Lady Justice

The world’s most ridiculous startup must finally face its own absurdity. The Supreme Court today ruled that Aereo’s service, which records over-the-air broadcasts made freely available to anyone with a compatible (and previously local) antenna and offers them for online streaming through its website and a number of mobile applications, is operating in violation of the Copyright Act of 1976.

Aereo might be able to continue offering the service, but it would need to receive licenses from the broadcasters and producers who sued it for copyright infringement, and it’s unclear how it would pay those fees while continuing to charge anything close to its nominal $8 per month fee. It’s also not clear that the companies with which Aereo has been fighting since its launch would be willing to give it the chance to license their content — why save the company you just managed to effectively kill?

Barry Diller, the chairman of IAC and an investor in Aereo, has said before that if the company couldn’t secure the Supreme Court’s blessing that it “probably would not be able to continue as a business.” (The company has not yet responded publicly to this morning’s announcement.) If Aereo suspends operations its customers will be left without the cheap television they’ve watched since its launch in 2012 and its attempts to defend its business will have been wasted.

Aereo might lament that outcome, but at least one person will have been proven right about the company after calling it “the world’s most ridiculous startup in July 2012.” Here’s former Pando contributor Farhad Manjoo on “the stupidest high-profile tech startup ever launched“:

Whatever happens, it’s hard to see the scenario where Aereo survives. At best, its legal battle will create a new regime in TV, one in which networks lose some of the money that cable providers offer them for “retransmission.” Such fees are a racket; your cable bill keeps creeping up in part because over-the-air networks keep demanding more money to send their purportedly free shows over your line. If Aereo’s legal case ends up slashing those fees, that would be a good outcome.

But as a standalone service, Aereo makes no sense. Indeed, anyone who truly wishes for more common sense in the media business should root for Aereo’s failure, not its victory. Let’s never forget that this is a firm that will charge people a sky-high price for shows that we can all get for free. By perpetuating the idea that free television should be a service that we pay for—that merely rebroadcasting free television should incur some kind of convenience fee for customers—Aereo is cementing an indefensible policy.

It might be time for Manjoo to saber some champagne.

In its decision the Supreme Court decided that Aereo was, for all intents and purposes, acting like a cable company. If you ignore the slight differences between the startup company and its legacy predecessors — using applications instead of television channels and antennas instead of cable boxes — you’re left with a company that took free broadcasts and charged people for the right to view them. That’s a cable company.

Today’s ruling could be seen as a step backwards for people who wish to watch television without a cable subscription, and in the near-term, that perception is probably accurate. But in the long-term, the decision to prevent TV-esque startups from pretending to be something besides a cable company simply by charging a lower fee and using different technologies might just be seen as a necessary step in creating a lasting change. The alternative would simply be indulging a faddish and ill-conceived company.

Update: Aereo CEO Chet Kanojia has responded to today’s ruling in an emailed statement:

Today’s decision by the United States Supreme Court is a massive setback for the American consumer. We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry.  It is troubling that the Court states in its decision that, ‘to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.’ (Majority, page 17) That begs the question: Are we moving towards a permission-based system for technology innovation?

Consumer access to free-to-air broadcast television is an essential part of our country’s fabric. Using an antenna to access free-to-air broadcast television is still meaningful for more than 60 million Americans across the United States.  And when new technology enables consumers to use a smarter, easier to use antenna, consumers and the marketplace win. Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle.

Justice Scalia’s dissent gets its right. He calls out the majority’s opinion as ‘built on the shakiest of foundations.’ (Dissent, page 7)  Justice Scalia goes on to say that ‘The Court vows that its ruling will not affect cloud-storage providers and cable television systems, see ante, at 16-17, but it cannot deliver on that promise given the imprecision of its results-driven rule.’ (Dissent, page 11)

We are disappointed in the outcome, but our work is not done.  We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.

It’s worth noting that Kanojia’s argument about free, over-the-air broadcasts being made available to everyone instead of those who can afford cable or satellite subscriptions is spot-on in principle — the problem is that Aereo isn’t making it easier to utilize these broadcasts without charging for its own solution. The main difference between its service and the companies that Kanojia decries in his statement is the fact that Aereo charges less for its product. While that might have been a step in the right direction, the difference between “expensive” and “cheap” when compared against “free” is greater than he portrays in this statement.

[Image via BockoPix Flickr]