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When Aereo launched in February 2012, Barry Diller and other investors in the streaming TV service spoke hopefully of freeing programming from a closed network. Were they too optimistic?
Aereo scored $95.6 million in venture equity despite a legal bull rush from television networks who contended the company was violating their public performance rights. Remarkably, $33.5 million of Aereo’s funding — more than a third — came in October 2013 as the case was nearing the Supreme Court. The high court hadn’t yet delivered its near death knell. In Aereo, they thought they had a technology that would disrupt the billions of dollars spent on cable and satellite service.
On Thursday, Aereo declared Chapter 11 bankruptcy, and according to the debtor’s court documents, the upstart had burned through most of its funding. Aereo counts $20.5 million in assets but just $4.6 million in cash on hand. That’s against $4.2 million in undisputed liabilities. Level 3, Quality Technology Services and Google are the three biggest creditors. Law firms come next.
The company is of course still facing liability for allegations of copyright infringement (though the broadcasters’ lawsuit will automatically be put on hold thanks to the bankruptcy filing) and remains hopeful about the future, stating in one filing, “If the FCC elects to permit internet transmission of local linear broadcast channels, then the Debtor, assuming its continued viability, expects to be able to operate profitably within that framework.
However, that will come too late for the 74 unfortunate employees in Boston and New York who were laid off from the company last week. Like the investors, they hitched themselves to the wrong wagon, although Aereo is attempting to get the bankruptcy court’s approval to pay them the salary and benefits promised.
In truth, Aereo never surpassed 80,000 subscribers, according to documents filed with the Copyright Office. That’s something to keep in mind before Aereo becomes an exemplar of promising technology killed by the stubbornness of the establishment.
Yes, Aereo was still in the growth stage and company executives like chief executive Chet Kanojia said the company could be profitable with even a low number of subscribers. According to the bankruptcy papers, Aereo was grossing over $3 million from its consumers before ceasing its operations last September. However, there might have been 80,000 news articles written about Aereo in its two years of operation. If anyone keeps a measure of publicity to consumer traction, Aereo would probably score very low.
The company is now in the hands of lawyers. Lots of them. In fact, there are six firms cleaning up the affairs of Aereo. There’s Brown Rudnick, handling the bankruptcy. There’s Fish & Richardson as well as Durie Tangri, still defending the company against broadcasters. There’s Houston & Associates, managing the company’s patent portfolio. And finally, there’s Constantine Cannon, advising on FCC regulatory matters, and Womble Carlyle Sandridge & Rice, doing the same with the Copyright Office, as Aereo attempts to pull itself out from bankruptcy with new hope about the future of television.
Correction: Original post said that Aereo had lost at the 2nd Circuit. The company prevailed before the injunction was overturned by the Supreme Court.
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