In a decision that could crimp consumers' hopes to cut the cord from their cable operators, the US Supreme Court said Aereo Inc, a video streaming service backed by media mogul Barry Diller, violated copyright law by using tiny antennas to broadcast TV content online to paying subscribers.
Wednesday's 6-3 decision is a victory for traditional network operators such as CBS Corp, NBC parent Comcast Corp, ABC parent Walt Disney Co and Twenty-First Century Fox Inc.
It may also make it harder for Internet rivals to provide alternative, a la carte programming at cut-rate prices.
"As convenient and as fun as it is for the consumer, an adverse decision would have completely changed the business model of Hollywood and of movies and TV," said Roger Entner, a telecommunications analyst at Recon Analytics LLC in Boston.
Wednesday's decision casts the Internet company's immediate future into doubt. Started in 2012 and backed by Diller's IAC/InterActiveCorp, Aereo typically costs about $8 to $12 a month, and lets users stream live broadcasts on mobile devices. Aereo does not pay the broadcasters.
For the networks, the victory protects the estimated $3 billion in so-called retransmission fees that broadcasters get from cable and satellite TV systems.
The decision could also raise concern for other technologies, such as cloud computing, that innovation would be stifled by making it too easy to deem use of certain content as theft. The majority in the Supreme Court decision played down the issue and indicated it would wait for a case that specifically addresses copyright law in other technologies.
Chet Kanojia, Aereo's chief executive, called the decision "a massive setback" for American consumers.
"We worked diligently to create a technology that complies with the law, but today's decision clearly states that how the technology works does not matter," he said in a statement. "We are disappointed in the outcome, but our work is not done."
Diller, in an emailed statement, said: "It's not a big (financial) loss for us, but I do believe blocking this technology is a big loss for consumers." Diller is worth about $2.5 billion, Forbes magazine said on Wednesday.
AS SEEN WITH CABLE TV
Writing for the majority, Justice Stephen Breyer said Aereo is "not simply an equipment provider," but rather bears an "overwhelming likeness" to cable TV companies whose ability to retransmit broadcasts was limited under a 1976 copyright law.
Any differences, he said, "concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service," which he said constituted a public performance of copyrighted content.
Breyer also agreed with the federal government that it was premature to suggest the decision could doom cloud-based services where TV shows, music and other content are stored on the Internet via servers from Google Inc, Microsoft Corp, DropBox Inc and Box Inc, among others.
Joining the majority were Chief Justice John Roberts, and Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.
Justice Antonin Scalia, joined by fellow conservative Justices Clarence Thomas and Samuel Alito, dissented, likening Aereo to a "copy shop that provides its patrons with a library card" that lets subscribers decide what content will be viewed.
"I share the Court's evident feeling that what Aereo is doing (or enabling to be done) to the Networks' copyrighted programming ought not to be allowed," Scalia wrote. He said Congress is equipped to fashion a solution better than "the crude 'looks-like-cable-TV' solution the Court invents."
Broadcasters' share prices rose in the minutes after the decision was announced, with CBS shares rising roughly 5 percent. The company in a statement called the decision "great news for content creators and their audiences."
The decision overturned an April 2013 ruling by the federal appeals court in New York, which had denied the broadcasters' request to shut down Aereo while litigation moves forward.
Some broadcasters had even threatened to cut off their free-to-air broadcast signals or create their own low-cost Internet feeds of the channel were Aereo to win.
The case is American Broadcasting Cos Inc et al, v Aereo Inc, US Supreme Court, No. 13-461.