The move comes as Aereo, which recently won a major appeals court ruling on nearly the same issue in New York, prepares to offer its service in Boston and 22 other markets as soon as this month. CBS and other broadcasters have vowed to sue to stop Aereo in those new markets, a threat that appears to have led it to file the new court action. (The new filing, reported by AllThingsD, refers to recent public statements and Twitter feeds by CBS executives, including one that says “we’ll sue”).

So what exactly is the meaning of Aereo’s new lawsuit? Here’s what one copyright expert familiar with the issue had to say:

Aereo’s decision to file a separate declaratory judgment action at this stage is unorthodox. They’ve prevailed on a preliminary injunction motion at the district and circuit court level — which means that both the Southern District and the 2d Circuit have ruled they are likely to succeed on the merits — so it’s unusual to seek a declaratory judgment on the same issues.

Recall that the appeals court decision from last month already protects Aereo for the immediate future in the U.S. Second District, a territory that covers the states of New York, Vermont and Connecticut. This means that the new declaratory action Aereo is seeking will not really change any facts on the ground but could give the company another favorable verdict — but not one that will determine its fate in Boston (which is in the First Circuit) or any of the other legal jurisdictions where Aereo plans to open shop.

The most likely explanation, then, is that the move is part of the increasingly pitched PR battle between Aereo and the broadcasters who, in another recent appeal, accused the upstart of creating “havoc” and “massive disruption” in the television industry. The broadcasters have also threatened to pull their signals altogether and distribute their channels, including Fox and ABC, only on pay TV.

Aereo, for its part, argues that its technology, which assigns every subscriber a personal antenna, is akin to private viewing through a DVR system.  The company’s CEO, Chet Kanojia, has accused the broadcasters of extracting exorbitant fees by forcing viewers to accept cable bundles stuffed with channels they don’t want to watch.

Aereo’s new lawsuit, therefore, gives it a way to gain the upper hand on the media message (for a short time at least) – and possibly pick up some additional legal language from a judge who has taken the company’s side in the past.

In the bigger picture, the Aereo fight is part of a great game over the future of the TV industry. Aereo, which is backed by a major investment from media mogul Barry Diller, has also been the subject of acquisition rumors by satellite provider Dish. Broadcasters fear that an alliance between the two companies could provide an end-run around the existing system that requires cable and satellite providers to pay for use of the over-the-air signals.

The final outcome could well end up at the Supreme Court given a current split between the courts in New York and a district court in California, which shut down a similar service to Aereo last year. In the meantime, it’s possible that a patchwork of decisions could result in Aereo being legal in half the country and forbidden in the other half.

In another recent development, the four major sports leagues have joined the anti-Aereo chorus by filing court papers to support the broadcasters’ request that a full panel of the Second Circuit reconsider its decision. The NFL, NBA, NHL and Major League Baseball argue that the appeals court was wrong to consider Aereo a “private” transmission like singing in the shower:

An individual who sings a copyrighted lyric in the shower engages in a private performance […] A commercial service (like Aereo) that retransmits the broadcast of a copyrighted television program to thousands of paying subscribers at the same time is not in any way comparable.

Here’s a copy of Aereo’s new lawsuit:

Aereo Complaint for Declaratory Judgment – FINAL FILED

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The app lets people “watch CBS shows on the best screen available for them,” CBS Interactive president Jim Lanzone said in a statement, “with a host of extra features that give them a richer viewing experience whenever and wherever they tune in.” Those extra features, which will be integrated “by the start of the Fall TV season,” will include “integrated social feeds; live events that allow fans to engage directly with talent; and second-screen experiences synched to the broadcast with additional content for select shows.”

Shows available through the app include NCIS, The Good Wife, Survivor, CSI and How I Met Your Mother, among others. But full episodes of some well-known shows, like The Big Bang Theory and The Mentalist, are missing from the app even though they’re available through CBS’s website. And the app does not provide a way to catch up on past seasons, or even all of a current season: only select episodes are available.

Other networks are also experimenting with offering streaming through their apps. NBC allows streaming of some shows through its iOS app, for example, while Fox only lets users stream full episodes through its “Fox Now” app if they authenticate their subscription to a TV provider.

