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Aereo says it turned a profit in some markets, wants partners

Source: Aereo

The chief executive of closely watched Internet TV start-up Aereo said on Tuesday that the controversial company had turned a profit in some of its markets, and is also looking for broadband partners to pair with its service.

Speaking at an investor conference hosted by UBS, Chief Executive Officer Chet Kanojia said it takes about 6,500 subscribers in a city to break even and that some markets had already turned profitable.

He did not identify the markets, but said cities such as Denver and Detroit were performing well, while the expansion into Miami was disappointing. New York, where Aereo is based, had a mediocre start, but is showing a turnaround.

(Read more: How Disney plans to keep kids hooked on TV forever)

Aereo was launched in March 2012 at $12 per month in New York and has since expanded to about 10 cities with plans to enter several more next year.

It lets subscribers stream live broadcasts of TV channels on phones, tablet computers and other devices using individual antennas. Users can watch the major broadcast networks such as CBS, NBC, FOX, ABC, the CW, PBS, Telemundo and other channels.

Its largest investor is IAC, which counts Barry Diller as a chairman. Diller has been a vocal proponent of Aereo, taking on its opponents publicly, whether they are broadcasters or the National Football League.

The TV industry sees the service as a threat to its ability to control subscription fees and generate advertising income, its two main sources of revenue.

In October, broadcasters ABC, which is owned by Walt Disney, CBS, Comcast's NBC Universal and Twenty-First Century Fox, asked the Supreme Court to hear their case claiming the online service steals copyrighted television content. (Disclosure: NBCUniversal is the parent company of CNBC and CNBC.com.)

Future

Kanojia said Aereo has so far invested $65 million in developing and releasing its product. Last January, the company raised $38 million, which added to a previous round of funding of $20.5 million.

Aereo has never revealed subscriber numbers, but Kanojia said the company is aiming to reach 2 million to 5 million customers. He said churn, or the rate of cancellation was "fairly low'' at about 2 percent.

Aereo is looking for possible tie ups with broadband or Internet bandwidth providers, Kanojia said. A few times during the presentation he said he could envision Aereo's service being sold alongside broadband in a bundle that costs about $50, which he called a ``lot more rational'' TV service than those offered by cable companies. He did not name any potential partners.

(Read more: Intel wants $500 million for Web TV service: Report)

Kanojia said he had made a mistake by not making the service available on televisions when it came out. Initially, Aereo was focused on the iPad only, but data now shows that 65 percent of people using the service view it on a big screen, whether through Apple TV, Roku streaming service, or by physically connecting their computer or tablet to a television.

"What they are using is the television, so there is a mad scramble how to make that easier,'' he said.

Aereo plans to make announcements at the Consumer Electronics Show in January that could include putting the service in gaming consoles or installing it directly onto TV sets, Kanojia added.

—By Reuters

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