Supreme Court’s Aereo Decision Could Change TV Business, Groups Say

Last week's announcement by the Supreme Court that it would consider the legality of streaming video startup Aereo could shake up the business landscape around two key technologies: Over-the-air broadcasting and cloud computing.

Last week’s announcement by the Supreme Court that it would consider the legality of streaming video services provided by startup Aereo could shake up the business landscape around two key technologies: over-the-air broadcasting and cloud computing.

A U.S. Supreme Court decision that’s still months away could change the television business for good—and some major associations are already taking sides.

Last week, the justices announced they would take up the lawsuit brought by the major U.S. broadcasters against Aereo, the digital television startup that created controversy with its novel way of getting around online streaming regulations—by using thousands of tiny antennas to pick up over-the-air broadcast signals, then offering consumers remote access to them.

The case, which made its way to the Supreme Court after broadcasters lost an appeal to shut down the service last year, is already drawing attention for its potential to set a significant precedent. Where the major players stand:

Broadcasters cheer: The National Association of Broadcasters (NAB) issued a statement immediately after the high court’s announcement that it would hear the case. “NAB is pleased the Supreme Court will review this critically important case, and we are optimistic that broadcasters will prevail,” association CEO Gordon Smith said in the statement. “Enshrined in the Constitution is the concept that content creators deserve to be protected from product theft. We look forward to the resolution of this case.” Despite Aereo, the broadcast industry appears to be benefiting from cord-cutting. As Bloomberg BusinessWeek notes, the NAB cited a June report showing that the share of consumers who rely on over-the-air broadcasting increased by 38 percent from 2010 to 2013.

Aereo’s take: Aereo sees the the fight centering on issues related to the legalities of cloud computing, with a 2008 U.S. Court of Appeals ruling in Cartoon Network v. CSC Holdings opening the way for remote storage of digital content accessed remotely. That suit is often referred to as “the Cablevision case” because the cable company’s digital video recording technology was at the center of the dispute. “The landmark Second Circuit decision in Cablevision provided much-needed clarity for the cloud industry and, as a result, helped foster massive investment, growth, and innovation in the sector,” Aereo CEO and founder Chet Kanojia wrote in a blog post. “The challenges outlined in the broadcasters’ filing make clear that they are using Aereo as a proxy to attack [the] Cablevision [ruling] itself and thus undermine a critical foundation of the cloud-computing and storage industry.” Aereo backs the Supreme Court’s decision to hear the case, which it hopes will validate the company’s business model.

Aereo ally speaks up: Among Aereo’s biggest backers is the Consumer Electronics Association, which previously supported the company in court. In a statement released after the Supreme Court news broke, CEA noted that the case has many similarities to another case that yielded a major decision involving the broadcast industry. “It is notable that this case comes before the Supreme Court as we celebrate the 30th anniversary of the court’s landmark decision in the Sony Betamax case,” CEO Gary Shapiro said in a statement. “In Sony, the court ruled on behalf of consumer rights and innovation, as we urge them to do in Aereo. Indeed, Aereo is just the latest in a line of innovations that broadcasters claimed would kill their industry. Instead, cable TV, the Betamax, and the DVR gave the broadcasters new revenue streams and new audiences.”

A win for Aereo could lead to major changes in the TV industry. As Time notes, the ruling could threaten the longstanding revenue structure of broadcast television, particularly the billions of dollars in retransmission fees that broadcasters receive from the cable industry every year—fees that are often the subject of lengthy battles and corporate wrangling. That could lead broadcasters such as Fox to move their networks—or sports leagues to move events like the Super Bowl—to cable in an effort to protect their financial investment.

CEA’s Shapiro bitingly addressed the potential fallout of that possibility: “If these networks do not believe that broadcasting is a viable business, we encourage them to relinquish their spectrum for wireless internet and other productive uses,” he said.

(Aereo press photo)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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