Big Business Trend: Knock Out Disruptive Upstarts
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The Fiscal Times
June 27, 2014

Innovative new technologies and out-of-the-box disruptive companies have been in vogue for more than a season. From Uber to Airbnb, smaller startups are finding creative ways of using technology to grab a share of various markets. But more and more, deeply entrenched players, from cable companies to taxi driver unions, are rallying to defend their turf. 

It’s the latest trend in tech: The Empires are striking back. 

Their most recent victim was the popular Internet streaming service, Aereo. On Wednesday, the highest court in the land ruled 6-3 in favor of the TV broadcast companies, who’ve long argued that Aereo had violated copyright laws by streaming their content. 

Related: SCOTUS: Your Cellphone Has the Right to Remain Private 

The days of Aereo subscribers being able to access live broadcast television on Internet-enabled devices are, for the most part, gone. In order to stay in business, Aereo will now have to broker license fee deals with the major networks, namely, CBS, Fox, NBC and ABC. 

Some see the Aereo case as a major setback in a time when dynamic and disruptive companies should be taking the lead. “[The ruling] gives the TV industry a false sense of security that they can keep doing what they are doing. The problem for them is that in the long term, they are going to find a generation of people who aren’t satisfied with the TV product they are being sold and aren’t going to buy it,” said Redcode’s Senior Media Editor Peter Kafka in an interview. 

His point: there’s a reason why consumers were turning away from the typical television providers to begin with. 

“What Aereo might have done for the TV business is given them an impetus – a ‘forcing function’ as the tech guys like to call it – to speed up their rate of change, offer a more interesting product, and play around with different prices.”    

Related: Mark Cuban on How Obamacare Could Help Startups 

Other sectors of the industry are already facing their own pushback. In some cities, hotels have gone after Airbnb—now the world's largest community hospitality company—demanding they pay hotel taxes. Under pressure, the company put forth two bills that would allow them to essentially do what hotels do for their guests—add an extra charge for taxes. 

Related: With McCarthy’s Rise, Tech Sector Gets a Boost 

Uber isn’t going down so easily. Even as taxicabs honk their horns across the country in protest, Uber’s growth has been extraordinary. Since it launched in 2009, the company now has drivers in 67 cities in North America and 36 countries worldwide. According to the Wall Street Journal, Uber is now valued at $18.2 billion. 

“AirBnB and Uber are doing just fine,” said Kafka, who argues that people should not look at Aereo as any sort of precursor for the future. “DropBox or Google or YouTube are not going to stop doing what they are doing. The question around Aereo was always designed to be litigated. They knew from the get-go that this would be something they would fight in court. They went in knowing that,” said Kafka. 

Aereos Founder, Chet Kanojia, begs to differ. “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,” said Kanojia, calling the ruling a “massive setback for the American consumer.” 

Matt Schruers, a lawyer for the Computer and Communications Industry Association and writer at the Disruptive Competition Project, says the ruling could spark a whole new set of lawsuits against up-and-coming small cloud companies. “[At risk] is anybody who is doing something new and a little bit different,” says Schruers, whose organization represents Aereo. 

As he sees it, the fallout is two-fold: young entrepreneurs will be less willing to take risks, and investors, less willing to invest. Schruers says those starting companies will say, “Even if I had all sorts of fail-safes in place to ensure that it was content that the end user was lawfully entitled to have, I could still be sued because that’s a public performance.” And those investing in companies will say, “‘Wait a minute, your service has some kind of content playing feature? I’m not interested.’ They’ll take their money elsewhere,” said Schruers. 

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Reilly Dowd is a senior writer at The Fiscal Times. Based in Washington, D.C., she covers national politics, economic policy, technology, and elections. She has previously worked at Al Jazeera America, SnagFilms, ABC News, CNN and in the Obama White House.