Aereo Loses the Battle

This decision is like watching your step-mother going over a cliff in your brand new car!


..."if the decision comes down on the side of Aereo, then the broadcasters could revolt. "It’s possible that networks may decide to move their popular programming over to a paid service if the Supreme Court should rule in Aereo’s favor," said Grant Whipple, Consumer Electronics Product Manager for Winegard Company, an antenna manufacturer not affiliated with Aereo. In an interview with DealNews, Whipple said antenna producers like Winegard are watching this case very closely, as such a negative reaction from broadcasters could hurt antenna sales — and antenna users — in general."

http://www.engadget.com/2014/06/25/united-states-supreme-court-aereo/

http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf

US Supreme Court rules Aereo's streaming service is illegal under copyright law

BY Ben Gilbert @RealBenGilbert 3 hours ago

In a precedent-setting decision, the United States Supreme Court ruled today that Aereo is in violation of US copyright law. The decision states that Aereo's use of tiny antennas hooked up to cloud DVR technology violates the right of companies producing broadcast content. Specifically, the decision says that Aereo's business violates the 1976 Copyright Act; the act states that individuals or businesses are violating copyright if:

1: perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or
2: 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 are capable of receiving the performance or display receive it in the same place or in separate places at the same time or at different times

In the case of Aereo, the Supreme Court says the company's service is tantamount to "a performance or display of the work."
The decision is backed up by the Supreme Court's history with cable companies. In 1976, the Copyright Act deemed the rebroadcast of airwave-based television via cable a performance. As a result, cable companies had to pay broadcast networks for access to content. Today's ruling states that Aereo is essentially in the same boat as cable TV companies. "Aereo's activities are substantially similar to those of the [cable television] companies that Congress amended the Act to reach," Associate Justice Stephen Breyer writes.
Aereo's argument was that, since it only rebroadcasts shows that its users choose and save on customer-assigned DVR machines, its users were retransmitting/performing. More simply: each Aereo subscriber is assigned an individual DVR machine and antenna. Since each user must choose what they watch (unlike cable, which is a feed of every channel all the time), Aereo argued that it's not a rebroadcaster, but its users are (which is legal). Instead, Aereo thinks of itself as a hardware provider. That hardware (DVR machines and antennas) provide a service. Associate Justice Breyer disagrees: "We conclude that Aereo is not just an equipment supplier and that Aereo 'perform[s].'"
The nine Supreme Court justices were split six to three, with justices Breyer, Roberts, Kennedy, Ginsburg, Sotomayor and Kagan in favor, while justices Thomas, Alito and Scalia were against. Justice Scalia wrote the dissenting opinion of the court.
Update: Cablevision, a Northeast US cable company, offered the following statement on today's ruling:

"We are gratified that the Court's decision adopted a sensible middle ground, holding that unlicensed retransmission services like Aereo violate the copyright law, while protecting consumer-friendly, cloud-based technologies, such as RS-DVR. The real winner today is the consumer who will continue to benefit from future innovation."

Cablevision was in a particularly awkward situation with regards to the case, as it previously battled similar copyright law to keep selling its cloud DVR technology. As the statement above notes, Cablevision is particularly pleased with today's ruling because it both pushes against Aereo's business model (which competes with cable TV) and provides space for services like cloud DVR to exist.
Update 2: The National Association of Broadcasters (NAB), which serves as the mouthpiece for the broadcast companies which sued Aereo, issued a statement regarding today's ruling as well:

"NAB is pleased the Supreme Court has upheld the concept of copyright protection that is enshrined in the Constitution by standing with free and local television. Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false. 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.

Television broadcasters will always welcome partnerships with companies who respect copyright law. Today's decision sends an unmistakable message that businesses built on the theft of copyrighted material will not be tolerated."

Update 3: Aereo itself has finally issued a statement. It's a long one, but here it is in full:
"Today's decision by the United States Supreme Court is a massive setback for the American consumer. We've said all along that we worked diligently to create a technology that complies with the law, but today's decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry. It is troubling that the Court states in its decision that, 'to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.' (Majority, page 17) That begs the question: Are we moving towards a permission-based system for technology innovation?

"Consumer access to free-to-air broadcast television is an essential part of our country's fabric. Using an antenna to access free-to-air broadcast television is still meaningful for more than 60 million Americans across the United States. And when new technology enables consumers to use a smarter, easier to use antenna, consumers and the marketplace win. Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle."

Justice Scalia's dissent gets its right. He calls out the majority's opinion as 'built on the shakiest of foundations.' (Dissent, page 7) Justice Scalia goes on to say that 'The Court vows that its ruling will not affect cloud-storage providers and cable television systems, seeante, at 16-17, but it cannot deliver on that promise given the imprecision of its results-driven rule.' (Dissent, page 11)"

We are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world."