Prime Instant Video already offered some CBS and Showtime series for streaming. Amazon also announced a deal earlier this week to stream episodes of CBS’s upcoming Stephen King drama Under the Dome this summer while the show is still on the air.

The TV business is still based on an archaic business model that forces customers to buy arbitrary bundles of channels. Fans of arts programming, for instance, often have to shell out $5 a month for football shows — even if they hate football.

This isn’t a technology issue. It’s instead the problem of what media doyen Peter Kafka calls the “TV industrial complex” — a cabal of broadcasters and cable distributors that refuse to surrender their bundled TV business model.

That’s why upstart Aereo, which uses tiny antennas to stream TV signals to mobile devices, is so intriguing to watch. The company is offering a way for people to watch shows where and when they want — and has so far withstood the TV industry’s lawsuits. Yesterday, we showed off photos of Aereo’s tech. Today, we’re exploring the vision and strategy of the man who wants to kick in the door of the TV industrial complex once and for all.

The quest to end an “abusive” system

Chet Kanojia, who is speaking at paidContent Live in April, is a soft-spoken engineer who likes stylish shoes. At 43, he’s already built an advertising company, Navic Networks, and sold it to Microsoft — and presumably made himself a fortune. When we chatted at Aereo’s site in Brooklyn this week, the first thing I wanted to know is why he picked this fight. Why, that is, did he decide put so much energy into Aereo when the TV industry might crush the company in a second like it has done to others before?

“I had the option to be a VC, to do nothing or to do something really really meaningful,” said Kanojia. “In my heart of hearts, I belive that when businesses are created or preserved with analogue mentalities, they’re artificially constrained and ripe to to be recast in a different way.”

He adds that he loves TV content like 60 Minutes, Parenthood and Downton Abbey. But he is exasperated by the TV industry’s ossified pricing model.

“Why can’t there be a simple way to pay for this? It’s just irrational that it should cost hundreds of dollars a month. It’s an abusive system set up in an artificial way.”

Broadcasters like NBC and Fox, of course, would argue that we need a system that provides revenue to produce the content that people like so much. In recent years, these networks have been leaning on distributors to pay them for carrying over-the-air channels — and presumably think Aereo should too.

Kanojia is having none of it, saying the broadcasters are already making money from public spectrum through advertising and that it’s unreasonable for them to ask for more. Also, Aereo is not part of the regulatory regime that requires big TV companies to offer their channels for sale to cable and satellite distributors; this means that, for now, Aereo is unable to sell channels like ESPN (owned by ABC) to its customers.

Kanojia adds that pure “a la carte” TV is not the only solution to the TV muddle. He would also settle for “rational bundles.”

A high stakes bet

Aereo’s disruptive potential lies in the fact that, unlike other forms of pay TV, subscribers can add or drop it without the hassle of set-top boxes or contracts. For now, Aereo is available only in New York City but is about to roll out to 22 new markets across the country for the same price of $1 a day or $8 a month to watch and record shows. Kanojia believes this will change people’s conception of how we get access to television.

“You can come in five or ten times a year and a pay a dollar. We have lots of habitual one dollar buyers. It’s a massive dent in the psyche.”

For Aereo to have a long-term impact, though, it will still have to survive an ongoing legal gauntlet. On this front, it has a decent chance because investors and lawyers designed the company as a high-stakes bet, counting on a 2008 appeals court ruling that said private remote DVRs don’t violate copyright (you can read the legal details here). After broadcasters sued it last year, Aereo won the first round and the case is now on appeal.

The price tag for the loser will be high. On one hand, media mogul Barry Diller and others have put at least $58 million into Aereo, money that could evaporate if Aereo is shut down. On the other hand, GigaOM Pro analyst Paul Sweeting (who has written about Aereo) said the initial court decision was a “disaster” for the networks and that a loss at the appeal level will open the floodgates.

“If the networks don’t win, what it means is that all you have to do is bounce a signal off a cloud-based DVR and you can do what you want,” said Sweeting by phone.

Whatever the outcome of the court case (which could go to the Supreme Court if courts in New York and California continue to disagree), Kanojia thinks he will have made an inexorable dent in the current tv structure. He also thinks the litigation will help other pioneering TV companies.

“The legal situation is unfortunate, but it forces clarity and that’s a good thing.”

