Meet the most dangerous man in TV

Aereo CEO Chet Kanojia
Aereo CEO Chet Kanojia
Posted: April 15, 2013

LONG ISLAND CITY, N.Y. - Two subway lines, the E and the M, get you to this gritty outpost in Queens from the glamour and energy of midtown Manhattan. And it was here Wednesday that one could find the most dangerous man in the TV business, Chet Kanojia, slurping takeout Thai in a rehabbed electric-motor factory with an urban farm on its roof.

It didn't look like ground zero in a potential economic revolution in the TV business, with a used-car dealership across the street and the Tequila Sunrise Mexican restaurant down the block.

But it could be.

"Resorting to name-calling is a sign of desperation," said Kanojia, a supremely confident native of Bhopal, India, casual in jeans and an open-collar blue-striped shirt. "They are focused on this because it is real. It is credible. There is not anyone in these industries who can say with a straight face that consumers are getting a good deal."

His Aereo Corp. online TV service has few subscribers, is available only in the New York metro area, and faces significant legal challenges. Kanojia, though, plans to take it to the nation's TV markets this year and has millions of dollars in venture capital to do it.

And that has the broadcast-TV executives very twitchy. The New York Times reported that morning that TV bosses were "circling the wagons" with talk of converting broadcast-TV networks - free American institutions for decades via rabbit-ear antennas - into cable channels because of Aereo.

Two days earlier, News Corp.'s Chase Carey had blasted Aereo for "stealing" Fox's TV signals during a speech at the National Broadcasters Association convention in Las Vegas.

If Aereo is successful and ultimately deemed legal, subscribers could drop Comcast Corp. and other pay-TV systems for Aereo's $8-a-month streaming service to TVs, smartphones, tablets, and laptops.

Billions of dollars in retransmission fees paid to CBS, ABC, Fox, and NBC by cable and satellite operators for their stations could be threatened as TV viewers switch to Aereo or a service like it. TV insiders say these fees are modern economic pillars of broadcast-TV stations and help pay for sports and local news.

Chicago attorney Andrew Goldstein, of the Freeborn & Peters L.L.C. firm, said Aereo could be a "serious blow to Comcast and the broadcasters."

Kanojia lived eight miles from the Union Carbide chemical plant that in 1984 spewed poisonous gases that claimed about 3,000 lives. Kanojia said he lived while so many others died because "the wind was blowing the other way." That and wrapping a wet towel around his face as a crude gas mask.

This early lesson in crisis management seems to have served him well. The 43-year-old tech entrepreneur exudes an unflappable demeanor despite the darts flying in his direction.

He believes the time is ripe for Aereo because of customer dissatisfaction with pay-TV prices and because people don't watch many of the channels for which they pay.

Half of TV viewing is of network shows available free over the air, which he can stream inexpensively. Aereo customers could supplement this broadcast-TV content with Netflix, Amazon Prime, or other video services.

"It's inevitable," Kanojia said, "that the TV will migrate to the Internet." He says he wants Aereo to be the next big thing in television.

Aereo has raised about $65 million in venture capital and has the backing of longtime entertainment executive Barry Diller. It plans to expand to 20 additional markets this year, including Philadelphia. Kanojia, who sold his previous tech company to Microsoft, said that Aereo could announce its next market in a month and that new markets would be added every two weeks.

On April 1, a New York appeals court ruled in Aereo's favor in a suit by broadcasters seeking to shut it down. That prompts the current handwringing in the broadcast-TV industry.

But the legal issues are not settled.

Judge Denny Chin of the U.S. Court of Appeals for the Second Circuit called Aereo's technology a "sham" and a "Rube Goldberg-like contrivance" in a dissenting opinion.

Aereo, broadcasters say, violates federal copyright law because it is a "public performance" and not a "private performance." Private performances - a person singing a Broadway show tune in the shower - is permitted under copyright law.

Aereo's service is a public performance because many people would be seeing the same TV content at the same time, broadcasters say.

A California federal court has ruled against a copycat antenna-based streaming service, Aereokiller, and some legal experts believe the issue might have to be decided by the U.S. Supreme Court.

Kanojia says that he is not stealing TV signals and that his technology conforms to federal laws because:

An individual can watch free over-the-air TV using an antenna.

An individual can legally copy a TV show or movie for private use.

A company can remotely copy and store digital information for a consumer and then transmit the content to the consumer.

"You combine those three, and you have Aereo," Kanojia said. The company assigns a tiny antenna in an Aereo-run antenna farm to a subscriber, grabs broadcast-TV signals out of the air based on what the subscriber would like to watch, stores the TV content on a remote digital-video recorder, and then streams the TV content over the Internet to the subscriber.

So even though many people may be watching the same TV show, each TV show is individually received by a subscriber-specific antenna, copied on a DVR, and then streamed.

Goldstein, the Chicago lawyer, said, "There is a perceived loophole in the Copyright Act, and these companies like Aereo are taking full advantage of it."

Based on the New York court rulings, he said, "it does not look good [for the broadcasters]. It's likely they will get a lobbying group together to close the loophole."

Contact Bob Fernandez

at 215-854-5897 or or follow on Twitter @bobfernandez1.

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