5-cent explanation: Does Brooklyn, NY-based Aereo violate copyright laws when they provide equipment, at a cost of roughly $8 a month, to get local stations routed to consumers computers, tablets, or phones, to record and play programming on a cloud-based server?
10-cent explanation: Aereo might be on to something – A la carte programming that saves viewers hundreds of dollars by abandoning packages and contracts with the majors cable companies. Since this case first ignited attention in January, studies revealing people tend to only watch 7-8 channels out of the hundreds they’re offered through their cable companies have raised eyebrows. Wise to this reality, young people in particular have cut ties with their cable providers opting instead for Apple TVs, Rokus, Slingboxes and now Aereo.
The first three can be used to watch Netflix and Hulu on a television set. The last, if you live in one of the eleven states where Aereo rents their equipment, can be used to record and watch local television states. If it all sounds a little too simple, inexpensive, and easy, that’s because the major broadcast networks, like CBS, NBC, Fox, ABC, and PBS, say it is and that Aereo is breaking established federal copyright laws by refusing to pay retransmission consent fees.
This point is where we could get into the weeds of this case, but we’re not going to do that. What do you need to know? Aereo has thousands of tine antennas throughout cities, including New York, which make local programming accessible on the basic, free channels anyone with a TV and no cable box would get if they just plugged in the set and turned it on. While it might not seem like a big deal, remember that organizations like the NFL, and other major league sports, make millions of dollars off of major televised games. Fox, NBC, ABC, CBS, and PBC not only consider it a big deal, but a momentous shift in the way people watch TV with potentially devastating financial consequences to all of these networks.
Aereo argues they’re not providing new content, they’re simply providing the equipment, like a cable cord, satellite dish, or bunny ears, enabling users to access content. What users access by downloading, holding on a cloud-based storage, and watch is up to them. The shows are already broadcast for free and, once watched, are deleted. Aereo claims a 1984 precedent set in Sony v. Universal Studios supports their position in that a person watching a recorded program in his own home, not in public, exercises what the Court called a “fair use right.” The broadcast networks’ attorney, Paul Clement, vehemently disagreed saying Aereo should have to pay royalty fees.
Decision: Very few people assumed Aereo was going to come out of this case with a victory. They did not. What was a surprise, however, was a lack of a unanimous decision (6-3 for ABC) and that Justice Scalia’s dissent sounded less like an indictment on the start-up’s cheap ways of weaseling out of paying license fees and more like a verbal smack down of the majority opinion. His displeasure was in the majority declaring Aereo was in fact a cable company and as such must pay licensing fees like all the other cable companies. “In sum, Aereo does not ‘perform’ for the sole and simple reason that it does not make the choice of content. And because Aereo does not perform, it cannot be held directly liable for infringing the Networks’ public-performance right.” (Decision here)
So what does this mean for the little* internet start-up that tried to challenge the all-powerful cable companies? For now, Aereo’s future doesn’t look good. The company issued a statement to their customers advising them that service would end the weekend after the SCOTUS decision. But in an interview with C-SPAN, founder Chet Kanojia made a point about revolutionizing internet television: “The internet is happening to everybody. All of us. Whether you run a retail store, movie studio, or car service – it doesn’t matter. That connectivity is happening. The reaction to that cannot be slander. It should be productive business models.” Kanojia’s Aereo might not be the model that survives this time, however, his point about connectivity resonates in ways people, especially young people, are immediately responsive to. Aereo and its consumers may have lost this battle, but the war of attrition against the omnipotent cable companies is not over.
*Arguable considering they had the financial support of former FOX Broadcasting exec and billionaire Barry Diller.