Tuesday, July 1, 2014
There has been rightful focus on the Supreme Court’s most groundbreaking recent pronouncements: rejection of warrantless cellphone searches, establishing for-profit corporations’ rights to religious choices (!), and mandatory union dues curtailments. Because it was not, perhaps as socially consequential as those decisions, last Wednesday’s 6-3 ruling against Aereo, an upstart Over-The-Top (OTT) internet service, went under the radar, so to speak. Speaking to the Media Law and Policy teaching side of my brain, the Court held that Aereo, an internet provider of broadcast programs, directly violated the copyrights of ABC, FOX, CBS, NBC, and other “traditional” broadcast networks. The decision preserved—for now—broadcasters’ exclusive ability to control the re-transmission and licensing of its programs. On the other hand, the decision was a temporary setback for the ‘cord cutters.’
Cord-cutters, most of whom are Millennials, are those media consumers who have elected to do away with traditional television viewing, going so far as not just refused to subscribe to cable television, but not own a television at all. As a result, cable companies have seen a marked decline in subscribers. At the same time, broadcast and cable companies have chased viewers onto the internet, their laptops, their tablets and their smartphones. Television networks, in fierce competition with the likes of online networks such as Netflix, YouTube, and Amazon Prime, have Hulu, Hulu Plus, or their own online channels streaming network content. Aereo posed a real and further threat to cable and broadcast television revenue streams.
Broadcast networks bring in billions of dollars per year from cable companies by permitting them to air broadcast programs such as ABC’s Modern Family. In addition, the owners of those shows (which may or may not be the network’s parent company) can yield untold revenue by licensing syndication rights to cable networks or OTT streaming networks such as Netflix. In that context, it should be apparent why the networks were so concerned about Aereo, whose technology captured broadcast signals by way of miniature antennas on large antenna boards, and provided broadcast program downloading and time-shifted viewing or recording. While charging subscribers between $8-$12 per month for the service, Aereo paid the program owners nothing.
The broadcasters executed a bold legal strategy that paid off. They argued that Aereo was legally liable for direct infringement (primarily liable for re-transmitting copyrighted work), as opposed to indirect infringement, or secondary liability. For the Supreme Court, the issues came down to two seemingly simple questions: Was Aereo performing a copyrighted work, and if so, was it performing it publicly? Justice Breyer, writing for the majority, answered both questions “yes.”
Aereo’s position was that it was simply a “dumb pipe”—like a set of rabbit ears or a VCR—that any consumer could purchase and use to watch or record programs. Justice Scalia, in dissent with Justices Alito and Thomas, agreed, arguing that Aereo was more like the Kinko’s that provides a patron with the library card: It’s the patron that may violate copyright law when copying the book, not Kinko’s.
The majority disagreed, and held that Aereo was acting more like a cable company, through which subscribers can elect which shows to watch or record. Moreover, despite the fact that Aereo technology assigned an individual to each antenna, and even if subscribers were watching the same show, a separate copy of the show was made for each viewer, the Court said Aereo was providing the show to the public. Consequently, Aereo was bound to seek copyright permission from the copyright holders—just like cable companies.
The decision will likely ring the death knell for Aereo and similar streaming servicers (e.g., FilmOn), if Aereo’s weekend decision to suspend its streaming service is any portent. On the other hand, the decision was a tremendous victory for broadcast networks. By ruling not just that Aereo was liable for copyright infringement, but directly liable, the Court spared television program copyright owners the fate that befell the music industry. The Napster and Grokster decisions caused the record industry to engage in nearly a spate of “John and Jane Doe” lawsuits—chasing individual consumers for alleged or actual illegal downloading and sharing of music. Those lawsuits—tens of thousands—proved to be both economically costly and a public relations disaster for the industry. Copyright holders of television broadcast content, for now, will be spared a similar fate.
Even if Aereo ceases to exist in its current form, there are other internet businesses that allow consumers to view broadcast programming without the aid of cable or satellite infrastructure. In addition, virtual multiple-system operators are seeking to aggregate television channels and deliver them by broadband connection. However, under any regime, how the business makes money will be, well, the $64,000 question. In light of the Supreme Court’s Aereo decision, paying for content from television broadcasters will be a given for the foreseeable future. For now, cord-cutting Millennials will have to find another OTT to watch their favorite broadcast show.