The Supreme Court will ponder the future of television on Tuesday when it hears arguments about the legality of Aereo, an Internet-television service. If the court says Aereo’s current operations are illegal, it’s curtains for the company. On the other hand, a ruling that Aereo is legal could tilt the balance of the TV industry in favor of the cord cutters, ushering in a revolution in the way we watch—and pay for—television service. Or not: Aereo may well convince the courts that it is legal and ultimately lead to little or no change in television.
The legal issue at play is whether Aereo is violating broadcasters’ copyrights by setting up farms of tiny antennas and then renting access to each one to its subscribers. The business model itself is a fun thought experiment (if you like semantics), and you can read about the legal arguments here and here. The economic issue is that Aereo doesn’t pay broadcasters the retransmission fees they get elsewhere. These fees are a relatively new revenue stream for broadcasters—satellite companies began paying them about a decade ago while trying to lure people away from cable—but they’ve become increasingly important. Broadcasters’ revenue from the fees will reach $4 billion this year, according to SNL Kagan.