Aereo talking deals with cable nets

CEO: We don't want to know about cord

For a man at the center of a media storm, Aereo founder and CEO Chet Kanojia is so soft spoken that even miked up a roomful of curious media investors had to scrunch forward to hear him.

But it was hard to miss this: the controversial startup is talking to cable programmers, operators and others to expand its lineup beyond local broadcast stations. Kanojia, who spoke at the Goldman Sachs media conference in Gotham, wouldn’t name names but said a few deals are done. With broadcasters trying to shutter the service for good, new deals would create ripples across the TV biz.

Aereo went live in March and launched formally last month in New York City. It captures broadcast signals with tiny antennas it designed. The service is accessed online with an Aereo account and offers daily, monthly or annual subscriptions.

The company has been in court from the get-go but won the first round. In July, a judge ruled against broadcast networks’ request for a temporary injunction to shutter it. The nets are appealing that decision, and eventually there will be a trial. But in the meantime, Aereo plans to expand into 12-15 new markets in less than a year, Kanojia said. He said the company, which is backed by Barry Diller’s IAC/Interactive Corp., will take on new investor as it expands.

“The idea behind Aereo is that there is a place in this world for a neutral technology platform that de-couples content ownership from distribution, because. It’s an opportunity for anyone who has  product they want to market to the consumer (but) what they lack is a simple technology,” he said.

“The thinking is, we will enable the technology in the cloud, starting with broadcast because it’s is free to air, but then we open it up to any like-minded company. There are a few of them, not a lot of them, who would like to put their product on Aereo.”

However, broadcast nets don’t see themselves as exactly free, given the massive coin they pour into developing content. They collect hundreds of millions of dollars from cable operators and station affiliates for the right to air that content.

CBS chief Leslie Moonves predicted earlier this week that retrans and reverse comp payments would hit $1 billion over the next few years.

Aereo provides broadcast feeds live or offers a proprietary DVR service. It can only operate within local markets. And Kanojia stressed that there’s no automatic commercial skipping feature. “Our goal is to mimic what the consumer is used to today.”

He said about half of Aereo’s users have never had a cable connection, or have dropped it. But cable subscribers are starting to come on board to complement existing service. Aereo’s DVRs are simpler to use, he said, and, a viewer, for example, might grab a broadcast of a Sunday night football game with that while the traditional DVR programs a favorite HBO show. Aereo subs tend to be young and tech savvy, but a surprisingly high number watch the morning news on network television, he said.

Most Aereo viewers watch on iPads and half of have a Roku or Apple TV device for TVs. Usage trends are still anecdotal and likely to shift after the service is enabled on laptops and desktops over the next few week. That’s when it plans to rev up marketing, which until now has been mostly word of mouth.

Kanojia said Aereo’s costs are well below a typical distributor. “Storage is a cost, but the capex we have per sub is a fraction of what a set top box costs.”

He’s aware that’s he’s smack in the middle of major industry hot points, like retrans and jitters over cord cutting.

“We don’t ask questions. We don’t want to know whether you’re cutting the cord or not,” he said.

“Aereo’s goal is to focus on the consumer,” he added. “We are not (here) to help someone resolve their business disputes with someone else. We are not in the business of getting between people’s relationships.”

“But some things make sense. If you want to enrich your broadband product,  you can enrich it with Aereo.”