Aereo Introduces New Pricing to Entice Customers

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NEW YORK - FEBRUARY 10:  Barry Diller attends the amfAR New York Gala co-sponsored by M.A.C. Cosmetics to Kick Off Fall 2010 Fashion Week at Cipriani 42nd Street on February 10, 2010 in New York, New York.

As its court case continues, Aereo rolls out a new pricing structure, including daily one-hour free try-outs.

Aereo, the upstart company backed by Barry Diller, has announced a new pricing structure that's intended to get consumers to try the platform that distributes TV digitally to computers and mobile devices.

The service is now being offered at different $8 and $12 monthly plans, or an $80 annual plan, or a $1 daily pass. In addition, the company is allowing consumers the ability to try out Aereo free each day for one hour continuously. At the moment, Aereo is only available in New York City, although Diller and other Aereo executives have signaled interest in rolling it out to other cities soon.

The new pricing structure comes three weeks after a New York judge disappointed TV broadcasters by denying an injunction against Aereo's service. The major copyright infringement lawsuit continues on appeal, but Aereo is taking advantage of all the free publicity that the court case has garnered to push its product.

Despite generating much hype over its business model, which includes thousands of antennas that capture over-the-air TV channels and DVR capabilities, the service thus far has returned underwhelming subscriptions. With $20.5 million in investment and a launch last March, Aereo only had 3,500 customers at the time of the injunction denial.

Aereo hopes that more flexible pricing, and a free tease of the service, will bolster the numbers. The announcement also comes during the Olympics, which has caused some non-cable subscribers like Slate's Matthew Yglesias to complain about not being offered a way to watch the Olympics online. In a press release announcing the new pricing, the company's chief executive hinted that sports enthusiasts are one target demographic for the service.

“We know that one size does not fit all, that’s why we’ve designed our new pricing structure to work for a wide variety of lifestyles,” said Aereo CEO Chet Kanojia.  “Whether you want a day pass to watch the ‘big game’ on your mobile device or an annual membership that provides you with 40 hours of DVR storage, we have a plan that works for you."

One analyst is positive about the news.

Richard Greenfield at BTIG Research writes in a research report that he suspects that Aereo's "on-going court case will be strengthened by helping consumers access public broadcasting signals at no cost and with no credit card required."

Other analysts have been more cautious.

For example, David Bank at RBC Capital Markets noted recently that prior legal precedent might not apply outside of New York. "if Aereo were to try to offer this service outside of NYC, the outcome would likely be much more negative," he wrote.

The broadcasters all say they expect to win at the 2nd Circuit Court of Appeal. The plaintiffs recently submitted a motion to expedite the process there. They wrote:

"This Court should grant Appellants’ motion to expedite the appeal to mitigate the harm that Appellants continue to suffer due to Aereo’s ongoing violation of Appellants’ exclusive rights under the Copyright Act. Although Aereo currently offers its service only in the New York City area, Aereo is expanding its service to other major markets nationwide. Indeed, the day after the district court denied preliminary injunctive relief, Aereo’s principal investor and board member Barry Diller announced that the company would “really start marketing” and would expand to most major U.S. markets by the end of 2013."

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