Updated April 22, 2014 1:35 p.m. ET
WASHINGTON—Supreme Court justices on Tuesday expressed unease with online-video startup Aereo Inc., but they also voiced concerns about the consequences of ruling for the broadcasters that are challenging the legality of the service.
After an hourlong oral argument, the outcome of the case appeared too close to call.
Aereo is aiming to become a larger player in the market for Internet-based alternatives to cable television. The company's service allows its subscribers to stream their local over-the-air broadcasts to an array of electronic devices, and to record shows and watch them later.
The broadcasters, including Walt Disney Co. Walt Disney Co. U.S.: NYSE $79.57 +0.46 +0.58% April 22, 2014 3:08 pm Volume (Delayed 15m) : 4.10M P/E Ratio 21.64 Market Cap $138.61 Billion Dividend Yield 1.08% Rev. per Employee $262,674 04/22/14 Supreme Court Conflicted on Le... 04/22/14 Aereo, U.S. Broadcasters to Sq... 04/20/14 Silicon Valley Tech Giants Str... More quote details and news » 's ABC, Comcast Corp.'s Comcast Corp. Cl A U.S.: Nasdaq $50.94 +1.06 +2.13% April 22, 2014 3:08 pm Volume (Delayed 15m) : 26.18M P/E Ratio 19.65 Market Cap $129.68 Billion Dividend Yield 1.76% Rev. per Employee $475,419 04/22/14 Supreme Court Conflicted on Le... 04/22/14 Comcast Bucks Trend, Adding Vi... 04/22/14 Data Point: Who's More Likely ... More quote details and news » NBC, CBS Corp. CBS Corp. Cl B U.S.: NYSE $59.74 +0.03 +0.05% April 22, 2014 3:08 pm Volume (Delayed 15m) : 5.54M P/E Ratio 20.99 Market Cap $34.37 Billion Dividend Yield 0.81% Rev. per Employee $618,785 04/22/14 Supreme Court Conflicted on Le... 04/22/14 Aereo, U.S. Broadcasters to Sq... 04/20/14 John Hane: Aereo's TV Internet... More quote details and news » and 21st Century Fox, are aiming to sink Aereo, saying the service is operating illegally by engaging in wide-scale, unauthorized exploitation of their copyrighted programming without paying for it.
The high court heard oral arguments to consider whether the Aereo service violates the broadcasters' exclusive rights under federal copyright law to the public performance of their works.
Chief Justice John Roberts voiced skepticism about Aereo's service, saying it was built in a way specifically designed to get around restrictions in U.S. copyright law. However, he also said that one could view Aereo as fairly similar to an equipment provider like RadioShack RadioShack Corp. U.S.: NYSE $1.32 -0.13 -8.62% April 22, 2014 3:08 pm Volume (Delayed 15m) : 4.40M P/E Ratio N/A Market Cap $145.50 Million Dividend Yield N/A Rev. per Employee $124,884 04/22/14 Supreme Court Conflicted on Le... 04/22/14 RadioShack Store Operations Ex... 04/16/14 RadioShack Mired in Talks With... More quote details and news » that sells a consumer an antenna and a digital video recorder to make legal personal copies of programming.
While the court signaled its reservations about Aereo, the justices also made clear that they had concerns about the implications of ruling for the broadcasters. Justices Stephen Breyer, Sonia Sotomayor and others said a ruling against Aereo, which is a cloud-based service, threatened to harm more established cloud-computing services, such as Apple Inc. Apple Inc. U.S.: Nasdaq $531.40 +0.23 +0.04% April 22, 2014 3:08 pm Volume (Delayed 15m) : 5.38M P/E Ratio 13.10 Market Cap $474.10 Billion Dividend Yield 2.30% Rev. per Employee $2,163,820 04/22/14 Chromebook Review: Can the Bro... 04/22/14 Cloud Photo Storage: The Best ... 04/22/14 Supreme Court Conflicted on Le... More quote details and news » 's iCloud. Justice Breyer said the broadcasters' arguments made him "nervous," while Justice Sotomayor said the case was a difficult one.
The broadcasters argued that Aereo is retransmitting their programming to the public without authorization, a clear violation of copyright law.
Broadcasters are worried that if the court finds Aereo legal, it could undercut the billions of dollars in revenue the networks receive from cable and satellite companies, which pay to retransmit the networks' programming.
Aereo argued its service is the functional equivalent of what a consumer has the legal right to do with home-based equipment, only it is cheaper and more efficient. The company has done little marketing so far and the Supreme Court case could provide it with a publicity boost if it prevails.
The Aereo service, currently available in 11 cities, relies on thousands of dime-size antennas that are assigned to individual subscribers who log on to watc! h and record local broadcasts.
In a bid to avoid problems under U.S. copyright law, Aereo designed its system so that no two customers share the same antenna or digital recording, a setup that means the service isn't a public transmission, the company said. Aereo modeled its technology after a 2008 ruling by the New York-based Second U.S. Circuit Court of Appeals that upheld the legality of a Cablevision Systems Corp. Cablevision Systems Corp. U.S.: NYSE $16.83 +0.40 +2.44% April 22, 2014 3:07 pm Volume (Delayed 15m) : 2.38M P/E Ratio N/A Market Cap $4.44 Billion Dividend Yield 3.56% Rev. per Employee $405,501 04/22/14 Supreme Court Conflicted on Le... 04/22/14 Aereo, U.S. Broadcasters to Sq... 04/14/14 Broadcasters Seek an Aereo 'Pl... More quote details and news » remote-storage digital video recorder.
A divided U.S. appeals court in New York refused to shut down Aereo last year.
A high-court decision is expected by the end of June.
Write to Brent Kendall at brent.kendall@wsj.com
Source : http://online.wsj.com/article/SB10001424052702304049904579517722557177420.html
