Aereo Legal Victory Means Disruption For More Than Broadcasters

An ongoing court battle may decide the fate of an upstart programming provider that could prove to be disruptive to broadcasters and even other services that provide ways for cable cutters to obtain the shows they want.

Aereo, the controversial startup that provides subscribers with access to local TV programming on tablets and smartphones, will live to fight another day after a decision handed down from the U.S. Court of Appeals for the Second Circuit in New York, affirming an earlier ruling blocking an injunction on the service.

The preliminary injunction was requested by the plaintiffs in the copyright infringement lawsuit brought against Aereo by local New York broadcasters and their corporate parents.

Aereo uses tiny antennas to rebroadcast over-the-air channels to each of its subscribers' mobile devices, even recording broadcasts using DVR-like functionality.

The problem for broadcasters, which include CBS Corporation, Comcast, News Corporation, PBS and the Walt Disney Company, is that none of Aereo's $8/month fee goes to the local TV stations. This is not the case when programming is carried over cable and satellite services, which have to pay the stations rebroadcast fees - fees the TV stations are increasingly depending on in a time when advertising revenue is on the decline thanks to competition from Internet ad services.

(See also To Truly Stop Aereo, TV Broadcasters Need To Innovate Like Hell.)

The initial injunction against Aereo was spiked in July 2012, and the broadcasters in the lawsuit vowed to appeal. Yesterday's ruling from the Second Circuit is the result of that appeal.

Because each customer controls one and only one antenna in Aereo's antenna farm, the judges felt that this did not constitute public performance of TV programming. And the DVR service seemed to be in line with an earlier ruling in a case against Cablevision that found DVRs to be perfectly fine.

For cable cutters, particularly those in the larger cities when antenna use is not always practical, services like Aereo will serve as an effective tool for customers seeking to bypass cable and satellite fees.

But Aereo could also be a source of disruption for the first generation of alternative broadcast sources, such as Hulu, Apple's iTunes, and Amazon.

For example, today, if I don't catch a network show over the air (which happens a lot on my schedule), and it's not available on Hulu Plus, I will have to buy that episode from Amazon. But if an Aereo-like service ever comes to my city, I can DVR that episode and hold it to watch it when I want… even without waiting the usual one day later for the episode to be available on one of these services.

If reliable, then now I would have to re-balance my entire cable cutting budget. Hulu Plus provides my primary network TV programming with Amazon as backup. An Aereo-like service would enable me to skip the Hulu Plus subscription fee and buy less programming from Amazon, thus saving me even more money, which is the whole point of this exercise.

That's just in my situation, of course, but I would imagine anyone that's taken an Apple-centric approach would find similar savings with buying less programming from iTunes.

Aereo and similar services won't completely replace Amazon/iTunes content, because there's content on basic cable channels I like to watch, and more esoteric channels like BBC America for Doctor Who. Not to mention that right now Aereo works best for tablets and other mobile devices, not the big-screen television.

Aereo itself is not done yet - the plaintiff broadcasters can still appeal the injunction decision up the legal ladder. Even if they don't, there's still the actual court case that must be to be held. But for now, it looks like the startup has found a way to successfully dodge copyright restrictions to keep its service going.

If ultimately successful, Aereo and similar services will prove to be disruptive to many forms of programming providers, not just broadcasters. Expect a lot of companies to be tuning in to this trial.

Image courtesy of Aereo.