The Supreme Court Is About to Decide the Future of TV

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

National Journal
Brendan Sasso
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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.

What Hap­pens If Aereo Wins?

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.

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.

What If the TV Net­works Win?

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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