Media attention to the service has focused primarily on the legal dispute between Aereo and TV broadcasters who have tried, and so far failed, to shut it down. The legal controversy is real but also overshadows the implications of the service for TV viewing and the technological wizardry that makes Aereo work. (Aereo founder and CEO Chet Kanojia will be speaking at our paidContent Live event in April.)

To get a better idea of just how Aereo is serving up TV, we went to the company’s plant in Brooklyn to get some up-close photos. Here’s our tour:

From the Empire State Building to your iPhone

Aereo transmits from the top floor of a nondescript government building on Vanderbilt Avenue on the edge of downtown Brooklyn. You can see it on the right: 

Aereo chose this location for a reason. The floor on which it operates has a direct line of sight to the city’s biggest transmission tower. Here’s a picture of the tower and the view from Aereo’s window:

These direct sight lines make it easy for Aereo to pick up the powerful signals emitted from over-the-air broadcast services like ABC, NBC, CBS, Fox and local community stations. Aereo’s technology then transcodes and relays those signals to its customers who can watch TV, change channels and record shows with their phones or iPads:

Tiny antennas for everyone in the city

Aereo works by letting every subscriber rent a pair of tiny antennas. Customers get two antennas so that they can watch live TV while also recording a show or, alternately, to watch live TV on two different devices at the same time. While Aereo created the personal antenna system as a way to comply with copyright rules (you can read about the legal issues here), the antennas themselves are remarkable in that they give Aereo the capacity to serve 1 million New York City customers from the single floor in Brooklyn and an adjoining rooftop.

Here’s a close up look of the dime-sized antennas in action:

Aereo CEO Chet Kanojia explained that the device is a simple copper antenna but that, rather than picking up the entire TV spectrum like a typical cable antenna, it picks up only the 6 megahertz block of spectrum that a viewer wants to see at a given time. He describes it as a “switched antenna” that’s beautiful in its simplicity. The ingenuity, Kanojia said, is that Aereo’s 1.5 inch antenna changes its electrical and magnetic characteristics in order to replicate the tasks of a standard 35 inch UFH or three foot VHF antenna.

The size of the antenna allows Aereo to cram many of them into a small space which is one reason Aereo is able to relay TV to so many people at the same time. Another reason is that the antennas are “multitenant” which means that, when one Aereo subscriber is not using an antenna at a given time, it is available to all other subscribers.

Cheap storage and high-performance fiber

Aereo relies on the antenna system to offer a cheap TV services that subscribers can easily add or drop at any time. But the antenna is only part of the equation. To make the service economically viable, Aereo is also capitalizing on major advances in transcoding technology and cloud storage. It is these advances that now make it affordable for Aereo to translate the over-the-air TV signals into iPhone video streams and to let people store hours of television on remote servers.

According to Kanojia, commercial transcoding costs per stream would have been $8,000 per customer two years ago but now the company can do it for under $20 (these figures relate to capital expenditures, not monthly costs). He also notes that a terabyte of storage, which once cost over $1 million, can now be had for under $100. The new efficiency, he said, is not just in raw storage capacity but better spindle speeds on hard drives that improve transmission times.

Here is a look at Kanojia standing in front of Aereo’s proprietary transcoding devices and a close-up of the servers which act as a private cloud service and on which Aereo customers store thousands of hours of TV to watch later:

To connect the antenna system with the transcoding and recording devices, Aereo relies on multiple 10 gigabit fiber links that look like this:

Aereo also relies on leased fiber networks in different spots around New York City to deliver TV content to its subscribers. This system means it doesn’t have to rely on content delivery networks or other middlemen.

“What’s the point of long-hauling something when you’re already 80 percent there?. There’s no CDN’s. It’s a local to local product,” said Kanojia.

Next: the man who would break the cable industry

Aereo wants to overturn the current TV business model in which viewers shell a hundred dollars for a bundle of channels, many of which they don’t want to watch. Aereo’s challenge comes by way of its technology but also in the form of Kanojia himself, who is picking a fight that many have lost before (iCravetv, ivi, etc) — and is so far holding his own. You can now read our follow-up account of Kanojia’s vision for the future of television.

