The Aero Bomb

When the Library of American Broadcasting honored Barry Diller with the “Giants of Broadcasting” award last October, the 71-one year old innovator mused: “It’s especially nice that I get this honor when many people in this room are suing me”. Diller, clearly enjoying the irony of the moment, was referring to a lawsuit against his latest start-up, Aero. Aero offers a virtual antenna of sorts, allowing subscribers to get over-the-air TV channels via the Internet and record shows of interest in a cloud-based DVR.

Broadcasters are furious, because they believe Aero should pay them for a right to rebroadcast their channels. Aero’s defence states that this complaint has “no merit”, since “consumers are legally entitled to access broadcast television via an antenna and they are entitled to record TV content for their personal use” .
Fox, whose TV business Diller built and ran for over 12 years, is one of the broadcasters filing the lawsuit.

When Aero launched in 2012, no one was sure about it’s prospects.
“Areo: The future of TV is here today” hailed the tech commentary on the Forbes website – probably just to stay on Barry’s good side. “Barry Diller’s OTT Service Areo Is Dead On Arrival,” pronounced the Streaming Media Blog.
One thing was sure, however: the broadcasters were going to sue.

Over-to-air channels are financed by advertising. However, for decades they have been trying to build an additional revenue stream by charging operators a re-transmission fee. It was, in fact, Barry Diller himself – in his famous address to the National Association of Broadcasters in the early 90s– who urged the free broadcast channels to develop the second stream of income in addition to advertisement. At the time he argued that retransmission fees were critical to the survival of free-to-air TV. He is basically the father of the “second stream” strategy, which he is now blowing out of the water with his Aero bomb. And he is charging consumers a monthly subscription to watch and record the channels he is getting off the air for free.

I wonder if the unavoidable lawsuit was in itself a brilliant marketing move, following an old New York maxim: “There is no such thing as bad publicity – just make sure they spell your name right.” Aero is a startup and its marketing budget is miniscule compared to a typical cable service. Being sued is certainly a solid alternative to getting your name out there.

Diller has consistently pushed the boundaries of TV business, using new technologies to disrupt and reinvent. At the same time, he is a pillar of the US broadcast establishment and his move to undermine the very core of the strategy he once created — and to upset his long-time friends who run the big over-the-air channels — has significance beyond the small markets where Aero operates.
In a recent New York Times interview, Diller described the TV business as an environment where “your friends really are your enemies”. Broadcasting is a business run primarily by greed, and secondarily by fear – fear of anything new, anything that disrupts, anything that might grab the attention of the already fidgety consumer. Despite its limitless funds and capacity to transform the world, it is a business that, to paraphrase America’s greatest lawyer, Gerry Spence “offers little in the way of enlightenment” (Spence at the time was talking about bankers and golfers). In fact, I wish Diller would bring Spence on the Aero defense team. I wish that HBO would pick up the whole story up and turn it into a reality TV drama. The TV loop will be complete, and despite the confusion it will make for really good entertainment.