Aereo's Kanojia Ready for a Fight, Bring on the Lawyers

NEW YORK ( TheStreet) -- Aereo's Chet Kanojia, the cool and determined founder and CEO of the would-be television disruptor, wouldn't tell a New York conference how many subscribers his ambitious start-up has managed to attract, but his comments did reveal something about how he spends his days.

"Half the time I wonder what percentage of our subscribers are actually consumers, versus media executives or lawyers, or whatever," Kanojia said, to the laughter and amusement of attendees at Ad Age's Digital Conference in Manhattan on Wednesday.

These days, closely-held Aereo is as much a fledgling media outlet as it is a litigant. Indeed, Kanojia hasn't made many friends among the country's largest media companies since starting an online service that delivers television programs over the Internet. Aereo is currently only available in the New York metro area but Kanojia said 22 additional U.S. cities will have access to the service by the summer.

Aereo's own lawyers did have reason to celebrate on April 1 when a U.S. appeals court rejected a petition from CBS ( CBS), Disney's ( DIS) ABC, News Corp.'s ( NWSA) Fox and Comcast's ( CMCSA) NBC charging that Kanojia's company was illegally re-selling media property. More legal battles are pending.

The country's largest broadcast networks argue that Aereo, which counts Barry Diller's IAC/InterActive ( IACI) as a shareholder, should be paying them "re-transmission" fees to carry American Idol or CSI: Crime Scene Investigation as part of its online service. Kanojia counters that the broadcasters use government-issued free-over-the-air spectrum to deliver their programming, and therefore Aereo is simply providing a valuable service at a reasonable price of $8 to $12 a month, much less than the typical pay-TV plan.

Pay-TV channels such as Bloomberg Television, Kanojia told the advertising conclave, have cut direct deals with Aereo to carry their programming. Aereo may also carry "quality products that are independent" and not able to get onto the channel slate at pay-TV outlets. He said the country's cable and satellite-TV operators created a monopoly of service while some programmers "can't get on the dial," he said.

Broadcasters, of course, are petrified that Aereo will put an end to CBS' ability to demand large payments from pay-TV carriers such as Time Warner Cable ( TWC) and Liberty Global ( LBTYA), owner of DirecTV, if consumers are able to access the shows they want via a comparatively inexpensive service.

"The government granted the spectrum explicitly so people would have access to free television," Kanojia said, citing a statistic from the National Association of Broadcasters that 54 million U.S. consumers get television using an antennae. "There's been no restriction on what kind of an antennae, what size, where it's placed. Who provides the antennae has got nothing to do with it."

Kanojia says Aereo is a natural outgrowth of consumer frustration with having to pay a monthly pay-TV bill for scores of channels which are never watched. The music business was similarly turned on its head when file-sharing ripped the cover off the business model of packaging a bunch of songs few wanted to hear in order to sell an over-priced CD.

Speculation is rife that if Aereo continues to win in court and among Washington policymakers, the broadcasters will pull their most popular and expensive shows - sporting events high among them - from the free over-the-air spectrum and make them available only through pay-TV.

As for where this battle goes next, Kanojia declined to deliberate. But he didn't appear to be backing away.

"Broadcast is such an important aspect of the American fabric that somebody is going to reach these people," he said. "The argument, the name-calling, is just absurd."

As for that subscriber number, Kanojia used the cover that Aereo is a private company and therefore he's under no obligation to reveal such vital information.

This fight is still in the early rounds.

Written by Leon Lazaroff in New York

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