An interesting read on "cord cutting" from MarketWatch.

http://www.marketwatch.com/story/story?guid=560c83cc-fb21-11e3-ae23-00212803fad6

June 24, 2014, 11:37 a.m. EDT

If you haven’t cut the cord on cable TV, you should

Insight: Stand up to cable companies in the most powerful way you can

By Nat Worden

Apple

If you like being offered free stuff by huge companies, try calling your cable provider and informing them that you’ll be canceling TV service in favor of an Internet-only connection. I did, and it was gratifying.

MarketWatch Interactive: CUTTING THE CABLE CORD
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I’m a Cablevision Systems (NYSE:CVC)   customer in rural Connecticut, and I subscribed to the company’s “triple-play” Internet, TV and phone service for years. I’m a busy professional and a parent of small children, so I have little time for watching TV these days, and this service was expensive relative to my actual usage — except for the Internet service, which I need for all sorts of things.

After purchasing Apple TV (NASDAQ:AAPL)  , it became clear that I no longer needed cable TV service, and I rarely used a wireline phone. When I called Cablevision to cancel those items, they kept me on hold for an eternity to connect to their “Retention Department,” which didn’t seem appropriate to me.

When I finally got through, their representatives offered me several rounds of discounted promotional offerings to keep their TV service, which kept getting cheaper as I rejected them one after another. Then they gave up, and I returned my monstrous, electricity-draining cable box with it’s god-awful user interface and remote control that never worked (yes, I tried changing the batteries). That may have been the most satisfying errand I have ever run as a consumer.

On Wall Street, this is known as “cord-cutting,” and it’s a trend that’s developing among consumers — particularly the young. Many analysts argue this is something that’s only happening on the margins, and it’s unlikely to affect the pay-TV business in a substantial way. I suspect they’re wrong, and that we’ll reach a tipping point in the not-too-distant future at which most consumers will decide the Internet is an adequate medium for serving all their entertainment and information needs and traditional pay-TV subscriptions are no longer necessary or relevant.

Now, I pay about $60 a month for Cablevision’s broadband service — almost $100 less than I was paying — and I subscribe to Netflix (NASDAQ:NFLX)  so my kids can watch commercial-free kid shows. I’m also trying Hulu Plus for online access to network TV shows. There’s also online video options for sports fans, like MLB.com, and you can buy all the great TV series a la carte on iTunes if you don’t mind being a little behind the curve — who can stay current on all these shows anyway? I’ve also been pleasantly surprised by Apple TV’s library of free video podcast selections, which are excellent, including some current news shows.

Oh, and then I can access the entire Internet on my computer, which has some good stuff on it too — including independent news and commentary sources that often better informed and more accurate than our mainstream, corporate news outlets.

I have absolutely nothing against Cablevision or any other cable company and all the great people who work for them. In fact, I’ve seen Cablevision CEO Jim Dolan sing and play guitar in his rock band — he’s surprisingly talented and has excellent taste in music. I just like having options as a consumer.

I tried AT&T’s (NYSE:T)   U-Verse Internet service, which finally made it to my neighborhood, but it was too slow. So, like many Americans, I only have one real choice for quality Internet service, and according to the Federal Communications Commission, we pay more for Internet service than consumers in other developed countries — often substantially more — and in return, we get lower quality service.

I don’t know how this situation could sit well with any red-blooded American capitalist, except for one who is benefitting from it handsomely, like Comcast (NASDAQ:CMCSA)   CEO Brian Roberts. He wasn’t kidding when he recently justified Comcast’s impending acquisition of Time Warner Cable (NYSE:TWC)   by saying the two companies don’t compete. A handful of cable companies have divided up the country, and their territories don’t overlap — there really is no competition between them.

If this sounds like the way a monopoly works, that’s because it is. Therefore, we should have federal regulations — like real net neutrality rules and other consumer protections — imposed on the nation’s Internet service providers in order to promote access and competition, which would help our economy grow and innovate in the digital age.

Unfortunately, our federal government appears to be woefully corrupt and dysfunctional to most sensible people of all political leanings, and the telecommunications industry is able to deploy its lobbying strength on Capitol Hill to get basically everything it wants. This has troubling ramifications for our nation’s media future at a time when we’re undergoing a massive transformation in communications technology.

If we have limited sway over this situation as voters, though, we do have some leverage that we can wield in the free market as consumers, which is why everyone should consider their options for cutting the cord, saving money, and pressuring the handful of giant companies that control our media and access to the Internet to stop standing in the way of technological progress and move out from behind their old business model to compete for audiences on the new media playing field. 

Nat Worden is a journalist whose work has appeared in The Wall Street Journal, The New York Times, Outside Magazine, Newsday, The Village Voice and elsewhere. He’s a vice president with GoodWorks Insurance, an independent insurance brokerage. Follow him on Twitter @NatWorden