The U.S. Supreme Court could settle the fate of a new technology company that television broadcasters fear would destroy their business.
On Friday, the high court said it would hear arguments that Aereo Inc., a startup firm, violates copyright law by enabling its customers to stream local television stations over the Internet and that it should be shut down.
The major media companies seeking the court’s review include CBS Corp., 21st Century Fox, Walt Disney Co. and Comcast Corp.
Launched in 2012 and backed by media mogul Barry Diller, Aereo is currently available in 10 cities, including New York, where it is based. Although it has not arrived in Ohio, the company’s website says Aereo is coming soon to Cleveland, Columbus and Cincinnati. It distributes broadcast signals via a tiny antenna and offers customers access to a cloud-based digital video recorder that holds up to 60 hours of content. The service costs $8 to $12 a month.
Broadcasters fear that Aereo, which does not pay them for their content, could grow in popularity and threaten the distribution fees they get from pay-TV distributors, including cable and satellite companies, in return for carrying their channels. Aereo has argued that it is merely an antenna service and is no threat to the bottom line of broadcasters.
So far, the courts have agreed with Aereo. Last year the U.S. Court of Appeals for the 2nd Circuit in New York said Aereo’s transmissions and recordings are not “public performances” of copyrighted material. That is the ruling broadcasters are seeking to have overturned by the Supreme Court.
“We believe that Aereo’s business model, and similar offerings that operate on the same principle, are built on stealing the creative content of others,” CBS said in a news release Friday. “We are pleased that our case will be heard, and we look forward to having our day in court.”
Aereo founder and Chief Executive Chet Kanojia said his company has “every confidence that the court will validate and preserve a consumer’s right to access local over-the-air television with an individual antenna, make a personal recording with a DVR and watch that recording on a device of their choice.”
Arrangement under fire
Consumers have always had the ability to buy an antenna to receive over-the-air television signals. Broadcasters say that Aereo is exploiting this arrangement by retransmitting the signals without compensating or getting the approval of the TV firms and by charging consumers for the service.
CBS and Fox have previously indicated that if Aereo’s business is found to be legal, they will turn their over-the-air broadcast networks into cable channels.
“We simply cannot provide the type of quality sports, news and entertainment content that we do from an advertiser-supported-only business model,” 21st Century Fox President Chase Carey told media analysts last year. CBS chief Leslie Moonves has made similar statements.
The broadcasters also worry that if Aereo passes legal muster, cable and satellite companies could use it or a similar technology to get around paying retransmission consent fees.
However, given that the parents of the major broadcast companies also own powerful cable channels, such a scenario is unlikely. For example, ABC is a sister company to ESPN, and NBC is part of the same media giant that owns the popular USA Network. Each can use that leverage while negotiating deals for their local TV stations. Aereo made that point last week to analysts.
It is unrealistic to think a pay-TV distributor is not going to be able to say to ABC, “I’m not going to pay your retransmission consent fees, but I want ESPN,” Kanojia said.
He said that if the court rules against Aereo, it will hurt not only consumers but also the cloud computing industry.
“The broadcasters are asking the court to deny consumers the ability to use the cloud to access a more modern-day television antenna and DVR,” Kanojia said.