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Supreme Court Halts Aereo's Flight

After years of legal wrangling, the US Supreme Court has finally dealt what may be the fatal blow to video streaming company Aereo.

In a much anticipated 6-3 decision, the high court announced that Aereo Inc. 's system of using dime-sized antennas to capture over-the-air (OTA) TV signals and then deliver them to consumers as individual online streams is equivalent to creating a public performance. As such, Aereo must pay retransmission fees to broadcasters, just like any cable TV, satellite TV, or telco TV provider. (See CBS Financials Fuel Aereo Angst.)

From the official Syllabus or summary of the decision in the case of American Broadcasting Cos., Inc., Et Al. v. Aereo, Inc., FKA Bamboom Labs, Inc:

    Aereo claims that because it transmits from user-specific copies, using individually-assigned antennas, and because each transmission is available to only one subscriber, it does not transmit a performance 'to the public.' Viewed in terms of Congress' regulatory objectives, these behind-the-scenes technological differences do not distinguish Aereo's system from cable systems, which do perform publicly. Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.

The Supreme Court's decision, which reversed a ruling by the United States Court of Appeals for the Second Circuit, was written by Justice Stephen Breyer. Justice Antonin Scalia led the dissent, joined by Justice Clarence Thomas and Justice Samuel Alito.

Because Aereo has based its entire business model on combining free OTA content with web video in an inexpensive online subscription service, the company now has no way to generate revenue without a significant shift in strategy. Presumably there is still value in Aereo's technical process for capturing video over the air and efficiently transcoding it for delivery over the web. But whether that will translate into a successful business in the future is unclear.

Meanwhile, the ruling is a major win for broadcasters. While OTA networks have historically made the bulk of their money from advertising, their income from licensing fees has grown substantially as a share of total revenue in recent years. If Aereo had prevailed in court, there would have been nothing to prevent other service providers from following a similar model and bypassing retransmission fees to deliver OTA content.

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— Mari Silbey, special to Light Reading

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