CES 2014: Aereo says it has secured $34 million in additional funding

Aereo, a Barry Diller-backed startup that provides broadcast television channels over the Internet for a monthly fee, said Tuesday that it has secured $34 million in additional funding from outside investors.

The money will help Aereo expand beyond the 10 metropolitan areas it currently serves. It will also allow Aereo to develop apps for additional devices, such as Internet-connected TVs and game consoles, while battling copyright-infringement lawsuits filed by broadcasters.

The additional funding, announced on the sidelines of the International CES gadget show in Las Vegas, comes from Aereo's lead outside investor, Diller's IAC/InterActiveCorp, as well as several existing and new investors.

Aereo's service starts at $8 a month and currently covers New York, Boston, Houston and Atlanta, among others. Subscribers get about two dozen local over-the-air stations, plus the Bloomberg TV financial channel.

In each market, Aereo sets up a data center with thousands of dime-size antennas. The company temporarily assigns an antenna to each subscriber to record a show or watch it live and transmits that show over the Internet to the subscriber's device. Because each subscriber gets his or her own antenna, the company reasons, it's no different from having a personal antenna at home to pick up free, over-the-air broadcasts.

Broadcasters argue that Aereo built the individual antennas specifically to skirt copyright law, as there's no technical reason such a service would need them. As a result, the broadcasters say, Aereo ought to pay licensing fees like cable and satellite TV providers.

Aereo so far has won court rulings in New York and Boston.

But federal judges in Los Angeles and Washington have ruled against an Aereo-like service called FilmOn X. In a ruling that bans FilmOn in all but three states, Judge Rosemary M. Collyer in Washington wrote that with antennas, servers and other equipment all networked together, "this system ... is hardly akin to an individual user stringing up a television antenna on the roof."

Meanwhile, broadcasters have appealed the New York ruling to the Supreme Court.

In an interview, Aereo founder and CEO Chet Kanojia said Aereo knew from the start that broadcasters might sue, and he portrayed its ability to obtain additional funding as a vote of confidence.

He said the two new investors will be able to offer Aereo advice and contacts: Gordon Crawford is a veteran media investor, while investment firm Himalaya Capital offers international experience as Aereo explores markets beyond the U.S.

The focus this year will be on continuing to expand in the U.S., Kanojia said.

A year ago, Aereo announced plans to reach about two dozen metropolitan areas. Kanojia said Aereo hit less than half of that by year's end because of delays hiring staff and developing outdoor antenna boxes. (Aereo's initial market, New York, has its antennas indoors.)

Aereo now expects to finish that round in the first half of 2014 and announce additional expansions for later in the year.

The service is now available on personal computers, Apple and Android devices and Roku streaming boxes. Kanojia said Aereo wants to develop apps for Google's Chromecast streaming device, various game machines and TVs.

Over the next six months, Aereo plans to add social features to help subscribers find shows and interact with others who like similar programs.

Including the latest funding, Aereo has raised nearly $100 million from outside investors. Aereo did not disclose what percentage of the company those investors own or how much each individual investor has provided. Besides IAC, existing investors include Highland Capital Partners and FirstMark Capital.
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