Aereo Takes a Win for the Consumer Against Broadcast Giants

Wednesday, April 3, 2013, by Agnieszka Zmuda

Most likely wishing this was some kind of April Fools’ joke, Broadcast giants were shocked and disappointed on Monday when the federal appeals court in New York rejected their appeal, ruling in favor of the start-up web-television company, Aereo.

Aereo allows its internet subscriber to stream live TV shows onto their computers, tablets, or smartphones, without compensating the networks. The way Aereo does this is what sets it apart from other streaming companies. By operating a sort of warehouse farm of small antennas that pulls the TV signal from the air, Aereo allows each subscriber to turn whatever device they are using into a mini-TV, minus the giant rabbit ears of yester year. Each internet subscriber pays a fee to leases one Aereo antenna, giving them full control over programming through the Internet. Aereo avoids paying the hefty license fees to the networks, which cable companies pay for access to stations, because they are only giving access to broadcasts that are already free. Streaming is limited to the area in which Aereo operates, but the company is set to expand its service to 22 cities this year.

Last year, just weeks before Aereo’s service was set to be made available in New York, the broadcast giants filed copyright suits in federal court, requesting a preliminary injunction to bar the company from streaming because it lacked the proper license to operate. They argued that providing people with live TV broadcasts qualified as a public performance of a copyrighted work, which requires a licensing fee. Other arguments made included infringement of the right of reproduction and contributory infringement. A district court judge denied this motion.

This is just one step in a long war against the broadcast giants

On Monday, the United States Second Circuit Court of Appeals upheld the lower court ruling in a 2-1 vote, saying that in light of their previous decision in Cablevision, the broadcasters “were unlikely to prevail on the merits” as they could not “materially distinguish” from the recording system used by Cablevision. The majority found that because the “potential audience” of each transmission of TV shows is a single subscriber, the transmission does not constitute a public performance.

The dissent, authored by Judge Chin, viewed that Aereo’s transmissions did constitute a public performance, and therefore was in violation of the Copyright Act. He called their use of thousands of individual antennas, instead of a central one, “a sham.” He further went on to describe Aereo’s antenna system as “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.

Aereo’s CEO, Chet Kanojia, is excited about winning this round, but understands this is just one step in a long war against the broadcast giants, who are not keen on giving up just yet. If networks don’t win another appeal in front of the full Second Circuit Court, they can try to have their case heard in front of the Supreme Court. Looking to the past, Kanojia knows that if all else fails, the networks will take their doomsday scenarios to Congress.

So consumers who are hoping for an easy cheap alternative to the hefty price tags of the cable companies should keep watch to see how this case develops.