Supreme Court Decision Deals Killing Blow to Aereo
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UPDATED: Jul 9, 2014
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The United States Supreme Court has dealt a killing blow to Aereo, the innovative cloud-based service offering remote individual antennae and DVRs to consumers for a monthly fee. In a 6-3 decision, the Court sided with the American Broadcasting Company (ABC) and ruled that Aereo violated copyright law by retransmitting copyrighted network television content through the cloud. The decision overturns a prior ruling by the 2nd Circuit Court of Appeals. Aereo has suspended operations in the wake of the latest ruling.
Aereo’s Antenna Farms
Aereo offered consumers in large television markets the opportunity to rent an over-the-air (OTA) antenna at one of the company’s remote “antenna farms” stocked with tiny “micro-antennae.” Aereo then fed the broadcast signals captured by the antenna through the cloud, allowing users to watch broadcast television on their computers or compatible set-top boxes such as the Roku or Chromecast. Aereo also offered limited DVR functionality.
We all know that traditional “network” television—ABC, NBC, CBS, Fox et al—is broadcast over publicly owned (and Federally regulated) airwaves, free to access through in-home antennae and tuners. As cable companies rose to prominence, the major networks negotiated licensing deals with cable companies allowing the cable companies to rebroadcast or retransmit network content through their cable systems. Copyright broadcasts were licensed for retransmission for a negotiated fee and each side—network, cable company and consumer—ostensibly got what they wanted.
And then the 21st Century happened.
“Cord-cutting” is becoming more fashionable by the day. More and more consumers—particularly in younger demographics—are opting out of costly cable or satellite contracts in favor of a combination of over the air broadcasts, a la carte purchases of content though online retailers such as Amazon and iTunes and subscription streaming services such as Netflix. Computers, phones and tablets are replacing the television as the entertainment epicenter of the household.
SCOTUS Determines Aereo Violated Copyright Law
Aereo sought to capitalize on the cord-cutting movement by providing a technologically advanced way to access content that is available free to all, charging a monthly fee for use of their infrastructure. It should come as no surprise that the major networks cried foul. Aereo circumvented the deals networks and cable/satellite providers have had in place, essentially taking money out of their pockets in the form of lost subscription and licensing revenue.
Cable and satellite providers have to pay to rebroadcast copyrighted programming that Aereo was retransmitting without paying a licensing fee. Despite being technically and factually wrong, the Supreme Court ruled that “Aereo’s system receives programs that have been released to the public and carr[ies] them by private channels to additional viewers.” Just like cable/satellite companies. And now, just like cable/satellite companies, Aereo must ante up or cease operations. So far, they’ve decided on the latter course of action.
The decision is fascinating because, despite the 6-3 majority, it is largely based on a “smell test” approach as opposed to actual law. As Gizmodo pointed out, the highest Court in the land essentially took the position of “if it looks like a cable provider and quacks like a cable provider, it’s a cable provider.” Why let facts get in the way of entrenched corporate interests?
Conservative Justices Dissent – Chilling Effect On Tech Innovation
In a turn of events that is sure to secretly infuriate the largely liberal, anti-corporate cord-cutting population, staunch conservative Justices Scalia, Alito and Thomas dissented from the majority’s opinion, writing that it was “built upon the shakiest of foundations.” And while they don’t necessarily agree that Aereo was in compliance with the spirit of copyright law and FCC regulations, they do acknowledge that decision may have a chilling effect on technological innovation when it comes to cloud-based delivery of copyrighted content.
In an entertainment landscape that is becoming more segmented by the day, the network and cable/satellite models are rapidly becoming outmoded. Cord-cutters, streaming services and other cloud-based innovations are eroding what was once stable—and profitable—territory for major corporations. Much like the traditional music industry, traditional broadcast and cable/satellite providers have seemingly decided to fight the evolution of content consumption at all costs, instead of focusing on monetizing emerging technologies. And the Supreme Court, in a decision that is sure to have far-reaching consequences, has given its stamp of approval.