A Simple Guide to the Aereo Supreme Court Case

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A view of the Supreme Court in Washington, Wednesday, June 27, 2012. Aereo will face off against television broadcasters starting next week in a case that will have ramifications for the technology and media industries.
Image: Evan Vucci/Associated Press

Next week the United States Supreme Court will hear a case pitting Aereo, the startup that streams free-to-air broadcast TV to your home, against the broadcasters that provide this television content.

Mashable will be producing a variety of pieces to help understand the ramifications of a case that will resonate throughout the technology and media industries, regardless of which side wins.

To get started, here is an explainer on the case. If you have any questions after reading this, please put them in the comments.

How does Aereo work?

When you sign up for an Aereo account, what you are actually doing is leasing a small antenna and cloud service.

Each person with an Aereo account is assigned an individual antenna that accesses the broadcasts of free, over-the-air TV. These antennas, which are about the size of a dime, are grouped together and placed in an area to receive good reception.

Aereo antenna

An Aereo antenna vs. a dime.

Aereo then takes the television broadcasts from the antenna and streams them to you. It also stores the television broadcasts that you tell it to, like a DVR.

There’s debate about the legality of the antenna structure. However broadcasters’ brief to the Supreme Court dropped disagreements over whether Aereo’s antennae operated individually or in the aggregate.

The company has posted more info about its system and the legal questions at a new advocacy site — www.protectmyantenna.org.

So far, so good. What’s the issue then?

Broadcast television is the subject of copyrights, which protect the rights of content creators. Television stations pay licensing fees for broadcast content, otherwise they would be in violation of copyright law.

Aereo pays no such retransmission fees

Copyrights? Where is this headed…

Copyright law complicates this debate. We’ll try to make this simple.

The question revolves around public and private performances — how and where something is shown.

If you buy a DVD of a movie, you have the right to watch it in your home; that is considered a private performance. You are not allowed to play that DVD in a theatre and charge for tickets; that is considered a public performance and is a violation of the copyright.

So why can Aereo stream copyrighted material to a bunch of people?

Over-the-air broadcast television is free to air, meaning you are entitled to watch it privately without charge. You are also allowed to record it, say to a VCR, and watch it later.

Aereo’s argument is that it does not transmit to many people at once. It transmits to you, individually, from your antenna, through your cloud service, into your computer for your viewing only.

This, Aereo argues, constitutes a private performance. You are controlling the content privately as you would from your roof antenna. Aereo merely houses it for you.

In other words, Aereo could bill itself as an antennae leasing and cloud storage service. Neither of those things are illegal to operate. Aereo argues there is no difference between its service and having your own antenna to watch free TV.

But Aereo’s entire business plan is to retransmit!

True, but that in and of itself is not illegal. On its side are previous court rulings between Cartoon Network and Cablevision. These cases established that playing individual recordings of television (via DVR or cloud storage) was a private, not a public, performance.

One important difference here: Participants in this case were paying a license fee to transmit content. Aereo pays no such fee.

Who’s buying this argument?

On Aereo’s side is the U.S. Court of Appeals for the Second Circuit — the second-highest federal court in the country. It ruled 2-1 (a panel of three judges hear cases like this one, which appealed a lower court’s decision) in favor of Aereo, deciding the company’s offerings were essentially an off-site DVR and should not be considered public performance.

Who isn’t buying this argument?

A judge in Utah. He granted a preliminary injunction against Aereo on the grounds that the company had violated copyright law. The ruling disagreed about the interpretation of the relevant copyright law.

Neither is Judge Denny Chin, the dissenting voice Aereo’s 2-1 victory in the Second-Circuit Court decision, who said: “What Aereo is doing is not in any sense ‘private.’”

These judges take a macro approach: Aereo is commercially retransmitting these  performances on a wide scale. Regardless of if it uses thousands of antennae or one antenna, they reason that Aereo is retransmitting copyrighted programs to the public.

Read more: http://mashable.com/2014/04/18/guide-to-aereo-supreme-court/

TV Networks Succeed In Killing Aereo In Supreme Court

The 6-3 decision said the startup service has to pay broadcasters when it takes their programs and streams them to paid subscribers. Broadcasters painted the ruling as a win for consumers. But that claim is dubious.

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Aereo captures broadcast TV and provides programs to subscribers via tiny antennas.

A little more than two years after it was born, Aereo is basically dead.

In a case watched by more people than Aereo has subscribers, the Supreme Court ruled Wednesday that the Barry Diller-backed company violates the copyrights of broadcasters when it captures their signals and delivers them to subscribers for a fee. Aereo works by using thousands of tiny, dime-sized antennas to capture local broadcast TV signals and redistribute them to its subscribers, who can then stream or record shows for viewing.

