Is Aereo the New Betamax? The Supreme Court Weighs the Future of TV

Today the Supreme Court will hear arguments in American Broadcasting Companies v. Aereo. It is a case which reportedly has entertainment industry executives wearing out their Xanax prescriptions, as they contemplate the destruction of the entire economic foundation of the television industry. The press keeps repeating statements like that, anyway.

The guts of the Aereo case, though, mostly involve arcane issues of the interpretation of copyright laws. Among the scholars and lawyers who've spent a lot of time on communications and copyright, Aero is lightly expected to lose. But it could go the other way.

What's wrong with Aereo?

What bothers broadcasters about Aereo is this: It lets its customers watch broadcast television over the internet without paying for cable. Broadcast television is free, of course, to anyone with an antenna. But under a federal law known as the Cable Act, the companies who retransmit those broadcast signals over cable have always been required to pay licensing fees to the broadcasters. The revenues from those fees are substantial, in the hundreds of millions to even billions of dollars.

The broadcasters sued Aereo because they fear that the service might tip the whole arrangement into the (subjective!) abyss of internet-delivered television, bypassing traditional cable altogether. After all, one reason Aereo is a much cheaper option than cable each month is precisely that it doesn't have to pay those statutory retransmission fees. Its costs boil down to the maintenance of its digital antennae and its internet connection. The rest it pulls freely from the air, as it were. Each subscriber to Aereo, can either watch channels live (with a brief delay) or record shows to watch later. A dime-sized antenna, located at a data center, is assigned to that customer specifically when they watch or record a show.

But the retransmission fees that traditional cable companies are stuck paying were created because the Copyright Act protects a copyright holder's right to control all "public performances" of a work. And that's the net that the broadcasters are trying to cast for Aereo, arguing that they're engaging in "public performances" of the television shows offered.

"Public performances," though, can be in the eye of the beholder. Those of you who were sentient during the Video Store Age may recall, for example, that at the beginning of each rental tape a warning would appear, specifying that the use of the video did not grant the right to a public performance. In the event that you were an infant or not alive then, you may consult the following YouTube video for reference:

When I was a kid at a Canadian day camp in the 1980s, I distinctly remember watching a lot of these rented videos on afternoons our teenage counselors were feeling lazy. (Nightmare on Elm Street 3 was one afternoon's particularly memorable viewing.) Whether those group viewing sessions were a public performance is a matter of interpretation. The Copyright Act defines public performance as follows:

To perform or display a work "publicly" means—

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

I am still not sure whether day camp constituted a "place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered."

But anyway: Under all its convolutions, Clause (2) is the reason cable companies have to pay retransmission fees. They do use a "device or process" to "transmit" a "performance" of the work "to the public," which "receive[s] it... in separate places." And yeah, cable companies are awfully clearly doing this.

The broadcasters argue that Aereo is doing the same thing, considering that it's offering a public-facing service that allows people to watch copyrighted television shows.

The Second Circuit disagreed, and ruled that Aereo may continue to use its particular devices and processes to transmit television to the public. The broadcasters are appealing that decision to the Supreme Court.

Aereo's excuse

Aereo's excuse is that it's not really a service for delivering television programs, but more a service that allows customers to rent antennas and recording equipment. Like a Blockbuster Video that has a big warehouse of VCRs in the back, sort of. They point out that their technology is designed so that when a viewer elects to watch a broadcast television show, that viewer is making and storing their own copy of the program. They may watch it then or later, but no one but that single viewer can access it.

That technology is a lot like the model described and approved in another hotly criticized Second Circuit decision, in a case called Cablevision. That one involved remote-storage DVRs, or RS-DVRs, which—not unlike Aereo—stored recordings of television on a remote hard drive before re-transmitting them to viewers.

The broadcasters who challenged Cablevision argued that the transmission was a "public performance" in the meaning of the Transmit Clause. The Second Circuit disagreed, delicately pointing out that "the transmit clause is not a model of clarity," and that

because the RS-DVR system, as designed, only makes transmissions to one subscriber using a copy made by that subscriber, we believe that the universe of people capable of receiving an RS-DVR transmission is the single subscriber whose self-made copy is used to create that transmission.

There are differences between the RS-DVR and Aereo—for example, that Cablevision had already paid transmission fees for the right to broadcast those shows on cable at all. Though the Supreme Court declined to hear the appeal in Cablevision, the broadcasters argue in their Aereo brief that the whole purpose of the RS-DVR system was to evade copyright laws. And courts usually don't like systems that circumvent copyright.

Still, there's a certain broader logic to the Second Circuit's argument that's hard to ignore. Because otherwise, if every transmission of a private copy to a single viewer is restricted by the copyright act, cloud computing could be in peril. If you store any copies of copyrighted media in remote storage like a cloud, you could arguably be "transmitting" them every time you access them there. So the act of using cloud storage could amount to a series of infringing transmissions every time you watch or listen to something, even if you own it.

And we know that the Supreme Court doesn't want that, because lo these many years ago, it approved a technology known as the "video tape recorder." In the dark ages B.N. (before Netflix), it heard a case called Sony v. Universal City Studios in which broadcasters made the argument—which now sounds insane—that recording television for your own use in your own home was copyright infringement.

It might be hard even for the relatively elderly to remember this now, but at the time the Betamax was thought of as a major threat to the entertainment industry. The suits worried that there was no use for such technology other than to record the copyrighted programs that were being offered on television.

So panicked television producers sued Sony on a theory that by selling Betamax machines, the company contributed to widespread infringement being committed by home users. The Supreme Court disagreed, holding that sure there was a lot of copying going on, but it constituted "fair use" under the copyright law. Justice Stevens wrote for the majority:

One may search the Copyright Act in vain for any sign that the elected representatives of the millions of people who watch television every day have made it unlawful to copy a program for later viewing at home, or have enacted a flat prohibition against the sale of machines that make such copying possible.

And as you know, because the people were consequently allowed to have video tape recorders, the entire television industry collapsed and now we don't have anything to watch anymore—or, wait, sorry, things were fine and home video became a substantial revenue stream for the entertainment industry and people were sufficiently frightened by those warnings at the beginnings of their rented videos to prevent any real catastrophe. And everyone calmed down.

But now, of course, the Lord God created the internet, and it's time to panic again.

It might be hard to feel particularly sorry for Aereo, here, if they do lose. They are not exactly free-culture types—they've found a way to charge people for the over-the-air signals they could theoretically receive for free, and it does feel like there's a deliberate if clever end-run around the structure of copyright law going on here. But the idea that the only way to deliver television is the way we've always done it is not the most productive way of thinking of it either.

After all: had the Supreme Court gone that route in 1984 kids like me in America might not have spent their whole childhoods wearing out a tape of The Ewok Adventure, and the world as we knew it would have been very different.