Oral arguments for a case that could have far reaching effects on how people receive television programming will be heard by the Supreme Court on Tuesday. It’s the four major over the air TV networks vs. the upstart Aereo Corporation in a case that, depending on who you listen to, could either destroy over the air TV for the 60 million Americans who still get their signals via an antenna, or initiate a consumer paradise of options and choices on what to watch, when to watch it, and what to watch it on.
Is this a classic American business success story complete with heroes (media mogul Barry Diller), villains (huge media conglomerates), and plenty of drama (Supreme Court decides the fate of TV viewing)? Or is Diller & Co. a bunch of charlatans, raking in cash by pirating the work of others without paying for it?
Here’s the guts of the dispute:
Aereo subscribers can stream live broadcasts of TV channels on mobile devices using miniature antennas, each assigned to one subscriber. The service was launched in March 2012 in the New York area. The company has since expanded to about 10 cities and plans to enter several more.
The broadcasters claim the service violates their copyrights on the television programs and represents a threat to their ability to control subscription fees and generate advertising. Among those filing court papers in support of the broadcasts are the National Football League, Major League Baseball and various media companies, including Metro-Goldwyn-Mayer Studios Inc.
CBS said in a statement on Friday that Aereo’s business model is “built on stealing the creative content of others.”
Aereo counters that its service does nothing more than provide users what they could obtain with a personal television antenna.”We believe that consumers have a right to use an antenna to access over-the-air television and to make personal recordings of those broadcasts,” Aereo CEO Chet Kanojia said in a statement.
Aereo has won every legal battle it’s been in, including an appeals court ruling late last year. The Supreme Court agreed to hear the case in January.
But in a dissent from the majority, Justice Denny Chin offered a scathing observation about Aereo, saying Aereo’s platform is a “sham”:
Aereo uses a farm of time antennas, one for each subscriber, “but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna,” Chin wrote. “[I]ndeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.”
Chin is referring to a precedent set in a 2009 case where Supreme Court decided it would be acceptable for Cablevision to store consumers’ DVR content at its own sites, instead of requiring customers to have their own DVRs.
The bottom line is that media companies believe Aereo is stealing content and they want it stopped.
The head of CBS has threatened to cut off its broadcast signal and switch to an Internet-based service if broadcasters lose their bid to get Aereo taken down.
Cable and satellite companies are also keeping track of the case. Those companies, which currently pay broadcasters millions to retransmit their content, could have the incentive to develop a system similar to Aereo’s to cut down on their fees.
Broadcasters are growing increasingly reliant on those retransmission fees, especially as more and more people watch TV on DVR and skip commercials, the other main moneymaker for the stations.
“This is aimed right at the heart of part of their business model, but part of the business that by the way supports local broadcasters and affiliates and also is likely to be increasingly important in the future,” said Mark Schultz, the co-director of academic programs at George Mason University’s Center for the Protection of Intellectual Property.
A broad ruling could also have repercussions for Google, Dropbox and other services that rely on the “cloud” for storing information.
Kanojia has said his company has no Plan B in case the high court rules against him. But a victory would likely lead to a rapid expansion beyond the 11 cities where it currently operates.
A win for Aereo could also spur action in Congress, where broadcasters have a number of allies who will be pressed to crack down on the service.
“If Aereo were to win, I think that Congress would be under some pressure to at least do some partial copyright reform and close the loophole,” DiCola said.
Some analysts believe the likeliest outcome is some kind of compromise ruling where Aereo is allowed to continue with its business but forced to pay something to broadcast companies. Few expect CBS to follow through on its threat to yank its channels, although there is a chance that all broadcast TV companies will cut back on content if, as expected, an Aereo win allows cable companies to stop paying transmission fees to the media giants.
Whatever SCOTUS rules is bound to have far reaching, and perhaps revolutionary effects on how we watch TV.