Aereo Tunes Web TV With Legal Angle

Micro-Antenna Startup Expected to Cite Cablevision RS-DVR Ruling

By Todd Spangler -- Multichannel News, 2/20/2012 12:01:00 AM

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