Who Cares About Aereo

May 19, 2014 written by:

This June, the Supreme Court may change copyright law. While we’re being a tad dramatic, one case, American Broadcasting Corporation v. Aereo, is being followed with both great anticipation and concern. The backstory: Aereo is a tech company that provides each of its users a tiny remote antenna, which are housed on Aereo’s data centers and connected to Aereo’s remote DVRs located in the same data centers – cloud based DVRs. According to Aereo, its technology allows a user to make a recording of a live broadcast of a network television program by controlling both the antenna and the remote DVR. This recording can then be watched on any device immediately (with a few seconds delay) or saved for later viewing. Aereo’s subscription fees are ostensibly rental fees for the antennas and the DVRs.

 

The networks sued Aereo alleging that it violated the Copyright Act of 1976, which prohibits public performance of a copyrighted work. Aereo argued that it was not infringing their copyright because its technology was similar to a more efficient rabbit ear antenna, allowing a viewer to legally see network television shows for free. Since it only charges its users for its antenna, Aero maintained, it was not broadcasting a public performance of a copyrighted work, but only allowing its users to privately view these programs. And, Aereo argued, the original ads were kept in their
transmissions as well.

 

Typically, in order to show network television programs by a provider other than network stations, a provider would obtain a license from the networks. Thus, for example, cable companies can broadcast network television programming because they pay re-transmission fees to the networks. Aereo, the networks argued, was using fancy technology to bypass copyright law. While there are complex copyright issues in play, one of the questions the Supreme Court asked seemed deceptively simple: is Aereo an antenna or a cable company?  Oral arguments demonstrated that the answer is far more complicated.

 

The other, potentially bigger problem is how the Supreme Court’s ruling will affect cloud computing. Cloud computing has emerged as a big unknown here since Aereo’s system uses the cloud to transmit network programming to its users. After all, cloud computing companies aggregate and store data on a remote server, obviating the need for discrete storage hardware. It would be difficult for these companies to determine what content is copyright protected and what is not, a determination that may become unreasonably burdensome for these companies. If the Supreme Court found that Aereo’s system violates copyright law, then the fear is that cloud computing may be subject to copyright laws as well, potentially freezing all that big data in the cloud until copyrights are negotiated for each stream. Not a comforting prospect to cloud computing giants. Of course, it has been argued that cloud computing, at least with respect to music storage such as iTunes, would not be affected if Aereo was found to infringe copyrights – Apple and Amazon obtain appropriate licenses to host copyrighted works.  Moreover, it has also been argued that, since cloud computing are passive storage “devices” and Aereo acts as an active provider of content, cloud computing should remain unscathed.

 

In addition to the networks, who is concerned?

 

Obviously, cable broadcasters. The big players now pay networks re-transmission fees. Aereo’s model, if found legal, may make viewers think twice about subscribing to cable for network television shows when they can view these same shows ostensibly at a lesser cost and perhaps more viewing flexibility, through Aereo.

 

Advertisers – advertising dollars are typically spent after a thorough market analysis, including ratings that determine the number of viewers (and potential customers) who see certain network shows. If more viewers start to obtain network content through Aereo, rather than cable or network television, not only do the way ratings are obtained have to change, but advertisers would start seriously reconsidering how their dollars are being spent.

 

Consumers – currently, a younger demographic increasingly obtains content through set top boxes, online and Aereo. If Aereo’s technology is found infringing, consumers may have less choice in obtaining content. And, one can argue, traditional modes of obtaining content may not remain the first choice for consumers.

 

Cloud computing – big names in cloud computing are closely watching the case because a Supreme Court ruling that finds Aereo’s business model infringing might impact their business. After all, cloud computing companies aggregate and store data on a remote server, obviating the need for discrete storage hardware. It would be difficult for these companies to determine what content is copyright protected and what is not, a determination that may become unreasonably burdensome for these companies.

 

While a decision isn’t expected until June, it is safe to say that major players, and new entrants, are gearing up to navigate a changing landscape in how content is provided.

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