Aereo CEO: Broadcasters “Profiteering” with a Doomed Business Model

10/22/13Follow @curtwoodward

Chet Kanojia wasn’t surprised when the multi-billion dollar broadcast industry sued him. In fact, he was planning on it.

As the CEO of Aereo, a New York-based startup that streams broadcast TV over the Internet, Kanojia met with plenty of expensive lawyers before starting his brazen attempt to shake up the industry.

Their verdict, he told attendees at a Northeastern University event on Monday night, was, “You may be challenged. It’s going to be a difficult road. But you’re going to win.”

The speed of the fight is another thing altogether. Introduced in early 2012, Aereo’s bold approach thrust the small company directly between the big-money forces of cable and broadcast TV.

Right away, it had major financial backing from cable-company and all-around media magnate Barry Diller. And earlier this month, Aereo’s legal bills stepped up to another level when broadcasters took the case against it to the highest court in the land.

“This thing has gone from the back of my napkin two years ago, in my house, to in front of the U.S. Supreme Court and national policy in about a 20-month period,” Kanojia says. “So, what else could you ask for, right?”

Aereo currently operates in a handful of large media markets around the U.S., including Boston, New York, and Atlanta (it also has a significant office in the Boston area). The company uses dime-sized antennas to pick up individual, over-the-air streams of broadcast TV programming. Those streams—one per customer, the company notes—are then sent over the Internet to a subscriber’s computer, laptop, or connected TV screen.

It’s another lure for people who want to “cut the cord” and get rid of expensive, bundled cable or satellite service in favor of a la carte viewing over Web-based systems like Netflix or Hulu.

The crux of Aereo’s legal theory is this: Broadcast TV—the major, mainstream networks that originally were granted public airwaves by Congress—is already required to make its programming available to anyone who uses an old-school antenna. If you can use a really fancy antenna, why can’t you send that same free stream to the consumer?

It’s a bid that could bring vast change to the entertainment business, which Kanojia says is “the most irrational, illogical business.”

“And there’s a very simple reason why: Because it’s a great business. People make an insane amount of money doing what they do,” he says. “And so the idea of inserting this loose, little thing called the consumer in the midst of all this profiteering doesn’t fit anybody’s stated objective.”

Maybe so, but the broadcasters aren’t going down without a fight. The major networks rely on fees from other TV providers, including cable and satellite companies, which have been prevented by copyright laws from re-bundling broadcast content without paying for it. But that could all change with Aereo.

In their petition to the Supreme Court, the big broadcasters wrote that Aereo’s approach “is already transforming the industry and threatening the very fundamentals of broadcast television.”

Cable and satellite companies, they say, are threatening to use Aereo’s previous court victories “as a road map for reengineering their own delivery systems so they too can retransmit broadcast signals without obtaining the broadcasters’ permission.”

Kanojia admits that he’s not entirely sure whether Aereo’s crusade against ever-higher TV prices and crazy, oversized programming bundles will succeed. But, he said, someone will make this happen.

“It may take 20 years, it may take 30 years. It may not happen in my lifetime, it might be five years from now. I just don’t know,” Kanojia says. “The core skill I have is convincing people that I don’t know, but if there was anybody who was going to figure it out, I had a good shot at it.”

“The world that we are all living in today, the Internet world—there’s only one thing that matters, which is the consumer’s happiness,” he adds. “And the companies that identify that and adopt that mentality succeed. The old ways of doing things are just gone and done.”

Here’s a full video of Kanojia’s discussion with Northeastern president Joseph Aoun.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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