The Supreme Court's ruling against Aereo is a huge deal — not because it'll upend the TV industry, as some may have hoped, but because of the disruption it won't cause. What is (was?) Aereo, and what does the decision mean for the way we watch TV? Read on for more.
What is Aereo?
Based in New York City, Aereo was founded by chief executive Chet Kanojia in 2012. The company uses tiny antennas to grab TV signals out of the air. Those antennas feed the broadcast programming to a DVR, which then plays the programming back to you on your PC, tablet or phone on demand. The technology is cloud-based, meaning it works a lot like Dropbox or Google Drive: The TV shows are stored online, then served to you over the Internet. The service is available in roughly a dozen cities.
Why is it so controversial?
At issue was whether Aereo should have to pay money to TV broadcasters for their content. Right now, Aereo pays nothing — it gets the TV signals for free just as you or I might with our own televisions grabbing signals over public airwaves. But unlike us, Aereo gets to make money off of relaying those transmissions over the Web. Broadcasters challenged Aereo on that around the country, accusing it in court of stealing their work and infringing their copyright. They'd much prefer Aereo do what cable companies do, which is to pay "retransmission" fees for the right to carry broadcast content on cable.
What did the Supreme Court decide?
The court held in a 6-to-3 vote that Aereo wasn't simply providing equipment for consumers to watch their own taped shows later, as the company claimed. Instead, Aereo was found to have violated copyright law: Every time the company made a recording available to the consumer, it was engaging in a "public performance" that required paying for a content license.
Does this reading of the situation actually make sense?
Well, the majority of the justices believe Aereo is really no different from a cable company, which also pays for content and transmits broadcast signals to the public.
Three conservative justices disagreed. They argued in a dissent that Aereo doesn't transmit anything, publicly or privately. It's simply facilitating what customers would do on their own if they had the equipment.
Is Aereo dead?
Not immediately, but pretty much. Even top Aereo investor Barry Diller admits as much.
"We did try," he told CNBC, "but it's over now."
Aereo's whole business model depends on avoiding paying retransmission fees. Now that the Court has said that model is illegal, what can Aereo do? Maybe it can eke out a living selling people their own digital antenna kits, or something. But Aereo's future certainly doesn't seem very bright. Same goes for the various Aereo copycats that would've sprung up had the court ruled in the company's favor. Now, those companies will likely be deterred as a result of this ruling.
What's also unclear is how the decision could affect cloud computing companies. Aereo advocates warned the Court's justices that a broad ruling against Aereo would have chilling effects on the cloud industry, a growing part of the U.S. economy. In its opinion, however, the Court said it didn't expect its decision to have any bearing on future technologies.
It's one thing to assert that. But nobody, not even the Court, can predict whether that'll be the case.
What does this mean for the way I watch TV?
The justices' decision makes life a lot harder for cord-cutters. To continue watching broadcast TV, you'll need to grab a digital antenna and hook it up to your TV. Or, you'll have to pay your cable company for those channels.
A ruling the other way would have fundamentally changed the economics of TV. It likely would've altered the balance of power between content companies and distributors. It could have potentially drawn broadcasters into the net neutrality fight. It almost certainly would've affected advertising rates. It would have been fascinating to watch this future unfold — though it still may, just on a slower timeline without Aereo in its current state.
But overall, this decision means we keep the system we have. Broadcasters will still bring in much of their revenue from retransmission fees, cord-cutters will continue mixing and matching ad hoc combinations of Netflix, Hulu and other services, and the rest of us will keep on paying for our TV, one way or another.