Light Reading

Aereo Plans Faster Growth Amid Legal Drama

Alan Breznick
1/9/2014
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Despite the continuing legal efforts by the major US TV broadcasters to knock it out, Aereo is continuing on its merry way and showing no signs of slowing down.

In fact, Aereo Inc. , the video-streaming startup backed by former US broadcasting mogul Barry Diller that now operates in 10 American markets, intends to add five more by mid-February. It then plans to expand to another seven markets by the early summer, boosting its total market coverage to 22 regions, even as broadcasters attempt to take their legal blockade to the US Supreme Court. (See Aereo Fight Heats Up in DC.)

Beyond those plans, Aereo is looking to extend its reach further in the second half of the year. Speaking at the Citi Global investment, Media & Telecommunications conference in Las Vegas Wednesday, Aereo CEO Chet Kanojia said his company is scrambling to beef up its nationwide presence as quickly as possible because it knows that time is of the essence. "We don't want to end up winning the legal battle while losing the bigger battle," he said.

To further fuel its expansion plans, privately held Aereo just raised another $34 million in funding from a group of investors this week. With the fresh infusion of funds, the company has now raised close to $100 million in capital from its backers. (See Aereo Raises $34M .)

Kanojia indicated that more funding will likely be needed for Aereo to reach its goals of nationwide household and device coverage. As with online video providers, he said, it will take "a good deal of capital" for the company to "truly scale" its delivery infrastructure.

While Aereo has not disclosed any customer figures from its initial markets yet, Kanojia did reveal that the company needs just 6,000 paying subscribers to break even in any market. Aereo now charges customers $8 to $12 per month for its mix of local TV stations and cloud-based DVR service.

To his surprise, Kanojia said Aereo has learned from its early deployments that the majority of its customers are watching the service on their big-screen TVs, not tablets and other smaller portable devices. He estimated that 60% to 70% of subscribers are viewing Aereo's fare this way, which he considers a very promising sign. "That makes it a very stable product with a low turnover rate," he said.

Although it initially attracted mainly male techies, Kanojia said Aereo has seen its appeal broaden out to young families and young couples with limited disposable income. "It's speaking toward the value question and flexibility," he said.

As a result of these research findings, Aereo is now shifting its marketing efforts to focus more on big-screen users and young households, Kanojia said. In addition, he said the company is looking to develop more apps for customers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
1/13/2014 | 12:56:08 PM
Re: Supreme Court Case Be Damned
Yup. I agree. And I think they're going to win at the Supreme Court too. So it could be a very interesting market to watch. I wonder how many Aereo wannabes we'll see too. 
albreznick
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albreznick,
User Rank: Blogger
1/13/2014 | 12:54:22 PM
re:Aereo Growth
Good idea, Wanlord. I bet they're looking at that too. That could really rocket them from a niche service to something much bigger. 
wanlord
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wanlord,
User Rank: Light Sabre
1/10/2014 | 9:38:35 AM
re:Aereo Growth
Once they get through these legal hurdles, I think their next strategy should be less focused on having individual sign ups and work to integrate their stream with partners like Apple TV, Google, and other boxes. Having all of that combined is more reason to "cut the cord".  People don't want to pay individual bills for different content sources. I want everything in once place with one bill and one interface.
DOShea
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DOShea,
User Rank: Blogger
1/10/2014 | 12:14:27 AM
Re: Supreme Court Case Be Damned
They also don;t seem to be having any problem raising the money for expansion. If they do win in court, things could get very interesting very quickly on the customer front.
albreznick
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albreznick,
User Rank: Blogger
1/9/2014 | 6:02:49 PM
Supreme Court Case Be Damned
I have to hand it to the Aereo folks. They're not letting the prospect of extended litigation and a potential Supreme Court battle get in their way or slow them down. What I'd really like to know is how many customers they've signed up so far. I'll have more to say on what Kanojia had to say about retrans consent and related topics in a subsequent blog post.   
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