Aereo to expand into 22 markets

Controversial remote broadcasting service plans marketing push

Clearly unfazed by an ongoing legal battle, Aereo announced a fresh $38 million cash infusion and plans to expand in 22 markets starting this spring.

It’s also set to announce a deal with a box maker in the next several weeks, connecting Aereo to TV sets for the first time, said CEO Chet Kanojia.

The service, which has ticked off broadcasters by offering network fare online via tiny antennas, received the fresh funds from original investor Barry Diller’s IAC/Interactive and Boston venture capital group Highland Capital. It’s meant to take the company that now operates only in New York City to another level entirely. Rollouts will start this spring and ramp up through 2014 in the first phase of an expansion to make the service available to 97 million people, Kanojia told investors at the Citi Global Internet, Media and Telecom conference in Las Vegas.

It’s heading first to Boston, Miami, Atlanta, Chicago, Dallas, Houston, Baltimore, Detroit, Denver, Minneapolis, Philadelphia, Pittsburgh, Tampa, Cleveland, Salt Lake City and Kansas City; Washington, D.C.’ Austin, Texas; Raleigh-Durham, N.C.; Birmingham, Ala.; Providence, R.I.; and Madison, Wis. As it rolls out, subscribers who travel from one covered market to another won’t be able to access live shows from home but will be able to receive any local Aereo broadcasts.

As it grows, Kanojia said Aereo will start marketing itself for real this quarter instead of relying purely on word of mouth or avid readers of TechCrunch.

Aereo launched last year, offering daily and monthly subscriptions for broadcast and DVR playback service developed with its patented technology, as well as a “try for free” option for one hour a day. The broadcast networks sued for copyright infringement and also sought a temporary injunction to shut it down but were denied. The appeals process is ongoing and has seemed to tilt one way, then another.

“We’re pretty confident,” Kanojia said. Despite the acrimony, he insisted he has many friends in the broadcast industry.

Aereo was launched three years ago with $5 million in seed money before financing partners led by Diller and New York’s FirstMark Capital handed the startup $20 million. All of the original investors are providing more coin this time around.

“We said that we should expand,” Kanojia said, “and all the investors said, ‘Great idea.’ They said, ‘Expand faster.'”

With the company spending heavily now, it’s way too early to predict when Aereo will turn a profit, he said.

Beside broadcast fare, Aereo has inked a deal with Bloomberg Television and is in talks with other programmers.

“We think the opportunity is to use this as a starting point and let interesting people come in and provide their content. From the consumer point of view, Netflix would be an obvious partner,” Kanojia said.

Aereo is one of the many options fueling fears of cord cutting, as consumers drop cable and satellite subscriptions for Web fare. It also threatens key retransmission revenue for broadcasters, which charge traditional distributors a fee to carry their local signals.

Kanojia said about half of Aereo’s subs so far are people under 30 who have never had cable or satellite subscriptions.