Service had next to no subscribers as it struggled to sell customers on its role as a pricey cloud DVR for public TV

Aereo -- a once-promising New York City startup owned by InterActiveCorp/IAC (IACI), the internet company led by former broadcast executive Barry Charles Diller -- crashed and burned hard last month when the U.S. Supreme Court ruled that its business model was illegal.

The company had provided cloud DVR services which allowed customers to record and view -- at their convenience -- publicly broadcast TV.  Aereo insisted this didn't constitute "reselling" or "rebroadcasting" rival TV broadcasters' work.  However, that defense was weakened by the fact that Aereo's rates came at a significant premium ($8 USD/month for ~20 GB (20 hours of standard definition video)) over similar cloud DVR/storage services (indicating part of the value was in the ability to intercept broadcast content).

Aereo tried to strengthen its case by building a highly specialized backend with thousands of individual dime-sized antennas -- one per user.  It argued it was behaving no differently than any other viewer, and was simply providing convenience to its users.  The argument didn't impress in the end, though.
Chet Kanojia
Aereo CEO Kanojia poses with his company's backend hardware, which included thousands of dime-sized antennas.  Apparently only 77,000 customers bothered to subscribe. [Image Source: Buck Ennis]

In the aftermath of the Aereo's collapse, paperwork filed from the U.S. Copyright Office indicates it was pretty much a moot point, even if Aereo had won.  Even before it lost, Aereo appeared to see the writing on the wall and began filing requests with the U.S. Copyright Office to be treated as a cable broadcaster.  However, the outlook revealed was grim.   According to the filing, first reported by Re/Code, it had only 77,596 subscribers at the end of 2013.

Its top 3 markets were:
  • New York City, N.Y. -- 27,000
  • Boston, Mass. -- 12,000
  • Atlanta, Geor. -- 10,000
Aereo is continuing the fight, with the new legal plan looking to rebrand itself as a "cable" provider.  It writes:

Under the Second Circuit's precedents, Aereo was a provider of technology and equipment with respect to the near-live transmissions at issue in the preliminary injunction appeal. After the Supreme Court's decision, Aereo is a cable system with respect to those transmissions.

Aereo is getting creative and trying to survive legally by rebranding itself as a "cable broadcaster", while providing identical services. [Image Source: Aereo Blog]

According to a letter [PDF] obtained by CNBC, the Copyright Office granted provisional acceptance to the plan, but warned it likely would be rejected in the long run, writing:

Internet retransmissions of broadcast television fall outside the scope of the Section 111 license.

Reuters reports that the broadcast companies who sued Aereo called the scheme "astonishing".  They've asked a federal judge and the Copyright Office to summarily strike it down.

Even if Aereo were able to unfathomably survive, it looks like its business model is next to dead given the subscriber numbers.  Unsurprisingly it's reportedly exploring other options, including using its dime-size antennas in small set-top budget DVRs.

Sources: RE/Code, Aereo [PDF, 1], [PDF, 2], The Verge

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