Streaming TV, The Legal Way

Unlike FilmOn, Aereo is rebelling ... quietly.

Since launching his service in March in New York, Aereo founder and CEO Chet Kanojia has had to fend off the skeptics. Not just broadcasters, who brought a big copyright infringement lawsuit against the company, but also certain business analysts too.

Like Alki David, Kanojia is an immigrant, born in India, to a family in the international cement business. He came to the U.S. in 1991 around the same time as Alki. But that's where the similarities end.

"I've always been a tinkerer," says Kanojia, who has a Ph.D. in computer systems engineering and started up a company, Navic Networks, that offered real-time audience data to such cable companies as Time Warner, Charter and Cox. He sold the startup to Microsoft before seeing his "opportunity" when a 2008 appellate court decision blessed a remote-storage DVR introduced by Cablevision against the objections of content holders.

In the wake of that decision, he launched Aereo, which some politely have called an "insane" system of thousands of tiny antennas, each assigned to individual subscribers to give them the ability to see live TV on digital devices, or what he describes as "DVR in the cloud." He raised $20.5 million in seed investment, including millions from Barry Diller, who said that when he first heard Kanojia pitch Aereo, his team "spent a lot of time and a good amount of money trying to find, legally and technically, what was wrong with it."

Aside from the "possibility of being disruptive," Diller's investigation came up empty -- and when broadcasters asked for an injunction, a New York federal judge came to the same conclusion.

Aereo hardly had much time to celebrate when one skeptic, Frost & Sullivan analyst Dan Rayburn, wrote a column predicting that Aereo had "no shot" at surviving, citing high infrastructure costs and the need for a massive subscriber base. "No shit," responds Kanojia. "I find it fascinating that the key piece of criticism is we are going to need more money, and I sort of look at them: 'Did you just figure that one out?' "

Aereo is in negotiations with several cable nets -- Kanojia won't say which but says they're household names -- to offer what essentially will be an "a la carte" menu of channels costing about $2 to $4 each. (Aereo would get a cut of the money passed along to the networks.) Kanojia wants to service those who don't understand why they're paying $100 a month for clunky equipment and a dial glutted with channels they don't want. Says Kanojia: "We're going after that irrationality. … If the technology is the impediment, we can fix that."

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