As Aereo threatens to alter TV landscape, major networks promise a fight

For consumers who want to cut their cable cord and get all of their television from the Internet, there’s been a major obstacle: It’s hard to get live sports and local news.

Now a Web start-up, called Aereo, is offering to remove that last barrier with a simple method. It is using antennas to pick up programming from public airwaves and then deliver shows into homes that have a Web connection — for as little as $10 a month.

With Aereo planning to expand its service to Washington and 21 other markets this summer, CBS, ABC and other big networks have attacked the upstart company with renewed vigor.

In lawsuits, they argued Aereo is little more than a content thief. But their efforts to persuade federal courts to shut it down have failed. On Monday, Fox Television’s parent company fired back, saying it might consider delivering its shows only through cable connections, no longer broadcasting them.

“We won’t just sit idle and allow our content to be actively stolen,” said Chase Carey, president of News Corp., which owns Fox Television.

The battle over Aereo, which was founded barely two years ago, underscores the television giants’ growing fears of the disruptive force of Internet video. With Web connections fast enough to deliver high-quality picture and sound, the cable and television industries’ long hold on the living room is loosening, with weighty implications for the way programming is created and distributed.

Faced with cable bills that typically reach well over $100 a month, 5 million households have abandoned cable, up from 2 million in 2007, in favor of much cheaper Web-based options, according to Nielsen. Netflix, for instance, offers an array of movies and TV shows to those with an Internet connection for a subscription of less than $10 a month. Through Apple and Amazon.com, consumers can pay a few dollars for each show they view.

As these alternatives have grown in popularity, the traditional model of television — which has long financed the creation of shows and padded the profits of cable companies that distribute programs — has trembled. But it has been able to hold its ground as the only source for the latest shows and live sports.

Aereo offers all of the programming that appears on CBS, NBC, Fox, ABC, PBS and about two dozen other channels. Customers could see NCAA tournament games live or the most recent episodes of “American Idol” or “Dancing With the Stars.”

Such shows are also freely available to consumers who use antennas to get their television. About 54 million people still watch over-the-air broadcast television.

But on top of that content, Aereo also allows for pausing live TV or recording shows and saving them for later — features once exclusive to subscribers of cable or satellite services. The company eventually envisions allowing consumers to pay for only what they watch, similar to ordering food items off an a la carte menu.

“All we are doing is giving consumers an alternative to what is now an utterly irrational system where people have to pay too much for so many channels,” Aereo chief executive Chet Kanojia said in an interview Monday at The Washington Post.

Backed by media mogul Barry Diller, chairman of IAC/Interactive Corp., Aereo was expected to draw attacks from the networks, Kanojia said. (Diller is a member of The Washington Post Co.’s board of directors.)

“We were prepared for the controversy. We are controversial and know this is far from the end” of the battle, he said.

In court, the networks banded together and argued that Aereo’s service violates copyright laws. Aereo countered that it was not trying to steal content but simply allowing consumers to use its antennas to access shows on public airwaves. A lower federal court sided with Aereo last year. Last week, two out of the three judges in the U.S. Court of Appeals for the 2nd Circuit in New York agreed with the lower court’s decision.

After losing those battles, the television industry is expected to take its case to Capitol Hill, some analysts said. Others predicted the unique and complicated case could reach the Supreme Court.

“If Aereo’s model is ultimately upheld,” Stifel Nicolaus analysts Christopher King and David Kaut wrote in a recent note, it could force “the broadcast/content companies to seek Congressional relief.”

At the National Association of Broadcasters’ annual trade show on Monday, Carey, the News Corp. president, said, “We will continue to aggressively pursue our rights in the courts, as well as pursue all relevant political avenues, and we believe we will prevail.”

Carey added: “One option could be converting the Fox broadcast network to a pay channel, which we would do in collaboration with both our content partners and affiliates.”

Kanojia, emboldened by the recent court’s decision, was in Washington on Monday meeting with federal officials on Capitol Hill to “explain how our service works and dispel the myths.”

So far, Aereo offers its only service in the New York area. Kanojia declined to reveal how many people have signed up. He said the company plans to begin service in the Washington area by June and will be blanketing subways and newspapers with ads.

But don’t expect any television commercials.

“Yeah, no one in TV will agree to take our ads,” Kanojia said.