Editors Note: This is the last of three Deadline posts that lay out the issues in the Aereo case, which Deadline Legal Editor Dominic Patten will cover from the Supreme Court next week. Today: An interview with Aereo CEO Chet Kanojia.
Broadcasters challenged Aereo‘s legality almost from the moment in early 2012 when it launched in NYC. It is a David and Goliath contest: the tiny, Barry Diller-backed streaming service defending itself against attacks from CBS, Disney, Fox, and Comcast’s NBCUniversal among other companies as well as the federal government’s Office of the Solicitor General. The plaintiffs say Aereo steals their property by selling their over-the-air programming without paying them. They liken it to a cable or satellite distributor and say that it packages channels and then redistributes them — in legal terms creating a public performance that, since it isn’t authorized by the broadcasters, violates the “transmit clause” of the Copyright Act of 1976. But Aereo CEO and founder Chet Kanojia says there’s no violation. He simply leases to consumers the antennas and technologies they need to privately exercise their right to watch broadcast signals for free. He sees next week’s Supreme Court hearing as a fight for his company, as well as a struggle to protect public control of the airwaves, and consumers’ ability to harness the power of the Internet.
DEADLINE: Barry Diller has said that if you guys lose at the Supreme Court, it’s basically game over. Are you turning off the lights if the Supreme Court rules against you?
KANOJIA: It’s going to depend on what the nature of the scope of the conclusions from the Supreme Court happens to be. If it’s a straight up, wipeout loss — and the Supreme Court shows the 2nd Circuit’s analysis of the transmit laws and, as a result, the idea was private performance is incorrect — then it will be very difficult for Aereo to be in business. For us, along with a lot of other companies that buy DVRs or cloud solutions, it will be a very difficult climate for sure. One result may very well be that we cease to operate.
Related: Barry Diller Says Aereo WIll Be “Finished” If It Loses Supreme Court Case: Video
DEADLINE: What if it goes in your favor?
KANOJIA: It’ll mean business as usual for everybody. I think the broadcasters will continue to grow and succeed. I think Aereo will continue to sell to consumers who don’t consume broadcast TV from cable or satellite but use antennas or are not part of the system. Then I think overall the pie will continue to grow.
DEADLINE: What do you think the broadcasters will do if they lose?
KANOJIA: Oh, they’re going to come back for a Round 2. They may go to Congress. The strategy of this industry is, “Let’s litigate, legislate. And if you can’t figure that out, then see how to make money from basic knowledge.”
DEADLINE: So why bother, if it’s just going to be ongoing trench warfare?
KANOJIA: Because I care about this industry. I care about it as a consumer and I care about as a technologist who wants to create better experiences in front of consumers. Right now we’re all prohibited from that whether you’re a new content creator or a new channel or have a new piece of software in a new box. Nobody can get in front of the consumer because the vertically integrated companies control everything. We have boxes in our home that are connected to a television which we spend hours on, and they’re 15-year-old or 20-year-old technologies. There is no incentive in these companies to create value for consumers. They’re monopolies.
DEADLINE: The broadcasters say it has nothing to do with value for consumers. The root of your ongoing legal battles is that you are stealing their content. The former Acting Solicitor General says Aereo is trying to get something for nothing by plucking signals out of the air and selling them to the American public.
KANOJIA: They’re absolutely incorrect and it’s an allegation without merit. The 2nd Circuit Court of Appeals, the only Appellate Court that’s spoken of this issue, has very clearly said that Aereo’s technology prevails on its merits. The reasons for that are: A consumer has the right to an antenna. Nobody is disputing that. A consumer has a right to a DVR. Nobody’s disputing that. A consumer has the right to combine an antenna and DVR. Nobody is disputing that. Aereo technologies only apply to free-to-air broadcast television which is required to be free in the public interest in exchange for the spectrum. So this allegation that we’re stealing is just baseless on so many different levels that it’s astonishing that they even make this argument.
DEADLINE: Part of their argument is also that you violate Copyright Law by creating a public performance of protected material and content.
KANOJIA: Our position on this has been that [when] a consumer makes a copy [of a broadcast] and then subsequently makes a transmission of that copy to themselves [and it’s] bought in a single cast way — meaning a one-to-one way — [then it] is a private performance. No different than if a consumer were to store a file on Google Drive or Dropbox or whatever else. It is a one-to-one transmission that should be considered a private performance. What the broadcasters argue is [that] a sufficient number of these things are going on, [and] it should be aggregated into a public performance. That would cast a pretty light net over any Internet-based delivering mechanism.
DEADLINE: The broadcasters don’t buy that. They say you collect the signals and provide access to your subscribers and that is clearly a public performance.
KANOJIA: Well, I respectfully disagree since the only Appellate Court that’s spoken on this issue has said it’s a private performance. If you don’t like the answer that doesn’t mean the answer’s wrong.
DEADLINE: OK, but the broadcasters could say that Aereo doesn’t like the answer, and that they deserve to be paid for the content that they create, market and air.
KANOJIA: Well, of course they get paid for it. They make billions of dollars in advertising. That is the business model that Congress signed up on. This idea that somehow retransmission fees should be layered on in every technology that comes in is a huge novel stretch that they’re trying to make. They are getting paid — it’s called advertising, and it’s free spectrum. This is the deal they cut with Congress. Now people are beginning to want alternatives. According to the [National Association of Broadcasters] there has been an increase in antenna usage from 2011 to now, from 54 million to 60 million. That is part of the reason why Comcast lost 10 million subscribers over the last decade on video and all of these guys are losing. You can’t continue to abuse the consumers in the system in the way you have. You can’t continue to put the line forward that says in 2017, 2018, your cable [bill] is going to be $400 a month. People can’t afford this.
DEADLINE: So this is really about bundling in your view?
KANOJIA: This is exactly correct. This is about bundling. The reason it’s about bundling is these are integrated media companies. The way they attract and sell the product and make it a no-option, no-choice for both the cable company and effectively with the consumer is what drives the profits, right? A broadcaster also owns tons of cable channels or the same media company does and they get paid for all those channels irrespective whether you watch them or not. That’s what they’re trying to protect. I’m sympathetic to the idea that these are large public companies and they want to make the most profit and continue to grow. But you’ve got to create innovation. You’ve got to create new products if you want to charge people more. The problem is the system today is that they just keeping raising the rate and expect the consumer to pay or the cable company to make less money and that isn’t going to work. This is going to break irrespective of Aereo. It’s inevitable.