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