When Phil Toronto moved into an apartment in the East Village last summer, he tried going without cable television. Eventually, after missing a few Jets games, he caved and ordered a subscription. Then in March Toronto, who is 25 and manages emerging technology at Vayner Media, heard about Aereo, a service that lets New Yorkers watch broadcast television live on some laptops and mobile devices for $12 a month. Toronto knew he had found a great deal.
“I was paying about $80 a month for something I used about twice a week,” he said. “I realized I could spend that money better.”
The entrepreneurs — and the investors — behind Aereo are hoping that the rest of New York realizes that too. Since launching in March, the Brooklyn-based startup lets viewers watch television on a web browser. They only have access, however, to the basic broadcast channels – the same ones they’d get if they owned a television set and a pair of rabbit ear antennas. In other words, no HBO, no Showtime, no AMC. And the potential to grab cord-cutters, like Toronto, is strong. According to the Nielsen Company, the number of families that don’t own a cable subscription in the past year has risen by more than 22 percent.
“They don’t have an antennae that they beam out to everyone,” explains John Bergmayer, an attorney who works for Public Knowledge, a group that advocates for digital rights and might write a brief on Aereo’s behalf. “Instead, each individual person essentially gets their own antennae.”
Over pizza and beers at Columbia University last month, executives at the company explained to business students that the device might change the way consumers think about television. As David Cann, the vice president of operations, put it: “They’re not thinking on a park bench in Central Park, I can watch ‘The Master’s’ right now.”
But more Americans are watching television programs later than they air, using DVRs. Almost 106 million did so in the last quarter of 2011, according to the Nielsen Company, up from 7 percent from a year ago. So the company’s main selling point – watch television live, wherever you are – may not be that big of a draw.
“Consumers want their shows on all their devices at any time,” says Sarah Rotman Epps, an analyst for Forrester Research. “But not necessarily in real time.”
Aereo obviously hopes that they will. “We saw the wide-scale adoption of internet-connected devices, the growth in bandwidth speed, and the growth in consumer consumption in video,” said Nick Sallon, director of business development. “It was really a massive opportunity.” And they based the company in New York, he added, because New Yorkers often adopt new technology earlier than the rest of the country. Toronto, who works in the media industry, said that ten of his friends have already signed up for a free 90-day trial, which ends soon, though he plans to re-new it.
But not everyone is enthralled with the new idea. In fact, most of the major broadcast networks filed lawsuits against the startup, claiming copyright infringement, after investors announced plans to launch Aereo in March — the most prominent is Barry Diller’s IAC/InterActiveCorp.
“This case is not about stifling new video distribution technologies, but about stopping a company from violating our copyrights and redistributing our television programming without permission or compensation,” said some of the broadcasters in a statement.
Bergmayer thinks that Aereo should prevail under the law. “They’re not giving people access to anything they don’t have a right to,” he says. “You can already watch all of this stuff, if you have a good enough antennae, for free.”
In the short term, Bergmayer says, Aereo is hardly a threat to the broadcast networks’ bottom line. “If they’re still dependent on ads as their primary revenue stream, then what threat is Aereo at all?” he asks. “All it’s doing is increasing the number of viewers.”
Though the company won’t reveal how many members it has, when asked about its growth Aereo’s Sallon described it as, “prolific,” though he chuckled after. But Ettman, the research analyst, is more skeptical. “The segment of consumers that still watches live television tends to be an older demographic,” she says. “It is not very convenient to have to tune in at a very specific time in consumer’s busy lives.”
But when must-see cable TV airs, — this year on Sunday nights — Aereo members are at a disadvantage since a limited number of channels are offered. When the fifth season of AMC’s “Mad Men” premiered in March, for example, Toronto had to head over to a friend’s house to catch up.
For the most part, “Aereo fit my bill,” he says. But on occasion, he concedes, “It’s a bit of a gamble.”
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