Aereo Falls Flat With Supreme Court, Broadcasters Win Big

In a landmark decision that sets parameters for how startups distribute content online, the high court ruled that Aereo’s business model violates broadcasters’ copyrights. The broadcast TV industry welcomed the ruling, but tech groups say it could squelch innovation—particularly in cloud computing.

Sorry, Aereo users—the Supreme Court says the service isn’t legal.

On Wednesday, the nation’s high court ruled 6-3 that the Barry Diller-backed startup had violated copyright law  (opens in a new tab) by failing to pay royalties to the over-the-air television broadcasters whose shows it distributed through its cloud-based service. The case has been closely watched by both the television industry and the technology world.

The Court majority was unpersuaded that Aereo’s business model operated within the constraints of copyright law. The company had argued that it sold its customers access to a network of thousands of tiny antennas rather than to the content itself, saying legal precedent involving copyright infringement did not apply to the case.

Aereo, which had raised roughly $100 million from investors, said the decision was disappointing but it plans to move forward.

“We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world,” CEO Chet Kanojia said in a statement  (opens in a new tab).

Several associations offered reaction to American Broadcasting Companies v. Aereo  (opens in a new tab) [PDF]:

Broadcasters defend their innovation record: The National Association of Broadcasters, a plaintiff in the case, said the decision paves the way for strong copyright protections for the industry. “Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false,” NAB President and CEO Gordon Smith said in a statement  (opens in a new tab). “Broadcasters embrace innovation every day, as evidenced by our leadership in HDTV, social media, mobile apps, user-generated content, along with network TV backed ventures like Hulu.” He added that the industry would welcome “partnerships with companies who respect copyright law.”

Electronics manufacturers see the bright side: The Consumer Electronics Association, which filed an amicus brief in the case backing Aereo, noted that the ruling was fairly narrow  (opens in a new tab). In a statement, CEA praised Justice Antonin Scalia’s “powerful dissent,” in which he noted that similar court cases have been fought over other disruptive technologies (“We came within one vote of declaring the VCR contraband  (opens in a new tab) 30 years ago in Sony,” he wrote) and that content companies tend to favor the status quo over disruption. CEA President and CEO Gary Shapiro said in a statement: “[W]e question how much longer broadcasters can claim to justify their use of public spectrum when they oppose innovative services like Aereo which expand their viewing audience.” Shapiro added that “laws should be clear and favor innovation.”

Computer industry groups foresee cloud dangers: The Computer and Communications Industry Association, another Aereo amicus, took a more pessimistic view, saying the ruling endangers future investments in cloud computing. “During arguments in this case, the justices seemed to express an interest in not harming other internet services, but the ruling unfortunately does not meet that goal,” CCIA President and CEO Ed Black said in a statement  (opens in a new tab). The Electronic Frontier Foundation, which had joined in CEA’s brief, agreed with this assessment  (opens in a new tab), saying that the ruling shows “companies can follow the letter of the law but still get shut down if a court decides that their business is somehow similar to a cable company.”

(Aereo press photo)