Networks Defeat Aereo 6-3 In The Supreme Court

The Supreme Court recently made a powerful ruling that has implications for the way that we watch TV, and more importantly, the development of disruptive technologies.

AereoOn June 25th, the Court ruled 6-3 in favor of the networks against a TV startup called Aereo, saying that the company will need to pay the networks for the re-broadcasting of their content.

Aereo’s business model worked on the same principle that governs an antenna in your own home. Once you buy the antenna, the signals that it picks up from networks like ABC, CBS, Fox, NBC and PBS are free. Networks don’t charge for over-the-air broadcasts because most of their money comes from advertising anyway – the more people that watch their channels, the more money they make.

However, many people don’t like installing antennae in their homes because the signal is unreliable and most premium channels don’t broadcast for free. Aereo solved the first problem by lining a warehouse with tens of thousands of tiny antennae next to a machine that amps up the signal’s power. Users were allowed to rent one of these antennae for $8 per month, the signals from which were pumped back to them over the Internet, making Aereo one of the cheapest options in television.

Court Ruling

This is all set to change now that the Supreme Court has ruled against Aereo. To their credit, the justices were careful to tread lightly in the face of the potentially massive and unpredictable ramifications such a ruling might have. Liberal justice Stephen Breyer, who led the majority that voted against Aereo, told the startup’s lawyer that he did not understand what a decision either for or against the company would do to other kinds of technologies.

In the end, the majority opined that Aereo was overwhelmingly similar to the cable companies that were specifically targeted by amendments that Congress made to the Copyright Act in 1976. Breyer acknowledged that Aereo has a key difference in that its system remains inert until a subscriber indicates that he or she wants to watch a program, but found that the difference was ultimately not critical.

“This difference means nothing to the subscriber,” he wrote. “It means nothing to the broad­caster. We do not see how this single difference, invisible to subscriber and broadcaster alike, could transform a system that is for all practical purposes – a traditional cable system into a copy shop that provides its patrons with a library card.'”

While Aereo was never a massive company – at least in part due to its limited range of content – the finding would have carried important ramifications either way. Finding for Aereo would have meant that the piece of copyright law that ensured that cable companies had to keep subsidizing networks would have been weakened, or potentially caused them to stop transmitting for free over the air. Find for the broadcasters, however, and there is the potential for damage to citizens’ rights to obtain free content.

In the end, the Supreme Court took an extremely narrow opinion and ruled that Aereo’s business model was illegal only in that it is extremely similar to old CATV systems. While the startup’s users are likely to be disappointed, this is probably the safest ruling the Court could have made for the long-term development of new technologies.

If you are interested to learn how this entire case began, check out Is Aereo Fight Headed to the U.S. Supreme Court?  at www.businesslawnews.com.

If you have any questions about this post or would like to discuss your sports and entertainment matters , please contact me, Anthony R. Caruso at www.ScarinciHollenbeck.com.

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Anthony R. Caruso is a business transactional attorney in New York and New Jersey with experience in structuring, negotiation and completion of legal deals involving business, entrepreneurs, athletes and performers.

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