Streaming-TV startup Aereo will be forced to shut down or make massive changes after the Supreme Court ruled Wednesday that its service is illegal.
The two-year-old startup lets customers in 11 cities watch broadcast TV over the Internet for $8 a month. Aereo sought to revolutionize the TV industry, but it enraged media titans in the process, who successfully argued that the startup infringes on their copyrighted programming.
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It's unclear what happens to Aereo as a company now -- the company's CEO vowed Wednesday to continue the fight, while key investor Barry Diller said “it’s over” -- but the ruling has implications for both its customers and other TV-watchers.
What happens to Aereo’s service now?
At the very least, Aereo can't continue operating the way it currently does. Aereo argued to the high court that it's legal because of a carefully crafted setup: The company houses thousands of tiny antennas in its data centers, and each customer is assigned a specific antenna to make a “copy” of the broadcast.
In Aereo’s view, the company’s method works in a way that's comparable to some antennas and DVRs. But the Supreme Court agreed with the broadcasters, ruling that Aereo violates law by retransmitting the broadcasters' copyrighted programs without paying a fee.
So Aereo will need to reinvent itself in order to continue. Aereo could pony up those retransmission fees, or license its video-streaming technology to its former media foes.
When, exactly, Aereo will have to comply with the Supreme Court's ruling is unknown even to Aereo.
"It's still unclear what this means immediately for Aereo customers," the company said in an email to NBC News. "Aereo is still evaluating its options."
What does the ruling mean for consumers?
Aereo, of course, sees the court's ruling as harmful to both customers and the tech industry at large.
“Today’s decision by the United States Supreme Court is a massive setback for the American consumer," Aereo CEO Chet Kanojia said in a statement Wednesday. Kanojia reiterated Aereo's belief that its technology is legal, and he characterized the ruling as one that "sends a chilling message to the technology industry."
The broadcasters see it differently. Leslie Moonves, CEO of CBS, said Aereo's demise ensures that broadcasters can stay in business.
"We will continue to do the same high-quality, premium programming that we’ve done and we will deliver it," Moonves said. "So this is a pro-consumer thing. And frankly, for Aereo to say that it isn’t is a little bit of sour grapes."
David Bank, media analyst at RBC Capital Markets, agreed with Moonves.
"Had Aereo been victorious, the risk would have been the broadcasters would have been forced to become cable channels to prevent Aereo and other technologies from monetizing its content without being paid," Bank said.
Beyond Aereo users, the ruling is a big blow to supporters of the "a la carte" TV model -- a setup in which customers would pay for only the channels they want, rather than big bundles of channels they never watch. Broadcasters and cable companies have generally taken a strong stance against this model. But if Aereo had won, experts said, the providers may have been forced to reassess how they package their offerings.
What happens to Aereo's employees?
It’s not clear. The company, which has offices in New York and Boston, still had open positions listed on its website Wednesday. An Aereo spokesperson said the company is evaluating its options.
NBCUniversal, the parent company of CNBC and NBC News, is among the broadcasting and cable companies that opposed Aereo on copyright claims before the Supreme Court.
-- NBC News' Julianne Pepitone, CNBC's Katie Little, and NBC News Staff.
First published June 25 2014, 2:22 PM