Supreme Court (U.S.)

Aereo CEO: We're disappointed in the outcome, but our work is not done

CNBC with Reuters
Huge win for broadcast networks

The U.S. Supreme Court ruled Wednesday that online TV service Aereo, backed by media mogul Barry Diller, violates copyright law by using tiny antennas to provide subscribers with broadcast network content via the Internet.

On a 6-3 vote, the court handed a victory to the four major TV broadcasters and cast Aereo's immediate future into doubt.

Click here for the full Supreme Court ruling.

Aereo CEO and founder Chet Kanojia said in a statement that the decision was "a massive setback for the American consumer."

"We've said all along that we worked diligently to create a technology that complies with the law, but today's decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry," Kanojia said. "We are disappointed in the outcome, but 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."

Networks involved in the case praised the ruling. The National Association of Broadcasters commended the Supreme Court for upholding "the concept of copyright protection that is enshrined in the Constitution."

"Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false," NAB President and CEO Gordon Smith said in a statement. "Today's decision sends an unmistakable message that businesses built on the theft of copyrighted material will not be tolerated."

In an interview on CNBC's "Squawk on the Street," former chairman of the Federal Communications Commission, Reed Hundt, said that the Supreme Court "made the right call" and that the decision was "a really, really big win for broadcasters."

"Aereo has very little chance surviving in the business and Barry Diller got his hands caught in the regulatory cookie jar," he said. "You can't use technological tricks to bypass [cable network] rules and regulations. I think that's a very reasonable decision."

How Aereo ruling will impact new tech

Major Aereo investor Diller told CNBC that "We did try, but it's over now."

Diller said the service would have offered consumers an "alternative to the bundle."

"It's not a big [financial] loss for us, but I do believe blocking this technology is a big loss for consumers, and beyond that I only salute Chet Kanojia and his band of Aereo'lers for fighting the good fight," he said.

The court said the service constitutes a public performance of copyrighted content. For the networks, the victory protects the estimated $3 billion in so-called re-transmission fees that broadcasters get from cable and satellite TV systems.

Justice Stephen Breyer said in the majority opinion that the ruling should not spell trouble for cloud-based content services in which personal files—including TV shows and music—are stored remotely on the Internet on servers from companies such as Google, Microsoft, DropBox and Box.

Aereo had argued that cloud services use the Internet in the same way as it does to store and transfer copyrighted content.

"It seems like there's a little bit of opening up [in the ruling] of what could happen to new technologies, but this is going to need a much more detailed read to find out those implications," Rich Greenfield, media and technology analyst at BTIG, told CNBC. "I think the immediate implication for Aereo is, is there going to be a way for them to get compulsory licenses to survive, or do they simply disappear?"

The case came before the court when Walt Disney's ABC network, CBS, Comcast's NBCUniversal and Twenty-First Century Fox appealed a decision by the 2nd U.S. Circuit Court of Appeals in April 2013 that denied their request to shut Aereo down while litigation moved forward.

Aereo, backed by Diller's IAC/InterActiveCorp, charged users a low monthly fee to watch live or recorded broadcast TV channels on computers or mobile devices. Aereo did not pay the broadcasters.

Last week, Kanojia told CNBC his company charges for technology, not TV content, and therefore is not infringing on copyrights.

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Any customer can buy an antenna and DVR for their home and watch and record their local channels, said Kanojia—adding that his company is doing the same thing but with more modern technology.

The networks, including CNBC's parent NBC as well as ABC, CBS, and Fox, said Aereo stole free, over-the-air programming and then transmitted that content to its online customers, without paying retransmission fees to the broadcasters.

—By with Reuters. CNBC's Becky Quick contributed to this report.

Disclosure: CNBC's parent company, NBCUniversal, is among the broadcasting and cable companies opposing Aereo on copyright claims before the Supreme Court.