What's The Right Hype Level For Aereo?

by David Goetzl, Sep 21, 2012, 5:14 PM

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With Aereo, there’s an entertaining contrast between funder and fundee. Barry Diller, the chairman of financial backer IAC, has been a big-talking and provocative champion of the service, which streams live broadcast channels to mobile devices. Company CEO Chet Kanojia is low-keyed and reticent.

The juxtaposition was on full display Friday as Kanojia mentioned Aereo's plans to launch in 12 to 15 additional markets (it’s only in New York now) within 12 months or probably less. He seemed to view it as sort of ho-hum, speaking about how New York has been “a great learning experience” – a chance to ensure the system is technologically sound.

Diller would have been trumpeting how broadcast networks need to run scared.

Kanojia, who appeared by himself at an investor event, was asked whether Aereo would begin offering content beyond local stations. He mentioned there have been some deals with announcements on added programming coming.

Diller would have been trumpeting how broadcast networks need to run scared.

Would Aereo work with cable operators to try and help them circumvent payments to CBS, Fox and others?

Nope. Kanojia said “the focus is exclusively the consumer” and Aereo is “not in the business of helping somebody resolve their business disputes with someone else.”

Diller would have been trumpeting how broadcast networks need to run scared.

So far, Aereo is only accessible on Apple devices such as the iPad and iPhone, but that will soon expand to PCs and then Android smartphones. As Kanojia implied, that could open up opportunities to view live TV at work -- even in meetings.

Diller would have been trumpeting how broadcast networks need to run scared.

Broadcast networks view Aereo, which offers DVR functionality, as a threat to their carriage fees and ad dollars. So, they’ve taken the start-up to court. A judge denied their request for a preliminary injunction and now they’re appealing, while continuing to move towards a trial to shutter it.

The confident Diller relishes the opportunity to needle the establishment. During court testimony, Konojia looked pretty agonized.

(By the way, if there is a perception – and why wouldn’t there be? -- that Diller and IAC are the only gravy train for Aereo, the company has multiple other venture capitalists behind it.)

Aereo officially launched in August by invitation only, keeping with its strategically mellow marketing, where it is looking to appeal to the tech-savvy underbelly and recruit members to be evangelists. That approach continued Friday as Aereo handed out coffee to diehards who lined up early to get the iPhone 5 at a New York Apple store.

Kanojia joked about Aereo’s “non-existent marketing.” Diller had previously indicated a big-time push would be coming.

Aereo offers an $80 annual subscriber fee, along with plans that run between $8-$12 a month, and there’s a $1 day pass with three hours of DVR storage space.

“The goal is as many pricing options as we can that will fit the consumer without confusing them,” Kanojia said.

Aereo doesn’t release numbers on subscriber rolls. But the company says half of its early users have indicated they continue to pay for TV service. Whether the other half are cord-cutters or have never paid for TV isn’t known.

About 75% of early users have indicated they use Aereo indoors. That would suggest a lot of cord-cutters or cord-nevers are gravitating to the product, using it in lieu of a TV.

Kanojia doesn’t appear to want to suggest Aereo could grease cord-cutting. Maybe that’s influenced by the current litigation or a desire to partner with cable operators in some fashion.

Clearly, though, when Aereo does start marketing – and it will need to do something to make a splash in new markets – positioning the service as a complement to Netflix and Hulu for cord-cutters would seem to be intuitive.

But there are two other benefits with potentially wide appeal worthy of emphasis: the $1 day pass and chance to dial up live TV on a whim anywhere. And they’re related.

Want to watch the Super Bowl, but no TV? Spend a buck.

Cut the candy bar and watch animation domination on Fox for the same price.

At the beach, missing the game? Go Aereo.

Of course, Aereo may be five years late. Local stations are starting to offer the same live feeds on mobile devices. And, TV Everywhere is growing for those who still have the cord.

Maybe broadcasters are too worried. Diller would say they need to be more so. 

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