The Supreme Court struck a dramatic blow against Aereo today in a ruling that puts the TV streaming service as it currently exists on its deathbed. In a 6–3 ruling, the court found that Aereo's service violates the Copyright Act by playing back recordings of broadcasters' TV shows — even though it legally captures those shows over the air and obtains individual copies for each viewer. Aereo had argued that it was merely providing technology that its subscribers were renting in order to watch TV, positing that the viewers were responsible for playing back those recordings.
"Insofar as there are differences, those differences concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service," the ruling reads. "We conclude that those differences are not adequate to place Aereo’s activities outside the scope of the [Copyright] Act."
Aereo as you know it is done for
The ruling is one of the most important seen by the television industry since the 1984 Betamax case but in many ways will have an opposite effect, stifling one area of innovation that was beginning to force the industry out of its comfort zone. Some broadcasters had even said that they would open their own Aereo competitors if the service were found to be legal. Instead, this ruling fully removes Aereo and copycat services as a threat.
That's a huge issue for Aereo, as its current business has just been found illegal. Aereo will likely have to pay licensing fees to broadcasters if it wants to continue operating, but that's if Aereo can afford them. Certainly, it would be difficult to pay those fees and continue offering its service, which costs $8 per month, at such a low price.
Aereo may choose to reinvent itself, but up to this point it's said that a Supreme Court ruling against it would essentially mean the end. "If it’s a total straight-up loss," Aereo CEO Chet Kanojia told The Verge earlier this year, "then it’s dead. We’re done."
"Today’s decision by the United States Supreme Court is a massive setback for the American consumer," Kanojia says in a statement following the ruling. "We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry."
Nilay Patel visits Aereo during June 2013, during a much more optimistic time in its business. (From Top Shelf 15: Lost in Translation)
Kanojia says that Aereo's "work is not done" and that it will continue to fight for consumers. He doesn't, however, discuss what the future might look like for Aereo's traditional streaming service.
The coalition of broadcasters facing off against Aereo included Disney, NBC, Fox, and CBS, among others. The White House had also joined them in the fight, arguing that Aereo was a threat to copyright.
"NAB is pleased the Supreme Court has upheld the concept of copyright protection that is enshrined in the Constitution by standing with free and local television," Gordon Smith, CEO of the National Association of Broadcasters, says in a statement. "Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false."
After launching in 2012, Aereo was quickly hit with a number of lawsuits in the districts that it popped up in, including New York and Boston. It largely won these cases and even saw a major victory before a US appellate court, which found that it did not violate broadcasters' copyright early in 2013.
"These behind-the-scenes technological differences do not distinguish Aereo’s system."
Suits continued to be filed against Aereo, however. And eventually, both it and broadcasters petitioned the Supreme Court with the hope of quickly putting an end to their battle, interested in settling the issue of legality sooner rather than later.
Aereo's service allows subscribers to watch and record live TV over the internet for a monthly fee. It maintains a bank of tiny antennas in each city that it operates in that pull down local TV signals broadcast over the air, much like old rabbit ears. Every time a subscriber wants to watch or record a show, Aereo assigns an antenna to them. Aereo actually takes separate recordings for every single person watching and doesn't allow them to be shared. That means that even if you forgot to record last week's Crossbones, you won't be able to watch a recording that someone else made, even though it's in Aereo's system. You'll just have to wait for a rerun.
Aereo went through those lengths to keep streams individual because it believed that it was effectively mimicking a setup that someone might create at home — albeit with the added complexity of a recorder. The broadcasters argued that Aereo's streams constituted public performances of their content, thus violating the Copyright Act and requiring that it be licensed for playback. Aereo said that its subscribers — and not the company itself — were the party responsible for playing the shows. Broadcasters argued the opposite, finding agreement in the court.
The Supreme Court found that Aereo was not acting as an equipment provider, making it in essence a cable provider itself. "Viewed in terms of Congress’ regulatory objectives, these behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems, which do perform publicly," the decision reads. "Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies."
The court goes out of its way to note that this ruling should not impact other emerging technologies though. There was some concern that a ruling against Aereo could be seen as stifling innovation, but the broadcasters and White House argued that there was no need for the decision to do that, and clearly the court agreed.
Even the dissent is suspect of Aereo
The decision was delivered by Justice Breyer with Roberts, Kennedy, Ginsburg, Sotomayor, and Kagan joining. Scalia filed a dissenting opinion, with Thomas and Alito joining.
Though the dissent finds that Aereo cannot be in violation of the Copyright Act because, quite simply, it "does not 'perform' at all," the dissent still takes a fairly negative view toward the service as a whole. "I share the Court’s evident feeling that what Aereo is doing (or enabling to be done) to the Networks’ copyrighted programming ought not to be allowed," Scalia writes.
Instead, Scalia notes that the court did not look at whether Aereo facilitated a secondary liability for copyright infringement, and he suggests that this might in fact be the case. Were it not, he says that what Aereo is doing is still a "loophole" in the law. Scalia's dissent comes largely from the view that this ruling distorts the Copyright Act, regardless of whether Aereo is on completely sound legal ground.
Scalia compares today's decision to the Betamax case 30 years ago. He notes that broadcasters made similarly "dire predictions" about what the legality of that technology could allow for, but says that it isn't in the court's scope to consider this. Instead, the dissent feels that it's the job of Congress to address new technology like Aereo.