The bandit of broadcast
The Supreme Court's decision on Aereo may affect more than the TV business
CHET KANOJIA, the founder of Aereo, wonders which actor will play him, when Hollywood makes a film about his startup disrupting the television industry. “Probably a white guy,” Mr Kanojia, who is Indian-American, says drolly. Whether his firm will feature on the big screen or rapidly be forgotten depends on the outcome of a lawsuit between Aereo and America's big free-to-air broadcast networks—such as ABC, CBS and Fox—which is being weighed by the Supreme Court. Oral arguments in the case were heard on April 22nd and a decision is due within months.
Mr Kanojia and Aereo are not yet household names, but are the subject of much debate among geeks, copyright lawyers and TV executives. Aereo picks up the signals of free-to-air channels and streams them to its subscribers over the internet, so they can watch them with the same good picture quality as they get via cable, but for a fraction of the average monthly cable bill. Each subscriber is assigned one of a huge number of thumbnail-sized aerials in Aereo's warehouses. Aereo claims this is in principle no different—and thus no less legal—than the subscriber putting an antenna on his roof. But broadcast bosses see it differently. They say Aereo is violating copyright law by not paying them for a “public performance” of their content.
So far Aereo is available in only 11 cities. But broadcasters worry that it threatens a fast-growing revenue stream: the fees they get from cable- and satellite-TV operators that retransmit their channels. Such fees came to about $3.3 billion in 2013, according to SNL Kagan, a data firm. The pay-TV companies would not want to keep paying these if Aereo did not have to. So broadcasters have threatened that if Aereo wins, they will take their content off the public airwaves and offer it through pay-TV only.
Aereo has raised around $100m from various investors, including Barry Diller, a veteran media executive. Mr Diller's volte-face is worthy of a prime-time drama: having launched Fox, one of America's four big broadcast networks, in the 1980s, he is now a booster for broadcast's bandit. But if Aereo loses it will probably shut down. The government has supported the big broadcasters, undermining Aereo's chances. As for the courts, so far their judgments on Aereo's legality have been mixed: last year two federal courts sided with Aereo, but in February a federal court in Utah ordered it to close its operations in that state.
Legislation has not kept up with new technology. Cable in America is regulated by a 1992 law, and copyright by a 1976 one. Both were written before the rise of the commercial internet, notes Rich Greenfield of BTIG, a research firm.
Many are watching the case to make sure the verdict does not imply that it is piracy to transfer any sort of content via the internet without a licence from whoever owns the copyright to it. That could be costly for firms that store media files in the “cloud” for paying clients, such as Apple and Google. As Stephen Breyer, one of the Supreme Court justices, said in this week's hearing, “What disturbs me…is I don't understand what the decision for you or against you…is going to do to all kinds of other technologies.”