The big four broadcast TV networks — ABC, CBS, FOX, and NBC — along with PBS and Spanish-language network Univision jointly sued Aereo shortly after its launch, claiming that the service was stealing their programming by redistributing it for “public performance.” Aereo countered by arguing that its technology was little more than an updated version of a TV antenna consumers could freely purchase in stores like Radio Shack and that since it only distributed signals to consumers individually it was simply providing a private performance.

The Supreme Court sided with the broadcasters in a 6-3 decision. Justice Stephen Breyer, in writing the majority opinion, said the court concluded that “Aereo is not just an equipment supplier.” Essentially, the court ruled that Aereo’s technology is less like a TV antenna and more akin to the way a cable or satellite TV provider distributes programming. And since those distributors pay to retransmit the programming signals of broadcast TV networks, so should Aereo.

Conscious of potentially stifling technological innovation, particularly as it surrounds cloud-based storage companies such as Dropbox, Breyer kept the decision narrow. Still, Justice Antonin Scalia, who was joined in the minority by Justice Clarence Thomas and Justice Samuel Alito, in writing the dissenting opinion said the court’s ruling was “built on the shakiest of foundations.”

“In sum, Aereo does not ‘perform’ for the sole and simple reason that it does not make the choice of content,” Scalia wrote. “And because Aereo does not perform, it cannot be held directly liable for infringing the Networks’ public-performance right.”

Both Diller and Aereo CEO Chet Kanojia have previously said that the service had “no Plan B” and that a loss in the Supreme Court would likely result in the shuttering of the company.

“It’s not a big (financial) loss for us, but I do believe blocking this technology is a big loss for consumers,” Diller said in a statement. “Beyond that I only salute Chet Kanojia and his band of Aereo’lers for fighting the good fight.”

For his part, Kanojia painted the decision as a setback for both consumers and the tech industry writ large. Noting that more than 60 million U.S. households still use an antenna for TV service, Kanojia said in a statement that the court’s decision “is a massive setback” and that “consumer access to free-to-air broadcast television is an essential part of our country’s fabric.” He also said that the ruling “sends a chilling message to the technology industry.”

The broadcast TV industry, of course, had a different reading of the ruling. To a network, they all claimed it as a win for either consumer, content creators, or copyright law. It certainly was a win for their stock prices, all of which shot up on the news. CBS shares were up the most in mid-afternoon trading Wednesday, gaining $2.69. Disney shares were up $1.28, while 21st Century Fox and Comcast were up 42 cents and 57 cents, respectively.

“[This] is a win for consumers that affirms important copyright protections and ensures that real innovation in over-the-top video will continue to support what is already a vibrant and growing television landscape,” said Rupert Murdoch’s 21st Century Fox in a statement.

CBS, whose Chief Executive Les Moonves was the loudest critic of Aereo, going so far as the claim that he would convert his network into a cable channel if the Supreme Court ruled in Aereo’s favor, said in statement, “We are pleased with today’s decision which is great news for content creators and their audiences.”

Of course, both sides are basically staking out opposite ends of the spectrum in a bid to reach some middle ground. As Moonves said on CNBC Wednesday shortly after the ruling, “We’re not against something going on the cloud, just against not getting paid for it.”

Indeed, the entire battle is less about copyright law and more about retransmission fees, or the money cable and satellite distributors pay broadcast network owners like CBS to repatriate their signal. In recent years, these fees have become a lucrative second revenue stream to go along with advertising revenue for network owners, totaling billions of dollars.

Aereo’s technology allows the company to take a populist stance in part because it provides a clever workaround to having to pay retransmission fees and pass along the cost to the consumer, which is what cable and satellite distributors do. And not getting paid is what the network owners dislike the most about Aereo.

Further, the framing of the battle as a tech startup innovator against greedy big media companies is inaccurate. Aereo is not exactly a helplessly small or poor company. In addition to Diller, Aereo has raised roughly $100 million in venture capital funding from such heavyweights as First Round Capital, Highland Capital Partners, Lauder Partners, and others. It just doesn’t want to buy content wholesale.

Aereo currently operates in 11 cities, including Boston, New York, Miami, and Austin, offering its service for a Netflix-like price of $8 per month. Prior to Wednesday’s ruling it had plans to launch in 16 more cities, among them Chicago, Philadelphia, and Denver.

Should the company change its mind and decide to use some of that venture capital money to negotiate retransmission deals with the broadcast network owners, it could become a legitimate, legally compliant company.

Some are skeptical Aereo would undertake such a radical transformation of its business. In a report last week, BTIG analyst Rich Greenfield wrote that: “The whole purpose of Aereo is to leverage what consumers can legally do by themselves through equipment purchase and shift that upfront investment to a leasing model. If Aereo has to license local broadcast television content, the unique consumer value proposition afforded by free-over-the-air television evaporates.”

But it seems as if Kanojia left the door about to such a plausible Plan B in his statement on the ruling.

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

Read the full opinion:

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Read more: http://buzzfeed.com/lisatozzi/supreme-court-rules-against-aereo-in-victory-for-tv-networks