Two years later in Sony v. Universal Studios, the Supreme Court rejected the idea that video recordings constituted copyright infringement. By 1986, videocassettes had become the motion picture industry’s largest source of revenue.
Three decades later, the court is once again considering whether a new technology — one that relies on cloud computing to store programming — violates the Copyright Act. And as in decades past, there are parties on both sides warning of the huge economic consequences that could come from the court’s ruling.
On Tuesday, the court considers those arguments in ABC, Inc. v. Aereo, Inc.
CBS’ Barry Bagnato speaks with the stakeholders
Since 2012, the startup company Aereo has given consumers a new way to watch or record over-the-air broadcast television. Typically, a consumer must have an antenna to pick up broadcast signals or a subscription to cable or satellite services. Aereo, by contrast, assigns its users an individual, remote antenna to pick up a signal so they can watch a program over the Internet — or record a program to their remote DVR storage space and watch it later.
Broadcast companies, including CBS, have balked at this technology, arguing that Aereo’s service is more akin to a cable subscription than it is to a DVR service. “Aereo isn’t just in the business of providing hardware. They’re selling a service,” Neal Katyal, former U.S. Solicitor General and an adviser to major broadcasters in this case, told CBS News Radio.
By that logic, Aereo should have to pay the same fees that cable companies do to retransmit network shows. Cable and satellite companies must pay retransmission fees because under the Copyright Act, only the owner of copyrighted content has the right to air a “public performance” of the content in question.
Aereo, meanwhile, argues that it isn’t airing “public performances.” By assigning each subscriber a personal antenna each time he or she logs on, the company says it is enabling many private performances. The company is relying on the precedent set in the 2008 Cablevision case, in which a federal appeals court said that remote DVR storage systems don’t infringe on copyright protections.
By skirting retransmission fees, Aereo threatens to disrupt the way broadcast companies do business. The vast majority of TV consumers now get their programming from cable, satellite or fiber, making retransmission fees increasingly valuable. Citing research valuing those fees at $3.3 billion in 2013, PricewaterhouseCoopers concluded earlier this year that “gaining increasingly greater shares of the retransmission pie will be critical for TV Broadcast profitability going forward.”
Aereo’s business model could encourage cable companies to follow their lead, or at least give the cable companies more leverage in negotiations with content creators. Should that happen, broadcast executives have threatened to change their strategies completely. CBS CEO Leslie Moonves has said the company could compete directly with Aereo by streaming its own content online. Last year, Fox executive Chase Carey warned his network would pull shows like “The Simpsons” and “Glee” off the public airwaves all together and move its content to cable.
If broadcast companies move their content to cable or the Internet, network affiliates could take the biggest hit — they’d no longer have popular broadcast content to bookend local newscasts.