Today, the Supreme Court has reversed the decision of the Second Circuit in ABC vs. Aereo. Translation? Aereo lost big. It's now illegal. And that sucks.
Essentially what the Supreme Court determined today is that Aereo, the innovative cloud-based antenna and DVR, violates copyright law. It's basically a cable company, says the ruling, instead of just an innocent provider of remote antennae. And while the ruling doesn't apply to future technologies—it's very specifically Aereo that's getting kicked here—it's a crushing blow to one of the most exciting technologies we have.
Let's talk this through.
What Is Aereo?
If you're not familiar with Aereo, you should be. It's essentially a digital TV antenna and cloud DVR, except one that doesn't require you to set up any goofy hardware in your living room. Instead, Aereo assigns you your own tiny antenna on one of its tiny-antenna farms, and streams what comes in over the cloud through your Roku, Apple TV, Chromecast, or browser. Here is a diagram!
You're the one with the dog.
As you might suspect, television networks do not like this arrangement one bit! Yes, broadcasts from the big networks like ABC (the ones suing), CBS, NBC, and Fox are technically free if you bother to set up rabbit ears in your home. But if you, like the vast majority of Americans, get your Big Four action through your cable, satellite, or fiber provider, part of your monthly subscription goes into those network coffers. Aereo circumvents this arrangement, keeping the eight dollar subscription fee for itself.
If you're thinking that Aereo's scheme seems clever but not necessarily wrong, legally speaking, lower courts to this point have agreed with you. The Supreme Court, however, does not.
What's the Decision Say?
Here's a link to the full decision, which you can also see in full below. Basically, the Court has ruled that while Aereo may present itself as an innocent provider of equipment, it is in fact a cable company in practice. Specifically, it's "public performance," which means that the broadcasts are intended for a large audience, and therefore subject to the same rules as cable and satellite companies. In other words, they have to pay for the privilege.
The ruling comes as at least a small surprise; Aereo certainly follows the letter of the law regarding retransmissions, even though it's clearly been skirting the spirit. And it's hard to wrap one's head fully around the idea of broadcasts that take place only in one's home as being public transmissions.
Here's the key passage from the decision, though, and the distinction that seals Aereo's fate:
Because Aereo's activities are substantially similar to those of the CATV companies that Congress amended the [Copyright] Act to reach, Aereo is not simply an equipment prvoider. Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, virtually as they are being broadcast. Aereo uses its own equipment, housed in a centralized warehouse, outside of its users' homes. By means of its technology, Aereo's system "receives programs that have been released to the public and carr[ies] them by private channels to additional viewers."
In other words, if it looks like a cable provider and quacks like a cable provider, it's a cable provider. The specific technology that's being used is immaterial if the end result is the same.
Justice Scalia offered a lively dissent, effectively calling the Court's reasoning not just bull, but problematic bull:
... Aereo does not "perform" at all. The Court manages to reach the oppostie conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard ("looks-like-cable-TV") that will sow confusion for years to come.
It's worth noting that not even Alito thinks Aereo should be strictly legal, but he does recognize that the grounds on which this case was decided are at best shaky and at worst absurd. It's a precedent that will make the future of streaming content both stunted and confusing.
And that, beyond present and would-have-been future Aereo subscribers being pretty bummed out, is the biggest concern about today's ruling. While the decision doesn't prevent future technologies from developing, it does set a precedent that's going to be very hard for future cord-cutting efforts to get around. The more it resembles cable TV, the more likely it is to get shut down. Which sets us up for future solutions that are by definition inferior, regardless of whether they are technically legal or not.
Not that it matters at this point, but the vote was 6-3, with Scalia, Alito, and Thomas dissenting.
What Does It Mean?
Basically, Aereo in its current form is done. Finished. It doesn't have anywhere else to turn.
That's not to say, though, that the company couldn't survive by cutting deals with networks, paying them for the right to rebroadcast their content to its customers. It's not clear, though, if the economics of that would work out, either for Aereo or for you. At a certain point, you might as well just pay for television on your teevee.
More troubling, too, is that this provides a strong disincentive for other companies down the road who might otherwise try to disrupt the future of television.
We're still waiting to hear Aereo's response. In the meantime, cord cutters, it might be time to start making plans to reconnect.
Update: Aereo CEO Chet Kanojia has finally issued a response. Emphasis added below; it seems as though they're not going to close up shop, but it's hard to see what their alternatives are at this point:
"Today's decision by the United States Supreme Court is a massive setback for the American consumer. We've said all along that we worked diligently to create a technology that complies with the law, but today's decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry. It is troubling that the Court states in its decision that, 'to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.' (Majority, page 17) That begs the question: Are we moving towards a permission-based system for technology innovation?
"Consumer access to free-to-air broadcast television is an essential part of our country's fabric. Using an antenna to access free-to-air broadcast television is still meaningful for more than 60 million Americans across the United States. And when new technology enables consumers to use a smarter, easier to use antenna, consumers and the marketplace win. Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle."
"Justice Scalia's dissent gets its right. He calls out the majority's opinion as 'built on the shakiest of foundations.' (Dissent, page 7) Justice Scalia goes on to say that 'The Court vows that its ruling will not affect cloud-storage providers and cable television systems, see ante, at 16-17, but it cannot deliver on that promise given the imprecision of its results-driven rule.' (Dissent, page 11)"
"We are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world."
Huge hat tip to the always great SCOTUSBlog.