Our preferred start-up narrative is the one about a couple of young, brilliant founders using their technical wizardry and disdain for authority to overturn stodgy industries and make billions. So it was a little jarring when the Supreme Court came along on Wednesday morning and decided that the well-funded, well-liked, two-year-old TV company Aereo runs an illegal service.
Aereo uses tiny antennae to stream TV shows over the Internet for a monthly fee of as little as eight dollars. TV companies, displeased that they weren’t getting paid for the programs that Aereo was picking up with those antennae, took their complaints to the Supreme Court; they argued that Aereo was violating a clause in the Copyright Act of 1976 that gives them the exclusive right to “perform the copyrighted work publicly.”
The Court’s decision hinged on how it interpreted the definition of the words “perform” and “public.” In the case of TV programming, “perform” has an idiosyncratic definition: it basically means to show images and make sounds audible. Aereo’s laywers said that Aereo itself wasn’t performing but was merely giving subscribers access to equipment that allowed subscribers to do the performing. The company’s argument also pointed out that when a subscriber chooses to watch a program, Aereo picks up the show using an antenna assigned only to that person—which constitutes a private viewing, they said, not a public one.
The Court disagreed, by a vote of six to three. (Justices Antonin Scalia, Clarence Thomas, and Samuel Alito dissented.) “Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes,” Justice Stephen Breyer wrote in the majority opinion; using this equipment to provide its service is enough to constitute a performance. Breyer also noted that Aereo delivers the same images and sounds to “a large number of people who are unrelated and unknown to each other”—in other words, the public.
The decision raises a broader question: Could the Court’s rationale be applied to companies other than Aereo? Aereo and its supporters had argued that a ruling against the start-up could endanger “cloud” storage services like Dropbox and Google Drive, which also provide equipment to let people handle digital files—including, in some cases, media. During oral arguments before the court in April, some of the Justices seemed to take that possibility into consideration.
In the Court’s decision, Breyer acknowledged the concerns about Internet storage services but wrote that the decision “does not determine whether different kinds of providers in different contexts also ‘perform.’” He even specified some areas the Court hadn’t covered—for instance, whether the clause is violated when someone “pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”
A lawyer for one of the major cloud-storage companies did not seem worried by the decision: “The Supreme Court is saying, basically, we’re limiting this case to exactly what Aereo is up to, and not trying to expand the case to cloud in general.” The lawyer, who didn’t want to be identified, noted that all the talk of the potential impact of a ruling on other start-ups seems to have influenced how the Court framed its decision. “In the Supreme Court’s argument, you can really hear the Justices struggling. They don’t want to mess up this burgeoning industry,” the lawyer said.
Of course, as always, the Court’s reasoning leaves room for interpretation. What kind of equipment can be said to create a performance? What kind of service can be said to serve the public? Scalia wrote in his dissenting opinion that “the Court vows that its ruling will not affect cloud-storage providers … but it cannot deliver on that promise” because of “the imprecision” of its reasoning. The most immediate question is what happens to Aereo and all its stamp-sized antennae. Before the ruling, Chet Kanojia, Aereo’s founder and C.E.O., said repeatedly that Aereo didn’t have a backup plan in mind. (Barry Diller, a big Aereo investor, said the same thing.) That might have been a ploy, a way of reminding the Justices how much was at stake; it’s possible Aereo could find a way to survive by offering a different service or by configuring its existing one differently.
On Wednesday morning, after the Court’s decision was announced, Aereo’s Web site looked the same as always. “Aereo is Expanding,” the home page crowed. When I visited the site, I was offered a free thirty-day trial. And Kanojia’s statement in response to the ruling was decidedly more vague than his earlier comments. “We are disappointed in the outcome, but our work is not done,” he said. “We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.” He didn’t elaborate on what those technologies, or their impact, might be.
This didn’t stop some of Aereo’s rivals from declaring the company dead. Alki David, the C.E.O. of a competing site called FilmOn, which has also battled with TV networks, used the decision as an opportunity to write, in a statement, about his mistrust of the courts and the failure, in his eyes, of public policies. He ended his message by writing, “My condolences to Barry Diller and Chet Kinojia—you fought a good fight. Call me if you need work.”
Above: Aereo C.E.O. Chet Kanojia departs the U.S. Supreme Court on Tuesday. Photograph by Jonathan Ernst/Reuters/Corbis.
Vauhini Vara
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