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What: Shares of Sinclair Broadcasting Group (NASDAQ:SBGI) were heading to the stratosphere today, gaining as much as 18% after the Supreme Court ruled that Aereo, an Internet TV provider, was illegal.
So what: Sinclair, which owns or operates 167 television stations in 77 markets, was among a group of broadcasters sueing to shut down Aereo, which subverted the standard cable business model by selling access to TV directly over the Internet for $8 per month without paying licensing fees as affiliates and cable companies normally do. Shares of CBS, the lead plaintiff in the suit, were up 5% as a result of the decision as well. The court said that Aereo was in violation of copyright laws because it essentially stole broadcasting signals and sold them to customers.
Now what: While Sinclair may have won this battle, the trial is a reminder that technology is fast pressuring the traditional media and broadcast players. Aereo had argued that it was only enabling users to watch otherwise free broadcast TV transmitted over public airwaves, but even with its loss, companies like Netflix and other services are making cord-cutting a growing phenomenon. Even so, consolidation in the broadcast industry has become increasingly common as there are a limited number of TV stations in the country, and industry stocks have risen. Ultimately, programming quality will determine the fate for the traditional broadcasters. Lawsuits alone will not be enough to keep them relevant.
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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.