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Aereo Sets 22-City Expansion

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
1/8/2013
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Aereo Inc. has raised a $38 million second round that will help extend its broadband TV/cloud DVR combo into 22 more markets this year, theoretically reaching 97 million Americans.

Aereo has raised $63 million so far. The second round was led by IAC/InterActiveCorp and Highland Capital Partners.

Today Aereo only offers service in New York City, but the expansion will get under way this spring, Aereo CEO and founder Chet Kanojia said Tuesday during a Citibank conference in Las Vegas held alongside the Consumer Electronics Show.

Here are the cities Aereo is targeting for its first expansion phase: Minneapolis; Madison, Wis.; Cleveland; Providence, R.I.; Boston; Philadelphia and Pittsburgh, Pa.; Chicago; Salt Lake City; Denver; Kansas City; Baltimore; Washington, D.C.; Raleigh-Durham, N.C.; Atlanta; Austin, Houston and Dallas, Texas; Tampa and Miami, Fla.; Birmingham, Ala.; and Detroit.

Aereo's platform uses tiny antennas to capture free, over-the-air broadcast TV signals, transcodes them, and delivers them to customers over broadband. That's coupled with a network DVR. It also has a deal to stream Bloomberg TV, and is in discussions to carry more cable TV channels.

The expansion is predicated on how Aereo fares in its lawsuits, as major broadcasters are suing over copyright claims and want the service shut down. The broadcasters are worried Aereo's model will harm their ability to strike rich retransmission deals with pay-TV operators. (See Judge Keeps Aereo on the Air and Aereo Fights for Its Life.)

Aereo's Kanojia wouldn't forecast an outcome in the case.

Kanojia shed some light on what Aereo has learned about its customers so far. He says it’s a "50/50 mix," with half being "cord-cutters" and "cord-nevers," and the other half consumers pay-TV subscribers. Aereo has not disclosed a subscriber number, but he said about half of Aereo's customers use the product three to four times a week, with the reminder using it about two times per week. About 80 percent of usage happens indoors using Wi-Fi, he added.

Aereo will launch its first marketing campaign this quarter.

Kanojia also discussed Aereo's architecture in some detail, noting that it doesn't use a content delivery network and that it requires only 200 square feet of surface area to serve 350,000 subscribers. The larger scaling challenge, he said, is powering and cooling those sites.

The service is local, so Aereo doesn't have to worry about long-haul connections and can instead just simply lease fiber in its markets. Aereo's picture quality stands out, he said, because "we control the quality of that entire circuit."

— Jeff Baumgartner, Site Editor, Light Reading Cable

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jtombes
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jtombes,
User Rank: Light Beer
1/11/2013 | 7:45:41 PM
re: Aereo Sets 22-City Expansion
Right ho. I'm wondering what demand is for smaller bundle of content, and at what price points.
jayja
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jayja,
User Rank: Light Sabre
1/11/2013 | 1:08:55 PM
re: Aereo Sets 22-City Expansion
My guess:- Playing it safe.- If their argument is that they are merely locating antennae for their customers and using broadband in place of the cable from the roof top antenna to the TV then they will want to- - NO FOOLING - be offeringg the service within antenna range, presumably with no signal enhancement vs OTA.
craigleddy
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craigleddy,
User Rank: Blogger
1/11/2013 | 2:50:42 AM
re: Aereo Sets 22-City Expansion
The broadcasting industry has a long and largely unsuccessful history of attempts to rally station groups around a particular advanced technology -(even HDTV didn't come easily). So I wonder if Diller & crew tried to win over broadcasters with Aereo before moving ahead. Based on the broadcasters' track record, he probably gave it two seconds of thought and, as he famously responded after losing his Paramount bid, said: Next. - - --
wanlord
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wanlord,
User Rank: Light Sabre
1/10/2013 | 4:33:05 PM
re: Aereo Sets 22-City Expansion
The broadcasters are just mad because they didn't think of this first and now they can't-monetize-on advanced smart targeted ads, etc.
wanlord
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wanlord,
User Rank: Light Sabre
1/10/2013 | 4:30:28 PM
re: Aereo Sets 22-City Expansion
Jeff B, do you know more about how they determine "eligibility" ?
Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
1/10/2013 | 3:19:53 PM
re: Aereo Sets 22-City Expansion
Interesting, i have not thought about that... sure, go ahead and nest the really good stuff into the pay channels. That'll learn-'em.-- But I don't see that flying with the government...it might argue that such a move would be an abuse or misuse of those free airwaves. But I agree, somebody's going to pay the freight. JB
Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
1/10/2013 | 3:16:50 PM
re: Aereo Sets 22-City Expansion
It would appear so...but still interested to see how Aereo would do with its approach once it starts to expand and actually market the thing.- But we've seen these slimmed-down, no-frills cheaper alternatives flame out before...USDTV, Sezmi...

NOticed in the LA Times that Chet thinks he can get 5% to 6% marketshare. With 100M homes covered, that's quite a goal to put out there. JB
joanengebretson
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joanengebretson,
User Rank: Light Beer
1/10/2013 | 2:39:05 PM
re: Aereo Sets 22-City Expansion
I think it would be a real shame if Aereo were shut down. I believe a growing number of people are interested in OTT and over-the-air video as an alternative to cable but who don't have a roof antenna any more who could benefit from Aereo's offering. I'm hoping that they either win the legal battles or reach some settlement with broadcasters. Expanding to more cities means that many more people will be disappointed if Aereo is shut down -- and regulators will be that much less likely to do that.
Cooper10
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Cooper10,
User Rank: Light Beer
1/10/2013 | 1:27:38 PM
re: Aereo Sets 22-City Expansion
Pay TV penetration is ~90% of HHs - there is high demand at current price points.
jtombes
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jtombes,
User Rank: Light Beer
1/10/2013 | 2:50:33 AM
re: Aereo Sets 22-City Expansion
The extent to which Aereo succeeds in the market (apart from the courts) will show how much demand there is for a lower cost bundle of less --i.e. fewer channels of-- 'high quality, professionally produced content.'
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