U.S. Supreme Court Deals Severe Blow to Aereo

By: CBS MoneyWatch
By: CBS MoneyWatch
The U.S. Supreme Court on Wednesday ruled that Aereo, a service that lets users watch broadcast television on Internet-connected devices with dime-sized digital antennas, is effectively stealing content from the media companies.

Aereo

June 25, 2014

CBS MoneyWatch - The U.S. Supreme Court on Wednesday ruled that Aereo, a service that lets users watch broadcast television on Internet-connected devices with dime-sized digital antennas, is effectively stealing content from the media companies.

In a 6-to-3 decision, the justices rejected Aereo's argument that it is only a provider of equipment and decided that, for purposes of copyright law, the service should effectively be treated like a cable company. The ruling states, "given Aereo's overwhelming likeness to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference here."

At issue in the case is what constitutes a "public performance" of copyrighted material, a key standard under the law. Broadcasters involved in the case -- CBS, the parent company of CBSNews.com; Comcast, 21st Century Fox; and Walt Disney -- argued that Aereo is illegally taking their content.

Aereo launched in 2012, immediately gaining attention for its method of letting consumers access broadcast TV over the Internet. The company assigns customers an individual, remote antenna that lets consumers pick up broadcast, cable or satellite signals. Programs can also be recorded to a DVR.

Aereo maintains that it merely provides technology to view video content privately, much as someone would use a roof-top antenna to watch TV at home. As a result, the company argues, it isn't airing a public performance; rather, it is enabling many private performances. In its defense, Aereo cites a 2008 Cablevision case in which a federal court ruled that remote DVR storage systems don't infringe copyright protections.

Broadcasters claimed that Aereo is more like a cable subscription than a DVR service, arguing that the company goes beyond simply providing equipment for watching TV.

The stakes in the case are high not only for the litigants, but also for consumers. Top media executives, including CBS chief executive Les Moonves, had raised the possibility of moving their networks online and to cable if they lost in court. That would take a particular toll on networks' local TV affiliates, which would no longer have access to popular programming.

Chase Carey, chief operating officer of 21st Century Fox, had hinted at even stronger action, saying the company wouldn't "sit idle and allow our content to be stolen."

The battle between Aereo and the broadcasters had been brewing for some time. Aereo founder Chaitnaya "Chet" Kanojia has said that the media companies threatened legal action after he first told them about the service several years ago.

Aereo, which had been rolling out its service to cities across the nation, charges $8 a month for access to an antenna that in turn gives users access to the content of ABC, CBS, Fox and NBC over their computers and smartphones, bypassing traditional pay TV operators such as cable and satellite providers.

Also worrisome for the broadcasters was that Aereo didn't pay fees to re-transmit their programming, an increasingly lucrative part of the companies' business that research firm SNL Kagan expects to hit $7.15 billion by 2019.

"The stakes are potentially enormous, and the Supreme Court is aware of that," said Andy Baum, a partner at Foley & Lardner. "Obviously, a ruling in favor of Aereo would threaten a large portion of the [networks'] current business model and revenue structure."

Aereo supporters, including Barry Diller, Chairman of IAC/InterActiveCorp. (IACI), contend that a ruling against the service would have an adverse impact on a range of important new technologies, including "cloud" computing. Following the decision, Diller said in a statement, "It's not a big (financial) loss for us, but I do believe blocking this technology is a big loss for consumers, and beyond that I only salute Chet Kanojia and his band of Aereo'lers for fighting the good fight."

Aereo CEO Kanojia said in a news release earlier this year, "They are asking the Court to confine consumers to outdated equipment and limit their access to lawful technology in order to protect a legacy business model, the success of which is built on eliminating consumer choice and competition in the marketplace."

That view didn't sway the court. During oral arguments, Chief Justice John Roberts seemed to drill straight to the heart of the broadcasters' claims by asking whether Aereo created its system to circumvent copyright law.

The Supreme Court said in the ruling that it believed its decision was limited and would not imperil emerging technologies.


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