MAGNA GLOBAL Flash POV: Aereo Case Goes to the Supreme Court
The Aereo case squarely positions the rights of content owners against clever technologists, who believe that the way they transmit content may redefine the limits of owners’ rights in the content. After different courts looking at Aereo and a similar model reached different conclusions on the legality of Aereo’s position, the Supreme Court has agreed to review one of the decisions ruling in favor of Aereo.
Having the Supreme Court rule on who is right in this battle should create more clarity in the market for content distribution. That will help drive long-term investment decisions for technology innovators, and for media providers including television and cable networks. If the Supreme Court rules against Aereo, and effectively shuts it down, we can expect largely the status quo to remain, with companies coming up with new methods of content distribution required to pay retransmission fees to content owners. It may also force owners of cloud-based technologies to obtain licenses to send copyrighted material via the Internet. A decision in favor of Aereo, however, will create major market disruption. Among other things:
+ Many companies can be expected to copy Aereo’s model to avoid retransmission fees, including major cable networks.
+ Television networks cannot be expected to continue investing in content at current levels if retransmission fees are eliminated. Absent a technological solution to block retransmission, this may threaten the entire public broadcast system concept.
+ Third parties currently generating billions of dollars in revenues from TV networks — like sports leagues — may shift to paid cable or other private network broadcast. This is already happening to some degree as more major sporting events have shifted to cable networks like ESPN, where rights fees can be recouped by increasing subscriber charges.
While these are some possible impacts of any Supreme Court decision in Aereo, the impact of the ruling will depend on how narrow or broad a decision is issued by the Court. For example, if the focus of a Supreme Court ruling is Aereo’s antennae system, that is not particularly new or innovative technology. The Court could say, for example, that this particular system constitutes a public performance and violates copyright, but leave the door open for new broadcast models or technologies to skirt the current copyright rules. Alternatively, Aereo’s use of cloud technology and the fact that individual consumers are the ones pulling content from the Aereo system could be the focus. If the Court were to find that cloud-based systems are a way for companies to make content available without such companies being classified as engaging in a public performance of content, that kind of ruling could have more far-reaching implications. And, of course, Congress could seek to enact legislation in response to any Supreme Court decision, that might further shift the landscape in the media and technology industries.
Bottom Line: From an agency/advertiser point of view, spending will ultimately move to whatever channels can deliver a client’s desired audience. If content and audience shift from publicly-available television to premium cable channels, for example, we can expect media dollars to follow. For now, there are a lot of unknowns, and any major industry shifts would take time and buy-in from a lot of different parties before it could be realized.
