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Summary:

Chet Kanojia, the man behind the company that could transform the TV industry, has some very big ideas about how to manage the airwaves and how people will watch television five years from now.

Chet Kanojia Aereo
photo: Jeff Roberts

In 2012, Chet Kanojia set out to take on TV’s goliaths with a slingshot full of tiny antennas, but he never imagined things would go so far so fast. Aereo, the start-up he created, is going before the Supreme Court on Tuesday to face off against ABC and the other big broadcasters in the most important TV case in decades.

Sitting in Aereo’s office in New York’s Soho district in early April, Kanojia looked more weary than when I first met him a year ago, but he still burns with the same quiet charisma and passion for creative technology. During that time, Aereo’s service, which lets subscribers watch and record over-the-air TV for $8/month, has expanded from New York to 10 more cities.

Recent media chatter has been about Aereo’s chances at the Supreme Court, but on this day our discussion was not about law. Instead, Kenojia shared some of his vision for TV, technology and the public airwaves. Here are some lightly-edited highlights from our conversation.

On Netflix and why HBO will be spun-off in 5 years

JJR: When this started you talked about a “smarter bundle” of channels. Has your view of the cable industry and TV evolved?

Chet Kanojia: My view has gotten stronger that a break in the current system is inevitable, irrespective if Aereo is around or not. Look at the current prices.  Any industry compounding at 7% is just unsustainable. A change is inevitable.

The right model will be if someone can put together broadcast access with either HBO or ESPN, then it’s game over. One of those pay channels has to go outside [the cable system] because if Netflix continues to do what they’re doing, then the virtuous cycle continues — they spend a little more on content to get more subscribers, and then they will start outspending all pay channels combined.

The only way to compete with that will be for HBO or Showtime to go out of bundle. The key to understand is that it’s not just a pure financial issue, it’s also a data issue. So for example, Netflix can make those bets because it knows what those consumers are doing or not doing.  When you’re a bundled network like HBO you have no idea what the consumer does — and the cable guys have zero incentive to give you that information. I would say HBO will be spun out in 5 years.

On the future of NFL and TV sports

JJR: The NFL and the other sports leagues are supporting the big broadcasters, who have threatened to remove their shows from over-the-air TV and become cable channels if Aereo wins the case. Will that actually happen?

Chet Kanojia: I don’t think they can do that. Just to put it in context, ESPN has Monday night football, and the performance is a fraction of what the broadcasters get.

It’s not going to be economically viable for them to go that way. Frankly, if they’re going to go that way, why wouldn’t the leagues do their own direct paid relationships? MLB.com has been a template of where that’s going. I think a sports fan will be happy to pay $100 or $200 a year. The leagues don’t need a middle-man. If they don’t need a broadcast affiliate, they certainly don’t need a channel — they already have their own, like the NFL Network.

nfl sunday ticket

The FCC and selling the public airwaves

JJR: Let’s talk about the airwaves which, as you’ve pointed out, are a public good the broadcasters are using. What’s going to happen to all that spectrum in the future?

Chet Kanojia: FCC Chairman Tom Wheeler is demonstrating that they don’t need [all that spectrum], you can do frequency sharing and you can do channel sharing or all sorts of other things. The FCC has shown there’s an opportunity — while protecting the broadcasters’ statutory rights, while ensuring they can still be on the air. The FCC’s being extremely generous offering this idea of an incentive auction to sell part of their spectrum, rather than using eminent domain.

JJR: What do you think the airwaves should be used for instead?

Chet Kanojia: To the extent they can stitch together blocks, it should be unlicensed wireless. I don’t understand why our country has this model where we grant companies access in perpetuity to spectrum, which is a finite and very constrained resource.

If you look at anytime that there’s unlicensed use, it creates far more value. WiFi, Bluetooth, all of those things – the amount of overall investment and products that are made in that category far exceed. It should be unlicensed and, if there is a license it should be a term license.

If the FCC truly wants competition, it will be about granting internet access. And the way to do that is to create a big unlicensed block. This isn’t a criticism of the FCC, but no matter what money they raise in the spectrum auction, it will be peanuts compared to the value of the unlicensed side.

On Apple and home entertainment

JJR: Who do you think is doing the best job in the internet TV and home entertainment space?

Chet Kanojia: I love Netflix. The new interface is great, I just love the company. We’re all dying to see what happens with Apple. More and more I’m convinced that the idea of tablets, phones, computers all being projectors is ultimately the right model. And by projectors I don’t mean optical projectors but IP projectors.

I don’t know where things are on the music side, but everywhere in my house there is AirPlay capability. I love Sonos but the problem is that the Apple iTunes sync is just manual and that sucked. Apple’s keeping them out I suspect.

On innovation in a Comcast world

JJR: Take us a year from now. If Aereo wins, what will the company look like?

Chet Kanojia: We’ll be in 50 cities or so. We’ll start marketing effectively, and open our platform to new uses. We’ll provide our technology to small and medium sized cable guys — on the network and DVR and application side.

There’s a weird dynamic in the marketplace now. There’s no company stepping up to provide equipment in the video business — mainly because the cable guys have killed all suppliers, so no investor is going to finance a new company. The world that we’re heading for is one where whatever Comcast builds is what you can have.

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  1. Steve Symonds Friday, April 18, 2014

    Unmitigated self-promotion from the CEO of a company that’s at bottom a pirate. Good job, GigaOm – NOT.

