Notes From An Enlightening Interview Of Aereo’s Chet Kanojia
NEW YORK–The “fireside chat” interview of a tech executive by some other industry type at a tech conference doesn’t always yield insights more profound than “hey, this guy says ‘disrupt’ a lot.”
But a round of questions for Aereo chief executive Chet Kanojia from Consumer Electronics Association CEO Gary Shapiro and audience members during CEA’s CE Week conference here shed more light than I expected on that TV startup–and how we view intellectual-property disputes and challenges to established markets.
(Disclosure: For about a year, I wrote for CEA’s blog.)
After some “how did you come to found this company?” inquiries, Shapiro got to the round of lawsuits Aereo has fielded from TV networks. They object to Aereo letting its subscribers rent a tiny antenna in a centralized facility (in New York, one of two markets so far, it’s located in Brooklyn) and then have the programming received by that antenna sent privately over the Internet to Aereo apps.
Kanojia, saying dismissively that “the allegation was, like it always is, copyright infringement,” made an important point about the basic logic behind the networks’ claims–that paying somebody else to store or play media you’re allowed to enjoy directly amounts to a public performance for which they must be paid.
“What’s really at stake… is your ability to control your own media,” he said. “The world heads towards a point where you have to pay a tax every time you store media away from your house.”
Indeed, it took a few tries for Cablevision to get court clearance for its plan to offer remote DVR storage to subscribers. And Aereo’s recent victory in the Second Circuit does not guarantee future success, especially in other circuits.
(The Computer & Communications Industry Association, which hosts this blog, filed briefs in that case at the district and circuit-court levels.)
Kanojia ducked a question about whether the Ninth Circuit court defeat of a similar TV place-shifting service called Aereokiller, saying he didn’t know enough about its mechanics, before offering a succinct defense of Aereo’s own logic.
“Does the customer have the right to buy an antenna?” Yes. “Does the customer have the right to lease an antenna?” Yes. “Where it’s located, nobody questions that,” he continued. “There’s nothing in the rulebook that says the cord can only be 10 feet long.”
But a subsequent question from an audience member who wanted to watch her New York stations while traveling to Boston brought out an aspect of the service I’d overlooked before: its prohibition on tuning in outside your home market.
You’d think that Aereo’s “the Internet is the cord” logic–as well as the existence of the Slingbox place-shifting system since 2004–would allow for that. Instead, Kanojia said the company would adopt a half-measure that, to me, seems unlikely to placate the networks or satisfy that audience member.
“We will let you have free access while in Boston, but you can’t set up recordings while you are out of your home market,” he said.
Two other queries from the audience brought up a couple of basic misunderstandings about how a new entrant in a market can challenge incumbents and how those established firms can respond.
A couple of people asked about Aereo’s selection of local stations and picture quality. Those are valid points (Kanojia said Aereo didn’t have sufficiently reliable reception of some small New York stations and was planning to let users specify higher video bit rates, up to maybe 8 million bits per second from the current cap of 2.75 Mbps), but they’re also somewhat beside the point in this competitive context.
An incumbent may think customers will only leave for an alternative at feature parity with itself, but that’s generally not how it works. Customers will gladly sacrifice quality or compatibility to solve a larger problem. For instance, Firefox 1.0 didn’t work at every site that welcomed Internet Explorer 6, but look where the browser market is now. In Aereo’s case, the prospect of trading $100-ish cable-TV bills for Aereo’s $8-plus-tax rate allows a great deal of room for compromise.
Finally, two others in the audience asked Kanojia how the service could respond if TV stations opted to offer their own full-time online streaming. As a self-identified employee of Hearst Corp. (a TV station owner) said: “If you win, there’s no guarantee that somebody else won’t come in and take you out.”
But there’s the catch: most of the TV-streaming options we’ve seen so far have adopted the “TV Everywhere” model, in which full-time viewing is limited to existing cable or satellite subscribers. That’s a great perk for current customers, but viewers who have already left may only respond by borrowing TV Everywhere passwords from friends or relatives.
Meanwhile, Aereo’s expansion continues. It announced Thursday morning that it will launch service in Chicago on September 13, and after the chat Kanojia told me that it’s coming to a market particularly dense with discussions on these issues–Washington–sometime this August.