The Supreme Court ruled yesterday that a startup Internet company has to pay broadcasters when it takes television programs from the airwaves and allows subscribers to watch them on smartphones and other portable devices.
The justices said in a 6-3 vote that Aereo Inc. is violating the broadcasters' copyrights by taking the signals for free. The ruling preserves the ability of the television networks to collect huge fees from cable and satellite systems that transmit their programming.
Had services such as Aereo been allowed to operate without paying for the programming, more people might have ditched their cable services, meaning broadcasters would have been able to charge less for the right to transmit their programs.
Aereo looks a lot like a cable system, Justice Stephen Breyer wrote for the court in rejecting the company's attempts to distinguish itself from cable and satellite TV. "Aereo's system is, for all practical purposes, identical to a cable system," he said.
Aereo is available in New York, Boston, Houston and Atlanta among 11 metropolitan areas and uses thousands of dime-size antennas to capture television signals and transmit them to subscribers who pay as little as $8 a month for the service. Because each subscriber is temporarily assigned a dime-sized, individual antenna, Aereo had made the case that it wasn't like a cable company and wasn't doing anything customers couldn't do on their own at home.
Company executives and prominent investor Barry Diller have said Aereo's business model would not survive a loss in the U.S. Supreme Court.
Aereo chief executive Chet Kanojia called the decision "a massive setback for the American consumer" and said the company would continue to fight, without being specific.
The 2nd U.S. Circuit Court of Appeals had ruled that Aereo did not violate the copyrights of broadcasters with its services. It said its ruling stemmed from a 2008 decision in which it held that Cablevision Systems Corp., of Bethpage, could offer a remote digital video recording service without paying additional licensing fees to broadcasters because each playback transmission was made to a single subscriber using a single unique copy produced by that subscriber. The Supreme Court declined to review that ruling.
Cablevision, which owns Newsday, said following the decision, "We are gratified that the court's decision adopted a sensible middle ground, holding that unlicensed retransmission services like Aereo violate the copyright law, while protecting consumer-friendly, cloud-based technologies."