Video services

Aereo Makes Cord-Cutting Bid in NYC

A startup called Aereo is targeting prospective cord-cutters in New York City with a new service that relies on a central array of tiny, thumb-sized antennas to deliver HD broadcast TV channels to Internet-connected boxes, smartphones and tablets.

Under its approach, which will probably test the patience of broadcasters and their lawyers as well, Aereo assigns customers to miniature, remote (and proprietary) antennas installed at a centralized facility. This facility also houses a network-based DVR that will let customers record and store up to 40 hours of programming. Aereo (formerly Bamboom Labs Inc. ) plans to kick off its service in NYC on March 14 and sell it for $12 per month (Aereo's offering it on an invite-only basis until then). Aereo claims its system can receive broadcasts from the majors (NBC, ABC, CBS, Fox, etc.), and more than 20 local channels, which are relayed to customers via the Internet.

Aereo and its "Live TV. No cable required" motto is getting off the ground with anticipated support for most Web browsers, and integration with a wide range of devices, including the iPad, Amazon.com Inc. (Nasdaq: AMZN) Kindle Fire and other Android units, Apple TV, Roku Inc. boxes, and PCs and Macs.

And it's got access to some serious scratch and a head-turning board member in Barry Diller. Diller's IAC/InterActiveCorp (Nasdaq: IACI) is heading up Aereo's $20.5 million Series A round. Aereo, which is run by former Navic Networks (an interactive advertising firm that's now part of Microsoft Corp. (Nasdaq: MSFT)) chief Chet Kanojia, has raised about $25 million in all. (See Microsoft Nabs Navic .)

The service is still a month away from its official launch, but BTIG Research analyst Richard Greenfield got an early look and posted this video demo showing Aereo in action.

Why this matters
Aereo represents a potentially troublesome competitor for New York area pay-TV providers such as Verizon Communications Inc. (NYSE: VZ), Time Warner Cable Inc. (NYSE: TWC) and Cablevision Systems Corp. (NYSE: CVC), because Aereo's pricing, packaging and capabilities could be especially appealing to cord-cutters. Greenfield, however, believes some consumers might also be interested in tacking Aereo's service to their existing pay-TV packages.

Aereo is also entering the picture as cable operators and broadcasters continue to battle over retransmission deals that, at times, have left cable customers without access to some major broadcast channels. Greenfield wonders if MSOs might utilize Aereo to deliver broadcast content in local markets without having to pay steep retrans fees.

Then there's that nagging "Is this legal?" question to consider. Aereo's approach shares some similarities with ivi Inc. , which piped live TV channels via the Internet until a court ordered it to shut down amid copyright challenges by programmers. Aereo believes it's on the up-and-up because its customers will be accessing broadcast channels via their own private (albeit remote) antennas. Aereo is also limiting access to within the subscriber's designated market area (DMA).

"If Aereo is in fact legal, we find it hard to fathom that the traditional [MSO] bundle will survive and that retrans payments will continue to scale as broadcasters are expecting them to over the next several years," Greenfield noted in a blog post (registration required).

For more
Read more about cord-cutting, ivi's legal issues and Aereo's plans when it was still known as Bamboom.

— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 5:42:43 PM
re: Aereo Makes Cord-Cutting Bid in NYC

...when Aereo's service (at least in the demo) seems to run pretty well on an iPhone on AT&T's 3G network in NYC.  JB

SabrinaChow 12/5/2012 | 5:42:42 PM
re: Aereo Makes Cord-Cutting Bid in NYC

...about Innovation.  This is a very clever concept.  Every user has their own antenna in the cloud and the internet pipe is a coaxial cable extension to it.  If this gets launched in my area I'll jump on it quickly.

Traditional MSOs will now go the way of IPDR to bill the customers monthly for the bits across the cable modem in an effort to get back lost video revenue.  Comcast already has it in place, every other shop will now jump on board.  Wireless providers already charge by the bit. 

I would think Aereo should be working on some kind of compression mechanism for the video streams that maintains good quality video while reducing the bit rate and keeping the cable/wireless bill low.

shygye75 12/5/2012 | 5:42:42 PM
re: Aereo Makes Cord-Cutting Bid in NYC

So we move from rabbit ears to thumb antennas. Finally, PROGRESS!

