The Supreme Court Kills Aereo Because It Found a Loophole

In the aftermath of Wednesday's 6-3 Supreme Court decision stating that Aereo was in violation of the U.S. Copyright Act, there arose in the tech world an amount of hand-wringing that would make Helen Lovejoy green with envy.

When the decision came down, most media outlets proclaimed the demise of the innovative tech start-up. Others lamented the decision and lashed out at the bipartisan group of justices that wrote for the majority. Still others rushed to argue that no, the decision didn't mean the end of Aereo. A friend of mine, a subscriber to Aereo's service, is in the midst of the traditional five stages of grief. In a single day, he's cycled through denial, anger, depression, and now he's onto the bargaining stage, devising solutions to save the company so convoluted you'd need to divert physicists from the Large Hadron Collider to fully comprehend them.

The dust still hasn't settled and it will be a while before we know if Aereo can survive, but here's what we do know: Aereo used a series of antennaes to pull live broadcast signals out of the air and stream them to its subscribers. It did this without paying licensing fees to the networks who own the shows, unlike other broadcasters. Aereo argued that it was merely an equipment provider and not a broadcaster and therefore didn't need to pay licensing fees (hence why their rates are $8 a month as opposed to Comcast's $99). Six of the SCOTUS justices didn't buy it. Roberts, Ginsberg, Kennedy, Breyer, Kagan, and Sotomayor found that despite the technological back-end that made Aereo so unique, Aereo still functioned largely as a broadcaster of copyrighted material as defined by the 1976 amendment to the Copyright Act. They also said that Aereo was a "public performer" of the copyrighted materials. Taken together, these issues meant that Aereo has been violating copyright law since its inception two years ago.

Clearly, a lot of people don't agree with the decision, and this TechDirt article explains why. In essence, they claim that the SCOTUS used a "looks like something that infringes test" to get to their desired result. They looked at the surface and, without really understanding how the technology works, decided that it must be a broadcaster. Critics of this approach cite this as another example of the anti-technology, intellectual laziness that's hung over this particular line-up of justices for some time.

The critics are right in one regard: in determining a case, the justices should always try their best to understand how a particular technology works. Simply relying on a "looks like" approach is not the way the highest court in the land should operate.

But I'm not convinced that's what happened here. I've read this decision cover to cover (unlike other SCOTUS decisions which can be punishingly long, this one clocks in at a reasonable 35 pages). I wanted to hate the outcome. But to my eyes the justices did in fact understand Aereo's technology. They simply weren't convinced that the technology stood far enough apart from those of more traditional broadcasters to exempt Aereo from having to comply with the Copyright Act. This decision doesn't read like a "if it looks like a broadcaster then it must be" approach. It seems much more logical and considered than that.

However well considered the intentions though, bad law can still come out of it. Whether the Court intended it or not, the decision effectively gives cable companies and broadcasters - powerhouses that already lord over us - even more authority to run the board however they want. As I write this, Fox is using the three-day old Aereo decision as leverage in its legal battle against Dish Network.

It also raises a question of legitimacy, as do most of the recent decisions from this heavily partisan Court. In the decision, the justices state that the decision is narrowly tailored towards rectifying Aereo's specific actions rather than attacking technological advances by other start-ups in general. In other words, it looks like the Court is singling out Aereo for punishment, rather than deciding the law. And it does raise the question as to whether this case was really about technology, or whether it was a facade for something more sinister: loopholes (Scalia says as much in his dissent). Aereo thought it found a technological loophole so that it wouldn't have to pay licensing fees to the networks like Comcast, Time Warner, and AT&T have to. Was this a case of revenge? Were the broadcasters expecting the Supreme Court to act as a bludgeon for their interests? If so, that's the bigger concern.

Supreme Court Deathmatch: Aereo vs. The Entire Broadcast Network Industry

For the last six months, a friend of mine has relentlessly tried to get me to ditch my Xfinity hookup and replace it with Aereo, an online TV subscription service. To hear him tell it, it’s the greatest thing ever invented - immediate and live access to broadcast news, sports, and TV shows from the big 10 networks such as NBC, CBS, ABC, FOX, PBS (no cable channels though), all for a measly $8 a month. I think I’ll wait though. I’m happy with my yesteryear technology and I derive a certain amount of comfort from mindlessly flipping through hundreds of channels I’ll never watch. More importantly, Aereo may not even exist in six months. That’s because tomorrow the Supreme Court will hear oral arguments in the case of American Broadcasting Companies, Inc. v. Aereo, Inc. And if Aereo loses, according to its own CEO, the company is kaput.

For those who don’t know, Aereo is a startup that takes television broadcasts from networks and retransmits them to you live via the internet. You can also store these broadcasts in a cloud-based DVR, all for the cost of two cups of coffee. As it turns out, even though you’re paying Aereo, Aereo is not paying the networks; it's just ripping these broadcast signals out of the air and streaming them to you. That didn’t make the networks too happy, so they banded together and sued Aereo for copyright infringement.

This isn’t an easy case and I don’t envy the justices the amount of work they'll have to even understand the technology at play (read this article if you want to know how behind-the-times the SCOTUS really is). Ultimately, this case turns on whether Aereo’s retransmission of broadcast television constitutes a “public or private performance” of copyrighted works. Private performance is perfectly legal, like when you buy a DVD and show it in your home. Even if you invite 100 friends over to watch, you’re safe. But let’s say you rent a theater and charge for admission - that would make the performance public, and that becomes copyright infringement.

In this case, the networks argue that Aereo’s actions constitute public performance because:

1. Aereo streams “live TV” to a wide variety of subscribers;
2. Aereo charges fees for its services;
3. Unlike other retransmitters, Aereo doesn’t pay licensing fees to the networks for permission to broadcast their content.

In opposition, Aereo argues that it does not transmit “to the public.” It transmits only to its paying user base. Furthermore, the choice about what gets retransmitted at any given time is made by the subscriber, not Aereo. Some lower courts have already sided with Aereo, but if I’m being totally honest, I empathize with the networks, even though siding with a corporate copyright holder gives me the willies. Creating and broadcasting content is back-breakingly hard and terrifically expensive. Even some of those low-budget reality shows for third-rate cable channels that look like they were shot on iPhones… oftentimes they have budgets in the tens of thousands of dollars per  episode. And there are lots of working-class content creators behind those shows. Remember, most people in the entertainment industry aren’t millionaires; they’re regular people working paycheck to paycheck, relying on a steady stream of work from networks and studios to pay their bills. It’s easy to think of the producers and directors and say “who cares?” But the people who get hurt first and hardest are the below-the-line talent: the grips, boom operators, location managers, scouts, production assistants, etc. What will happen to those jobs if the networks believe that pouring money into original content is no longer a profitable business model? And if you’re one of the networks, do you want to continue operating in an industry where it’s permissible for competitors to poach your signal and rebroadcast your content without owing you a fee for your trouble?

I don't know what's going to happen, but in a corporate-friendly court like this one, I can see the Supreme Court buying an argument that Aereo’s continued existence will irreparably harm the bottom lines of not just the networks, but the big telecoms like Comcast and Time Warner (soon to be a single world-killing behemoth). I don’t want to see Aereo go down because the use of technology to better peoples' lives is an intrinsic part of the American ethos. But I also don’t want to see a wholesale dismantling of the entire entertainment industry (alarmist I know, but still possible).

I’ll update this post with some thoughts after Tuesday’s oral arguments. In the meantime, I’m going to stick with my cable hook up, and I’ll tell my friend to  start budgeting for cable again if Aereo goes down the poop chute.