Paul Glenchur, Senior Telecom-Cable Analyst
June 25, 2014
As we expected (Supreme Court Hears Aereo Case, April 22, 2014) , the Supreme Court ruled in favor of broadcasters in their challenge to Aereo, a service that retransmits broadcast signals to subscribers over the Internet. The broadcaster victory removes Aereo’s technological threat to rising retransmission consent revenues, a boost for the likes of CBS, NBC-Comcast, ABC-Disney, Twenty-First Century Fox, Gannett, Sinclair Broadcast, Media General, LIN Media, Tribune, Nexstar and others. The Court, in a 6-3 opinion authored by Justice Stephen Breyer, concluded Aereo’s online retransmissions of broadcast programming are substantially similar to the traditional cable television retransmissions for which Congress imposed copyright liability in the mid-1970s. Although Aereo uses individual antennas and user-dedicated copies for its retransmissions, these technical distinctions, the Court said, are insufficient to make a legally cognizable difference. The service is a “device or process” (key language in the relevant statute) to transmit public performances of copyrighted broadcast programs.
Cloud-based Services: Also, as we expected, the Court emphasized that its decision is not intended to compromise the availability of remote-storage DVRs and cloud-based media services. The Court’s majority acknowledged that it cannot fully insulate such services from legal uncertainty because such technologies were not squarely at issue in the Aereo case. But the Court noted that cloud services are not primarily purchased or used by subscribers for the transmission of content; they are used primarily for storage. Moreover, the Court noted, the use of cloud-based services could be protected by the fair use doctrine, the same legal basis for allowing traditional VCR time-shirting of copied programs. Accordingly, the opinion does create modest uncertainty for network DVRs and cloud-based media services, but, as anticipated, the Court’s majority is doing all it reasonably can to signal that such services will be distinguishable from Aereo, a bit of reassurance for cable operators (Cablevision, Comcast, Cox) that have deployed or will soon roll out premium network DVR services. This is also helpful to equipment vendors like Arris. Google, Amazon, Apple and others continue to build on their cloud-based offerings as well.
The Dissent: Justice Antonin Scalia, joined by Justices Clarence Thomas and Samuel Alito, dissented. They agreed that Aereo instinctively raises concerns about its legitimacy under copyright laws and policies, but they would have affirmed the lower court ruling in favor of Aereo because the text of the applicable copyright law, in their view, does not adequately address the unique circumstances of Aereo’s technology. According to the dissenters, this is a matter that Congress needs to address.
Further Mischief Ahead? Perhaps more importantly, the dissent raises the prospect that Aereo or similar services could dodge the impact of the majority’s ruling by making modifications that build greater distance between new technology-enable services and traditional pay television offerings. For example, Justice Scalia wrote, imposing a service mandate that prohibits the viewing of desired programming until it has completed its live broadcasting airingmight avoid the majority’s basic rationale — that Aereo is not sufficiently different from traditional cable television services that retransmit broadcast signals. Currently, Aereo allows its subscribers to watch copied programs on a virtually live basis by imposing a delay of just a few seconds from the over-the-air commencement of the desired program. Still, today’s ruling creates broad conceptual limits to services that attempt to establish a new “device or process” to communicate or transmit copyrighted material to the public regardless of when or where such content is consumed. Based on today’s decision, any system that attempts to work around the basic protections for broadcast transmissions is likely to have a difficult time surviving judicial challenges.
Congress is Off the Hook: Today’s Supreme Court decision in favor of broadcasters obviates the need for lawmakers to address the consequences of an adverse ruling. This reinforces the likelihood that Congress will ultimately pass a fairly clean extension of DBS distant signal authority before such authority expires at the end of this year. As we noted, however, Congress may nonetheless include language that moderates some of the adverse impact of recent FCC rules restricting the use of joint sales agreements. Broadcasters, without needing a fix to an adverse Aereo court decision, can continue their full and undiluted opposition to the efforts of pay television operators to push legislative reforms to existing retransmission consent laws.
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