Broadcast TV executives breathed a sigh of relief Wednesday after the Supreme Court ruled Barry Diller’s Aereo violated the networks’ copyrights on their programming.
The epic legal battle promised to upend traditional broadcast TV if Aereo, the upstart digital antenna and cloud-based DVR service, prevailed.
Aereo provides subscribers broadcast TV service streamed to their computers for a monthly fee of about $8 — none of which goes to the networks.
The 2-year-old company, together with other streaming neophytes such as Netflix and Hulu, can satisfy most of a TV viewers needs for a small percentage of a typical cable bill.
But broadcasters, faced with losing a chunk of the $4 billion a year in retrans fees if Aereo won and took its regional service nationwide, said they would go as far as to give up their broadcast licenses and convert to cable networks to prevent Aereo from grabbing their over-the-air signals and to preserve the integrity of their financial structure.
The 6-3 high court ruling, written by Justice Stephen Breyer, reversed two lower court decisions that sided with the Diller-backed business against big media companies, including CBS, Disney, 21st Century Fox and Comcast’s NBCUniversal.
Diller has said that if he lost at the Supreme Court he would close up shop. The high court ordered the trial court to reconsider the case based on the new interpretation of the law.
Most likely, the trial court judge will issue an order barring Aereo from operating.
“It’s not a big (financial) loss for us, but I do believe blocking this technology is a big loss for consumers, and beyond that I only salute [CEO] Chet Kanojia and his band of Aereo’lers for fighting the good fight,” Diller, chairman of IAC/InterActiveCorp, said in a statement.
The decision is expected to leave up to 500,000 Aereo subscribers in the New York City area in limbo. There are between 2 million and 5 million subscribers nationwide.
The court found that Aereo’s gimmick-driven means of retransmitting over-the-air broadcasts — using thousands of dime-sized antennas, each leased to a specific subscriber, much like the household rabbit ears that used to dot every TV top — was too similar to cable companies.
And because cable companies “perform publicly,” so does Aereo, which means it’s also liable for paying the networks so-called retransmission fees.
Broadcasters immediately got a boost from the decision, sending shares of CBS up more than 6 percent in Wednesday trading. 21st Century Fox, the owner of Fox, and Disney, which controls ABC, rose about 2 percent. And Comcast, which owns NBC, gained 1 percent.
The broadcasters wasted no time in declaring their decisive victory a win for both business and consumers.
Justice Antonin Scalia, in a sharply worded dissent, said Aereo didn’t violate copyright laws because consumers chose the programs they viewed, not the company.