Aereo Supreme Court case: what’s at stake — local news included

Chet Kanojia, the founder and CEO of Aereo, speaks during a March 2014 interview with The Associated Press in New York. The future of the online service hinges on a legal battle with broadcasters that goes before the Supreme Court Tuesday. (AP Photo/Mark Lennihan)

The cast of characters fighting Aereo gives you a hint of how important the case that goes before the U.S. Supreme Court on Tuesday at 11 a.m. ET is to the future of broadcasting.

It is as big as the 1984 Betamax case, which seems like a silly notion now, but wasn’t back then. In that case, the court allowed you to tape record what you see on TV, despite dire warnings from broadcasters that it would ruin them. Now, the court has to consider technology that can deliver live TV programs to your phone, laptop or tablet. And the company that wants to deliver the programs also wants to avoid paying the broadcasters anything for the rights.

All of the TV big networks (ABC, NBC, CBS and Fox) are trying to stop Aereo. TV stations fought long and hard to get cable companies to pay for the content they pass along. Now they are fighting Aereo for the same compensation.

But Aereo says the networks have it all wrong. Aereo says it is just leasing consumers the technology that enables them to watch programs that are free to watch over the air. It is similar to the arguments that cable companies used when they attempted to avoid paying retransmission fees.

Everyone from Viacom and the National Association of Broadcasters to the NFL and Major League Baseball have filed briefs in the case. It is serious enough that if the networks lose this case, they could even start a move to take their programs to pay TV rather than allow them to be free over the air. When lower courts ruled in favor of Aereo, Wall Street reacted by lowering the values of major broadcast company stock. This is serious business.

The Obama Administration is supporting the networks’ argument that this is a copyright issue and will say so in front of the court. Prior to 1976, the question of whether companies could retransmit a radio or TV signal without violating copyright law was murky. But in 1976, Congress passed a new Copyright Act that tried to define what it means to “perform” somebody else’s work. The law includes two passages; the second is the one to pay close attention to in this case. It states in part:

“[t]o perform … ‘publicly’ includes, among other things, ‘to transmit or otherwise communicate a performance or display of the work … to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”‘

Lower courts have said Aereo is not performing, but sends each of its subscribers an individualized transmission of a performance from a unique copy of each copyrighted program. And, it is not transmitting performances “to the public,” but rather is engaged in tens of thousands of “private” performances to paying strangers.

In other words, Aereo says don’t think of this as a mass performance. Rather, think of it as something it provides for customers individually. The service, it says, would fit just fine under the copyright law.

Aereo says using an antenna, as it does, is not stealing. Aereo also says broadcasters get to use the public airwaves for free and sell advertising. That, Aereo says, is fair enough compensation.

What if Aereo wins?

Remember that in the 1984 Betamax case, the entertainment industry said it would ruin business. It turns out taping programs didn’t ruin the business. But networks say this decision could be a game changer.

If Aereo wins and doesn’t have to pay broadcasters for the signal they pass along, there would be little to stop cable companies from using the same technology. And cable companies currently pay more than $3 billion a year in fees to television stations. That amount will skyrocket in coming years, so broadcasters see this as a critical fight, not just to stop Aereo, but to stop any hope that cable companies might join it.

If Aereo loses, company backers say it would doom the service.

Networks have said if they lose the case, they might just take their programs and turn them into pay services. The implications of that would be devastating for local TV stations whose value is woven deeply into their network affiliation. The New York Times‘ David Carr offered this analysis:

The vast majority of people already get their television, including the broadcast networks, through their cable or satellite service. If Aereo wins, networks could let the antennas go dark and tuck themselves inside the cable and satellite universe, where, like AMC or ESPN, they would then be paid programming fees.

That would be bloody. There are over 200 local broadcast affiliates, all of which depend on networks for a share of revenue and much of their programming. Local news, which is part of their mandate as public broadcasters, might wither, and as existing contracts expired, there would be a brawl for lucrative local advertising. Companies that own large groups of local stations like the Tribune Company and the Sinclair Broadcast Group would suddenly find themselves in possession of a much diminished collection of assets.

If broadcasters lose, they will probably turn to Congress to change the law. The National Journal said:

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.

How it works

Aereo is not a device, it is a service. There are no new gadgets to buy, nothing to attach or plug in. Aereo is a service electronic devices talk to. The service allows you to search for a show and record it. Or watch the program live. Or you can watch live, pause it, rewind it and watch again. It does not strip out commercials.

David Pogue at Yahoo! Tech explains how it works and why he thinks it is a cool service.

The networks of course worry that Aereo might be, as Pogue says, very appealing. It would allow you to record any over-the-air program and play it on a wide range of devices for 8 to 12 bucks a month.

This file image provided by Aereo shows a screenshot from an iPad streaming “Bob the Builder” via Aereo on New York’s PBS station, WNET 13. (AP Photo/Aereo)

The National Association of Broadcasters says Aereo would also allow viewers on the West Coast, for example, to watch programs as they are being broadcast on the East Coast three hours earlier, wrecking advertising models and undercutting how networks distribute programs. Plus, NAB says, there would be no way to measure viewership, so stations could not get credit for Aereo viewers in the critically important Nielsen ratings.

Aereo’s website includes a map of where it is now and where it would be soon if the court rules in the company’s favor.

The decision

Everyone will be watching the justices to get a hint from their questions how they might rule. Look for a decision this summer.

Resources

• An especially thoughtful review of the case from SCOTUSBlog.
Bloomberg explains how Aereo collects signals and passes them along.

Related: Sports leagues urge Supreme Court to take up broadcasters’ complaints against Aereo | Aereo will move into Miami, Houston and Dallas | Why Aereo has broadcasters rattled

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  • http://www.ilsw.com Bill Garber

    I vote for total disruption … no … destruction of the local broadcast affiliate model. They are hugely subsidized with FREE bandwidth in copious amounts. And they get revenue from every cable and satellite distributor. And they are still greedy.

    Let them compete on an open playing field, and see who will be willing to watch and pay. Their local news has no more value than cable news channels.

    My preference is for Aereo to win, and then for the networks to make good on their threat to go totally cable and satellite … or, as CBS has already for the most part set itself up, to do direct by Internet.

    This is why the Internet as a utility, with 1 Gbs full commit and full duplex to every housing unit and every desk nationally is what the feds should regulate into existence using a guaranteed 5% or 9% return on capital and operations for the capital invested.

    Then news, entertainment, social and commercial interests can provide services on a subscription or single use model.

  • MendoChuck

    Sounds like I need a new antenna . . . . Anyone know where I can get one of these?

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