The CEA supports Dish in the ongoing litigation with CBS, and in a press release it decried CBS’s policy of forbidding coverage of companies it’s in litigation with. ”We are concerned the new review policy will have a negative impact on our brand should we continue the awards relationship as currently constructed,” Karen Chupka, SVP of CEA’s events and conferences, said in a statement. “We look forward to receiving new ideas to recognize the ‘best of the best’ products introduced at the International CES.” Meanwhile, Gary Shapiro, CEA president and CEO, said, “We are shocked that the ‘Tiffany’ network, which is known for its high journalistic standards would bar all its reporters from favorably describing classes of technology the network does not like.”

CNET SVP and general manager Mark Larkin said CNET “is committed to delivering in-depth coverage of consumer electronics.  We look forward to covering CES and the latest developments from the show as we have for well over a decade.” A CBS spokesperson told The Verge that the network had already decided it wouldn’t partner with CES again.

Dish, too, weighed in with a statement. President and CEO Joseph Clayton said, “I regret that the award has come in the face of CBS’ undermining of CNET’s editorial independence. We look forward to continuing our longstanding relationship with CNET’s editorial staff and hope they are able return to their long tradition of unbiased evaluation and commentary of the industry’s products and services.”

This post was updated with comments from CNET and Dish.

According to Deadline, three different endings were filmed for this Monday’s Hawaii Five-0, each featuring the reveal of a different killer.

During the live broadcasts (both East Coast and West Coast), viewers will be encouraged to vote for whodunit via Twitter or the official CBS site — the winning ending for each broadcast will be aired in real-time. This could, at least in theory, lead to CBS airing a different ending in New York than in Los Angeles.

Actively including social media voting in the show is a television first, but it’s also a natural build on how Twitter has become an essential part of the television experience for many viewers.

Take for example ABC Family’s Pretty Little Liars — at this week’s Television Critics Association press tour, the show’s creators pointed to Twitter as being a huge factor in the show’s popularity and ratings success:

When the subject of the amount of social media the show gets and the involvement of the fans, Oliver Goldstick said, “What’s great is it’s almost taking us back to old time television where people all watched at the same time because there’s something communal. It’s tribal. People are watching this. They’re not just DVR’ing or watching later online. There’s an aspect of this that is really old fashioned, as cutting edge as it is, because people are experiencing simultaneously.” King added that, after Toby was revealed as part of the ‘A’ Team, the network got a call from a mother who wanted to complain about having a room full of sixteen-year old girls who couldn’t stop crying.

(I do not know what being a member of the A-team means. But apparently it’s a big deal.)

The catch with the Hawaii Five-0 experiment, though, is that participating will encourage real-time viewing, commercials and all — the driving force behind much of the television innovation happening these days (see also recent experiments in second-screen technology like the StorySync experience for AMC programming).

But it also requires a Twitter account and/or active engagement with the internet, which could be an issue for Hawaii Five-0‘s audience: According to AdWeek, the median age of the show’s viewers is 55 years old.

I’m not saying people older than 55 don’t know how to use the Internet — my parents are both active users of Twitter. They also don’t watch Hawaii Five-0.

CNET was ready to give the Hopper with Sling DVR, a set-top box from Dish Network, a spot in the finals of its “Best in CES” awards at the Consumer Electronics Show — until a directive came through from the site’s corporate parent CBS that the Hopper couldn’t win the award, because CBS is suing the company over its AutoHop commercial-skipping feature.

Not only was the Hopper disqualified from the award, but CNET added an editor’s note to its review of the device saying it would no longer be reviewing any products that were the subject of litigation with its parent company — a list that would include both the Hopper and Aereo, the over-the-net video broadcasting startup backed by Barry Diller, which CBS is also suing.

As John Hermann of BuzzFeed noted, this is probably every tech journalist’s nightmare: being told by a corporate parent that they can’t do their jobs because the parent co. is involved in a a lawsuit. But it’s more than just a journalist’s nightmare — it could be a serious problem for CNET when it comes to maintaining the trust of their readers. The site noted that the restrictions only affects its reviews and not its news reporting, but will readers make that distinction?

Presumably, when someone goes to the CNET site looking for information about set-top boxes or video-streaming hardware, they want the most complete information they can find. If they know that certain products aren’t going to be reviewed because CBS doesn’t like them for some reason, that’s going to color their impressions of the site’s thoroughness in doing its reviews — and it might also make them wonder about what else is being left out.

