Aereo CEO Chet Kanojia Says CBS-TWC Fight Means 'Validation'

4:38 PM PST 07/22/2013 by Eriq Gardner
Chet Kanojia

The digital upstart executive also says that Aereo can be profitable with a low number of subscribers.

If Time Warner Cable can't reach an agreement with CBS by Wednesday on a new retransmission agreement, the cable company might have to pull the network from its system. If so, a TWC spokesperson has let it be known that it would be recommending Aereo to New York subscribers.

Aereo is the controversial tech service that runs an antennae farm that captures over-the-air stations and relays the signals to its subscribers' digital devices. The company is currently battling all of the major TV networks in court.

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Speaking Monday at the Fortune Brainstorm Tech Conference in Aspen, Colo., Aereo CEO Chet Kanojia said it would be a welcome development.

"Wouldn't that be a change?" he asked rhetorically. "That would be such a validation that the cost structure of this industry is getting to a point that the cabal is now questioning that structure."

Konojia also predicted more fights between programmers and distributors -- referring by example to Cablevision's lawsuit against Viacom -- as leading toward more "shifts."

Aereo still hasn't released numbers about its traction among consumers, leading many in the TV industry to conclude that it hasn't gotten many people to sign up for a service that costs about $8 a month. For example, earlier in the day, during a conference call after a second-quarter earnings announcement, Gannett chief executive Gracia Martore said that Aereo was “extraordinarily inconsequential" to its TV broadcast business.

Nevertheless, at the Brainstorm conference, Kanojia gave some insight into how the company plans to make money and the method by which it has rolled out its service market-by-market. Up until now, it's been commonly assumed that Aereo has been moving slowly with an eye on being legally careful, but there could be another reason for Aereo's crawl across the nation.

"Where we pre-announce, that gives us guidance on the initial capacity we need," he said.

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By allowing people to pre-register, Aereo gets an idea of what it needs to build by assuming something like a 70 percent conversion rate. Thus, if 10,000 people pre-register, Aereo rolls into a market like Utah -- where it just announced it would be launching soon -- and builds enough antennas to support 7,000 subscribers.

Konojia said that the economics of his business meant that the company didn't "have to bet the farm on a single market," that its model meant "you could turn a profit at a very low subscriber count in each market. If you do it 50 times, or 40 times, you have a very meaningful business."

That said, to repay the tens of millions of dollars that investors like Barry Diller have put into the company, Aereo will likely have to eventually become a consumer hit. Kanojia said he hopes that in about five years, a good percentage of the TV-watching population signs up for the service. Being ambitious, Aereo's chief pegged the target at 25 percent market penetration.

E-mail: Eriq.Gardner@THR.com
Twitter: @eriqgardner

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