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Why the Aereo Supreme Court case matters

Posted by Scott Christopher on Wed, Jun 25, 2014 @ 10:06 AM

Any day now* the Supreme Court will be ruling on the decision about the over-the-air/cloud DVR company Aereo. (Read my original assessment of Aereo that I wrote last fall here). At issue is whether Aereo should have to pay retransmission fees to the broadcasters for their content, like most cable companies, or if what they are supplying is simply a technological service for consumers, shifting the digital antenna from their roof to the cloud. We are watching this case because we believe a lot is at stake, for the advertising industry, cable consumers, and the television ecosystem in general. 

Here's a cliff's notes version of what is at stake and some articles to reference to get you up to speed.

When the case was argued before the Supreme Court back in April, Katie Couric (now with Yahoo news) interviewed the CEO of Aereo Chet Kanojia about the case, the company and what the fate of the company will be if they lose. Also CNN's Brian Stelter, formerly of the NY Times, filed this report and great recap of the company's short 2 year history, which he has been following since his time at the Times. He points out that Aereo's destiny was the courts from the beginning, because of the nature of its technology and the vast, wealthy industry it is taking on that has deep pockets to fight the legal battle. Also of note, Aereo is backed by billionaire Barry Diller, and Stelter interviews him for his reaction to the arguments.

Regarding profitable businesses that have a lot on the line, both MLB and NFL filed friends of the courts briefs on this case. This Washington Post article explains why - most of the contracts these sports leagues have with the broadcasters depend on those broadcasters making a lot of money via those retransmission fees.  Live sports is still the big money-maker in broadcast and cable - but a ruling in Aereo's favor could make low cost access available to consumers. The mega-merger between AT&T and DirecTV is even at stake!

Also, as a media buying company we know this will affect the advertising world. If the court rules in favor of Aereo, and they will continue to not pay the big networks retransmission fees for their content, then TV stations will have to make more from advertising. That means our rates for our clients will likely go up. If consumers want quality content & programming, that costs money which has to come from somewhere.  

Another arena that will be affected are cloud computing companies and other tech start-ups. Many of the questions the Justices asked revealed that they understood this and did not want to limit innovation in this emerging space. A ruling against Aereo, many view would be a ruling against innovation and in favor of big corporations and media conglomerates to continue to line their pockets. It goes without saying, then if big business wins that consumers lose, but that's on the line as well. If the court rules against this start-up, not only will half a million Aereo customers in 11 markets probably lose TV service (including, ahem... yours truly- full disclosure), but this will stifle innovation for other over-the-top TV services that would provide alternatives to pricey cable bundles. As this USA article notes, "'The Aereo decision is an important milestone on that time line [of innovation].' Doherty says, '[A ruling in favor] can change the market conditions in America tipping it towards the consumer and less toward big media and negotiators.'" 

Perhaps the greatest evidence that the Justices understand what is at stake is the delay in the decision. It was expected last week, but it seems they are saving this for last. They know this is nuanced case, with hard-to-nail-down issues, and they know this could have broad reaching effects on many industries as well as set an important precedent. As this Philadelphia Inquirer article notes: "'These are not easy decisions," Neil Begley, the media and entertainment analyst with Moody's Investor Service, said Monday. "There is enormous potential precedent here.'" I'm staying tuned - should be any day now!

*UPDATE: 12:05PM June 25 - The decision came down earlier today against Aereo. Read the recap from Broadcasting and Cable here. Although I'm disappointed as a customer, I think overall the Court got it right. To redistribute the broadcasters signal, make money off of their content, and not pay the broadcasters for it is illegal. They also made sure their ruling was narrow enough to not impact cloud computing and other tech companies. Also, Aereo served their purpose by inventing a technology more in line with what customers want (streaming TV on any device, unbundled), paving the way for other innovators (and cable companies if they are smart) to meet that demand.

Topics: aereo, media buying company Atlanta, good media ideas, cloud computing

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