Aereo’s CEO on the future of Netflix, TV sports and the public airwaves

Chet Kanojia Aereo

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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