The Aereo Lawsuit and the Future of Television

We’re still more than a month away from oral argument in American Broadcasting Companies v. Aereo, but the war of words over the case and the future of broadcast television is already heating up. Last week, CBS joined a growing chorus of broadcast networks threatening to cease broadcasting entirely unless the Supreme Court rules that Aereo’s business model violates the Copyright Act. According to network CEO Leslie Moonves, “If the government wants to give [Aereo] permission to steal our signal, then [CBS] will come up with some other way to get [consumers] our content and still get paid for it.”  Moonves indicated that the network would consider going “over the top” by offering its content to viewers over the Internet without a paid-TV subscription.

According to network CEO Leslie Moonves, ‘If the government wants to give [Aereo] permission to steal our signal, then [CBS] will come up with some other way to get [consumers] our content and still get paid for it.’

Aereo functions as a kind of remote-storage digital video recording (“DVR”) service. For $8 per month, Aereo assigns each subscriber two dime-sized antennae that pick up digital broadcast signals from local network affiliates. Rather than having consumers keep these antennae—the digital equivalent to the “rabbit ears” antennae used to pick up analog broadcast signals in the past—at home, Aereo stores all of its equipment in warehouses strategically positioned near network broadcasting stations. Subscribers remotely program their antennae to tune to specific stations at specific times and then stream the content to their computers, tablets, or other Internet-connected devices. Users can watch the content live or store programs for later viewing.

The lawsuit hinges on whether Aereo’s service constitutes public performance of network programs. The Copyright Act defines public performance as “to transmit or otherwise communicate a performance or display of the work . . . to the public, by means of any device or process.” The networks contend that Aereo’s service, which entails sending copyrighted programs to “tens of thousands of members of the public over the Internet for a profit,” constitutes public performance of the works.

Aereo argues that it does not provide public performances of copyrighted works, comparing its service to a “Remote-Storage DVR” approved by the Second Circuit in a landmark 2008 decision commonly known as the Cablevision case. In Cablevision, the Second Circuit held that a cable company’s cloud-based DVR service did not facilitate public performances because only the service only individuals who recorded the work could view the playback. Aereo argues that its service similarly provides private performances of copyrighted works because each subscriber uses a separate antenna, rather than relying on one communal antenna. Last year, the Second Circuit agreed.

The broadcast networks reject this reasoning as “nonsensical” and contrary to the plain meaning of the Copyright Act. The networks argue that, under the Second Circuit’s reasoning “When tens of thousands of Aereo subscribers all simultaneously watch the same broadcast of the Super Bowl using Aereo, Aereo is not publicly performing the Super Bowl.  It is merely making tens of thousands of simultaneous ‘private’ performances to its subscribers.”

The broadcast networks are not alone in their opposition to Aereo’s business model. Earlier this month, the Justice Department filed an amicus brief opposing Aereo. A week later, the DOJ took the unusual step of requesting permission to participate directly in oral argument. According to the government’s motion, “the United States has a substantial interest in presenting its views on the question presented” because “the Court’s decision in this case will likely address important questions about the scope of the public-performance right in the context of novel technologies for transmitting and viewing copyrighted audiovisual works using the Internet.”

The stakes are certainly high for the broadcast industry. Cable companies pay licensing fees to broadcast networks in exchange for the rights to include network affiliates in subscribers’ cable packages. The networks collect about $2.3 billion in licensing fees annually, costing cable subscribers about $1 per month for each channel. Coupled with a decline in advertising revenue, these payments now represent roughly 10% of broadcast network revenues. In contrast, Aereo customers pay the networks nothing to access their content, just like the estimated 7% of Americans who still use antennae to pick up broadcast network signals at home.

The government’s entry into the case caps an eventful month for Brooklyn-based Aereo. Two weeks ago, Aereo was forced to shut down its service in Denver and Salt Lake City after a federal district judge entered a temporary injunction against the company. Last week, the company announced plans for expansion during the South By Southwest festival in Austin, Texas.