One of the biggest questions that has been hanging over Aereo, apart from the ongoing dispute over its legality, has been what it wants to be when it grows up. While Aereo officials says consumer response has been “very positive” in the one market where it is available, the total addressable market for a paid service that offers a limited selection of programming — albeit conveniently — that consumers can also get for free has always been a question mark.
As a business plan, Aereo has always seemed more like an IP play than a long-term operating plan. It was purpose-built to win the inevitable legal challenge, which would make the intellectual property in its antenna technology and design a prime acquisition target for someone with broader telecommunications interests and a strategic interest in leverage over broadcasters. Someone like Verizon Wireless or AT&T for instance, which could bundle Aereo with LTE service in a mobile video and wireless broadband package on a market-by-market basis.
That still strikes me as the most likely endgame. It was probably no coincidence, for instance, that reports that Dish was in talks with Aereo surfaced just as Dish was preparing to bid for Sprint in an effort to break into the wireless business.
At the paidContent Live conference in New York this week, however, Aereo CEO Chet Kanojia began to put a little more flesh on his vision for the future of television and where he sees Aereo fitting into it. While an awful lot would have to go right for Aereo to make good on Kanojia’s vision — more than simply a legal victory — it’s hard to argue with the premise.
At the core of Aereo’s strategy is the idea that there is a limited universe of programming for which the ability to watch it live is a significant part of the value proposition of providing it, such as sports, news, and weather. For most everything else offering on-demand access is often more valuable to the viewer than the providing the ability to watch it live.
The current pay-TV model is based on bundling live access to all of it with a thin layer of on-demand access on top. But the future of television, according to Kanojia, will be one of “skinny live, deep catalog.”
Aereo’s goal is to peel off those parts of the bundle for which live access has real value while ignoring those parts of the bundle where it does not. ”We think we can provide 50 percent of the value proposition [of subscribing to cable] at maybe one-tenth the cost,” Kanojia said.
Because they carry a heavy proportion of sports and local news, broadcast channels were the obvious first target for Aereo’s strategy. While they can be accessed for free by anyone with an antenna, Aereo is providing value by enabling subscribers to access those channels live from anywhere using a connected device. Next up, according to Kanojia, is likely to be a free or very low cost package of non-broadcast news channels.
Aereo has no plans, however, to start recreating the full pay-TV bundle by layering on channels that predominantly carry programming for which live access adds little value.
“The last time I checked there’s no need to have Desperate Housewives or the Real Housewives of Orange County running on four channels at the same time,” Kanojia said.
Far better, according to Kanojia, to leave that part of the bundle to standalone on-demand services like Netflix and Hulu.
Ultimately, its a vision of an a la carte future for television based not on the unbundling of channels so much as the unbundling of value. Content for which live access has real value could be packaged together and made available in real time; content for which on-demand access has more value would be packaged into on-demand services and offered separately. Deep library content might comprise a third mini-bundle. But consumers would not be forced to pay for one just to get the others.
Aereo has a long way to go to reach that future. But it’s genuinely a more robust strategy than merely legal-trolling the broadcasters.