The more cynical might wonder whether anyone will even notice once the CES decision blows over, but for media entities — even large ones — in times like these, the trust of their readers is more valuable than ever, and it should probably not be squandered lightly.

Post and thumbnail images courtesy of Flickr user Hans Gerwitz

On Thursday, the CBS-owned, London-based music website became the latest website — after LinkedIn and eHarmony — to reveal that its data had been stolen, asking users to change their passwords after a dump of around 1.5 million passwords appeared on a cryptography forum.

Over the weekend, product chief Matthew Hawn posted an update saying that the hack had become apparent after a tip-off, and that the company had already upgraded its security as a result:

“Earlier this week, Last.fm received an email that let us know a text file containing cryptographic strings for passwords (known as “hashes”) that might be connected to Last.fm had been posted to a password cracking forum. We immediately checked the file against our user database and, while this review continues, we felt it was important enough to act on.

“We immediately implemented a number of key security changes around user data and we chose to be cautious and alert Last.fm users. We recommend that users change their password on Last.fm and on any other sites that use a similar password. All the updated passwords since yesterday afternoon have been secured with a more rigorous method for user data storage.”

But, while details of the attack only appears to have come to light in the last few days, evidence suggests that it actually happened at least three months ago — and that the company failed to catch it in the meantime.

In May, a number of users reported that they had been spammed at email addresses that could have only been available through Last.fm’s service. Customer support manager Matt Knapman responded by saying the company was investigating the incident and examining its systems for potential security breaches.

“We are investigating this matter urgently, running a security audit and looking at alternative ways the spamming of Last.fm users might have occurred.”

It appears this audit did not find evidence of the breach, nor did it uncover when the attack had taken place.

The timeline remains something of a mystery, but, despite rumors that it is the result of a breach that occurred in 2011, as suggested in this Reddit comment, I have learned that the attack most likely happened in February or March — a three full months before the first evidence spilled online.

The security flaw responsible, however, goes much, much further back. Former Last.fm developer Russ Garrett admitted on Twitter that he was responsible for failing to implement extra levels of password cryptography when he wrote the original security code as an 18-year-old in 2003, adding later that he “very much regretted” not fixing the issue before he left the company around three years ago:

@jgrahamc ultimately the unsalted MD5 auth was doing. In my defence: I was 18. It was 2003. The PHP community had no idea of bcrypt then.

— Russ Garrett (@russss) June 7, 2012

But even this is not the whole story: it explains why hackers were able to get crackable versions of user passwords, but not how they were able to access the data in the first place. How that happened, I am led to believe, is still being looked into.

I’ve contacted Last.fm for comment, but it is yet to reply.

“Ultimately, this case is about consumer choice,” said Dish in a complaint filed Thursday in Manhattan federal court. The satellite TV provider wants the court to declare that it is not infringing copyright or breaching the terms of its contracts with Fox, NBC, ABC and CBS. Meanwhile, the Hollywood Reporter reports that Fox has filed a separate suit against Dish to “aggressively defend the future of free, over-the-air television.”

Dish’s ad-skipping device stands out because, unlike other DVRs, viewers can skip an entire set of commercials rather than fast-forwarding or skipping in 30 second jumps.

The so-called “ad eraser” may delight consumers, but the TV networks reacted angrily during a conclave with advertisers in New York last week.

“How does Charlie Ergen expect me to produce ‘CSI’ without commercials?” said chief executive of CBS Corporation, Leslie Moonves, according to the New York Times. (Also, see my colleague Daniel Frankel’s excellent report on the strategy behind Dish’s “Molotov cocktail” at the broadcasters.)

In its complaint, Dish portrays its technology as a natural extension of existing time-shifting practices and points out that Americans have for decades chosen to disregard ads in one way or another.

Dish also claims that its technology does not alter the broadcasters’ signals and that viewers can only skip the ads the day after a show is aired live.

The TV networks are facing significant disruptions despite receiving new fees that oblige cable and satellite providers to pay them for carrying their over-the-air signals. In addition to its legal tussle with Dish over ad skipping, the TV networks are also suing Aereo, a start-up service that uses tiny antennas to broadcast shows directly to viewers’ iPads and iPhones.

Here’s a copy of Dish’s complaint:

Dish v TV Networks