UPDATE 2-Judge refuses to block Diller's Aereo online TV venture
* Major broadcasters lose bid for preliminary injunction
* Judge said ruling for broadcasters could shut Aereo down
* Some broadcasters, including Fox, plan appeal
* Online venture launched in NYC area in March
By Jonathan Stempel and Yinka Adegoke
July 11 (Reuters) - A federal judge has rejected a bid by major U.S. broadcasters to stop Aereo Inc, an online television venture backed by billionaire Barry Diller, to stop rebroadcasting some of its programming over the Internet.
The broadcasters sought to stop Aereo from streaming programs to phones, tablet computers and other devices, saying they would lose their right to retransmission fees from cable and other companies that rebroadcast their programming, and also lose critical advertising revenue.
Walt Disney Co's ABC, CBS Corp, Comcast Corp's NBCUniversal and Telemundo, News Corp's Fox, Univision Communications Inc and the Public Broadcasting Service had filed lawsuits accusing Aereo of copyright violations, even before the service was launched in the New York City area in March for $12 per month.
The launch of services like Aereo or Dish Network's ad-skipping Hopper device are seen as a threat to the TV industry's ability to control subscription fees and generate advertising revenue.
The $100 billion pay-TV business in particular is concerned that the delivery of TV signals over the Web will lead to customers dropping their expensive cable packages for cheaper, smaller Web TV packages which are being explored by technology companies like Apple Inc, Google Inc and Intel Corp.
U.S. District Judge Alison Nathan said on Wednesday that while the broadcasters demonstrated they faced irreparable financial damage if were the venture were allowed to continue, Aereo also showed it would face severe harm if the requested preliminary injunction were granted.
"First and foremost, the evidence establishes that an injunction may quickly mean the end of Aereo as a business," the Manhattan judge wrote in a 52-page opinion.
In a joint statement, Fox, PBS, Univision and the New York-area stations WNET and WPIX said they will appeal, calling the decision "a loss for the entire creative community."
CBS said in a statement it would fight on. "This case is not over by a long shot. We intend to immediately appeal this decision to the Second Circuit and seek expedited consideration."
NBC also said it would appeal. Lawyers for ABC did not immediately respond to requests for comment.
Diller, whose IAC/InterActive Corp provided $20.5 million of start-up financing for Aereo, welcomed the decision.
"Of course I'm happy the judge denied the injunction, and now we can really begin telling television consumers they have an alternative," he said. Diller sits on Aereo's board.
Nathan agreed that Aereo will damage the broadcasters' ability to negotiate advertising and retransmission agreements, given that the service could artificially lower Nielsen viewership ratings and force concessions.
She also said Aereo could reduce traffic to websites of the broadcasters themselves, damaging relationships with content providers and advertisers there.
But Nathan also said Aereo, in addition to facing the risk of closure, could lose employees, the ability to attract new investors, customer goodwill, and its "substantial investments" in the service.
"The balance of hardships certainly does not tip decidedly in favor of (the broadcasters)," she wrote.
The court concluded it was bound by a 2008 Second Circuit court's decision in favor of Cablevision Systems Corporation for its remote-storage digital video recorder (RS-DVR) system which also allowed consumers to record programs on remote servers. Broadcasters privately disputed the Cablevision ruling would apply to Aereo.
ISI Group analyst Vijay Jayant said that while the judge's ruling was significant, the trial would be decided by jury.
"There is a long road ahead before anyone can claim victory," he said.
The cases are American Broadcasting Cos. et al v. Aereo Inc, U.S. District Court, Southern District of New York, No. 12-01540; and WNET et al v. Aereo Inc in the same court, No. 12-01543.
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