Supreme Court: High-Tech Aereo Is Really Just a Cable Knockoff

6/25/14Follow @curtwoodward

The stakes for online TV streaming startup Aereo were always really high. 

In the eyes of the law, it was either going to be an innovative way to send consumers the shows they deserved or a clever workaround that really just made money from someone else’s work.

On Wednesday, Aereo lost that battle in convincing fashion at the U.S. Supreme Court. In a 6-3 ruling, the justices said the New York-based startup’s system of transmitting broadcast shows over the internet for a fee was an illegal violation of the TV networks’ copyright.

And in doing so, the court gave Aereo’s intricate, advanced technology a pretty healthy smackdown. Despite all of its next-generation advancements, the court said Aereo is “for all practical purposes a traditional cable system,” which started out by re-transmitting free broadcast shows from a better antenna—for a price.

Even the court’s dissenting justices didn’t offer too much solace for the defeated tech company, which had raised some $97 million in private investment from backers including media executive Barry Diller.

Justice Antonin Scalia, writing for the three-person dissent, disagreed with the court’s ruling mostly on technical legal grounds. But that still leaves additional copyright claims unresolved, and “I share the court’s evident feeling that what Aereo is doing (or enabling to be done) to the networks’ copyrighted programming ought not to be allowed,” Scalia wrote.

What comes next? The industry is watching for any possible “Plan B” for Aereo CEO Chet Kanojia, who has previously hinted that the entire company was riding on this ruling but has also hedged his bets a little in recent public statements.

That could mean paying retransmission fees to the broadcasters, which is where the cable companies went. If Aereo gets shut down, it would mean a loss of service for customers and, more importantly, layoffs for the company’s workers, which include a significant engineering force in Boston.

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

Aereo’s argument was that it merely gave TV viewers more convenient access to the free programming they already deserved—those major network shows that have to be offered at no cost when they’re being sent over the public airwaves.

Rather than an old-school antenna affixed to the roof, Aereo amassed a datacenter full of dime-sized broadcast antennas that were connected to an Internet-streaming system. Aereo customers were each assigned their own individual antenna and video stream.

That meant, in Aereo’s eyes, that consumers were actually just renting their own personal antenna and getting their hands on TV shows they already should have access to. But in this case, Aereo added a high-tech sweetener by allowing the shows to be streamed to connected devices.

When it worked, it was pretty magical. You don’t get everything on TV, but I distinctly remember sitting at a banquet table with a bunch of Bostonians who were streaming a Red Sox World Series victory over iPads while waiting for Online News Association awards to be announced.

But the Supreme Court said Aereo’s technology wasn’t enough of a difference to give it a pass under the federal copyright laws. And it went back to the 1970s to make that point.

In separate decisions in 1968 and 1974, the court ruled that precursors to today’s cable companies weren’t violating the networks’ copyrights with their new systems, which erected a beefed-up antenna and transmitted the improved signal to subscribers’ homes over a hard line.

But in 1976, Congress reacted by amending the copyright laws to make that workaround illegal. And even if there’s an argument that Aereo didn’t violate the letter of the law, the spirit of what Congress intended makes the startup’s model illegal, the court said.

“Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies,” the court wrote. It added that one significant technological difference—that Aereo customers started the streams on demand, rather than tapping into an always-on cable replay—makes no difference.

The court also took care to say that it wasn’t reaching conclusions that apply to other technologies not discussed in this case. Aereo supporters and others in the technology industry have worried that a loss by Aereo could raise legal problems for other cloud streaming services, but the justices said thy “cannot now answer more precisely how … the Copyright Act will apply to technologies not before us.”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • Jimmy James

    So, does this mean that people are committing a felony that are using the service right now?

    • curtwoodward

      No, this case is not at all about the users’ liability. It found that Aereo was infringing on copyrights. That was the only question.