The Supreme Court Is About to Decide the Future of TV

Broadcasters are asking the Court to kill the video site Aereo.

Aereo allows subscribers to watch local TV channels on their tablets, phones, and computers. 
National Journal
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Brendan Sasso
April 20, 2014, 7:22 a.m.

The Su­preme Court will hear ar­gu­ments Tues­day in a case that could shape the fu­ture of tele­vi­sion and even the In­ter­net.

All of the ma­jor TV net­works are su­ing to shut down Aereo, a ser­vice that lets sub­scribers watch and re­cord loc­al TV chan­nels on their com­puters, tab­lets, phones, and In­ter­net-con­nec­ted TVs for as little as $8 per month. The prob­lem is that un­like cable pro­viders, Aereo doesn’t pay the TV sta­tions for their con­tent.

Every­one has the right to ac­cess over-the-air TV chan­nels us­ing an an­tenna. Aereo calls it­self a “mod­ern-day tele­vi­sion an­tenna and DVR.” But Aereo sub­scribers don’t have an­tenna arms stick­ing out of their tab­let com­puters. In­stead, Aereo uses a cluster of thou­sands of tiny an­ten­nas to de­liv­er video over the In­ter­net to all of the sub­scribers in an area. Tech­nic­ally, sub­scribers are rent­ing ac­cess to one of those an­ten­nas.

The com­pany says it’s just mak­ing it easi­er to watch over-the-air TV. The ser­vice, which is cur­rently avail­able in only 11 cit­ies, is es­pe­cially ap­peal­ing to young people who want to drop their pricey cable pack­ages for Net­flix, Amazon Prime, and oth­er on­line op­tions, but don’t want to miss out on sports and loc­al news.

But ABC, NBC, CBS, and Fox have all sued, claim­ing that Aereo is steal­ing their con­tent. The video site has won some de­cisions in the lower courts, but the Obama ad­min­is­tra­tion has weighed in with a brief on the side of the broad­casters.

The TV net­works claim that their en­tire busi­ness mod­el is in danger if Aereo wins, and they’ve hired the best law­yers money can buy. Paul Clem­ent, a former so­li­cit­or gen­er­al who ar­gued be­fore the Su­preme Court to try to over­turn the pres­id­ent’s health care law, will rep­res­ent the TV sta­tions on Tues­day.

A host of tech­no­logy com­pan­ies have come to Aereo’s de­fense, warn­ing that a de­cision against the video ser­vice could threaten oth­er “cloud” stor­age sites like Drop­box.

The TV broad­casters fear an Aereo vic­tory could doom their whole in­dustry. While broad­cast TV is free over the air, most people watch their loc­al TV chan­nels through a sub­scrip­tion from their cable or satel­lite pro­vider. Un­like Aereo, those pro­viders pay the TV broad­casters for their chan­nels.

Broad­casters have been ne­go­ti­at­ing for high­er and high­er pay­ments in re­cent years, and so-called “re­trans­mis­sion fees” now ac­count for an es­tim­ated $3.3 bil­lion in rev­en­ue every year.

(Stephanie Stamm) Stephanie Stamm

The fear is that if Aereo wins, cable pro­viders could cut off those pay­ments, either by en­ter­ing in­to an agree­ment with Aereo or mim­ick­ing the com­pany’s tech­no­logy. Even if cable com­pan­ies don’t fol­low through with that threat, an Aereo vic­tory could give them lever­age to drive down pay­ments to broad­casters. Lower re­trans­mis­sion fees could mean lower cable bills for con­sumers (or just high­er profits for the cable com­pan­ies). (Stephanie Stamm)

Ex­ec­ut­ives at the ma­jor TV net­works say they can’t sur­vive without re­trans­mis­sion fees. In a fil­ing to the Su­preme Court, the net­works warned that Aereo “im­per­ils “¦ the vi­ab­il­ity of over-the-air broad­cast tele­vi­sion.”

If the Su­preme Court con­cludes that Aereo isn’t vi­ol­at­ing the law, the first thing the broad­casters will prob­ably try to do is get Con­gress to change the law. They ar­gue that Aereo is try­ing to ex­ploit a loop­hole in copy­right law, and if the Court doesn’t shut the com­pany down, then Con­gress should just close the loop­hole. Broad­casters con­tin­ue to have im­press­ive clout on Cap­it­ol Hill and are used to get­ting what they want.

The broad­casters have already threatened that if the Court and Con­gress re­fuse to stop Aereo, they may pull their pro­gram­ming off the air.

“If we can’t have our rights prop­erly pro­tec­ted through leg­al and polit­ic­al av­en­ues, we will pur­sue busi­ness solu­tions,” News Corp. Pres­id­ent Chase Carey said last year. “One such busi­ness solu­tion would be to take the net­work and turn it in­to a sub­scrip­tion ser­vice.”

It’s un­clear what that threat would mean ex­actly and wheth­er broad­casters would con­sider shut­ting down en­tirely. A more likely res­ult is that the net­works would move pop­u­lar pro­gram­ming like sports and prime-time shows to cable chan­nels and leave lower-cost con­tent (like re-runs) on their broad­cast sta­tions.

A loss in the Su­preme Court is the end of the road for Aereo.

“If we lose, we’re fin­ished,” Barry Diller, a me­dia mogul and the main in­vestor in Aereo, said in an in­ter­view this month on Bloomberg TV. “Aereo would prob­ably not be able to con­tin­ue in busi­ness.”

But the case could have im­plic­a­tions for more than just the one small In­ter­net com­pany. Some tech groups and In­ter­net act­iv­ists warn that the Su­preme Court could throw cloud-com­put­ing com­pan­ies in­to leg­al jeop­ardy.

Like Aereo, com­pan­ies in­clud­ing Google, Amazon, Apple, and Drop­box al­low users to re­motely ac­cess copy­righted ma­ter­i­al. If the Court holds that Aereo’s re­mote-an­tenna sys­tem qual­i­fies as a “pub­lic per­form­ance,” and there­fore re­quires a copy­right li­cense, it could threaten com­pan­ies with sim­il­ar busi­ness mod­els.  

In a brief to the Su­preme Court, the so­li­cit­or gen­er­al ar­gued that Aereo is dif­fer­ent than oth­er cloud pro­viders be­cause for oth­er ser­vices, con­sumers are gen­er­ally play­ing back a copy­righted work that they ac­quired leg­ally in the first place.

The of­fice, which rep­res­ents the U.S. gov­ern­ment be­fore the Su­preme Court, said the con­clu­sion that Aereo is il­leg­al “should not call in­to ques­tion the le­git­im­acy of busi­nesses that use the In­ter­net to provide new ways for con­sumers to store, hear, and view their own law­fully ac­quired cop­ies of copy­righted works.”

But the Com­puter and Com­mu­nic­a­tions In­dustry As­so­ci­ation, a lob­by­ing group that in­cludes Google, Mi­crosoft, Ya­hoo, and Aereo, said the U.S. gov­ern­ment’s test is “un­work­able and will en­danger the thriv­ing cloud com­put­ing in­dustry just as it starts to ma­ture.”

Even if courts don’t ul­ti­mately shut down oth­er cloud com­pan­ies, a rul­ing against Aereo could res­ult in “years of costly lit­ig­a­tion, chilling much valu­able in­nov­a­tion in the mean­time,” the as­so­ci­ation warned.


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