In a win for big media, the Supreme Court on Wednesday grounded the streaming service Aereo with a ruling that the startup violates the Copyright Act by recording and streaming over-the-air TV to subscribers' devices.
The court's 6-3 majority concluded Aereo effectively operates as a cable service and therefore is covered by the copyright law.
"Aereo's activities are substantially similar to the (cable) companies that Congress amended the (Copyright) Act to reach," Justice Stephen Breyer wrote for the majority.
At the same time, Breyer insisted that "the court does not believe its decision will discourage the emergence or use of different kinds of technologies."
Aereo's system is made up of servers, transcoders, and thousands of dime-sized antennas housed in a central warehouse. Aereo claims that the service they offer is no different than old-fashioned TV antennas picking up broadcasts.
Their argument before the Supreme Court focused on the definition of a private performance versus a public one. By assigning each user an antenna that then records a unique copy of the broadcast they are participating in a private performance, they said. The court's majority didn't buy it.
"Aero is not simply an equipment provider," Breyer reasoned, adding that "when Aereo streams the same television program to multiple subscribers, it transmits a performance to all of them."
Broadcasters bluntly called Aereo's technology a loophole to get around copyright laws. Broadcasters including ABC, NBC, CBS and Fox filed federal lawsuits only two weeks after the startup service launched in 2012.
They argued that the startup steals their copyrighted content by pulling TV signals from the airwaves of local stations and allowing customers record online and stream it on their devices. Cable and satellite companies have to pay substantial retransmission fees for the same TV shows.
"The networks make dire predictions about Aereo," Justice Antonin Scalia wrote in dissent. "We are in no position to judge the validity of those self-interested claims or to foresee the path of future technological development."
Cloud computing advocates have warned that an Aereo loss could mean that popular online services like DropBox and Google Drive will be caught in the crossfire. The legal argument against Aereo could be dangerous for any streaming service that uses digital storage, they argued.
In the months leading up to the Supreme Court decision, Aereo founder and chief executive Chet Kanojia said that a ruling against them would be the end of the service. The company has not mentioned a back-up plan that would see them paying the retransmission fees for the content.
The Obama administration sided with the broadcasters, saying in a brief that Aereo is "clearly infringing" on the networks' copyright by streaming content without permission.
Up to today Aereo operated in a dozen major US cities, including Atlanta, Boston, Dallas, Miami and New York, and it had planned to expand to 50 by next year.
By Vera Bergengruen and Michael Doyle
McClatchy Washington Bureau