Arrow in Aereo's heart? Supreme Court says service undercuts broadcasters

06/25/2014 2:12 PM

06/25/2014 2:30 PM

In a win for broadcasters and big media, the Supreme Court on Wednesday grounded the streaming service Aereo, ruling that the start-up violates the Copyright Act by recording and streaming over-the-air TV to subscribers’ devices.

The court’s 6-3 majority concluded that Aereo effectively operates as a cable service and therefore is covered by the copyright law.

“Aereo’s activities are substantially similar to the (cable) companies that Congress amended the (Copyright) Act to reach,” Justice Stephen Breyer wrote for the majority.

Breyer also said, “The court does not believe its decision will discourage the emergence or use of different kinds of technologies.”

Some content providers _ including 21st Century Fox, the Walt Disney Co., CBS and Gannett _ were quick to praise the court’s decision.

“This decision gives the creative community greater confidence that copyright law cannot be so simply evaded and restores the proper balance to the system,” according to a statement from the Screen Actors Guild‐American Federation of Television and Radio Artists, a labor union.

Aereo’s system is made up of servers, trans-coders and thousands of dime-sized antennas housed in a central warehouse. Aereo says the service it offers is no different from old-fashioned TV antennas picking up broadcasts.

Its argument before the Supreme Court focused on the definition of a private performance versus a public one. By assigning each user an antenna that then records a unique copy of the broadcast, it’s participating in a private performance, it said. The court’s majority didn’t buy it.

“Aereo is not simply an equipment provider,” Breyer reasoned. “When Aereo streams the same television program to multiple subscribers, it transmits a performance to all of them.”

Broadcasters bluntly called Aereo’s technology a loophole to get around copyright laws. Broadcasters including ABC, NBC, CBS and Fox filed federal lawsuits only two weeks after the start-up service launched in 2012.

They argued that the start-up steals their copyrighted content by pulling TV signals from the airwaves of local stations and allowing customers to record shows online and stream them on their devices. Cable and satellite companies pay substantial retransmission fees to broadcast the same content.

“The networks make dire predictions about Aereo,” Justice Antonin Scalia wrote in dissent. “We are in no position to judge the validity of those self-interested claims or to foresee the path of future technological development.”

He used the example of a copy shop to illustrate his point, saying there’s a difference between legally copying a 10-year-old’s drawings and duplicating a famous artist’s copyrighted photographs. Similar examples, from library cards to valet parking, were used in the decision in an attempt to explain the complex legal problems behind copyright ownership.

Cloud computing advocates have warned that an Aereo loss might mean that popular online services such as Dropbox and Google Drive will be caught in the crossfire. The legal argument against Aereo might be dangerous for any streaming service that uses digital storage, they argued.

Aereo founder and Chief Executive Chet Kanojia called the Supreme Court’s decision a “massive setback for the American consumer."

“Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle,” he said.

The company provided an essential piece that thousands of “cord cutters” used to sever ties with pricy cable subscriptions. For a fraction of the cost, they were able to use Aereo to record live events, such as the Olympics or the Oscars, and supplement that with TV shows and movies from services such as Hulu and Netflix.

“This sends a chilling message to the technology industry,” Kanojia said in a statement.

The view that an Aereo loss might stifle innovation in the technology and cloud services industry by shackling it to an outdated communications law was a central point in the company’s defense before the high court.

“This ruling sends a signal to investors and venture capitalists that their resources in supporting such start-ups and innovators would be more safely invested elsewhere,” Ed Black, chief executive of the Computer & Communications Industry Association, said in a statement.

The Obama administration sided with the broadcasters, saying in a brief that Aereo is “clearly infringing” on the networks’ copyright by streaming content without permission.

Today’s ruling might be only a short-term win for broadcasters unless they adapt to give consumers what they ask for, said Nicco Mele, a digital media expert and lecturer at Harvard’s Kennedy School of Government. He compared the Aereo case to the copyright violation problems that users of the popular music-sharing service Napster experienced in the early 2000s.

Up until today Aereo operated in a dozen major cities, including Atlanta, Boston, Dallas, Miami and New York, and had planned to expand to 50 by next year. Its future is now uncertain.

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