    1. Except you don’t know what the hell you are saying. Let’s imagine a community has gardening tools they offer to the community for free. Someone comes along and offers his services (using the free tools), at a cost to the community. Is said person a thief? Aereo is essentially performing what you and I can legally perform, on our behalf, for a fee.

    2. Steve,

      You clearly have no clue what a pirate is. What these guys are doing is clearly legal and egalitarian. Something we need more of, not less.

      I’m betting you work for Comcast, right?

      1. Or maybe he works for AT$T ;) …

  2. great story and really cool spin on the real issuse “protecting private enterprise”…not a
    lawyer however always cool to see how the “rules” are used to help private companies to
    continue to have the proverbial “unfair advantage”…
    even when said advantage goes against the very people the rule makers purport to represent …the term (quiseling) come to mind ..

    That being said one wonders how they will justify “continueing” to give freely “public” spectrum to private companies whose value proposition is only I can use any program I broadcast over spectrum given to me for free …
    furthermore other companies who where gestated due to our (spectrum broadcasters) technical lack ..now must pay us to put our signal over those compaines “private infrastrcture”…
    now comes along someone who wants to use an “information service” (internet) to allow for access to free program and then record it and watch later

    … my grandfather says “when you throw a rock in the chicken coop the one who screams the loudest is the who was hit”

    GOOD WORK AERO some are noticing we are not all stupid

  3. I have been using Aereo for the last couple months and it is a very useful solution. I’m looking forward to the Chromecast support.

    I totally agree with Chet’s prognostication of the sports leagues cutting out the middlemen in the future. However, that would make the value of Aereo’s current product less valuable to consumers.

    1. I didn’t get that point…the fact that NFL gets lower ratings on ESPN than on broadcast suggests that middlemen DO add value (bring more audience). I also wonder at the notion that some seem to have that they’ll get to cherry-pick what they want to watch, ad-free…and somehow they’ll pay less in the end. It seems to me the end-game is consumers pay MORE for IP/on-demand video, or there will be LESS available. And there are issues of local news/emergency info (don’t buy it? Tell that to residents of NY during Sandy), information and entertainment haves/have-nots, etc.

      1. Access to content. In the view of the FCC, consumers have that access , just not to the degree that is available to subscribers of premium packages. The economics of content distribution have changed and Aero is in a position to suceed.

  4. Joseph Campbell Friday, April 18, 2014

    Interesting debate and easy to see both sides’ claims. All we can do as consumers is watch it play out and hope for the best.

  5. Insightful. A look of things to come. Kudos on holding the FCC to task over the Commons.

  6. What he speaks is inevitable and I hope the “Supremes” agree.. We’ve given the “broadcasters” to much lately. Their time has passed with their present use. There’s still space for broadcasters but not with the present business plan They need to wake up and support and join instead of fighting
    chuck azar, instant replay

  7. I have 1,200 channels of sh!t..!

    There is zero consumer protection in the Cable industry. Bundles/packages should be broken up by PER CHANNEL basis.

    I will subscribe to ABC for $0.68/month & probably $1.99 for ESPN..

    News Flash:
    Ask yourself this, if you pay $120/month for Comcast… why are there commercials on your channels?

    1. Precisely. I’ll sign up for what i don’t get free on my cable, as part of my homeowner’s agreement, the day Dish or Directv unbundles and offers what i WANT to see a la carte. I really won’t care much about the price, either. I’ll pay $10-20/mo each for certain channels. But never again will i pay anything close to $100/mo for the garbage offered over 600 worthless channels. The time it takes to scan thru them via the remote is reason enough never to return to cable as it’s currently run. If i wanted the junk those channels insult me with, i’d live in a trash heap.

  8. streamingmediablog Sunday, April 20, 2014

    Chet Kanojia does not understand how the business of pro sports works.

    MLB’s TV deal with Turner and Fox is worth $6.8 BILLION, over 8 years. Yet he says “The leagues don’t need a middle-man”. Really? How else is MLB going to make that money? They can’t charge enough for an online subscription to make up for the billions of dollars they get from the broadcasters. It’s the reason why local games are blacked out on MLB.TV.

    The NLF gets paid even more. The sports leagues have ZERO incentive to do anything radical that would disrupt their revenue stream from licensing the content to broadcasters. That’s where the big money is – BILLIONS. Why would they throw all that away to then broadcast everything online, with no blackouts and no restrictions? The moment they do that, the broadcasters won’t pay as much to license the content as they don’t have it as an exclusive in their local market.

  9. streamingmediablog Sunday, April 20, 2014

    Also, I find it interesting that nearly every time Aereo’s CEO does an interview, he talks about how many cities they will be in down the road, yet their service has so many problems in the limited locations they are in now.

    The company is 7 months behind rolling out in Chicago. They ran out of capacity in NYC. But he thinks a year from now they can be in “50 cities or so”? 50 cities with what kind of capacity? They have raised $100M already and are having problems scaling the service just for the limited markets they are already in.

  10. Netflix’ streaming content comprises a fraction of the movies they ship on dvd, which is in some peril in that shy of a citizens revolt (riiight) USPS will go belly up sometime in the next 5 years and stop home delivery. A solution, tho probably not the solution, will have Netflix deliveries shipped in a single bunch, say maximum 5 discs at a time to make it cost-effective for subscribers, delivered by the ilk of UPS or Fedex, returned via the same deliverer as soon as all films are viewed, in plenty of time to insure a weekly delivery on the same day each week, the cost of course borne by the subscriber.

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