Major TV broadcasters Friday petitioned the U.S. Supreme Court to shut down Aereo Inc., a streaming-video startup
backed by media mogul Barry Diller that they allege is stealing their content and putting their fundamental business
model at risk.
Broadcasters argued in the petition that Aereo, which streams local TV signals over the web for a fee without their
permission, violates their copyrights. The broadcasters, which include Walt Disney Co.'s ( DIS ) ABC, Comcast Corp.'s
(CMCSA, CMCSK) NBC, CBS Corp. (CBS, CBSA) and 21st Century Fox Inc. (FOX, FOXA, FOX.AU), are appealing a ruling by the
U.S. Second Circuit Court of Appeals, which denied their request for an injunction on Aereo earlier this year.
The circuit court's decision "is already transforming the industry and threatening the very fundamentals of broadcast
television," the broadcasters wrote in the petition.
An Aereo spokeswoman had no immediate comment. Aereo has denied that its technology infringes on content-owners'
If it takes up the case--which is far from certain--the Supreme Court could have a major hand in shaping how TV is
distributed over the Internet in coming years. A decision could have major implications for media companies at a time
when they're struggling to cater to growing consumer interest in online video.
If the high court instead chooses not to take the case--and leaves the matter to lower courts that thus far have sided
with Aereo--the streaming service could be in a stronger position as it continues its expansion in coming months.
"The longer Aereo is left unchecked, the more it can roll out its service," said David Wittenstein, head of the media
and information technology practice at law firm Dow Lohnes. "If Aereo gets a lot of customers in a lot of places, it
begins to be harder to shut it down."
For $8 per month, Aereo allows users to stream channels such as NBC, CBS, ABC and Fox to their mobile devices or
computers, giving them access to primetime shows, football games and local news. Aereo is available in seven markets
including New York, Boston and Atlanta and plans to reach 22 cities by the end of this year. The company will offer an
Android mobile app later this month.
Since it launched last year, Aereo has given fits to TV executives, who say it threatens to lure away TV viewers and
ad dollars and hurt their subscription revenues. Broadcasters have found a growing revenue stream in recent years from
charging pay-TV distributors for carriage of their channels. If Aereo's approach is found legal, cable and satellite
companies could adopt its design or push back on rising carriage fees, industry executives and analysts have said.
"Broadcasters rely on the revenues they receive from the cable and satellite companies that retransmit their signals
to recoup their substantial investments in programming, to fund new shows, and to develop new delivery platforms," the
The Supreme Court only takes up a small slice of the appeals filed. But the conflicting legal decisions in lower
courts over Aereo and a similar service, FilmOn X, could provide grounds for the apex court to intervene, legal experts
Broadcasters are on a legal losing streak with Aereo. In addition to the Second Circuit ruling against them, this week
a federal judge in Boston denied an injunction request by Hearst Corp.-owned station WCVB-TV, which argued that Aereo
puts its "entire business model at risk."
But broadcasters have had more luck fighting FilmOn X. A federal court in California, for example, ordered an
injunction on FilmOn X. The Ninth Circuit Court of Appeals is considering the company's appeal and could make a decision
any day, a lawyer for FilmOn X has said.
A definitive split between the Second and Ninth Circuits over streaming video technologies might encourage the Supreme
Court to take on the issue, legal experts have said.
Congress hasn't shown any signs it would intervene to address Aereo or other major issues roiling the media industry,
such as fight over rising carriage fees for TV networks, "so these issues end up falling to the courts" and the Federal
Communications Commission, said Paul Gallant, managing director at Guggenheim Securities.
The heart of the issue before the Supreme Court is whether Aereo infringes on broadcasters' sole rights under
copyright law to transmit their works to the public--so-called public performances.
Aereo's technology works by using racks of dime-sized antennas in its facilities to pick up over-the-air signals from
TV broadcasters. Subscribers are assigned individual antennas when they choose to stream a channel. Aereo stores the
programming on individual digital video recorders, converts the signal to a digital format and sends it over the Web
with a few seconds of delay. The company argues this approach simply amounts to a "private" performance--facilitating
any individual's legal right to receive over-the-air TV and record shows for their personal viewing.
Broadcasters have called Aereo's technology a gimmick. They argue that it doesn't matter that each user can only
access a unique copy and say Aereo is still transmitting their programming to members of the public. The petition said
the Second Circuit's support of Aereo's position was "nonsensical reasoning cannot be reconciled with the plain text of
the Copyright Act."
The tension over Aereo's service has spurred some TV network executives to muse about removing their programming from
over-the-air broadcasts, so Aereo can't pick up the signals, and instead distributing the content only to cable and
21st Century Fox and News Corp (NWS, NWSA, NWS.AU), owner of The Wall Street Journal and this newswire, were until
late June part of the same company.
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