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Chalk up another win for the innovators of media distribution. In a 2-1 decision, the Second Circuit Court of Appeals affirmed the lower court’s denial of a preliminary injunction against startup Aereo. While trial seems likely given broadcasters’ desire to stop the new business model entirely, Aereo is using the momentum to move forward. Rumors have already surfaced about potential expansion into a partnership with Dish Network, beginning in Denver. The legality of Aereo’s business model, based on the 2008 Cablevision Decision, remains undecided, but disruption of the current content distribution system seems likely.

Aereo, currently limited to the New York area, lets users watch and record local channels over the Internet by renting their own small antenna located at the Aereo facility. Each user has his own dedicated antenna and hard drive space. When the user records an over-the-air show, the system creates a new copy specifically for that user, potentially leading to thousands of copies of the same content. At the user’s command, Aereo relays the content through the Internet to the user’s computer.

Broadcasters argue that the system constitutes a public performance and therefore infringes their copyright. The television networks argue that the comparison to Cablevision or other cloud media distributors is misplaced. Specifically, other companies have paid licensing fees to rebroadcast the media content to their users, while Aereo obtains the content for free over the air.

Judge Denny Chin, who agreed with the broadcasters, went so far as to call Aereo’s tiny antennas a “sham,” a “Rube Goldberg-like contrivance,” and an attempt to ignore copyright law by taking advantage of a technical loophole.

While the ruling only pertains to the denial of the preliminary injunction, the courts went further to rule on several legal issues affecting the case. Considering that the question of “public performance” was answered strongly in favor of Aereo, commentators question how long broadcasters’ current retransmission-fee system can last. Most cable companies pass these retransmission fees onto their consumers. Aereo gives consumers and cable companies leverage by providing an alternative source of content.

If Aereo’s business model is upheld, it could provide greater legal certainty for startups and modern cloud media services. Unfortunately, the legality comes at the price of wasted resources—thousands of redundant copies and arbitrary technical systems. Until the laws catch up with the technology, such “contrivances” may be the best answer.

—Zachary Loney

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5 Responses to Aereo Looks to Expand After Recent Courtroom Win

  1. Jacob Marshall says:

    Legally, the Aereo case (and copycat services) will come down to the definition of a “performance” – when an Aereo user watches the copy of a show that they recorded, are they watching a private performance? Or does the underlying work itself act as a single “performance” which is being collectively watched by all users (in other words, is Aereo publicly performing an episode of Parks and Rec because many customers are watching that episode, albeit from individual copies of the work)?

    What will be very interesting is to see how broadcasters respond to Aereo. Already, instead of creating similar services that could compete with Aereo, broadcast executives are threatening to take their channels off the air in an attempt to get Congress to protect network interests. Cable companies are considering using Aereo-like technology to avoid retransmission fees. This could drastically change how we access TV and how much we pay for cable.

    Also, for the record – there are commercials with Aereo. You watch/record a broadcast of the show just like you would watch/DVR a broadcast from home. Whether you fast-forward through the commercials is up to you, the user.

  2. Caitlin Angelette says:

    They’re going to make up for it via internet access. Companies that provide cable and internet can and will respond via throttling and data usage limits

  3. Samantha says:

    Interesting post! It does seem like this should violate some form of copyright protection, especially since it could result in endless copies of works. Additionally, it will be interesting to observe the effect Aereo will have on other services like Hulu.

  4. Matt Ginther says:

    I’m not so sure I would be as quick as TH or Judge Chin to call Aereo’s service a sham. What Aereo is doing is no different than what many individuals already do, legally, just at scale.

    For example, instead of cable, at home I have a computer with a TV tuner attached to an antenna. This set up was not cheap: $600 for the computer, $100 for the tuner, $30 for the antenna, and $30/yr for the program data. But in return I have a programmable DVR for all channels I can get over the air. Further, I can stream these shows to any mobile device of mine (not that I do, but it’s a “feature”). And it’s all legal, at least according to SCOTUS.

    All Aereo does is provide this same set up for those who cannot or do not want to spend a significant amount of money on the necessary equipment or those who do not have the benefit of a strong TV signal. By charging a monthly fee instead they can make a profit while consumers reap the benefit of such an arrangement without the upfront costs. Would it be less of a “sham” if they just used one antenna and one computer to grab and distribute the shows, perhaps. But it’s as much of a sham as me having to go through above-described hassle to get my weekly fix of Tom and Norm on This Old House as opposed to just downloading it; but it’s the cost of following the rules, inane as they may be.

  5. TH says:

    Although Aereo’s business is almost certainly a sham, one has to question when television and broadcast rights will finally catch up to needs and demands of the 21st century. Given the recent surge in the use of cloud data sharing and storage, today there is very little difference between having one central broadcaster which can be picked up by multiple antennas for free and having one central hub that then permits users to access the same data and video online. While the fact that Aereo is essentially providing on-demand services, Aereo’s services do not seem materially different than a DVR. Neither have commercials (although that is, admittedly, under the process of changing) and both are on demand. Yes, Aereo is a sham. But maybe somebody is finally doing something right.

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