The Supreme Court on Wednesday ruled that Aereo was violating copyright law by streaming broadcast TV signals to subscribers without paying for them, striking a major blow to a startup that had threatened to upend the industry's lucrative business model.
The court ruled 6 to 3 against Aereo, reversing a federal appeals court decision and handing a victory to broadcasters who had sued the startup, claiming Aereo was stealing their programming.
Aereo is a 2-year-old company that uses tiny antennas to capture broadcast airwaves and stream those signals to users who pay about $8 a month for the service. It offers a handful of network TV offerings in about a dozen cities, and subscribers can watch and record the programming on their computers and mobile devices.
Broadcast signals owned by networks like Fox, ABC, NBC and CBS are transmitted free of charge to anyone with a television and an antenna. But cable companies like Comcast and Time Warner pay these networks billions of dollars in fees for the right to re-broadcast the network TV channels as part of paid cable packages.
Aereo argued it doesn't need to pay those fees because the broadcast signals -- which it captures and retransmits to its subscribers via the Internet -- are free.
Aereo's fate is unclear in the wake of the verdict. Many experts predicted the startup would be forced to shut down if it lost the case. But in a statement after the ruling, Aereo founder Chet Kanojia said that while he was "disappointed" in the outcome, "our work is not done."
"We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world," Kanojia said.
Though Aereo streams network TV to subscribers via the cloud, the justices said their ruling should not affect other tech companies that provide cloud services.
One of the broadcasters, 21st Century Fox, said in a statement that the decision against Aereo "is a win for consumers" because it protects copyright law and ensures "real innovation” in the television industry.
Chief Justice John Roberts and Justices Stephen Breyer, Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan sided with the broadcasters. In their decision, the justices found there was "no critical difference" between Aereo's businesses model and that of a cable company, which is bound by law to pay retransmission fees to broadcasters.
Aereo argued it merely supplied subscribers with antennas, but the justices found Aereo "does not merely supply equipment" but also broadcasts programs publicly in violation of the Copyright Act.
"Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, virtually as they are being broadcast," the opinion said.
In his opinion, Justice Breyer added that Aereo is providing a service that is "for all practical purposes a traditional cable system."
Justices Clarence Thomas and Samuel A. Alito Jr. joined Antonin Scalia in their dissent.
In a dissenting opinion, Justice Scalia said he agreed that "what Aereo is doing (or enabling to be done) to the networks’ copyrighted programming ought not to be allowed."
But Scalia said Aereo provides users with an antenna and may not be liable for copyright infringement because consumers -- and not Aereo -- choose which shows to broadcast.
"The point is that subscribers call all the shots," Scalia wrote.
Public Knowledge, a public interest group, called the Supreme Court's decision "very unfortunate for consumers" because Aereo "has provided an innovative service that brings consumers more choices, more control over their programming, and lower prices."
"We're concerned that the court's misreading of the law leaves consumers beholden to dominant entertainment and cable companies that constantly raise prices and gouge consumers," the group said in a statement.