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Supreme Court Aereo decision will slow innovation

Supreme Court Aereo decision

The Supreme Court’s decision siding with the broadcasters in the case against Aereo puts an end to one of the highest profile technology versus media battles ever. The implications for the industry are many, but the clearest of all is the chilling effect it will have on innovation.

In the 6-3 ruling, the majority of the court in effect accepted the broadcaster’s argument that Aereo is illegally broadcasting their copyrighted material over the Internet. The court held that: “having considered the details of Aereo’s practices, we find them highly similar to those of … CATV systems.” As such, Aereo is subject to the Copyright Act and must pay retransmission fees to broadcasters to continue in its current business.

The court went to great pains to try to narrow its decision to just Aereo in particular, rather than the broader topic of cloud services. Unfortunately, in trying to skirt the general issues the court created an air of uncertainty around any technical innovation in the area of digital media. The court said: “to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.” Chet Kanojia, CEO of Aereo, seized upon this point in his statement on the court’s decision. He asked: “Are we moving towards a permission-based system for technology innovation?”

In the dissenting opinion, Justice Scalia also worried that the court had failed to leave technology innovation unfettered. He disagreed with the majority in their finding that Aereo’s service constituted a performance (a necessary condition for the CATV conclusion.) He went further, saying: “The Court manages to reach the opposite conclusion only  by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (“looks-like-cable-TV”) that will sow confusion for years to come.”

In the short term, worries about whether the decision might overturn the previous Cablevision case, which made network DVR legal, seem to be unfounded. The court didn’t even mention the case in its opinion. However, companies with technology and business models related in any way to Aereo’s should review the decision carefully. FilmOn’s founder, Alki David, was understandably dismayed by the decision, but other companies should be concerned. NimbleTV and SimpleTV, for example, both have businesses that are at least technologically related to Aereo.

In the long run, the Supreme Court Aereo decision will surely have a chilling effect on any company thinking of applying its technology innovations to anything in the traditional TV domain.

And in the end, this might be exactly what the broadcasters wanted. Much of their efforts are now geared toward supporting the pay television environment, and reaping the benefits of those retransmission license payments. Innovation applied to free-to-air TV is, at best, wasted energy and, at worst, might encourage people to get rid of pay TV.

Whatever your belief about Aereo’s legality, we can certainly agree it made watching free-to-air television much more convenient for the connected generation. Unfortunately, convenience outside of the pay TV bundle is not something broadcasters have much incentive to provide.

Why it matters

The Supreme Court has decided that if a service looks a lot like cable TV, it must obey the rules governing cable TV.

Thus, Aereo must pay retransmission license fees to broadcasters.

The decision, while trying to skirt broader issues such as cloud media, casts a shadow over any technology development in the digital media realm.

This will likely have a chilling effect on technology innovation in the digital media market.

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(2) Comments

  1. Spot on. Fact is, Aereo’s attorney missed a huge opportunity as noted in this transcript snippet below. Ginsburg asked: “Why would I pay Aereo for free TV?” BECAUSE IT’S NEARLY IMPOSSIBLE FOR THE AVERAGE PERSON TO EXERCISE THIS RIGHT BY THEMSELVES IN THE DVR & TABLET AGE! That is what Aereo did – made it hassle-free for people to exercise their right.

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