Tomorrow, the U.S. Supreme Court will hear oral arguments in American Broadcast Company (ABC) v. Aereo, a case that could dramatically alter two major industries: broadcast television and the Internet.
Aereo is a streaming TV service that uses thousands of dime-size antennae to pick up broadcast signals, and then transmit those signals to its paying users. The secret sauce of Aereo's model lies in the antennae themselves: Each individual device is leased to a separate subscriber, a seemingly ingenious legal workaround that, Aereo argues, allows it to stream television to its users without paying a licensing fee to TV networks. (More on that later.)
This business model has, predictably, aroused the ire of broadcast companies, cable providers and even the U.S. Department of Justice and Copyright Office. However, despite such formidable foes, Aereo came out victorious in a previous suit in the 2nd U.S. Circuit Court of Appeals, in New York, when the court ruled that the company did not violate copyright law.
And now the case comes before the Supreme Court, where the verdict will either sink or swim the insurgent streaming TV service. (Aereo's CEO has stated that "there is no plan B" if the company loses.) While the court's decision isn't likely to come down hard in favor of either party, it is likely that the decision -- however nuanced -- will have a sizable impact on both television and cloud computing.
Salon spoke to New York University Law professor Jason Schultz, who specializes in intellectual property law and its intersection with new technologies, about the intricacies of the Aereo case, as well as its significance for the business of both television and the Internet. (Professor Schultz teaches the Technology Law and Policy Clinic at NYU; his class wrote an amicus brief on behalf of small broadcasters who are in favor of Aereo.)
This interview has been edited for length and clarity.
This is a complicated case, which doesn't seem immediately intuitive if you aren't familiar with the intricacies of copyright law. Could you explain a little bit about the background of the case?
In 1976, Congress rewrote the Copyright Act for the U.S. The last time it had been rewritten was 1909. In 1976, it was a world of television and radio and movie theaters and as part of that they started to look at what it means to publicly perform a copyrighted work. So, in 1976, Congress was like, “OK, all these broadcasters who broadcast over the air, those are people who have to pay copyrighters. But private citizens who listen, watch or read don’t.”
Then, right as they were struggling with this issue, cable companies really started to come around as businesses and they came up with a very clever business model. They said: “Ah-ha! If we were to basically broadcast something over the air, we would have to pay copyright [holders] all this money in licensing and royalties. But if we were simply a private citizen we could just put up our own antenna, receive our signal from a broadcaster, and not have to pay anything. What if we put up quote-unquote community antennas? We’ll put up one giant antenna on top of a hill and we’ll run cable — this is where the cable part of the cable company comes from — into every single home in the town and let them watch television through our cable service. We’ll charge them for the service, but we won’t have to pay the copyrighters anything because all we’re doing is putting up an antenna like any viewer would put up in their backyard.”
The Supreme Court looked at three cases where they were sued by the copyrighters for doing this. [The copyrighters] were saying, “No, no, no! You have to pay this anyway.” But the Supreme Court said, “No, actually they don’t, because that’s the dividing line between public and private.”
Congress then went and rewrote the Copyright Act in the mid-1970s, saying, “You’re right. Maybe we didn’t say it correctly [before] but now we’re saying it correctly -- that if you transmit or retransmit a signal from an antenna to the public, to a public group of people like a town, even if it’s through a cable or any other device, then you are a broadcaster and you must pay royalties.”
Well, fast-forward to today. After a bunch of rulings, this company Aereo comes up with a very clever business model. They said, “What if we use the Internet to set up a system where instead of putting an antenna in your own backyard and watching over the air broadcast, we put antennas all over the place where you can quote-unquote rent [the antennae]. Then we’re not broadcasting anything to any public individuals. But we have a thousand dime-size antennas because antennas can be super-, super-small, the size of a dime, and we put them on a rooftop in Brooklyn, and all you do is pay us $8 a month to quote-unquote rent one of those antennas. It doesn’t have to be a specific antenna at any given moment. It could be whatever antenna we assign to you whenever you decide you want to watch television.” So you don’t have to have an antenna. You don’t even have to have cable or satellite. You can just rent Aereo and when you want to watch television you tell the antenna what show to watch. And it has a DVR too. So it starts a DVR recording, and fits it into cloud storage, and then you can watch it whenever you want. So you can watch over-the-air television without an antenna or a cable box.
What are broadcasters and Aereo each arguing here?
Aereo's argument to why it is not a copyright problem, and why they don’t have to pay any licensing fees, is that it is a private audience member viewing television. They’re not a cable company. They’re not transmitting it to anybody. They’re just providing the equipment for the individual viewers to decide what they want to watch and they’re just using the Internet to do it. So that’s the Aereo argument.
Now, on the broadcaster’s side, they’re basically calling bullshit. They’re saying that is just the weirdest argument you can make because if you back up and look at this from 10,000 feet, you’re doing what the cable companies did in the 1970s. You are essentially allowing the public to watch television, and charging money for it instead of saying you're a cable and satellite provider and paying us.
