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Pulling back the curtain on Aereo

Aereo was a system designed by lawyers to prove a legal point more than it was to execute a sound business plan. If there were ever any doubts, they  should be erased by the subscriber numbers revealed in Aereo’s own filing with the U.S. Copyright Office last week as part of its bid to remake itself as a cable TV system.

According to an analysis of that filing by copyright attorney Seth Davidson reported Monday by Re/Code,  Aereo finished 2013 with all of 77,596 paying subscribers. About 27,000 of those subscribers were in New York, where Aereo debuted in 2012, followed by Boston, with 12,000, and the Atlanta area, with 10,000 subscribers.

That’s not a business, it’s a demonstration project.

There’s nothing inherently wrong with launching a demonstration project if that’s your only goal. But it’s an indication that we’ve reached the meta stage of the disruption curve in the pay-TV business, where disruption of an existing business model becomes and end in itself rather than a byproduct of genuine shift in market demand or the means to some other, clearly superior end.

Aereo’s problem was always going to be the limited appeal of its offering. Accessing over-the-air TV channels on mobile devices is a nice idea but it’s a feature, not a standalone business. Its greatest utility was the ability to watch must-see live TV on a phone or tablet in more or less real time, but that type of content makes up only a fraction of most broadcast channels’ lineups. The bulk of broadcast programming is more easily and conveniently available on demand or via DVR if it can’t be watched in real time. The number of consumers who would pay, on an ongoing basis, for the ability to watch a handful of must-see live content on their mobile device was always going to be limited.

You could argue, as Aereo in fact did, that the multiple lawsuits it faced prevented it from properly marketing its service by diverting resources and that its subscriber rolls would grow once it could tell more consumers about its advantages. But in that case, why continue adding markets when you can’t support the ones you’re already in, as Aereo continue to do right up until the end?

The answer is, Aereo was not that kind of business. It wasn’t really a business at all, in fact, as the subscriber numbers show.

As an enterprise, Aereo was an essentially cynical exercise. Its goal (or at least that of its financial backers) was its own design, conceived as a means to challenge the legal status quo in the retransmission market, which it could do as easily with a handful of subscribers in enough markets as it could with a lot of subscribers in just a few markets. In fact it’s not clear Aereo could even have made the numbers work with a lot of subscribers, given its reliance on individual antennas and individual recordings.

The retransmission status quo is certainly ripe for challenge, and few besides broadcasters would mourn its passing if it went away. But Aereo’s challenge was too cute by half. And the result is now a Supreme Court ruling that tortured the law to reach a result that would reject Aereo’s essential cynicism but which arguably leaves genuine innovators at a greater risk than had Aereo never come along.

Such are the wages of cynicism.