The courts have kept the lights on at Aereo so far, but it’s not clear that Aereo itself can afford the power bill. According to The Wall Street Journal (subscription required), the online start-up company is facing massive electricity costs thanks to the tiny antennas it has to keep running for every subscriber on its video streaming roster. In the Journal’s analysis, Aereo could end up paying $2 million a year in New York alone if it scales up to the 350,000 subscribers CEO Chet Kanojia says he can support.
Meanwhile, Aereo also announced today that it will launch in the Denver metro area on November 4th. That makes nine markets for the video company, which also debuted in Detroit yesterday, that has said it intends to cover 22 markets by year end.
Kanojia indicates he has some ideas for dealing with the power dilemma. One is to use fuel cells for power generation. Another, and seemingly more likely option, is to combine Aereo’s antennas with its transcoding equipment. Like the cable operators, Aereo is discovering that relying on denser, multi-purpose equipment can (eventually) reduce both cap ex and operating costs.
As for Aereo’s broader business model, the Journal reports that the company is in talks with wireless and wireline broadband providers about bundling Aereo with Internet service. I might have scoffed at that idea a year ago, but with even Comcast and Cox contemplating new broadband and IP video streaming bundles, I can certainly see other ISPs looking favorably on an Aereo partnership.
AND beyond direct partnerships, cable companies have now made it clear that they’re interested in Aereo’s approach to retransmitting broadcast TV signals. The cablecos could avoid spending billions of dollars in content licensing fees if it turns out that Aereo’s technology is ruled legal by the Supreme Court. (Still a big if) According to Bloomberg, Time Warner Cable, Charter Communications, and DirecTV have all said they would like to follow Aereo’s lead if the courts allow it.
View Comments
Great reporting, Mari.
I am very, very curious to see what their actual subscriber numbers are and how many people stick with the service after a month or two.
Uncle Barry has some deep pockets, so sub numbs and electricity bills are less of an issue than they would be at a traditional start-up, but he won't subsidize them forever.
Thanks, Alan. Yes, this does strike me as a major money sink, but Diller had to know he was playing a long shot and facing a long haul. What Aereo needs is some way to bring in money in the short term. Kind of like Netflix had its DVDs while the streaming business was still getting off the ground.
I use Aereo in Atlanta and it works well enough.
Here's what kills me: it's a stupid solution to a problem that legislatures and the businesses themselves have created.
From what I understand, the local stations' business model is: bring eyeballs to advertisers.
Based on that it seems like if I owned a local TV station that I'd be happy to have the cable company or a separate IP based company (like Aereo but without the 1:1 antenna deal to skirt around the law) to deliver the content. I'd be thankful for them doing it.
Instead we have must-carry rules and local networks wanting fees from the cable operators which just annoy the cable customers more and have them cut the cord which is counter to delivering eyeballs to advertisers.
I'd think that it'd be in both the cable (and IP) operator's interest to just carry the locals and for locals to say, "Thanks for that," and it just be done.