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Aereo Tunes Web TV With Legal Angle

2/20/2012 12:01 AM Eastern

Will Aereo fly?

The startup, whose backers include media
mogul Barry Diller, is launching a subscription
service in New York next month
that provides live broadcast TV channels and
network-based DVR over the Internet for $12
per month.

It’s pitched as an over-the-top alternative
to cable TV — but it could be
broadcasters that mount a legal
challenge to Aereo’s plans.

The Aereo service is based
on dime-size antennas. In New
York, these are housed in giant
arrays somewhere in Brooklyn
that receive over-the-air TV signals
and transcode them in real
time for delivery to iPhones,
iPads and other devices, without
the need for a set-top box.

The company’s legal justifi cation:
Each antenna is dedicated
to an individual Aereo subscriber,
so the service isn’t subject to the same retransmission
laws that pay TV operators are.
Similarly, the DVR service — which provides
up to 40 hours of storage per account — allocates
dedicated storage to each user so as not
run afoul of copyright laws.

As Diller, chairman of Internet company
IAC, put it at Aereo’s launch press conference
last week: “Every little antenna essentially
has a consumer’s name on it.”

Asked whether the company expects to
be on the receiving end of litigation, Aereo
founder and CEO Chet Kanojia responded,
“We understand that there will be challenges
… We are building a
transformative business,
and there will
be challenges.”

Broadcasters have
sued TV-over-the-Internet
streaming services
before — and
won. Last year, a federal
district court
blocked startup Ivi
TV from streaming TV
station signals online
without retrans payments
to broadcasters;
Ivi TV’s appeal in
the case is pending.

The National Association
of Broadcasters declined to comment
on Aereo.

Aereo’s New York City members will have
access to CBS, NBC, Fox, ABC, CW and PBS,
as well as other local channels. The $12
monthly charge provides a dual-tuner DVR
service, to allow recording of two shows at
once. Customers must prove they live in the
New York area by providing a credit card
with a billing address in the region, and the
service is not accessible outside the boundaries
of the broadcast-designated market
area.

Aereo is expected to rely on the Supreme
Court’s 2009 decision not to review a ruling
upholding Cablevision’s right to offer a DVR
service “in the cloud.” In the lawsuit, which
was filed by a consortium of content owners,
an appeals court agreed with the MSO’s
argument that its Remote Storage DVR (RSDVR)
was exactly the same as a conventional
in-home DVR — with the key technical requirement
that each subscriber must have a
dedicated physical disk in the headend.

But another startup was unsuccessful in
using the Cablevision RS-DVR case as a defense.
Zediva, a startup that offered rentals
of DVDs streamed over the Internet, was
shut down last year after a copyright-infringement
lawsuit by the movie industry.
In an amicus brief siding with the Motion
Picture Association of America, Cablevision
said Zediva was more like a new VOD service
that offers individual movies for rent,
whereas the RS-DVR delivers the same service
a cable-TV subscriber could already get
in a different way.

‘RADICALLY TRANSFORM’

TV
Diller, who has joined Aereo’s board, is satisfied the service is legit. He said that after
months of vetting Aereo with “lawyers and
tech people,” he was convinced the solution
was not only viable but has the potential to
“radically transform that centricity of how
you receive television.”

Broadcasters have received governmentgranted
licenses to the airwaves for free,
Diller maintained, so the public is entitled
to “receive it for free.”

The company, formerly called Bamboom
Labs, is currently offering the service in
an invitation-only test, available only on
iPhones and iPads. Aereo plans to launch
the service publicly March 14, with a 30-day
free trial.

The service’s user interface is written in
HTML5, so it can be easily ported to other
devices, Kanojia said. The guide uses
listings data licensed from Tribune Media
Services. Aereo also lets users share and
chat about shows with other subscribers
via Facebook and Twitter.

Aereo has already tested the
service with Roku set-tops and
can deliver live TV to an Apple
TV box from an iPad via the
AirPlay feature.

Before starting Aereo, Kanojia
was founder and CEO of interactive
TV and advertising vendor
Navic Networks, which Microsoft
acquired in 2008.

Kanojia described Aereo as
a disruptive service that fundamentally
simplifies the way
people watch and share TV on
multiple screens.

“This is about the generation
growing up — they expect things
on their terms,” he said.

AT A GLANCE: AEREO

Description: Subscription service that delivers local broadcast TV stations
over the Internet to various devices

Initial market: New York, slated to launch March 14

Pricing: $12 per month, with 40 hours of DVR storage

Funding: $25 million

Employees: About 65

Investors: IAC, Gary Lauder, FirstMark Capital, First Round Capital, High
Line Venture Partners, Highland Capital Partners

SOURCE: Multichannel News research

September