Broadcasters Ask Supreme Court to Intervene in Aereo Case
Broadcasters Ask Supreme Court to Intervene in Aereo Case
By AMOL SHARMA and SHALINI RAMACHANDRAN
Updated Oct. 11, 2013 4:56 p.m. ET
Major TV broadcasters petitioned the U.S. Supreme Court on Friday over Aereo Inc., a streaming-video startup backed by media mogul Barry Diller.
The broadcasters argue that Aereo, which streams local TV signals over the Web without their permission, violates their copyrights. The broadcasters, that include Walt Disney Co. DIS's ABC, Comcast Corp.'s NBC, CBS Corp. and 21st Century Fox, are appealing a ruling earlier this year by the U.S. Second Circuit Court of Appeals, which denied their request to shut down the fee-based service.
The circuit court's decision "is already transforming the industry and threatening the very fundamentals of broadcast television," the broadcasters wrote in the petition.
"We will respond, as appropriate, in due course," an Aereo spokeswoman said.
Aereo has denied that its technology infringes on content owners' copyrights. If it takes up the case—which is far from certain—the Supreme Court could have a major hand in shaping how TV is distributed over the Internet. A decision could have major implications for media companies at a time when they are struggling to cater to growing interest in online video.
If the high court chooses not to take the case and leaves the matter to lower courts that so far have sided with Aereo, the streaming service could be in a stronger position as it continues its expansion.
"The longer Aereo is left unchecked, the more it can roll out its service," said David Wittenstein, head of the media and information technology practice at law firm Dow Lohnes. "If Aereo gets a lot of customers in a lot of places, it begins to be harder to shut it down."
For $8 a month, Aereo allows users to stream broadcast channels to their mobile devices or computers, giving them access to prime-time shows and local news. Aereo is available in seven markets including New York, Boston and Atlanta and plans to reach 22 cities by the end of the year. The company will offer an Android mobile app this month.
Since it launched last year, Aereo has given fits to TV executives, who say it threatens to lure away TV viewers and ad dollars and hurt their subscription revenues.
Broadcasters have found a growing revenue stream in recent years from charging pay-TV distributors for carriage of their channels. If Aereo's approach is found legal, cable and satellite companies could adopt its design or push back on rising carriage fees, industry executives have said.
"Broadcasters rely on the revenues they receive from the cable and satellite companies that retransmit their signals to recoup their substantial investments in programming, to fund new shows, and to develop new delivery platforms," the petition said.
The Supreme Court only takes up a small slice of the appeals filed. But the conflicting legal decisions in lower courts over Aereo and a similar service, FilmOn X, could provide grounds for the apex court to intervene, legal experts say.
Broadcasters are on a legal losing streak with Aereo. This week a federal judge in Boston denied an injunction request by Hearst Corp.-owned station WCVB-TV, which argued that Aereo puts its "entire business model at risk."
But broadcasters have had more luck fighting FilmOn X. A federal court in California, for example, ordered an injunction on FilmOn X. The Ninth Circuit Court of Appeals is considering the company's appeal and could make a decision any day, a lawyer for FilmOn X has said.
A definitive split between the Second and Ninth Circuits over streaming video technologies might encourage the Supreme Court to take on the issue, legal experts have said.
Congress hasn't shown any signs it would intervene to address Aereo or other major issues roiling the media industry, such as fight over rising carriage fees for TV networks, "so these issues end up falling to the courts and the FCC," said Paul Gallant, managing director at Guggenheim Securities.
The heart of the issue before the Supreme Court is whether Aereo infringes on broadcasters' sole rights under copyright law to transmit their works to the public—so-called "public" performances.
Aereo's technology works by using racks of dime-sized antennas in its facilities to pick up over-the-air signals from TV broadcasters. Subscribers are assigned individual antennas when they choose to stream a channel. Aereo stores the programming on individual digital video recorders, converts the signal to a digital format and sends it over the web with a few seconds of delay. The company argues this approach simply amounts to a "private" performance—facilitating any individual's legal right to receive over-the-air TV and record shows for their personal viewing.
Broadcasters have called Aereo's technology a gimmick. They argue that it doesn't matter that each user can only access a unique copy and say Aereo is still transmitting their programming to members of the public.
To reinforce their argument, broadcasters are also seeking to overturn the legal precedent that has largely allowed Aereo to triumph so far: a 2008 victory for Cablevision Systems Corp. CVC in a case involving its cloud-based digital video recorder, in which major entertainment companies failed to convince courts that the technology infringed their copyrights. In the petition, broadcasters argue that the Cablevision case was "wrongly decided."
In a statement late Friday, Cablevision said the petition is a "brazen attempt…to go after the legal underpinning of all cloud-based services," which amounts to a "willful attempt to stifle innovation." "If Aereo ends up prevailing, it will serve the broadcasters right," the company said.
The tension over Aereo's service has spurred some TV network executives to muse about removing their programming from over-the-air broadcasts, so Aereo can't pick up the signals, and instead distributing the content only to cable and satellite operators.
Write to Amol Sharma at firstname.lastname@example.org and Shalini Ramachandran at email@example.com