It’s a distinction between what is a public broadcast, a public performance and a private viewing, or private performance. And this divide that we’ve had, historically, has been very easy to understand, because public performances were broadcasted on satellites or huge transmitters that flew through the air; or in a movie theater that fit 300 people in it. That’s very public and easy to get your head around. And private performances are things like in your own home or with a bunch of friends or in your car when you're listening to the radio or a tape that you have or a CD or whatever.
Now, with the Internet, these terms have gotten blurred. And what is public and what is private on the Internet is a very hard question to answer and usually very contextual -- and that’s why we’re at the Supreme Court. We’re at the Supreme Court because the broadcasters feel that this is public because the Internet is public, and Aereo feels that this is private because individual Internet users are assigning individual dime-size antennas to watch very specific TV programs. They just happen to be using the Internet to do it.
A lot of people have said that if Aereo loses, it could have a huge impact on cloud computing. What's the precedent being set if they lose?
It's hard to predict because even if they win or lose the Supreme Court still has to say why. And the question of why they win or why they lose will answer that question. But let me give you the "nightmare" scenarios on both sides. Because if it's a narrow ruling where it only affects Aereo and nobody else in the universe, then who cares? But the Supreme Court doesn't tend to take those cases. They take big cases that will affect lots and lots of people.
The nightmare scenario if Aereo loses is that the court will say that any device that transmits a show -- a television show, music, song, whatever -- from one computer to another is a public performance. No matter how limited it is, even if your system only involves one individual -- not even like a telephone call, which involves two individuals. Aereo involves one person and one person only. That person logs into Aereo, tells the antenna to record channel 5 and send me that television show to my device. It is a one-person activity. It can’t get more individual and private than that!
Now maybe someone else is watching the laptop with them or whatever. In most situations it might just be one individual telling the computer, "Send me the TV show." That is very much cloud computing. Cloud computing is using Dropbox or Google Docs or Amazon Cloud to store our music, our books, TV shows and anything else you watch in a very private way. How do you distinguish that from what Aereo is doing?
That’s a good question. Would this affect things like music players like Spotify or Pandora?
They get licenses. They’re paying. But it could affect even the idea that you go to a concert and you want to take a little video of your favorite song, they’re playing it onstage and make it a private video and you’re only going to show it to few friends. If you were to show a private video to a few friends that’s a classic private performance, but now that you store the video on YouTube, even if it’s a private account and you only let two or three friends see it. The ruling of the Supreme Court could make that illegal. You as an individual could be publicly performing that song from the concert because you stored it on a server and transmitted it to yourself and a few friends.
So that’s the main risk now, but who knows if the Supreme Court is going to go that far. There are some ways for the Supreme Court to try to look at the ruling without that concern. The concern is if Aereo loses, cloud computing loses because Aereo is essentially cloud computing for live television. For individual viewers to store programs and watch them later by essentially renting all the equipment.
This is interesting. So the nightmare scenario is that this could really affect Google Docs, Dropbox, Box …
Music locker, Amazon Cloud, anything where you store your stuff in the cloud. The distinction between the cloud and Aereo is very, very, very thin. And if the Supreme Court isn't careful and rules that Aereo loses, it could easily outlaw a lot of cloud computing. And that's a huge concern.
I was reading here they’re comparing this case to the Betamax decision with VCR’s being able to record TV shows to watch at a later date. And if Sony had lost then we might not have DVR.
Exactly. It’s got that kind of potential. Now, again, it depends on how broadly or narrowly the Supreme Court decides the issue. The VCR and DVR are consumer electronics that you buy and privately use in your home. When that case was decided, consumer electronics was a tiny industry. There weren’t a lot of consumer devices. VCRs and Mp3 players, a lot of those things hadn’t even been marketed yet.
This was a watershed case that opened up that whole industry. So if we think now about every personal electronic device that we could buy, that’s trillions of dollars. That came from decisions like the Betamax decision that says, "If people are using devices in the privacy of their own home, it is really their business. And even if they infringe copyrights sometimes, we can’t tell when they’re going to infringe copyrights and when they’re going to do things that are illegal." So as long as the devices are capable of doing both legal and illegal things, it’s OK to sell them. It’s only things that are absolutely only illegal that you can ban. That decision -- by allowing the private use of devices even with the potential to do illegal things -- has opened up a huge market for consumer welfare, innovation in the tech industry, etc.
[The Aereo case] is the same kind of case potentially, in that if you say that any Internet transmission of content is a public performance, then the copyright owners can control every single transmission of Internet content that included even potentially their works. So I really think this is the kind of case that if the court doesn’t get it right, will let copyright holders really limit innovation in any area that involves cloud computing or the transmission of any kind of copyrighted content.