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Summary:

Barry Diller’s latest investment in media disruption hasn’t even launched yet and it’s already in court. That’s part of the appeal of Aereo…

Barry Diller and Ali Velshi at SXSW 2012

Barry Diller’s latest investment in media disruption hasn’t even launched yet and it’s already in court. That’s part of the appeal of Aereo for Diller, chairman of IAC (NSDQ: IACI), who gleefully admits: “One of the reasons I love it is it’s going to be a great fight.” In a shades-of-Slingbox moment, he also demonstrated for the South by Southwest crowd exactly why broadcasters and multichannel distributors don’t like the latest broadband broadcasting concept, showing a few seconds of live TV and the “DVR in the sky” service that comes with it.

For $12 a month, Aereo is promising New Yorkers access to a remote dime-sized antenna that will stream broadcast networks live over broadband across devices, along with storage space on a cloud-based DVR. The company is housing thousands of the HD-quality antennas in data centers. The company has raised $20.5 million and is slated to launch as an invitation-only service in New York March 14. Fox (NSDQ: NWS), Univision and PBS are already suing to stop it.

Diller is a summa-cum-laude graduate of the old school who in another life might well have been one of the execs lining up against the idea of a service that bypasses cable and satellite to deliver broadcast networks to consumers. Now he’s the one claiming broadcasters “forgot a longtime ago” how they got a free broadcast license in the first place. “They have the right to say where and when they want programming they own to be displayed,” he admits. But the man who created Fox contends they don’t have the right to insist on intermediaries they approve as the conduit to consumers. “I don’t think it’s on the side of settled law or on the side of the angels.”

When they ask for retransmission fees to allow Aereo to operate, Diller says he tells them, “When you get Radio Shack to pay you a slice of profit for selling an aerial, we’ll pay you.”

Diller argues that Aereo avoids legal issues others have faced by leasing the antenna to consumers, who then “control” it via devices they already own. A win in court — not the most likely of outcomes given how the courts have reacted so far to efforts to stream networks without agreements — doesn’t guarantee a business win. During the on-stage interview with CNN’s Ali Velshi, Diller enthused about the idea but added, “We don’t know yet. We don’t know anybody’s going to want to do this.”

(To which I’d add, even if enough people in NYC, where broadcast signals can be impossible to receive without third parties, pay to make it work financially in that market, there’s no guarantee it would be viable in other major cities. Those most likely to pay $12 a month for Aereo or something like it are already paying for cable or satellite and think they could save money by mixing broadband broadcast delivery with other offerings like Netflix (NSDQ: NFLX), Hulu Plus or ad-supported options.)

This is what Diller calls the essence of the internet: “Push a button and you publish to the world. so long as you have an idea, nothing between you and the consumer. That is a profound change of how media has been for the last 100 years.”

But he doesn’t use his own “button” — ie a Twitter feed. Diller says he regrets not starting with Twitter early on but thinks it’s too late now. That doesn’t stop him from being “very admiring” of Rupert Murdoch, who he sees using Twitter during a difficult time to get away from having his message managed and make his own voice heard.

  1. While certain that the lawyers will charge an amount that will easily eclipse the investment that Mr. Diller is making, in the end I do not see how the networks stop this advance in market access.  Somewhere, far away from the media elites a nerd is in a garage coming up with something that is cheaper, better, and Radio Shack will sell.

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  2. All the chatter about Aereo has been about the legal issue, but this article gets to the real heart of the matter.  Will people pay for this?  I just don’t believe enough will do so to make this a business.  You can get the networks for free right now via either an antennae or the free version of Hulu.  And you get the same functionality or better than Aereo’s DVR with Hulu Plus.  Why would anyone pay $12 a month?

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