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Aereo case may not be a Supreme Court slam dunk for broadcasters

May 21, 2014 by Scott Bomboy


The controversy isn’t dying down over potential landmark Supreme Court case about television, the Internet and copyright issues, as the highly publicized Aereo case heads towards a likely June decision. And at least one media expert thinks Aereo has a chance of winning.

713px-AntenasAmerican Broadcasting Companies, Inc. vs. Aereo, Inc. isn’t the most far-reaching merit case decision that could come from a Court that already has handed down rulings on public prayer, affirmative action and campaign finance, and will soon issue rulings that affect Obamacare and cellphone searches.

The case involves a copyright battle between Aereo, a tech TV startup, and the major television networks that could affect the future of broadcast television and cloud computing.

Aereo provides a paid service used by people with computers, and it allows customers to watch broadcast TV programs on a computer that are also available for free over the airwaves - without compensation to the broadcasters.

Some TV networks have hinted they will consider pulling their free broadcast signals if they lose the case, or greatly reduce the amount of programming offered over the free airwaves.

A few months ago, Aereo was seen as a big underdog in court, but now it might have at least a puncher’s chance, says one media analyst.

Neil Begley, senior vice president of corporate finance at Moody's Investors, said in a recent  interview some experts believe the Aereo case was a “toss up” at this point.

“When you take these nuanced [Supreme Court] arguments and layer them over outdated copyright laws that do not adequately account for evolving technologies, it could result in a losing outcome for the broadcasters,” he said in a Bloomberg radio interview. “So there are a lot of people who believe it is a toss-up at this point.”

Moody's said on May 5 that an Aereo victory "is unlikely, but [it] can't rule out the possibility" because "either Aereo or others could develop a broadcast model that circumvents copyright agreements."

In a plot twist, Aereo’s lawyers have argued that a ruling against it would also set a precedent that could shut down the huge cloud computing industry, where digital content is stored remotely and retrieved by computer users. That led companies like Mozilla to jump into the battle, saying a broad decision against Aereo “would endanger the thriving cloud computing industry just as it starts to mature.”

Last week, CBS chairman Les Moonves repeated his harsh rhetoric about Aereo, downplayed the ruling's possible effect on the cloud computing industry, and didn't totally discount a loss 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 on Bloomberg TV. “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.”

Aereo’s biggest financial backer, media mogul Barry Diller, had a response to CNN about the company’s critics last month after Supreme Court arguments were held in Washington, when he said media coverage about Aereo was “dopey.”

"Rather than saying it's a gimmick, what we did is constructed a technological advance within law as we understood it," Diller told CNN. He also put Aereo’s odds of success at 50 percent in the case.

And then this Monday, media critic Michael Wolff and Aereo CEO Chet Kanojia got in a tense discussion about the case in a public session at Internet Week New York.

"Your business is based on making money off of that programming that you don't own, you haven't paid for.... You have just found something of a work-around,” Wolff told Kanojia.

Kanojia told Wolff that Aereo’s business model “should be totally legal. This shouldn't be a controversy."

The TV networks are deeply upset that Aereo could set a precedent that will erode their revenue models, which depend on retransmission fees and contracts with sports organizations.

Paul Clement, the noted attorney representing the TV networks, tried to shoot down the cloud computing argument in front of the Justices in April, only to be on the receiving end of more questions from the Court.

“Are we somehow catching other things that would really change life and shouldn’t?” asked Justice Stephen Breyer, who said the prospect of harming the cloud computing industry made him nervous.

David Frederick, the noted attorney representing Aereo, argued that the “cloud computing industry is freaked out about the case” because a decision against Aereo would bring copyright law into play any time music or an image is retrieved from the cloud.

Chief Justice John Roberts did pin down Frederick on Aereo’s business model as a convenient way around paying fees to broadcasters.

“Your technological model,” Roberts told Frederick, “is based solely on circumventing legal prohibitions that you don’t want to comply with.”

However, observers in the courtroom seemed aware that the Justices were focusing on the cloud computing issue.

For now, the Justices will discuss the case privately and a ruling is expected in late June.

Scott Bomboy is the editor in chief of the National Constitution Center.

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