Broadcaster heavyweights poised for final round with Aereo

A landmark U.S Supreme Court decision on the fate of controversial broadcasting startup, Aereo is looming in June and the industry is keenly awaiting the outcome.

The Supreme Court decision could have far-reaching ramifications for the future of television distribution, broadcasting and cloud computing.

Aereo, is a 2-year-old startup that uses small antennas to capture broadcast airwaves and stream those signals to users who pay a bargain US$10 a month for the service. The service which is backed by investors including Barry Diller’s IAC, FirstMark Capital and Highland Capital Partners, broadcasts an eclectic range of network TV offerings in several cities. Subscribers are also given the ability to watch and record the programming on their computers and mobile devices.

The key issue for broadcasters is that Aereo does not pay transmission or copyright fees for its content and the Supreme Court will soon hand down its decision on whether it will be forced to start paying up. ABC, NBC, CBS and 21st Century Fox instigated the legal action alleging that Aereo has taken advantage of a legal loophole. Aereo contends that the use of antennas is within its rights.

For broadcasters, if the Aereo model is deemed legal, they fear there’s nothing stopping cable companies from copying Aereo to avoid paying the broadcasters billions of dollars in fees.

Fox, ABC, NBC and CBS are transmitted free of charge to anyone who has a television and an antenna yet cable companies like Comcast and Time Warner pay the broadcasters billions of dollars in fees for the right to re-broadcast the network TV channels as part of paid cable packages. Aereo argues it doesn't need to pay those fees because the broadcast signals, which it's capturing and then retransmitting to its subscribers over the Internet are free.

Aereo CEO Chet Kanojia claims that the Aereo goal is “not to make money as much as it is to make an alternative… We started this business to force change.” He argues that Aereo and television networks should have the mission of “providing a good product for the consumer at a fair price.”

Kanojia is optimistic about clearing the regulatory hurdles and potential competitors. “It’s a very complicated technology and we have the expertise.”

Aereo supporters say if the company loses the case, it will likely shut down. If Aereo wins, broadcasters have threatened to yank their broadcast signals off the free airwaves and instead offer them only to paid subscribers.

Barry Diller, a key Aereo investor claims that as Aereo streams network TV to subscribers via servers in the cloud, a Supreme Court decision against Aereo “threatens to outlaw the entire cloud-computing industry.”
CBS chairman Les Moonves has downplayed the ruling’s possible effect on the cloud computing industry and is aggressive about a win in court.

“We obviously think Aereo is illegal. We think they’re basically taking our content, charging people for it and not paying us for our content,” Moonves said. “We think the court is going to side with us. Aereo did a very good job of confusing the issue, basically saying, well if you shut down Aereo you’re shutting down content on the cloud. You’re hurting new technology, which is absolutely not true. Look, we hope we win. We expect to win. If not, there are other things we can do to offset that.”