Aereo Nearing Two CE Pacts to Build Live Streaming App Into Smart TVs

Kanojia didn’t identify the manufacturers, but cited Samsung smart TVs as an example when describing for us how Aereo would be integrated as a software app in the user interface alongside Netflix and other services. Samsung officials didn’t comment. Much of Aereo’s push into TVs will be fueled by the formal release of an Android app, which has been in beta testing for about a month and would join an iOS version, Kanojia said. About 65 percent of Aereo customers view programming on large-screen TVs, he said. In addition to TVs, Aereo might field a Chromecast-like adapter that could plug into TVs, he said.

As Kanojia described plans for LCD TVs, he conceded that Aereo would fall short of reaching 22 U.S. markets with its service this year as originally planned. With the addition by year-end of Columbus, Cincinnati, Indianapolis and San Antonio, Aereo’s service will be in 15-16 markets, with a goal of reaching 22 “as soon as we can,” Kanojia said. Aereo hasn’t said how many customers subscribe to its $8 monthly service, and can be profitable in markets with 5,000-6,000 customers, Kanojia said. Aereo has turned a profit in some markets, Kanojia said, not specifying which. Aereo’s monthly subscriber churn within the first 60 days of service has been in the mid-2-percent range, he said.

The Chicago market also was expected to be a big opportunity for Aereo, but the company scrapped plans in September for a launch there. “Our site selection and construction was not where we wanted it to be,” Kanojia said, declining further comment. Aereo expects to launch in Chicago in 2014, he said. The Detroit and Denver markets have been very strong for Aereo, while Miami “has not been the best,” Kanojia said. Aereo’s start in New York was “incredibly mediocre” for the first two to three months, but the company has since had a steady rise in business, he said.

Aereo, which uses micro-antennas tuned to 6 MHz of spectrum to deliver programming, has spent $65 million on the service and the company expects to seek additional funding in 2013, Kanojia said. He declined comment on when Aereo might seek additional money and how much the company wants to raise. Each box containing the antennas and transcoding can service 7,000-10,000 customers, Kanojia said. Aereo typically leases rooftops for its antennas, spending about $500,000 on construction and installation of each system, he said. Aereo’s average capital spending per subscriber is $55 to $58, Kanojia said. It raised $38 million at the start of this year in an investment round that included Barry Diller’s IAC/Interactive Corp.

Moving Aereo into new markets has been “an exercise because we had to do speed and then come back to scalability,” Kanojia said. “The problem we didn’t anticipate was how quickly we would sell out the first 10,000 customers. Once the infrastructure is in place, then you can add capacity."

In moving to expand the service, Aereo will seek “bandwidth” partners -- potentially cable or telecom operators -- that would take Aereo service delivery the “last mile” to the home, Kanojia said. Aereo might be included in $50-$60 bundles, he said. Aereo also plans to open its platform to outside developers in the next several months in an effort to add new applications, Kanojia said. It has no plans to create its own operating system, preferring an open platform, he said. “We want to create an application point and then open it up to more people to add content.” Aereo itself also won’t bring advertising to the platform, he said. “The content owners and operators can be in that business,” he said. “I think it turns people off."

Meanwhile, Aereo will file a reply brief by Thursday with the U.S. Supreme Court in its ongoing legal battle with broadcasters over its ability to stream copyrighted content, Virginia Lam, vice president-government relations, told us. Broadcasters filed a cert petition earlier this fall seeking to overturn the 2nd U.S. Circuit Court of Appeals decision denying a preliminary injunction against Aereo.

UBS Conference Notebook

Discovery Communications remains “committed” to its investment in the 3net 3D channel largely because “we need the 3D content anyway,” Discovery CEO David Zaslav told us. “The channel itself is kind of just hanging out there,” he said. “Unless 3D really accelerates, it will be a nice-to-have and not a must-have.” Discovery owns part of 3net along with Imax and Sony. Among the operators carrying the 3D channel are DirecTV and Service Electric Cablevision, the latter in northeastern Pennsylvania. Discovery’s new distribution agreement with Time Warner Cable that includes TV Everywhere will give the cable operator’s subscribers access to the network’s programming shortly after it airs, Zaslav told us. Discovery, which before renewing its carriage pact with Time Warner Cable was a holdout on TV Everywhere, had previously limited over-the-top providers to 18-month or older content. “TV Everywhere will be very fresh and it will be so that you can see it right away” on Time Warner Cable, Zaslav said. “If it’s an hour later, you will be able to see it.” Discovery also is in discussions with over-the-top companies, including Netflix, on shortening its release windows, said Zaslav, declining to be more specific. “TV Everywhere in concept is terrific for us because we get measured with our spots,” Zaslav said in a recent investor conference call. “Currently we only get measured when you watch it on your computer, but pretty quickly we'll be measured if you watch it on your iPad. And so it’s kind of -- it’s an opportunity for us to move with technology on a fully measured basis.” Discovery is likely to exercise an option to buy a controlling interest in the cable channel Eurosport when it becomes available in late 2014, Zaslav said. It bought 20 percent of Eurosport in late 2012.