Chet Kanojia, founder and CEO of Aereo Inc., the new internet-based television service, says the potential market for the company could be thirty million to fifty million people who watch ABC, CBS, NBC, and Fox, but who don't want to pay for cable- or satellite-television packages with hundreds of channels and ESPN.
Aereo, now available in New York and launching in 22 markets this year, including Philadelphia, faces a big legal hurdle over whether its service violates federal copyright law by retransmitting network television signals without paying a fee.
But the company so far has persevered in the early goings of a lawsuit brought against it by Comcast Corp.'s NBC and other television networks in federal court in New York City.
"Let's not sit around and wait to be told what to do. Let's build a business," Kanojia said in a phone interview, after Aereo announced plans this week to expand despite the unresolved court case. He called Aereo, at just $8 a month, a "great consumer proposition."
Aereo assigns a tiny television antenna to each subscriber in a centralized location to catch over-the-air television signals. It makes digital copies of television shows and then streams the television content over the internet to subscribers' computers, tablets, and smartphones.
The company says it is not retransmitting television signals directly to consumers, but operating an antenna and cloud-based DVR (digital-video recorder) service controlled by the consumer, which the courts have found legal.
Aereo, industry experts agree, could be disruptive to the $150 billion pay-television industry by peeling away millions of subscribers and to the broadcast TV networks, which could lose billions of dollars in fees if Aereo's technology is ultimately deemed legal and copied.
Television networks are paid per-subscriber fees by cable television companies that retransmit television signals to users. Those fees are considered an important source of new television revenue for local news and entertainment. The fees will grow from almost nothing in 2005 to several billion dollars by 2015, according to research firm SNL Kagan.
But, if Aereo's technology is found to be legal, many believe, cable television companies could replicate it and avoid paying the television networks the fees.
Television sources acknowledge the threat, and some have described Aereo as a business model drawn up by lawyers. Dennis Wharton of the National Association of Broadcasters said: "We are optimistic that, in the final analysis, this will be viewed as a violation of copyright by the courts."
Rico says if they don't get their asses handed to them in court, Rico will happily sign up; he never watches most of the cable channels, and never ESPN...
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