The U.S. Supreme Court ruled Wednesday that online TV service Aereo, backed by media mogul Barry Diller, violates copyright law by using tiny antennas to provide subscribers with broadcast network content via the Internet.
On a 6-3 vote, the court handed a victory to the four major TV broadcasters and cast Aereo’s immediate future into doubt.
“Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false,” National Association of Broadcasters President and CEO Gordon Smith said in a statement. “Today’s decision sends an unmistakable message that businesses built on the theft of copyrighted material will not be tolerated.”
In an interview on CNBC’s “Squawk on the Street,” former chairman of the Federal Communications Commission, Reed Hundt, said that the decision was “a really, really big win for broadcasters.”
“Aereo has very little chance surviving in the business and Barry Diller got his hands caught in the regulatory cookie jar,” he said.
However, David Bank, a broadcasting and media analyst at RBC Capital Markets, said the decision is painful for Aereo, but fortunes “haven’t been really lost today.”
“At the end of the day, we’d always been of the view that regardless of how the Aereo decision went for particularly the big cap companies like a CBS or a Fox, it wasn’t going to be a huge impact because they convert cable channels or had other remedies,” he said.
The court said the service constitutes a public performance of copyrighted content. For the networks, the victory protects the estimated $3 billion in so-called re-transmission fees that broadcasters get from cable and satellite TV systems.
Justice Stephen Breyer said in the majority opinion that the ruling should not spell trouble for cloud-based content services in which personal files—including TV shows and music—are stored remotely on the Internet on servers from companies such as Google, Microsoft, DropBox and Box.
Aereo had argued that cloud services use the Internet in the same way as it does to store and transfer copyrighted content.
The case came before the court when Walt Disney‘s ABC network, CBS,Comcast‘s NBCUniversal and Twenty-First Century Fox appealed a decision by the 2nd U.S. Circuit Court of Appeals in April 2013 that denied their request to shut Aereo down while litigation moves forward.
Aereo, backed by Diller’s IAC/InterActiveCorp, charges users a low monthly fee to watch live or recorded broadcast TV channels on computers or mobile devices. Aereo does not pay the broadcasters.
Last week, Aereo founder and CEO Chet Kanojia told CNBC his company charges for technology not TV content, and therefore is not infringing on copyrights.
Any customer can buy an antenna and DVR for their home and watch and record their local channels, said Kanojia—adding that his company is doing the same thing but with more modern technology.
The networks including CNBC’s parent NBC as well as ABC, CBS, and Fox said Aereo steals free, over-the-air programming and then transmits that content to its online customers, without paying retransmission fees to the broadcasters.
Image credit: CC by Mark Fischer