8.05 a.m. EDT June 21, 2014 Revolutionary cloud TV service faces Supreme Court decision in coming days.Either way the decision goes, the Supreme Court's ruling on the legality of the Aereo streaming service could drive more people to cut the cord.
The court is expected to rule before the end of the month — and as early as Monday — on whether Aereo is breaking the rules by streaming live network TV stations over the Internet. Two years ago, the start-up began offering New Yorkers 28 channels and cloud DVR storage for a monthly charge of $8.
The company uses collections of dime-sized digital antennas to record local broadcasts; your subscription lets you stream those channels on computers and Android or iOS devices, or via Apple TV, Chromecast and Roku.
Cord cutters have welcomed the service as it has expanded to 10 markets including Atlanta, Boston, Dallas, Detroit and Miami, with more expansion planned. Along the way, Aereo began drawing the legal ire of broadcasters that decried the company's sidestepping of retransmission payments.
In January, the Supreme Court agreed to hear broadcasters' appeal of its case against Aereo. The major TV networks — along with the National Football League and Major League Baseball — argue that Aereo should have to pay fees to retransmit signals.
Aereo counters that it does not infringe on networks' copyrights because it rents subscribers antennas in each city — just as if they had an antenna at home. Customers access the content their leased antenna gets online via the company's streaming technology.
"Nobody says you can't have an antenna and nobody says you can't have a DVR. It's all about can you have an antenna and a DVR that you control remotely," Aereo CEO Chet Kanojia told earlier this year.
Also on Aereo's side, the Consumer Electronics Association, the trade group that represents device makers, and the Computer & Communications Industry Association, which represents Internet companies.
Industry observers are divided on how it will all shake out. The media and entertainment analysts at International Strategy & Investment Group expect the court will rule that Aereo is subject to retransmission fees.
"The skeptics say there is a 30% chance Aereo will win, while the optimists put the odds at 50%. In total, that suggests consensus is to the negative, that Aereo won't win," says Michael Greeson, co-founder of The Diffusion Group.
The Supreme Court "is not supposed to make cost-benefit decisions or concern themselves with the consequences of their decision," he says. But a decision in favor of Aereo would have a dramatic impact on the entire TV ecosystem. "In this case, it will be difficult for individual justices not to consider the consequences. There is simply too much at stake."
At The Envisioneering Group, research director Richard Doherty thinks the court will likely rule 5-4, but isn't willing to bet which way it will go. Whether cord cutters already subscribe to Aereo — or are considering it — they have a vested interest in an Aereo win. "It's probably going to lead to more choice and newer technology for cord cutting," Doherty says.
Conversely, a win for the broadcasters could result in higher pay-TV prices "because broadcasters will be that much headier about it and raise their fees with each negotiation," he says.
Higher prices could lead more customers to trim or cut the cord. Eventually, "the cord" will be transformed, suggested columnist Michael Wolff in a recent column. "What we know is that five years from now, the television business, and how we get video, and who pays for it, and who makes money from it, will have dramatically changed," he wrote. "What we don't know is who will benefit most and be top dog in the game."
The Aereo decision is an important milestone on that timeline. Doherty says, "It can change the market conditions in America tipping it towards the consumer and less toward big media and negotiators."
