Aereo CEO Chet Kanojia discusses his closely watched legal battle with TV broadcasters
Aereo founder and CEO Chet Kanojia is “confident” in his company’s case as the upstart video firm prepares to defend itself in a Supreme Court battle against the nation’s top TV broadcasters, he told TIME in an interview on Sunday.
Aereo, which launched in February 2012, uses thousands of dime-sized antennas to pick up free, over-the-air TV signals, which it sends to customers over the Internet for a monthly fee starting at $8. The startup has infuriated the major broadcasters, including NBC, FOX, ABC and CBS, which sued the company right after it launched, charging that the service is illegal because it doesn’t pay to pick up the signals it streams to users.
The broadcasters have warned that if Aereo prevails, they could yank their primetime shows from free TV and move them to pay channels like Showtime. The National Football League and Major League Baseball have threatened to take high-profile broadcasts like the Super Bowl and World Series to cable.
The outcome of the case could have significant ramifications for the future of Internet streaming, cloud computing, and the TV industry itself. The broadcasters, which last month filed their brief with the Supreme Court, say that Aereo’s service amounts to theft because the company doesn’t pay “retransmission fees,” unlike cable and satellite providers, which fork over billions for the right to offer popular TV programming to their subscribers. Aereo’s response brief is due on March 26 and oral arguments are set for April 22.
Last year, federal courts in New York and Boston agreed with Aereo’s argument that it is transmitting legally protected “private performances” to individual users over their own leased antennas, based on principles established by the 2008 Cablevision decision, which allowed remote-storage DVR technology. But last month, a federal judge in Utah sided with the broadcasters, increasing the urgency for a Supreme Court resolution. On Monday, Aereo, which already operates in 13 cities, will launch its service in Austin, Texas, just days before Austin’s SXSW Interactive technology conference.
In the interview, Kanojia, who sold his previous company, Navic Networks, a developer of TV advertising technology, to Microsoft in 2008 for a reported $250 million, described the origins of Aereo, how the service works and why he believes it is legal. Kanojia also discussed the consequences for technology innovation if Aereo loses, the broadcasters’ threat to move their shows to cable, and controversial comments made by a federal judge who described Aereo as a “sham” and a “Rube Goldberg-like contrivance.” The interview, which was conducted by phone, has been lightly condensed and edited for clarity.
TIME: What was your inspiration for starting Aereo?
Kanojia: At my previous company, we saw that the pattern of TV usage was that people had hundreds of channels on their cable boxes but only watched seven or eight channels in a given household. And at any given time, 50% of the usage was broadcast television, including local and network broadcasts, which is obviously available using an antenna, so that’s kind of when the lightbulb started going on. We saw that there’s a lot of waste in front of the consumer, and that consumers are always unhappy with the value and price they get out of the traditional television packaging model.
If you ask people how many love their cable company, the only people who say yes work for the cable company. So we knew there was an opportunity to serve consumers differently. If you could make a smart antenna that gets consistent reception for consumers, which they could access online and use on any device, they could get it for a fraction of the price that they are today forced to pay [for cable]. And as people’s media habits are changing, they could combine that on the same device with a Netflix or Hulu subscription. That would be a winning proposition for people because the combination would be $16 to $20 per month versus the $200 they had been paying.
TIME: How does Aereo work from a technical standpoint?
Kanojia: Anyone can go out and buy an antenna and stick it on their roof, and if they have a good line of sight to the transmission location they can pick up the signal. What we do is miniaturize the antenna to the size of a dime so we can pack hundreds of thousands of them into a small location, and then lease the consumer an antenna, just placed remotely. So each consumer gets their own antenna, and then they decide what they want to watch. We lease the technology to the consumer, and then the consumer decides if, when and how they choose to tune in to whatever channel they want. The pitch to the consumer is simple: The antenna is just placed remotely, and nothing else has changed.
TIME: U.S. Judge Denny Chin was the lone dissenter in the Second Circuit, and called Aereo a “sham” and a “Rube Goldberg-like contrivance.” What did you think of that statement?
