Aereo, SCOTUS, and the Cloud

aereo_scales-justice_content-2__largeThis week the Supreme Court of the United States (“SCOTUS”) heard oral argument in American Broadcasting Companies, Inc. v. Aereo, Inc. Aereo, a startup with nearly $100 million in funding, lets subscribers view live TV through a tiny antenna that can be controlled over the Internet and on mobile devices. The case is one about copyright infringment, and a key issue is whether Aereo is engaged in the “public performance” of copyrighted material. If Aereo loses, it is unlikely it has a tenable business because the licensing fees it would have to negotiate and pay to TV stations would be crippling. The larger concern is whether, if Aereo loses, it would any longer be permissible for cloud services, such as Amazon’s MP3 locker or Dropbox, to allow users to store copyrighted material and then reproduce/call the material from the provider’s servers to the user’s computer.

In light of the drama I looked back at my early thoughts about Aereo, which I shared over email in July 2012. My thoughts on the business case have evolved some since, but it was a fun exercise anyway. Here is the [slightly] edited email:

“I’ve been a proponent of TV anywhere for some time.  I . . . think a 3rd party, [rather than content] programmers or cable distributors, will play a vital role in making it a reality.  The problem with operators like Comcast being the source of TV anywhere is that they are still forced to ink deals with the programmers under the same expensive terms since their current, traditional deals would be put in jeopardy if Comcast tried something more innovative or consumer friendly. 
Between Aereo and Nimble, it is a tough call.  I worked with Chet [Kanojia] (CEO at Aereo) when he sold Navic to Microsoft. With his TV business expertise and [Barry] Diller’s backing, I think Aereo is well positioned. . . If the goal is to get consumers to cut off their cable service providers, consumers will need the combination of Hulu, Netflix, HBO Go and Aereo to fulfill all their viewing needs.  It seems that so far Aereo only gives viewers freely available networks (~20 channels).
[As for Nimble,] on one hand all it does is supplement current cable subscriber’s viewing experience by allowing them to have already-paid-for TV on the go, much like Sling Box.  On the other hand, I suspect Nimble is also trying to provide non-subscribers with access by using Nimble-registered cable accounts to rebroadcast channels to Nimble users.  This type of intermediary behavior was expressly prohibited by Sling Box’s terms of use because of copyright concerns.
Legally, if Nimble pursues the latter model, it stands the risk of being shut down.  Using music streaming as analogy, it would be in the netherworld of Grooveshark.  However, without the latter model, I don’t see much value in a service that merely acts as a portable DVR.  Cable providers can easily replicate that service.  Continuing the music analogy, Aereo is like Pandora because it seems technically to abide by copyright law by using a separate antenna for each user on its service and thereby, not publicly rebroadcasting channels.  The sacrifice is that it [provides] . . . a less customized product [or slate of channels than Nimble].  Finally, I would equate TV anywhere efforts by the likes of Comcast to Spotify because both services require making costly deals with resistant content providers.
Overall, I’m skeptical about Nimble.  But if it is legal and inexpensive, the opportunity to disrupt artificial geographic territories and customize content is the bigger opportunity.  Otherwise, I’d bet on Aereo as the natural evolution toward filling the web TV gap and disconnecting from cable operators.”
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