By ADAM LIPTAK and EMILY STEEL June 25, 2014 WASHINGTON — In a decision with far-reaching implications for the television industry, the Supreme Court ruled on Wednesday that Aereo, a start-up streaming service, had violated copyright laws by capturing broadcast signals on miniature antennas and delivering them to subscribers for a fee.
The 6-3 decision was a victory for the major television networks, which had argued that Aereo's business model amounted to a theft of their programming. The judges' ruling leaves the current broadcast model intact while imperiling Aereo's viability as a business after just over two years in existence.
The Supreme Court case comes at a crucial time in the media industry, when entertainment companies are navigating vast technological changes and rapid shifts in viewer habits. As a result, the economics of television financing and distribution are changing.
In arguments before the court in April, the broadcasters contended that Aereo and similar services threatened to cut into a vital revenue stream — the billions of dollars they receive from cable and satellite companies in retransmission fees, the money paid to networks and local stations for the right to retransmit their programming. The networks said this revenue was so essential that they would have considered removing their signals from the airwaves had the court ruled for Aereo.
Document | Supreme Court Decision in Aereo Case Citing copyright law, the justices rejected the streaming service's model of capturing broadcast signals and delivering them to subscribers.
The start-up contended that the service it provided through warehouses of small antennas was merely helping its subscribers do what they could lawfully do since the era of rabbit-ears: watch free broadcast television delivered over public airwaves.
Justice Stephen G. Breyer, writing for the majority, rejected all of Aereo's major arguments. He said the service was "not simply an equipment provider" but acted like a cable system in that it transmitted copyrighted content. "Insofar as there are difference," he wrote, "those differences concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service."
Nor did Justice Breyer accept Aereo's argument that its transmissions were private performances because they were made one at a time. "You can transmit a message to your friends whether you send identical emails to each friend or a single email all at once," he said in announcing the decision from the bench.
In oral arguments in the case in April, the justices had expressed concern that a ruling against Aereo would stifle technological innovation. Justice Breyer took pains on Wednesday to say the decision was limited to Aereo's service. "We believe that resolution of questions about cloud computing, remote storage DVRs and other novel matters not now before us should await a case in which they are clearly presented."
Graphic | ABC v. Aereo
Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan joined the majority opinion.
In a dissent that expressed distaste for Aereo's business model, Justice Antonin Scalia said the service had identified a loophole in the law. "It is not the role of this court to identify and plug loopholes," he wrote.
Justices Clarence Thomas and Samuel A. Alito Jr. joined the dissent.
Broadcasters applauded Wednesday's decision, and shares in the media groups shot up in the morning. CBS experienced the most dramatic increase of the media companies, with shares up about 4.5 percent in early trading.
Aereo uses thousands of tiny antennas to receive broadcast television signals.
"We're gratified the Court upheld important Copyright principles that help ensure that the high-quality creative content consumers expect and demand is protected and incentivized," The Walt Disney Company, which owns ABC, said in a statement.
Paul Clement, a lawyer for the petitioners in the case, characterized the decision as a "victory for consumers" and said the court "has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended."
Chet Kanojia, Aereo's founder and chief executive, said in a statement that the ruling was a "massive setback" for consumers and "sends a chilling message to the technology industry."
Mr. Kanojia said that Aereo had worked to create a technology that complied with the law. "Today's decision clearly states that how the technology works does not matter," he said.
Mr Kanojia pledged that the start-up would carry on with its battle, though he did not offer specifics on how Aereo would proceed.
"We are disappointed in the outcome, but our work is not done," he said. "We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world."
Barry Diller, whose IAC/InterActiveCorp was the principal financial backer of Aereo, said in a statement that ruling was not a "big (financial) loss for us," adding, "but I do believe blocking this technology is a big loss for consumers, and beyond that I only salute Chet Kanojia and his band of Aereo'lers for fighting the good fight."
Aereo's technology system relies on thousands of dime-size antennas — one for every subscriber — stored in local warehouses. Those antennas capture over-the-air television signals and are connected to a remote digital video recorder and Internet connections. Subscribers pay $8 to $12 a month to rent an antenna, which they control remotely from their computers, smartphones or other devices.
An Aereo subscription allowed users in about a dozen cities to watch near-live TV and record programs on major networks such as ABC, CBS, NBC and FOX. The service also offered a range of Spanish language programming, including the Univision, Telemundo and MundoFox networks.
In combination with other Internet services like Netflix and Hulu, it can help replace much of their average viewer's television diet at a fraction of the cost of a cable television bill.
Broadcasters criticized the start-up, claiming that the technology violated copyrights and was no more than a high-tech approach for stealing their content. ABC, CBS, NBC and Fox were among the broadcasters suing to shut down the company.
The case, ABC Inc. v. Aereo, No. 13-461, turned on a part of the copyright law that requires the permission of copyright owners for "public performances" of their work. The law defines such performances to include retransmission to the public.
A divided three-judge panel of the United States Court of Appeals for the Second Circuit in New York ruled last year for Aereo. In dissent, Judge Denny Chin wrote that the service was "a Rube Goldberg-like contrivance, over-engineered in an effort to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law."
For years, broadcast networks such as ABC, CBS, NBC and FOX provided their signals to television distributors for free. But in recent years, broadcasters started forcing distributors to pay to retransmit their programming. Industrywide, retransmission revenues now reach more than $4.3 billion, up more than five times from $800 million in 2009, according to SNL Kagan, a media research firm.
The fear was that a favorable ruling for Aereo would spur cable, satellite and start-ups to license or create technologies similar to Aereo that would capture and resell copyrighted programming. Even if the distributors did not create such technologies, they could use the threat as leverage in tense negotiations with broadcasters over retransmission fees.
Now in about a dozen metropolitan areas in the United States, Aereo counts fewer than 500,000 subscribers. Had Aereo triumphed, the company was likely to embark on a nationwide rollout in cities including Salt Lake City, Minneapolis, Tampa, Fla., and Raleigh-Durham, N.C.
Adam Liptak reported from Washington, and Emily Steel from New York.
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