Supreme Court Puts Kibosh on Aereo

Aereo may be dead in the water after the Supreme Court on Wednesdayruled it broke federal law by retransmitting programming without paying copyright fees.

The company, which allows consumers to watch broadcast TV over the Internet, had been in long-running battles with broadcasters over the legality of its service.

“Today’s decision by the United States Supreme Court is a massive setback for the American consumer,” said Aereo founder and CEO Chet Kanojia.

“We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry,” he added.

‘Change Or Shut Down’

“Today’s ruling means that Aereo’s basic business model will have to change if it intends to continue operating,” Mike Paxton, senior analyst at SNL Kagan MRG, told the E-Commerce Times.

“Based on previous statements made by Aereo CEO Chet Kanoja and IAC Chairman Barry Diller, any type of change that would involve paying for broadcast content would undermine their business model and is unlikely to be adopted,” he noted. “Bottom line: The ruling means Aereo cannot continue to operate without paying retransmission fees, so they either change or shut down.”

Aereo launched in 2012 in New York City and later expanded to other regions in the U.S. It let consumers watch broadcast-TV shows on their computers, smartphones or tablets for a fee starting at US$8 per month. Users had the option of watching shows live or recording them for later.

Broadcasters wasted little time in bringing legal action against Aereo, claiming that the company was acting illegally in retransmitting their programs without paying for the right to do so.

Copyright Loophole

Lower courts handed down contrasting rulings on the legality of Aereo’s service. The crux of the issue was a federal law provision that related to public performances of recorded works.

The Copyright Act governs how TV programs are transmitted “to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”

Aereo claimed its service did not constitute a public performance. When a user wanted to watch a show, Aereo used a single micro antenna to receive the chosen station. It then sent the station’s signal to a dedicated portion of a video recorder, then streamed that content to the consumer — in essence, sharing a recording of a recording. Since each user had a dedicated antenna and setup, Aereo argued that it effectively created many individual performances, rather than public performances.

The broadcasters argued the Copyright Act was intended to stop infringers from transmitting performances to the public, regardless of the number of people able to access each transmission.

Public Performance

The Supreme Court voted 6-3 against Aereo. The company “performs petitioners’ works ‘publicly,'” it declared.

“We must decide whether respondent Aereo, Inc., infringes this exclusive right by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air. We conclude that it does,” Justice Stephen Breyer wrote in the majority opinion.

While some onlookers feared the decision may stifle innovation in the industry, Breyer added that “given the limited nature of this holding, the Court does not believe its decision will discourage the emergence or use of different kinds of technologies.”

‘Little Impact’

“For the vast majority of consumers, the ruling has little or no impact,” SNL Kagan MRG’s Paxton said. “The discussion surrounding the ruling was more about how new technologies and business models could be used to distribute content — in this case, video content — than about anything else. Since only a few thousand households — and we still don’t know the exact number of Aereo subscribers — is directly affected, the overall impact on U.S. consumers is negligible.”

Broadcasters were buoyed by the decision. Stocks in TV companies soared soon afterward. Had the court ruled in favor of Aereo, those firms stood to lose billions, since the ruling may have undercut the legal standing that means cable and satellite companies need to pay copyright fees to air their programming.

“We’re gratified the Court upheld important copyright principles that help ensure that the high-quality creative content consumers expect and demand is protected and incentivized,” The Walt Disney Company said in a statement provided to the E-Commerce Times by Karen Hobson, VP of communications at Disney ABC Television Group.

‘Victory For Consumers’

“Today’s decision is a victory for consumers. The Court has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended,” said Paul Clement, attorney for petitioners in American Broadcasting Companies v. Aereo.

Among the petitioners are ABC, Disney, CBS, NBCUniversal, Telemundo, FOX, Univision and PBS.

“We are pleased with today’s decision, which is great news for content creators and their audiences,” CBS said in a statement provided to the E-Commerce Times by Chris Ender, EVP of communications.

‘Upholds Copyright Stance’

“In terms of how critical it is for the broadcast industry, it’s important because it upholds their stance about broadcast copyright laws and practices and how their content can be distributed,” noted SNL Kagan MRG’s Paxton. “It would have been more critical if they would have lost the ruling, but for now, it’s back to business as usual.”

Despite losing the battle, this may not be the end of the line for Aereo.

“We are disappointed in the outcome, but our work is not done,” Kanojia said. “We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”