Kanojia: That was an unfortunate characterization, in my opinion. Based on the Cablevision remote DVR verdict, a one-to-one relationship between the consumer’s copy or the antenna driving the stream to the consumer is what the law requires. We looked at that verdict and set out to comply with the law to the fullest extent possible, and we created a great technology that is solving a real consumer problem and bringing choice to the marketplace. It’s been proven that the technology functions as we describe it, and we’re proud of the fact that we engineered a technology to serve a consumer purpose that is fully compliant with the law.
TIME: Why is Aereo legal? Explain why the service is a “private performance.”
Kanojia: Nobody disputes the fact that a customer can have an antenna. Nobody disputes the fact that a customer can make a recording for herself or himself in their home, and as a result of the Cablevision case, they can make a recording in a remote location as well. Nobody is disputing that this system or combination of technologies that lots of companies sell today and make a profit on is perfectly legitimate. The debate is about how long the wire is between the user and the source of their recordings.
What the Second Circuit found in the Cablevision case — and the Second Circuit found that Aereo prevails on its merits as well — was that when a customer creates their copy and streams it to themselves under their own volition, and can decide whenever and however to do it, that constitutes private conduct. The stream that originates from that private conduct under their private control is a private performance. Let’s say I have a multi-room DVR that is sitting in my basement, and I’ve got six wires coming out of it going to six different rooms. I am streaming that content to myself and that’s a private performance. The relationship between the stream or the copy to the viewer is a one-to-one relationship at all times.
TIME: What would be the broader consequences for innovation and technology if Aereo loses the case?
Kanojia: The biggest impact would be on cloud computing in general, and specifically, cloud-based storage services. Here’s an example. You recorded a show off of your antenna and you’d like to be able to watch it on any device you want. The same goes for a piece of music or an e-book. It doesn’t really matter what the media is, the statute covers everything. Then you say I’m going to take all this stuff that I legitimately acquired, because I have the right to [receive] broadcast television and I purchased this song and I purchased this e-book, and I put it in my Google Drive, which is a cloud-based storage solution. Then I choose to stream it to myself whenever I want. That would be deemed illegal if Aereo is not legal.
That would be very serious. This is where we have a little bit of faith and confidence, because historically, technology has moved the needle forward and created more opportunities for everybody involved, and we have the same belief here. If Aereo is continued to be allowed to operate, it will create more opportunitiesfor everybody.
Here’s another example. Cable companies today are building out network DVRs, whether it’s Comcast, Cablevision or others. Why? Because it’s a heck of lot more cost-effective for them, and it results in a better experience for the to have a network DVR. Throughout the process, the courts didn’t find that there was any distinction between Cablevision’s technology and Aereo’s technology from a factual perspective. So that means if Aereo is not allowed to continue, neither are network DVRs, which would be a huge step backwards for a lot of these industries.
TIME: Some broadcasting executives have warned that if Aereo prevails, they might pull free, over-the-air TV signals and move popular programming to cable? What do you make of that?
Kanojia: I don’t believe that to be a serious threat, just from a business perspective. According to the NAB [National Association of Broadcasters], there are nearly 60 million people who are using over-the-air access. So the networks would have to make a business decision that they are willing to cut off 60 million people.
Are they going to disenfranchise 60 million people just because they want to make more money, notwithstanding the fact that 90% of their revenue is advertising? Nielsen has said it is beginning to measure the audience of technologies like Aereo, in terms of the audience they bring. They would be ignoring the fact that Aereo is helping them increase their audience, because last I checked no 25-year-old is running out to sign up for a cable connection. But with Aereo they are watching quality television, and they have a legitimate way to get that television without resorting to piracy, because these people aren’t interested in paying a $200 bill.
Most importantly, they would essentially be killing local broadcasting because local broadcasting depends on network television to bring it an audience. So from a business imperative, a business rationale, and their mandate to program in the public interest, they would be running afoul of all of these things, so I don’t find that argument persuasive at all.
TIME: Do you think Aereo will prevail in the Supreme Court?
Kanojia: It would be inappropriate for me to forecast anything or presume anything, but we think the logic that we have laid out is very compelling, sound logic. We are confident in the merits of our position and we are eager to find out what the Supreme Court thinks.