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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.
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