Aereo, a media company that distributes broadcast programming via the Internet, survived a major legal challenge to its business from CBS, NBC, ABC, Fox and other broadcasters.
In a 2-1 decision, the U.S. Court of Appeals for the Second Circuit in New York ruled that Aereo's transmissions and recordings of broadcast programming are not "public performances" of copyrighted material and added that the broadcasters "have not demonstrated that they are likely to prevail on the merits on this claim in their copyright infringement action."
The ruling was in response to an appeal of a previous dismissal of a preliminary injunction request by U.S. District Court in the Southern District of New York.
Aereo, whose backers include media mogul Barry Diller, is a distribution service that provides access to broadcast TV signals via smartphones, tablets and Internet-friendly TVs. For around $8 a month, Aereo subscribers get a tiny antenna that can pick up the signals of broadcasters. The antenna and a cloud-based digital video recorder can hold up to 40 hours of programming.
"We are grateful for the court’s thoughtful analysis and decision and we look forward to continuing to build a successful business that puts consumers first,” said Aereo Chief Executive Chet Kanojia.
Diller, a former senior executive at Fox, added, "We always thought our Aereo platform was permissible and I’m glad the court has denied the injunction – now, we’ll build out the rest of the U.S.”
Currently available only in New York City, Aereo has said it plans to launch in 22 cities in the coming months and hopes to be available in Los Angeles by the end of this year.
The broadcasters expressed disappointment with the ruling and vowed that the legal fight against Aereo will go on.
"Today’s decision is a loss for the entire creative community," said a joint statement from Fox, PBS and Univision and other broadcasters. "The court has ruled that it is ok to steal copyrighted material and retransmit it without compensation." The statement went on to say, "We plan to move forward towards a trial on the merits of the case, and on claims that were not impacted by this appeal."
Dissenting Judge Denny Chin agreed with the broadcasters. Chin wrote that Aereo is engaged in theft of copyright material because unlike other pay-TV services, it is not compensating copyright holders or the licensors of such content.
"Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do -- they capture over-the-air broadcasts and retransmit them to customers -- except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee," Chin wrote in his dissent.
Interestingly, while Aereo has had the law on its side on the East Coast, a ruling by the 9th Circuit Court in California against a similar service could prove troublesome. In that case, a preliminary injunction against the TV streaming service Aereokiller was granted.
Legal victories aside, some media analysts are skeptical about the viability of Aereo's business.
"I have never fully understood the consumer proposition," said Sanford C. Bernstein analyst Todd Juenger earlier this year. "For people who are cost-conscious, why not just buy an antenna and get broadcast for free? Is it worth $8 per month just to have mobile access and some sort of cloud DVR function?"
Aereo is trying to add cable channels to its mix, but those it would have to pay for, and so far it has only signed up the business news channel Bloomberg TV. Most of the popular cable channels are owned by the very same companies -- News Corp., Comcast and Walt Disney Co. -- challenging Aereo's right to exist.
Follow Joe Flint on Twitter @JBFlint.