Aereo CEO speaks on future of company, industry

Apr 17 2014, 4:58pm CDT | by

NEW YORK (AP) — The future of Aereo, an online service that provides over-the-air TV channels, hinges on a battle with broadcasters that goes before the U.S. Supreme Court next week.

For as little as $8 a month, Aereo subscribers in New York and 10 other markets can watch shows live or record them using Aereo's online digital video recorder. Subscribers access programming with computers, smartphones and other devices, as well as with TVs with Roku or Apple TV streaming devices. Aereo resembles a cable or satellite TV service, except it costs less and is limited to over-the-air channels, plus Bloomberg TV.

Cable and satellite TV companies typically pay broadcasters to include TV stations on customers' lineups. Aereo argues it's exempt because it merely relays free signals. When recording or watching a show, subscribers are temporarily assigned one of thousands of small antennas at Aereo's data centers. Aereo likens its antennas to the personal antennas in people's homes that pick up free broadcasts.

Broadcasters argue that Aereo built the individual antennas specifically to skirt copyright law, as there's no technical reason such a service would need them. Millions of dollars are at stake: If people ditch cable service for Aereo, broadcasters would be able to charge cable companies less.

Oral arguments in the copyright challenge are scheduled to go before the court on Tuesday, with a ruling expected by this summer.

Aereo founder and CEO Chet Kanojia recently spoke to The Associated Press about his company and the industry. Questions and answers have been edited for length, and the order of some questions has been changed to improve flow.

Q: Why shouldn't broadcast and cable companies fear Aereo?

A: What they should be afraid of, and I'm sympathetic to this, is the Internet is happening to everybody, whether you like it or not. It happened to books, news people, it happened to music people, it happened to Blockbuster. There is nothing in our Constitution that says there is a sacred set of companies that will never be affected by new technology.

Q: A lot of people who may think about cutting service and going with Aereo may be reluctant because of the one or two cable channels they watch regularly.

A: The market is going to evolve. If you think about what Netflix is doing (with original programming), it is going to force change in the paid TV business. Here's a channel effectively operating as a paid channel. If Netflix can pay the bills, the next hit show is going to be on Netflix. It's not going to be on HBO. That's going to force the change.

Q: How did you come up with this idea?

A: My last company, we pioneered how to measure viewership in cable systems. When you started looking at the data, it was obvious that nobody watches more than eight channels. Half of them happen to be major networks, which are free to air.

Q: If you prevail, what do you think that will mean for the industry?

A: Change is a long process. I don't think anything is going to change anywhere because of Aereo. What is happening is the entire market base is changing with access to alternatives, whether it's Netflix or iTunes or things like that. Aereo is simply providing a piece of the puzzle. After we win, it's not that a sea change is going to happen overnight. It is just going to be that we will be allowed to continue to fit that missing piece in a consumer's life as they're evolving. These things take decades to play out.

Q: If Aereo wins, a couple of broadcasters have threatened to become cable-only channels so that they can't be shown on Aereo.

A: They're individual companies. They can do whatever they want. I think the question becomes on an overall reach basis you're giving up 60 million eyeballs. That's how many people use antenna in some way, shape or form, which kind of correlates to about 18 percent of the household basis.

Q: Your Plan B should the Supreme Court decide against you?

A: We don't have a Plan B.

Q: For a $100 million investment, that seems to be a lot of faith.

A: We apply all of our energy in making sure we're ready and continue to grow the business. To me, if we optimize for loss or a potential loss, we give up optimizing for a win. If you believe your position, the only thing you should do is play to win. We've never been dishonest with our investors. Everybody knows what the risks are.

 
 

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