Supreme Court Rules Against Aereo in TV Dispute

Supreme Court Rules Against Aereo in Broadcast Dispute
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By Lawrence Hurley and Jonathan Stempel

WASHINGTON --- Broadcast and cable TV are not dead yet.

In a decision that could crimp consumers' hopes to cut the cord from their cable operators, the U.S Supreme Court said Aereo Inc., a video streaming service backed by media mogul Barry Diller, violated copyright law by using tiny antennas to broadcast TV content online to paying subscribers.

Wednesday's 6-3 decision is a victory for traditional network operators such as CBS (CBS), NBC parent Comcast (CMCSA), ABC parent Walt Disney (DIS) and Twenty-First Century Fox (FOXA).It may also make it harder for Internet rivals to provide alternative, a la carte programming at cut-rate prices.

Reaction Is Fast and Strong

Broadcasters' share prices rose in the minutes after the decision was announced, with CBS shares rising roughly 5 percent. The company in a statement called the decision "great news for content creators and their audiences."

"As convenient and as fun as it is for the consumer, an adverse decision would have completely changed the business model of Hollywood and of movies and TV," said Roger Entner, a telecommunications analyst at Recon Analytics in Boston.

For the networks, the victory protects the estimated $3 billion in retransmission fees that broadcasters get from cable and satellite TV systems. The decision could also raise concern for other technologies, such as cloud computing, that innovation would be stifled by making it too easy to deem use of certain content as theft. The majority in the Supreme Court decision played down the issue and indicated it would wait for a case that specifically addresses copyright law in other technologies.

Wednesday's decision casts Aereo's immediate future into doubt. It typically costs about $8 to $12 a month, and it lets users stream live broadcasts on mobile devices. Aereo does not pay the broadcasters. Chet Kanojia, Aereo's chief executive, called the decision "a massive setback" for American consumers. Diller, in an emailed statement, called the decision "a big loss for consumers."

What the Court Wrote

Writing for the majority, Justice Stephen Breyer said Aereo is "not simply an equipment provider," but rather bears an "overwhelming likeness" to cable TV companies whose ability to retransmit broadcasts was limited under a 1976 copyright law.

Any differences, he said, "concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service," which he said constituted a public performance of copyrighted content.

Breyer also agreed with the federal government that it was premature to suggest the decision could doom cloud-based services where TV shows, music and other content are stored on the Internet via servers from Google Inc, Microsoft Corp, DropBox Inc and Box Inc, among others.

Joining the majority were Chief Justice John Roberts and Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.

Justice Antonin Scalia, joined by fellow conservative Justices Clarence Thomas and Samuel Alito, dissented, likening Aereo to a "copy shop that provides its patrons with a library card" that lets subscribers decide what content will be viewed.

"I share the court's evident feeling that what Aereo is doing (or enabling to be done) to the Networks' copyrighted programming ought not to be allowed," Scalia wrote. He said Congress is equipped to fashion a solution better than "the crude 'looks-like-cable-TV' solution the court invents."


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