5 Overlooked Things to Know About the Aereo Case

Aereo LogoTomorrow marks a day that many in copyright circles have been waiting on for months. It’s the day that the Supreme Court of the United States (SCOTUS) will hear oral arguments in the Aereo case as the court looks to decide whether the TV streaming service is legal or not.

For those who don’t know or don’t remember, Aereo is a TV streaming service that uses a series of tiny antennas, one per customer, to capture over-the-air broadcast television and provide basic DVR services and stream the content over the Web. Broadcasters have sued the company in multiple jurisdictions and the New York case, which initially saw the court deny an injunction against the service, has made it to the Supreme Court.

But while the case has made it to the Supreme Court in near-record time, the Aereo case has become the focus of a great deal of media attention, likely being the best-known case before the court right now.

But, while the attention to a copyright issue is great, as usual, there are a lot of things that are either not getting a lot of attention in the media, or are just not being covered adequately.

On that note, as we head into the inevitable deluge of media coverage, here are five things to keep in mind about the Aereo case because they will likely be overlooked by at least most.

1. It’s Not About Aereo

Aereo AntennasOne of the larger and more common misconceptions about the case is that it is about the broadcasters battling against a tiny startup that’s threatening to disrupt their industry. However, the issue for the broadcasters has almost nothing to do with Aereo itself.

Aereo, as a company, isn’t really large enough to be a threat to the broadcasters by itself. It’s only available in 11 cities and limitations with scaling up an operation like Aereo’s would likely keep it a niche player even with a decisive win at the Supreme Court.

Instead, the issue is retransmission fees. Currently, broadcasters make about $4 billion per year from cable companies and others that want to retransmit their signals to customers. As per the Businessweek article above, those fees are making up a higher and higher percentage of revenues for broadcasters, now over 10% of their total revenues.

If Aereo were to win, those fees could dry up as cable and satellite companies could, theoretically, adopt Aereo-like setups to capture and retransmit over-the-air broadcast television for free. Though this service might not scale well for an Internet-based company, for cable companies they would scale much easier as they most of the infrastructure already in place.

In short, broadcasters aren’t guarding against Aereo, they’re guarding the retransmission fees that could go away if it wins.

2. It Almost Certainly Won’t Affect Cloud Computing

Though there’s been a lot of talk about how Aereo will impact cloud computing (not to mention briefs filed by Internet companies), it’s most likely that the case will have minimal to no impact on the bulk of cloud services that we’ve come to enjoy.

The key reason is that most cloud computing services are protected under the Digital Millennium Copyright Act (DMCA), which greatly limits liability of Internet service providers, including cloud companies, provided they meet certain basic criteria. Most, however, meet those criteria easily but Aereo does not because, as was explored by Devlin Hartline, it is not just an intermediary but an active participant in the retransmission.

While anything can happen when the Supreme Court rules, the distinction between Aereo and most cloud services are pretty clear and it’s highly unlikely that the Supreme Court is going to say anything that would erode or eliminate protections provided not just under the DMCA, but also under other rulings, such as the Netcom decision, which predates the DMCA.

Hartline has a great breakdown of that particular decision and how it applies to Aereo here.

In short, while cloud services that are similar to Aereo may be under fire, most companies have little to worry about.

3. The Courts Are Divided

It’s easy to look at this case and feel that Aereo has an upper hand going into the Supreme Court hearings and there is some reason to feel that way. The New York case that the Supreme Court is hearing was a victory for Aerea (at least in as far as that the court refused to grant an injunction against the service) both at the district and appellate court level.

Furthermore, only one court, a court in Salt Lake City, has granted an injunction against the service and that was granted after the Supreme Court agreed to hear the case.

However, while Aereo has had great success in the courts, its competitor FilmOn has had anything but. FilmOn uses almost the same technology but has suffered defeat after defeat in the courts, including an injunction that barred it from operating anywhere in the country other than the Second Circuit, which is where the Aereo appellate court victory was.

In short, while Aereo has done fairly well for itself in the courts, its batting average isn’t perfect and, when one looks at the courtroom history of its competitor, it’s clear that the courts are far more split on this issue than some make them out to be.

4. It’s a Test of Cablevision

Aereo’s success in the Second Circuit hinges on a key but controversial decision involving the cable company Cablevision, which dealt with the company’s remote DVR system. That system was ruled legal because every copy of every recorded program was separate meaning that, according to the court, it was functionally the same as what consumers could legally do in their home.

However, Cablevision itself is trying to distance itself from Aereo, pointing out differences between its service and Aereo’s system.

Other circuits, however, have refused to accept the Cablevision ruling and have ruled against both Aereo and FilmOn. Those that have ruled in favor of Aereo have, typically, cited the Cablevision ruling in doing so.

In short, SCOTUS is likely going to be testing the Cablevision ruling as much, if not more than, Aereo itself in its decision.

5. Even if Aereo Wins, It May Still Lose

While a victory for Aereo would be a major deal for the company, it would still have a long, difficult road ahead of it even with legal certainty.

First, broadcasters have already hinted that they might either curtail or altogether stop broadcasting their programs over the air. This would put it far out of the reach of Aereo or any similar service.

While this plan is fraught with problems, the largest being contracts with local affiliates, it might make business sense as the relatively small number of viewers that use over-the-air television might be worth sacrificing to preserve retransmission fees.

But even if broadcasters don’t make use of the “nuclear option” as it is being called, they have other ways to hit back including launching their own online streaming services, which will be easier and cheaper to do for them.

Most drastic, however, involves going to Congress and asking the government to draft new laws to protect their retransmission fees.

Even if Aereo scores a decisive win in the courts, its future is far from certain and it still faces many challenges moving forward including scaling, gaining access to new markets and much more.

In short, Aereo’s business is likely in serious trouble regardless of the outcome of the court case. There are just too many challenges and threats that lie ahead.

Bottom Line

In the end, the Aereo case is likely going to be a major ruling in the field of copyright. However, that can be said about any time the Supreme Court takes up a copyright-related matter.

Still, we won’t know exactly what the impact is until we read the court’s decision and see both which way the ruled and how broad/narrow that ruling is. That, however, is likely at least a month off.

The Supreme Court doesn’t go into recess until the beginning of July so it’s very likely that it could be the middle or end of June before we hear anything further about this case. In fact, it’s not uncommon for the court to release a slew of opinions in the last two weeks of June before heading into recess.

So whatever happens tomorrow, don’t expect anything definitive to be announced. Though we might get some clues from the questions the Justices ask, until we get the final opinion, the fate of Aereo and TV broadcasting will remain very much up in the air.

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