What the Aereo Decision Means for TV Technology

American Broadcasting Companies, Inc. v. Aereo, Inc.

Aereo is a streaming video service that allows subscribers to watch and record shows transmitted from local television stations for just $8 a month.  In April, the United States Supreme Court heard arguments regarding the legality of Aereo’s streaming service. The Court had to determine whether Aereo is a legal service for customers that gives more control over how users watch television or a barefaced violation of copyright law.  In late June, the Supreme Court ruled that Aereo violated copyright laws by retransmitting broadcast signals without paying the requisite licensing fees.

Aereo’s service uses thousands of dime-sized antennas fixed near broadcasting towers in order to receive signals from local, over-the-air TV stations.  Through Aereo’s service, users choose what to watch through a conventional on-screen guide. When a user requests to watch a program, Aereo designates a single antenna to that user, as well as individual storage space on Aereo’s servers. The user can then watch the program live or record it and watch it later.  Users can access anything broadcasted over the public airwaves in their local market; however, they cannot access content from another market.  The content is also accessible on TVs, computers, and mobile devices.  Aereo offers to store up to 60 hours of content for $8-$12 a month that can be watched at anytime— similar to a DVR. The one-antenna-per-user system was designed specifically to avoid copyright violations, relying on precedent set in the 2008 Cablevision case.  In Cablevision, the Supreme Court held that a single-user, internet-based DVR service does not violate a Broadcaster’s copyright.

Aereo provides several benefits over traditional antennas and cable networks like Comcast.  The service makes TV more portable, more accessible in areas with weak signal, and makes it significantly cheaper than basic cable.  Aereo could also bundle its service with other streaming sites, like Netflix, as an internet-based package.  Areo’s service, however, undercuts a significant revenue stream for local television stations called “retransmission fees.” Even though TV signals are accessible for free over the public airways, cable and satellite businesses–by statute–must pay television stations for the right to retransmit their signals.  Aereo does not pay broadcasters for the TV signals it captures and sends to subscribers.  Years ago, cable companies used to do the same thing.  Then Congress passed new laws that required the cable companies to pay billions of dollars in licensing fees to stations, networks, and other license holders.  If the Supreme Court had ruled that Aereo did not violate any laws, so the logic goes, there would be nothing to prevent cable companies from imitating their service.  A decision for Aereo, therefore, would most likely extinguish broadcast media profits.

Broadcasters argued that Aereo infringes copyright law because the streaming service constitutes a “public performance” of the television shows without the authorization of the copyright holders.  The 1976 Copyright Act (PDF) protects a copyright holder from others’ “publicly performing” a protected work: “[t]o perform … ‘publicly’ includes, among other things, ‘to transmit or otherwise communicate a performance or display of the work … to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.’”  For such public performances, the Act requires a license for retransmission.  ABC, CBS, Fox, and NBC claim Aereo is stealing signals and streaming them over the internet for a fee to its subscribers without compensating the networks.  They seek to prevent Aereo from stealing their free over-the-air signals because the networks want to collect retransmission fees and they do not want the signals available for subscribers on mobile devices.

Aereo argued that it is simply providing technology, not broadcasting programming.  Specifically, Aereo claimed that its streams do not satisfy the legal definition of “public performances” because each user rents an individual antenna.  The streaming service assigns each user an antenna, the user chooses what to watch, and the content is sent only to that user.  Thus, Aereo reasoned, the antennas are analogous to old rooftop antennas and its service is analogous to a web-based DVR that users direct to pass along individual programming.  Aereo further maintained that it was complying with federal communications laws because it is merely “leased technology.”

In a 6-3 decision, the Supreme Court ruled in favor of TV broadcasters against Aereo.  The ruling is a significant triumph for TV networks since they rely on licensing revenues from cable and satellite services.  The majority opinion, by the pen of Justice Stephen Breyer, determined that the law prohibits unlicensed companies to broadcast copyrighted performances to the viewing public.  Breyer’s opinion states that the “behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems, which do publicly perform.”

Justice Breyer’s opinion is quite clear that Aereo’s service is illegal.  It  reiterates the progress made in copyright law since the 1968 case,  Fortnightly Corp. v. United Artists Television, Inc., and interprets the  modern changes in copyright law as bringing cable systems within the  scope of the Copyright Act.  The Fortnightly case involved an antenna on a mountaintop that transmitted programming  to a local community. Breyer says that “history makes plain that one of  Congress’ primary purposes in amending the Copyright Act in 1976 was to  overturn this Court’s determination that community antenna television (CATV) systems (the precursors of modern cable systems) fell outside the Act’s scope.” The majority made clear they it does believe that Aereo should be immune from copyright obligations given its “overwhelming likeness” to cable systems:

“This history makes clear that Aereo is not simply an equipment provider… Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast.  In providing this service, Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes.  By means of its technology (antennas, transcoders, and servers), Aereo’s system ‘receive[s] programs that have been released to the public and carr[ies] them by private channels to additional viewers.’”

Most significantly, the majority opinion made clear that Aereo’s system of capturing transmissions and enabling a one-to-one copy to its subscribers does not excuse it from being required to license before operating.  The opinion does note, however, that the ruling is a “limited holding” and that the legality of hi-tech developments such as cloud computing and DVRs will have to await court cases yet to come.