MIT Technology Review

Wednesday, May 15, 2013

Aereo's on a Roll

Aereo CEO says he’s boosted by winning a round in court—and that “lines are very, very long” for his Internet TV offering, despite ABC’s new competing streaming service.

The legal battles are not over for Internet TV startup Aereo.  But for now CEO Chet Kanojia, whom I had a chance to interview yesterday, says things couldn’t be better—with “very, very long” lines in markets across the United States for his streaming local TV service that has the broadcast industry in full battle cry.

Aereo, backed by Barry Diller, has pioneered a novel distribution model: it captures free over-the-air broadcasts on tiny antennae in datacenters (one for each subscriber) then sends the shows over the Internet to those subscribers’ mobile devices or other connection (see “Watch Out for the Startup Using Tiny Antennas to Show the Oscars on an iPhone” and “Aereo Has Landed in New York: First Impressions”). And even through free airwaves don’t hold everything everyone wants, at $8/month with 20 hours of cloud-based DVR storage included, it’s certainly much cheaper than cable.

The broadcast industry asserts that the retransmission is a form of public performance that infringes copyright (see “A Legal Show Worth Watching”), but last month a federal appeals court gave Aereo a break, denying the broadcasters request for an injunction to shut Aereo down pending trial. In the federal system, trials can take years to play out, and meanwhile Aereo is busy expanding in 22 cities beyond the inaugural one, New York. The expansion plans were announced earlier this year, and the build-outs continue.

The broadcasters, for their part, are starting to fighting back on another front—with their own service tweaks. Earlier this week Disney’s ABC—a litigant in the court case—announced it would offer a streaming version of local broadcasts in the Philadelphia and New York markets, soon to expand to other cities.  Kanojia said he’s unperturbed, noting that you need to be an existing cable subscriber to get that service. “The sacred cow in this whole thing is the cable bundle,” he said. “You have to be a cable subscriber to get the streaming version. And if you are a cable subscriber willing to pay the $200 a month, you are probably not a customer who is looking to reduce your spend.”

Meanwhile, he claims, interest is surging in Aereo.  “We don’t announce or disclose our subscriber count; we are a private company—it’s a nice luxury to have.  But interest is very strong. We have a very highly engaged customer base. Utilization is through the roof. In new cities we do pre-registration. And just looking at the registration backlog, it’s actually extremely encouraging—well beyond our expectations. In every city, the line is very, very long.”

There will still very likely be a trial in federal court, even though Aereo has naturally asked for a dismissal of the case before trial (such dismissal requests are usually longshots). So the broadcasters may yet prevail over time.  But that may be moot, because the disruption of conventional broadcast business models is likely to continue.  And Kanojia said he wouldn’t mind if other disruptors emerged. “Nobody has ever done this before, and we have a very strong [patent] position. But if someone else figures out how to do this in a similar technology—it’s great for the consumers.  It’s a huge market, and there is plenty of room,” he says.