Barry Diller’s Start-up TV Service Aereo Raises $34 Million As It Expands Nationally

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Barry Diller/ Getty

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Yesterday media mogul Barry Diller’s clever TV re-distribution start-up Aereo announced that it has closed a new US$34 million Series C round of financing.

The new money will support Aereo’s rapid nationwide expansion as it scales up its TV service beyond its existing ten cities – New York City, Boston, Atlanta, Miami, Salt Lake City, Houston, Dallas, Denver, Detroit and Baltimore. Just a year ago Aereo operated only in the city of New York so the company is indeed moving quickly.

Aereo’s innovative remote, cloud-based, antenna/DVR cluster technology takes free over-the-air broadcast signals and then completely side-steps the cable companies for the “last mile” in distributing them to consumers. The cable companies, and indeed the broadcast networks as well, are of course furious as they stand to lose huge advertising revenues if the service takes off and survives legal challenge.

Accordingly the cable industry has now litigated against the Aereo concept in a case that has quickly gone to the Supreme Court of the United State to decide on the grounds that Aereo is engaged in the illegal re-transmission of broadcast signals. Quite how the case got to the list of cases the Supreme Court may potentially hear so fast is also perhaps an interesting question given the time such litigation can often take.

Aereo claims it is simply in the hardware business offering a new and innovative way of hosting thousands of tiny antennas in antenna-warehouses that then stream the programmes they receive individually from the air waves, to their clients over the internet, thus getting round legal restrictions on the retransmission of over the air broadcast signals on a “one-many” basis.

With the recording capability Aereo, consumers can also pause and rewind any program that they are watching live, or save a program for future viewing.
For the new investment round Barry Diller’s own media investment firm IAC InterActiveCorp, which controls the company, was joined by media investor Gordon Crawford and Himalaya Capital Management, as well as existing investors Highland Capital Partners, FirstMark Capital and others.

According to controlling shareholder Barry Diller young people, he says, aren’t interested in subsidizing other content that they aren’t interested in, which is the way that the cable industry packages are currently set up so he is just giving them what they want.

According to him, such à la carte programming, especially piped over the internet to your computer, to your mobile device or to your television set hooked up to your computer, will increasingly become the future of media consumption.

Aereo does this with a very clever trick that has huge warehouses full of tiny rabbit’s ear antennas with each one dedicated to an individual subscriber, who then gets the signal over the internet to his computer or television set.

Aereo current pricing begins with basic membership begins at $8 per month, for access to Aereo’s cloud-based antenna/recording technology and 20 hours of DVR storage. For an additional $4, consumers can then upgrade their membership and receive 60 hours of DVR storage for a total of $12 per month. Aereo even throws in the first month for free. The company states the technology even works on ‘smart’ devices from tablets to phones to laptop computers and is already supported on iPad, iPhone, iPod Touch.

“Aereo experienced tremendous growth in 2013 and we expect 2014 to be another blockbuster year. Last year at this time, Aereo was launched in only New York City. Today, Aereo is available in 10 markets and will grow to 15 by the end of the quarter, ” said Aereo’s founder and CEO Chet Kanojia, who continued,

“Aereo has scaled very quickly in 365 days and this additional funding will allow us to maintain this rapid pace of growth. We are thrilled to have a world-class group of investors who believe innovative, cloud-based technologies, like Aereo, are the future, ”

The Supreme Court is expected to decide later this week whether to grant review to a number of cases including the broadcasters’ and cable companies’ challenge to the legality of Aereo.

When the lawsuits were first launched Barry Diller himself seemed to welcome them, saying this brought huge amounts of publicity to the company which it might otherwise have taken much longer to attract.

For its part Aereo itself also seems to relish the litigation, saying in December, “While the law is clear and the Second Circuit Court of Appeals and two different federal courts have ruled in favor of Aereo, broadcasters appear determined to keep litigating the same issues against Aereo in every jurisdiction that we enter. We want this resolved on the merits rather than through a wasteful war of attrition.”

The disruption of established businesses through the power of technology and innovation has been a recurring feature of the last twenty five years, and clearly there may be plenty more yet to come if this example is any indicator.

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