In a move that's not really surprising, Aereo has filed for chapter 11 bankruptcy protection. Since the Supreme Court ruled that the Aereo online streaming service was a violation of broadcasters' copyrights, the company has been trying unsuccessfully to find a legal way to proceed. The FCC is currently considering a proposal that could help online providers by redefining what constitutes a multichannel video programming distributor, but the action comes too late to save Aereo.
Aereo Inc.'s quest to shake up the television industry with its online-streaming service has come to an end.
The Barry Diller-backed startup sought bankruptcy protection after the U.S. Supreme Court said its TV service violated programming copyright protections. The nation's highest court rang the death knell for Aereo in June, handing a victory to broadcast giants including CBS Corp., Walt Disney Co. (DIS)'s ABC, Comcast Corp.'s NBCUniversal and 21st Century Fox Inc.
Aereo had been striving to revolutionize broadcast TV viewing, offering live and recorded programs via the Internet for as little as $8 a month. The Internet-TV startup's failure eliminates an alternative to cable and satellite bundles, which can cost $100 a month and include channels many subscribers don't watch.
"We asked a very blunt question about the future of this industry, and I think consumers have connected with that," Aereo Chief Executive Officer Chet Kanojia said today in a phone interview. "We were in a regulatory no man's land. We were sort of a cable company without the protections."
The startup ceased operations following the Supreme Court's ruling, which said Aereo operated akin to a cable company. The company then struggled to obtain the correct licenses to continue doing business like a traditional TV provider.
Kanojia said he considered selling the company or its intellectual property before making the decision to file for bankruptcy. However, buyers were deterred by the unresolved litigation, he said.
Aereo filed the petition "to preserve estate value as it works toward its goal of consummating a sale of substantially all of its assets, recapitalizing or entering into some other reorganization transaction," Chief Financial Officer Ramon A. Rivera said yesterday in a court filing. The company appointed Lawton Bloom of Argus as chief restructuring officer.
Since the Supreme Court ruling, Aereo canceled its service and has focused on defending against the broadcasters' lawsuits, causing the company to reduce its workforce to 14 from 74.
The company designed its business to bypass federal law that gives copyright holders the exclusive right to perform its work publicly. The startup used individual dime-sized antennas for each customer to provide service in 11 cities and planned to expand into other markets, without paying retransmission fees for the programming.
Since Aereo began its operations, traditional video providers, including Dish Network Corp., DirecTV, Verizon Communications Inc., and Sony Corp., have been planning online programming packages. Meanwhile, Time Warner Inc.'s HBO and CBS, the most-watched U.S. TV network, announced new online-streaming services that don't require a cable subscription.
Getting content to viewers online outside of the traditional channel bundle is a move Kanojia said he applauds.
"Maybe we set the tone in what consumer expectations are," he said. "I'm glad that they are doing it. I'm not quite happy about the prices they charge."
The full Bloomberg article is available here.