Barry Diller’s OTT Service Aereo Is Dead On Arrival

Screen shot 2012-02-16 at 2.39.53 PMOn Tuesday, Barry Diller introduced a new company and service called Aereo that will offer consumers in the NYC area the ability to get live broadcast TV stations via the Internet, with DVR in the cloud, for a subscription fee of $12 a month. Unfortunately for Barry's IAC/InterActiveCorp, who invested $20.5M in the company, this is going to be another example of an executive bringing a product to the market, simply because of their ego. Aereo has no shot at succeeding let alone disrupting the current cable and satellite market like they imply.

Consumers are not asking for this service, aren't demanding it and certainly aren't willing to pay for it. Aside from the fact that the service gets no cable channels, will only be available in NYC to those who have a NYC based billing address and IP and might face legal issues, the biggest problem is that it won't work as well as Aereo implies. While the company lists the Roku as one of the devices it will support, when I inquired for more details, a representative said Aereo will work with a Roku provided you link it to a browser based iOS device such as an iPad and use it to control it. So now I need two devices to make it work on one?

Aereo will only work on devices that have a HTML5 compatible browser, not via apps, so getting this via an Xbox 360 or PS3 is out of the question. While the company has claimed it will offer "HD quality", so far, they have not defined what they classify as HD, what bitrate it will be encoded in, who is delivering the video or what kind of streaming technology, like adaptive bitrate, might be used. So while Aereo is trying to make the service sound really easy to use, they have yet to provide any real technical details which will determine how good the video really looks and how well it will be delivered.

Of course anyone can already get the channels that Aereo is offering by simply getting a TV antenna for over-the-air broadcasts, so they will have a hard time selling the same thing for $12 a month. Some might argue that the real value is that Aereo offers a DVR service in the cloud, but since all of the content being offered is from the major broadcast networks, it's not exactly hard to find their shows on the web after they air. Others might argue that the real value with Aereo is that you can watch live TV on mobile devices, but you'd blow through your wireless cap pretty fast if you watched enough TV via a 3G or 4G connection. And so far, consumers in the U.S. have not shown any real interest in wanting to watch live TV on mobile devices, outside of some very specific content.

Another big problem for Aereo that no one has mentioned is the amount of money they would need to spend to market and support their service. The cable and satellite companies have huge marketing budgets for TV, radio, print and web and Aereo won't be able to reach the same audience without raising a lot more money. New customer acquisition costs would be very high and support costs will also put a burden on the company. What happens when users call up complaining that they can't get the content due to them not realizing it's a problem with their device or their connection? Aereo is going to have to spend a lot of time helping customers with tech issues that the cable and satellite companies don't have. For the most part, cable TV always works and Internet based streaming services don't have the same level of reliability or simplicity that cable TV has and are more expensive to support.

There are more than 100M consumers in the U.S. that pay for TV via cable and satellite and Aereo has implied that a big market to them would be about 300,000 subscribers. That's not even one half of one percent of the total number of cable/satellite TV subscribers in America. Yet they think their service will somehow disrupt the cable TV market or make cable companies change their practices? They aren't being realistic.

Whether the technology works or not is irrelevant as this is not a service consumers want, are demanding or will be willing to pay for, in any real quantity. This thing is dead before it even gets off the ground.