Aereo loss protects billions in fees for broadcasters

The Supreme Court ruled Wednesday that Aereo, a startup streaming service, violated copyright laws by capturing broadcast signals on miniature antennas and delivering them to subscribers for a fee.

The 6-3 decision was a victory for the television networks, which had argued that Aereo’s business model of capturing airwaves and not paying licensing fees amounted to a theft of their programming. The judges’ ruling leaves the current broadcast model intact while imperiling Aereo’s viability as a business after just over two years in existence.

Aereo presented a threat because it let customers watch live and recorded TV online for as little as $8 a month without having to subscribe to a cable TV package, which can cost $75.

Broadcasters such as Walt Disney Co.’s ABC get billions of dollars a year from cable providers for the right to air the same programming. An Aereo victory could have endangered that revenue by giving cable providers a blueprint to avoid making such payments. Instead, Aereo was dealt a huge blow, and the fees for broadcasters may now reach more than $7 billion by 2018, according to research firm SNL Kagan.

“It’s a clear win for the broadcasters, and the status quo remains,” said Vijay Jayant, an analyst at ISI Group in New York.

The court had to decide whether the technology Aereo used to record and deliver programs over the Internet from its offices constituted a public performance of the copyrighted work. Aereo said its system of “one to one” transmissions to a customer’s screen is legally indistinguishable from the antennas that homeowners have placed on their roofs for decades.

The majority also said the ruling was a limited one that wouldn’t affect cloud computing, the business of storing videos and other content for customers on remote servers and then delivering the content through the Internet.

The court fight centered on a provision in the federal copyright law that gives owners the exclusive right to perform their works “publicly.” Justice Stephen Breyer, who wrote the court’s majority opinion, said Aereo violated that provision, operating much like a cable TV provider without paying fees.

“Aereo is not simply an equipment provider,” Breyer wrote. “Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast.”

Justice Antonin Scalia, who wrote the dissenting opinion, said Aereo didn’t violate the “public performance” provision because it let subscribers choose which programs they were receiving.

Aereo vowed to keep battling, though it didn’t specify how.

Aereo had roiled an industry already adapting to sweeping changes in how consumers watch video programming. Companies such as Netflix and Amazon.com are vying for viewers as more people choose to get their shows over the Internet instead of traditional cable.

Aereo’s loss takes away a key product for consumers looking to eliminate their cable or satellite TV bills. Aereo provided live content available only on broadcast networks, particularly sports such as National Football League games. People looking to cut the cord could have cobbled together a collection of services — Netflix, Hulu, Amazon Prime and Aereo — that mimics most of what pay TV companies offer.

“Now you don’t have the Aereo piece of the equation, and that hampers the ability of a consumer to put together his own cheaper package,” Jayant said.

The ruling is a triumph for broadcast companies, including 21st Century Fox, Comcast’s NBCUniversal and CBS, and spells the likely end of Aereo.

The court effectively protected the revenue from cable and satellite providers that 21st Century Fox co-chief operating officer Chase Carey said is essential to the broadcast TV industry. The industry’s payments are estimated to exceed $4 billion this year, a 30 percent gain from last year, according to research firm SNL Kagan.

CBS’s $2.2 billion in affiliate and subscription fees accounted for about 15 percent of its total revenue last year. Comcast’s NBCUniversal unit got $1.4 billion in revenue for licensing broadcast content, making up 6.1 percent of NBCUniversal’s sales.