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Aereo Expansion Could Signal Major Shift in Television

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A revolution is underway in the battle for your living room. Referred to as cutting the cord, more people are switching from subscription cable and satellite TV to streaming services, also called over-the-top services, like Netflix (NFLX). Industry watchers like Business Insider believe a generational shift is underway, with younger viewers leaving television in favor of wireless internet that allows them to stream content to mobile devices.

Tech giants Google (GOOG) and Apple (AAPL) have taken notice and are also in the game of trying to change the way we view television. But a smaller tech company is giving them all a run for the money. In our first episode of “Breakout Profiles” we’re introducing you to Aereo — the only company streaming live local television to users.

With strong financial backing from media titan Barry Diller, chairman of IAC and known widely for creating the Fox Broadcasting Company and USA Broadcasting, the company got off the ground quickly, and launched in March 2012.

Right now, the Internet-based service is only operating in New York City. It delivers 31 channels in three different languages — ranging from NBC and CBS to Telemundo and SinoVision — right to smartphones, tablets, PCs and even existing television sets.

In order to offer more flexibility than traditional pay-TV, there’s no subscription required. Membership plans range from $1 a day to $8 a month. And if you spring for the entire year, it’ll cost you a total of $80 --which is what many of us pay for cable each month.

“The idea that you have to buy everything in this consolidated package is what we are really trying to go after,” says Chet Kanojia, founder and CEO of Aereo. “I don’t know many 35 [years old] and under today that are desperately calling the cable company and saying ‘gosh I want that cable package.’”

Kanojia explains in the attached video that getting even a small percentage of viewers to cut the cable cord will go a long way in transforming the industry.

In his view, switching to a streaming format for media consumption gives people more freedom to break away from their TV sets and not worry about missing programs while they’re on the go.

There is one group, however, that isn't cheering for the change just yet: sports fans. Aereo doesn't carry any sports networks, which could very well be a dealbreaker for many.

“If you love ESPN, you gotta have ESPN, we’re not for you,” Kanojia admits. “But if you’re the rest, 70% of the country, you know we have a good case to make.”

If you’re wondering how this all works, the answer takes you straight to the heart of the legal battle that Aereo has been fighting. Last March, ABC, NBC and CBS filed a copyright violation suit claiming the service “is based on the illegal use of content.”

But in July a federal judge sided with Aereo because of how their technology is built. The company streams content through signals sent from tiny antennas. There are tens of thousands that exist at an undisclosed location in New York; one antenna for each subscriber.

This is precisely why the service was ruled legal. Since each user has their own antenna, it’s analogous to receiving a free signal using a regular antenna at home.

The networks’ legal teams haven’t backed down, and neither has Aereo. While appeals are expected, Aereo plans to build out its technology to bring service to 22 new markets this spring, including the New York suburbs, Chicago, Boston and Philadelphia. This could bring in 90 million new customers this year alone.

And the company’s CEO has plans to expand content offerings. “The idea of having movie channels or movies that aren’t interrupted by advertising every 13 seconds, I would pay for,” says Kanojia. “I would happily pay five or 10 bucks for a movie channel.”

The legal waters remain murky, but the expansion is underway. Aereo is rocking the boat and signalling a major change could come to television as we know it.

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