Aereo survival imperiled as court rules copyrights violated

The U.S. Supreme Court dealt what may be a fatal blow to Aereo Inc. and its dream of transforming the television industry, ruling that the Barry Diller-backed Internet startup is violating broadcasters’ copyrights. More

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Aereo survival imperiled as court rules copyrights violated

Posted 6/25/14

The U.S. Supreme Court dealt what may be a fatal blow to Aereo Inc. and its dream of transforming the television industry, ruling that the Barry Diller-backed Internet startup is violating broadcasters’ copyrights.

The 6-3 ruling is a triumph for broadcast companies, including Walt Disney Co.’s ABC, 21st Century Fox Inc., Comcast Corp.’s NBCUniversal and CBS Corp. They said Aereo was threatening the underpinnings of the industry by selling programming online without paying licensing fees.

Aereo sought to give consumers a new way to watch broadcast TV without buying the packages offered by cable and satellite companies. Customers in 11 cities have been able to watch live and recorded broadcast programs for as little as $8 a month.

Shares of IAC/InterActiveCorp., of which Diller is chairman, fell as much as 2.1 percent to $67.42 after the ruling, the most since May. CBS’s stock climbed as high as 7.9 percent to $63.75, the most since January, while Fox shares rose 1.6 percent to $35.02.

“It’s not a big (financial) loss for us, but I do believe blocking this technology is a big loss for consumers,” Diller said in an emailed statement.

CBS said in a statement, “We are pleased with today’s decision, which is great news for content creators and their audiences.”

Football, baseball

The ruling is also a win for the National Football League and Major League Baseball, which said Aereo is exploiting their copyrighted telecasts. The NFL told the court that Aereo’s legal arguments would let the company provide distant signals as well as local ones, so customers could watch games from around the country without compensating the league.

Justice Stephen Breyer wrote the court’s majority opinion. Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

Aereo contended that a ruling against the company would endanger cloud computing, the business of storing videos and other content for customers on remote servers. The majority said the ruling was a limited one that wouldn’t affect cloud computing.

The broadcasters said Aereo was trying to use a technical detail to circumvent well-established legal rights. The Obama administration backed the broadcasters.

Homeowners’ antennas

Aereo said it facilitates thousands of “one-to-one” transmissions from an antenna to a customer’s screen. The company said its system is legally indistinguishable from the antennas homeowners have placed on their own roofs for decades.

Aereo also distributes Bloomberg TV to subscribers. Bloomberg LP is the parent company of Bloomberg News and Bloomberg Television.

Broadcasters said Aereo threatened to create a blueprint that would let cable and satellite providers stop paying billions of dollars in retransmission fees each year to carry local programming. With those fees estimated to exceed $4 billion this year, some broadcasters said they might convert to cable channels if Aereo weren’t shut down.

The decision is a victory for local broadcasters, which negotiate their own deals with pay-TV providers. A ruling favoring Aereo might have undermined the value of billions of dollars in acquisitions.

The case is ABC v. Aereo, 13-461.

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