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Big US broadcasters vanquish upstart Aereo

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Broadcasters beat cloud service Aereo

The US Supreme Court rules that startup internet company Aereo has to pay broadcasters when it takes television programs from off air and allows subscribers to watch them on smartphones and other portable devices.

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Broadcast and cable TV in the US are not dead yet.

In a decision that could crimp consumers' hopes to cut the cord from their cable operators, the US Supreme Court said Aereo, 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.

The decision is a victory for traditional broadcasters such as CBS, Comcast's NBC, Disney's ABC, and Fox.

'Massive setback': Aero CEO and founder Chet Kanojia.

'Massive setback': Aero CEO and founder Chet Kanojia. Photo: Reuters

It may also make it harder for internet rivals to provide alternative, a la carte programming at cut-rate prices, and casts Aereo's own future into doubt.

"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 in Boston.

The decision may 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 Supreme Court majority played down that issue, saying it would wait for a case that specifically addressed such technologies.

Started in 2012 and backed by Diller's IAC/InterActiveCorp, Aereo typically costs about $US8 to $US12 a month, and lets users stream live broadcasts on mobile devices. Aereo does not pay the broadcasters. The service has operated in 11 US cities, and does not provide subscriber data.

Writing for the majority, 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 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, Microsoft, DropBox and Box, 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" and lets them decide what to view.

Scalia said he shared the majority's "evident feeling" that Aereo's activities "ought not to be allowed."

But he said the majority distorted copyright law, and should have let Congress fashion a solution better than "the crude 'looks-like-cable-TV' solution the Court invents."

For the networks, the victory protects the estimated $US3 billion in so-called retransmission fees that broadcasters get from cable and satellite TV systems. Some broadcasters had threatened to cut off their free signals or create their own low-cost internet feeds had Aereo won.

Chet Kanojia, Aereo's chief executive, called the decision "a massive setback" for American consumers, but stopped short of saying it means the end of the service.

"Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle," he said in a statement. "We are disappointed in the outcome, but our work is not done."

Reuters