Jeff Baumgartner 12/5/2012 | 5:42:41 PM
re: Aereo Makes Cord-Cutting Bid in NYC

I agree, this is a very interesting way to go about it, particularly in a dense city like NYC where good OTA digital TV signals may be tough to get. But, yeah, i could see a more aggressive move toward usage-based billing if we finally see a relatively cheap  OTT service with live broadcast TV component make a difference.  But companies like USDTV went after cord-cutters and cable nevers and they crashed and burned. And Sezmi ended up selling its assets.  What else is interesting here is that you don't necessarily need to invest in an additional box, unless that box is a Roku or an Apple TV, etc.  Connected TVs, tablets, PCs, etc., shoudl all be able to get this service.

But I will try to find out more about their compression scheme and what sort of speeds are required depending on the screen size.

And the network DVR is a nice kicker.  $12 screams value to me....even if part of it's about accessing "free" over the air TV.  JB



Jeff Baumgartner 12/5/2012 | 5:42:38 PM
re: Aereo Makes Cord-Cutting Bid in NYC

Oh, yeah. they are definetly giving this one a close look.  NAB isn't commenting yet, though. I don't think they have put in a cut for the bcasters since they are taking what's being offered for free over the air, but they have to be very concerned about the retrans implications.  Aereo is just in one market, but it's a high-profile doozy. JB



AESerm 12/5/2012 | 5:42:38 PM
re: Aereo Makes Cord-Cutting Bid in NYC

...about that need for compression. Just a thought: In Jim O'Neils' Feb 1 Fierce Online Video article on EyeIO he said he had spoken with the EyeIO execs who were in NY "meeting with potential clients." As with that start-up, the big names (Charles Steinberg, formerly of Sony, in EyeIO's case; Diller here) force you to take them more seriously. 

craigleddy 12/5/2012 | 5:42:38 PM
re: Aereo Makes Cord-Cutting Bid in NYC

Pretty innovative, but I'll bet legions of lawyers are poring over it this morning. 

Do the broadcasters get a piece of the subscription fee? Otherwise they'll be concerned about potential loss of ratings, retrans leverage, and their relationships with advertisers, producers and program syndicators.

Diller and the Aereo guys recognize the concern so I wonder how they'll make amends.     

DCITDave 12/5/2012 | 5:42:35 PM
re: Aereo Makes Cord-Cutting Bid in NYC

I note that the article's description of the company's target market is "prospective cord-cutters" instead of TV viewers or any broader demographic. A prospective cord-cutter, to me, is someone who is likely watching VoD content on something other than a pay TV system and looking to make that device/service the main source of video entertainment in the home.

That group of people (tech-savvy, motivated, likely under 45, not likely a sports fan, dissatisfied with pay TV enough to do something about it) is a pretty small demographic.

Diller usually doesn't bunt when he comes to the plate, so I'm wondering just how Aereo is really seeing as their end customer.

joanengebretson 12/5/2012 | 5:42:32 PM
re: Aereo Makes Cord-Cutting Bid in NYC


If broadcast TV signals are getting to customers through an Internet pipe, does the customer have to live in the NYC area? If not, it seems like you could use this as a way to get local channels from a distant market if you had some reason to do that (for example, if you moved away from the market you consider home). Might also be a good way to get TV broadcasts to remote rural areas where reception isn't very good.

Jeff Baumgartner 12/5/2012 | 5:42:30 PM
re: Aereo Makes Cord-Cutting Bid in NYC

I'd agree with that. There probably isn't a huge cord-cutting market for Aereo in NYC, but that will be one market they'll try to appeal to in the early going. I think they'll also be targeting the much larger group of pay-TV subs that would be interested in accessing broadcast TV programming on the go if they don't mind paying  $12/month for that. Of course, those they could gain access to all of their programming by buying a Slingbox, so there does seem to be some holes in Aereo's plan here. They hope to show consmers that another option exists, but they're definetely not the only option that will be out there starting in mid-March. JB  



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