Aereo Chief Says Court Ruling is ‘Chilling’

MULTIPLE CITIES—Aereo’s chief executive took the U.S. Supreme Court to task after it ruled against the streaming startup.

Aereo CEO and founder Chet Kanojia called the decision “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,” he said in a statement. “This sends a chilling message to the technology industry. 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.”

Kanojia and Aereo’s architects insisted the company rented individual antennas to subscribers, who paid $8 to $12 to stream broadcast channels on a few-second delay through a cloud server to Internet-connected devices. Broadcast engineers said the tiny individual antennas, packed into large arrays, could not work as claimed and instead would act as one large antenna, making Aereo the same as an other pay TV operator and therefore subject to retransmission fees.

Former Fox technology executive Andy Setos was pointed in his opinion of Aereo’s technology claims.

“Now that that distraction is over with Mr. Kanojia, still believing that his myriad small antennae work independently of each other as opposed to a single antenna such as one a cable operator would use to perform a broadcaster’s copyrighted works to the public, he should turn his attention to reaping billions from his invention which overturns the Standard Model, the underpinning of the scientific community’s way of characterizing the physical universe that we all exist in,” Setos said, referring to the Standard Model of particle physics. (Also see Pete Putman’s “Deconstructing Aereo’s Patent” for details on the technology.)

The case came before the high court after two federal courts denied injunctions against Aereo, while two others granted them against Aereo and a similar service. The resulting circuit split gave broadcasters a chance to appeal the denials. The high court was expected by many observers to limit their ruling to the injunction, but it instead addressed the full question of copyright violation:

“Whether a company ‘publicly performs’ a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.”

Retransmission consent law applies to public, versus private, performances.

The court found that “Aereo performs. It does not merely supply equipment that allows others to do so.”

The justices voted 6-3 to overturn the lower court. Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

Barry Diller, a former Fox executive and current chairman and CEO of IAC, told CNBC that the debate about Aereo was “over now” and “a bit loss to consumers,” according to Time. Diller was one of the lead investors in the company, which has raised a total of $97 million.

Reactions to the ruling were mixed and generally predictable. Gordon Smith, president and CEO of the National Association of Broadcasters, said it sent the message that “businesses built on the theft of copyrighted material will not be tolerated.”

Consumer Electronics Association President and CEO Gary Shapiro said the ruling against Aereo was a disappointment, but at least it left the Sony Betamax principles of fair use intact.

Wells Fargo’s Marci Ryvicker also noted that the ruling narrowly targeted Aereo.

“The opinion makes it clear that this ruling will not endanger other technologies,” she wrote in an analyst note. “Recall that during oral arguments, several justices expressed concern about the potential implications of their ruling against Aereo to other technologies, namely cloud computing. The opinion seems to be very specific to Aereo and therefore should have no impact on the CVC RS-DVR case.”

While the case technically has been remanded to the lower court, Ryvicker said the ruling “does not appear to leave Aereo much opportunity to maneuver. In our [June 11 update], we discussed the possibility of Aereo going back to the trial courts to argue the case based on its merits. However given that the Supreme Court’s opinion appears to be sweeping and definitive that Aereo is illegal, which we think takes Aereo out of operation as we know it.”

She further said the ruling left retransmission consent law “safe… and we anticipate broadcast networks and affiliates conducting business as usual.”