, but it definitely could be construed that way.”
Marc Lumpkin, a spokesperson for Locast, declined to comment when reached by The Desk on Thursday.
Unlike cable and broadcast companies, Locast did not compensate broadcasters for the right to re-transmit their signals. The four plaintiffs in the case — the Walt Disney Company, Comcast’s NBC Universal, Fox Corporation and ViacomCBS — are seeking a financial judgment against Locast for lost re-transmission and other commercial revenue as well as an injunction that would prevent Locast from operating without re-transmission agreements in place.