You will be redirected back to your article in seconds

Why Aereo Didn’t Try to Exploit CBS-Time Warner Cable Fight

Internet TV startup Aereo sat on the sidelines during the monthlong blackout of CBS on Time Warner Cable instead of trying to win over disgruntled cable customers because it didn’t want to build capacity that would go unused after the dust had settled, according to Aereo CEO and founder Chet Kanojia.

Aereo’s business is similar to that of a hotel, according to Kanojia, speaking Tuesday at Goldman Sachs’ Communacopia conference in New York: The company installs capacity and rents that out to consumers.

“If I get a million people who want rooms for one night, and I know you are going back to your boyfriend or girlfriend the next night, I’m left with all these empty rooms,” he said to explain why Aereo didn’t actively market the service during the CBS-TW Cable feud. “We very purposefully ignored the debate.”

To extend the hotel metaphor, major TV broadcasters would contend Aereo is illegally outfitting those hotel rooms with their furniture.

Broadcasters including CBS, ABC, NBC, Fox, Univision and Hearst Television are suing the company for copyright infringement. Aereo so far has successfully defended itself from legal challenges seeking to shut it down, but lawsuits against it are pending.

A similar service, FilmOn X, was ordered to shut down last week; FilmOn is appealing that decision.

Aereo has repeatedly tried to argue that its service and legal situation is different from FilmOn, which previously called itself “Aereokiller.” Kanojia took issue with the comparison between the two companies, saying in the FilmOn cases “there’s never been discovery, there’s never been an establishment of facts.”

It could take another year to have Aereo’s legal issues resolved, according to Kanojia. Fox, for one, has said it willing to appeal the case to the U.S. Supreme Court.

Kanojia claimed that the legal precedent Aereo is basing its defense on — a ruling upholding Cablevision’s network-based DVR service, which had also been challenged by content owners on copyright grounds — has implications for other industries. The Google Drive file-storage service, he claimed, relies on the Cablevision ruling.

“To stop Aereo, you’d be stopping entire industries,” he said.

For now, because Aereo isn’t paying TV broadcasters for programming, the company is able to build a very high-margin business.

Kanojia said it costs Aereo less than $2 per month per subscriber in infrastructure costs to deliver the service, which provide live and recorded TV. Aereo charges $8 or $12 monthly for the service, with 20 or 60 hours of DVR recording space, respectively.

“If the (subscriber) trajectory today continues to hold or accelerate… it’s  a very, very good business,” Kanojia said.

At the conference, Kanojia said Aereo plans to expand to four more cities — Columbus and Cincinnati, Ohio; Indianapolis, Indiana; and San Antonio, Texas — with launch dates to be announced.

Those are in addition to the 22 markets the startup has been targeting for deployment in 2013 and 2014. Aereo to date has launched the service in New York City, Boston, Atlanta, Salt Lake City, Miami, Houston and Dallas.

In the last three to four months, Aereo has grown its subscriber base tenfold, Kanojia said, although he declined to provide specific numbers. In addition, he claimed that nearly 4% of visitors to Aereo’s website convert into paying customers.

Aereo’s customers are typically between 25 and 45, and 65% are men. The median income of Aereo subscribers is around $100,000 annually, Kanojia said, and half of them have pay-TV subscriptions.

About half Aereo’s users primarily access the service on a TV, via a Roku set-top or Apple TV box via AirPlay with another iOS device. Almost 80% of the service’s video consumption is indoors.

Aereo, which has just over 100 employees, has raised $63 million from investors including IAC, FirstMark Capital, First Round Capital, Highland Capital Partners and High Line Venture Partners.

Popular on Variety

More TV

  • Roma Cinematography

    'Mission: Impossible - Fallout' and 'Roma' Win LMGI Awards for Motion Pictures

    Two major 2018 releases – actioner “Mission: Impossible – Fallout” and critics’ darling “Roma” – were honored for film location work by the Location Managers Guild International at a ceremony this evening at the Eli & Edythe Broad Stage in Santa Monica. The 6th Annual LMGI Awards also recognized “Chernobyl” and “Tom Clancy’s Jack Ryan” [...]

  • Viacom Channels Grab 'Seinfeld' Cable Rerun

    Viacom Channels Grab 'Seinfeld' Cable Rerun Rights

    Viacom has sealed a deal with Sony Pictures Television for the cable rights to “Seinfeld” starting in October 2021. The deal comes on the heels of a blockbuster new deal between Sony and Netflix for the streaming rights to the beloved NBC sitcom that also begins in 2021. “Seinfeld” reruns have been a staple of [...]

  • Soho House

    Soho House Lands In Downtown Los Angeles

    Warner Music, Spotify and Lyft are poised to welcome a new neighbor to downtown Los Angeles’ Arts District with Soho Warehouse, the third California outpost of the Hollywood-loved members-only club — and the largest North American opening to date. Hot on the heels of the Soho House Hong Kong debut earlier this summer, the private [...]

  • Elite Season 2

    San Sebastian: Spain’s SVOD Players Debate Competition, Brand, Talent

    SAN SEBASTIAN  — Executives from HBO, Netflix, Amazon and Movistar+ and “Elite” co-creator Darío Madrona took to the stage to field questions on the Global Impact of Spanish Series. Here, briefly, are five takeaways: 1.Spain First “La Casa de Papel” was watched by 34,355,956 Netflix accounts over its first seven days,  after a July 19 [...]

  • Samsung Makes Bid to Keep Viewers

    Samsung Makes Bid to Keep Viewers From Skipping Fox Ad Breaks

    Fox is hoping to knit together the seconds-long divide between a TV program and the commercials that support it. During ad breaks for a few football broadcasts, tomorrow’s run of the Emmys and Wednesday’s season premiere of “The Masked Singer,” the network will kick off ad sessions with special show promos that display artistic renderings [...]

  • Patria

    HBO Europe Unveils ‘Patria’ Footage to Captive San Sebastian Audience

    SAN SEBASTIAN — Amid large expectation, HBO Europe has revealed first footage giving a first sense of tone and pace of its Spanish original series “Patria.” A packed-to-overflowing press conference on Saturday morning at the San Sebastian Festival can be read as one sign of the potential popularity of the eight-part series. The panel sneak-peek [...]

  • Topic Studios

    Layoffs Hit Topic Studios as TV Division Relocates to West Coast (EXCLUSIVE)

    A small round of layoffs has hit Topic Studios this week in the television division, insiders familiar with the company told Variety. One of the insiders said three executives at the New York-based producer and distributor are out: senior vice president of scripted programming and Viacom alum Lisa Leingang, vice president of development Mona Panchal [...]

More From Our Brands

Access exclusive content