Aereo, Broadcasters’ Foe, Just Got a Huge Cash Boost

The Supreme Court is weighing whether to hear a lawsuit by the TV broadcasters challenging the startup

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Bebeto Matthews / AP

Chet Kanojia, founder and CEO of Aereo, Inc., stands next to a server array of antennas in New York, Dec. 20, 2012.

Aereo, the fast-growing streaming video service currently locked in a bitter legal battle with the major TV broadcasters, has raised $34 million in new venture capital funding, the company said late Tuesday. The cash infusion should help the two-year-old startup expand aggressively beyond the 10 cities where it currently offers service. The new funding amounts to an important vote of confidence for Aereo, which has asked the U.S. Supreme Court to hear a copyright-infringement lawsuit brought against it by the nation’s largest broadcasters.

Aereo will announce the new round of funding on Wednesday morning at the Citi Global Internet, Media & Telecommunications Conference, which is taking place during the International CES technology expo in Las Vegas. IAC, the media company run by mogul Barry Diller, is joined in the latest round of funding by well-known media investor Gordon Crawford, as well as existing Aereo backers Highland Capital Partners, FirstMark Capital and other investors. To date, Aereo has raised nearly $100 million in venture capital funding.

“Last year at this time, Aereo was launched in only New York City,” Aereo CEO and Founder Chet Kanojia said in an emailed statement. “Today, Aereo is available in 10 markets and will grow to 15 by the end of the quarter. In 2013, we also launched our first native app for Android, made improvements to enhance the user experience and more than doubled our employee headcount. Consumers are craving choice and options and as a result, we continue to see explosive growth across all our markets.”

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Aereo picks up free, over-the-air broadcast signals using an array of dime-sized antennas, and then sends those signals to customers via the Internet for $8 per month. Aereo’s users technically lease the tiny antennas, which the company houses in nearby “antenna farms.” ABC, CBS, NBC and FOX, along with several powerful allies, have asked the Supreme Court to shut down Aereo, arguing that it is stealing their TV signals. Last month, Aereo itself asked the high court to take the case, because it wants the case resolved once and for all.

If the high court agrees to take the case, it would set the stage for important test of copyright law with major implications for the entertainment industry. Federal courts in New York and Boston have sided with Aereo’s argument that it is transmitting “private performances” not copyright-protected “public performances,” much to the annoyance of the broadcasters. The broadcasters say that Aereo’s service amounts to outright theft, because the company doesn’t pay fees for the right to re-broadcast the TV signals it picks up.

It’s not hard to see why the broadcasters are upset with Aereo, because the startup poses a threat to the existing TV business model, which is based on a system in which cable and satellite companies pay billions of dollars in so-called “retransmission consent” fees to the broadcasters for the right to carry popular programming like prime-time shows and sporting events.

Aereo is currently available in New York City, Boston, Atlanta, Miami, Salt Lake City, Houston, Dallas, Denver, Detroit and Baltimore. “Aereo has scaled very quickly in 365 days and this additional funding will allow us to maintain this rapid pace of growth,” said Kanojia. “We are thrilled to have a world-class group of investors who believe innovative, cloud-based technologies, like Aereo, are the future.”