Aereo is moving on.
After a Supreme Court decision crippled the company's ability to do business--streaming TV over the Internet to consumers--the startup is seeking bankruptcy protection.
"Chapter 11 will permit Aereo to maximize the value of its business and assets without the extensive cost and distraction of defending drawn out litigation in several courts," the company's CEO, Chet Kanojia, said in a heartfelt post to the company's website homepage Friday.
Aereo filed bankruptcy Thursday "to preserve estate value as it works toward its goal of consummating a sale of substantially all of its assets, recapitalizing or entering into some other reorganization transaction," the company's chief financial officer, Ramon A. Rivera, wrote in documents filed with the U.S. Bankruptcy Court in Manhattan. The move comes just weeks after a significant round of layoffs all-but closed the company's Boston office.
The three-year-old company launched in New York City with the audacious goal of changing the way Americans watch television. It was built on a cord-cutter's dream work-around for network-TV viewing, dreamed up by Kanojia years before he started Aereo. It involved taking the signal-receiving antenna out of the customer's home, shrinking it down to the size of a dime, and placing it in a warehouse, where it could transmit network programming to an Aereo subscriber's Internet-connected device. Aereo subscriptions were available for about $10 a month in a few cities around the country for most of last year.
The television networks and their affiliates weren't pleased from Day One: They stood to lose as much as $3 billion in rebroadcasting fees, and fought back accordingly.
In a wide-ranging August discussion with Inc. and fellow founders Eli Pariser of Upworthy and Suroosh Alvi of Vice, portions of which were later published in Inc. magazine, Kanojia spoke with surprising candor about the challenges Aereo faced.
"Everybody [at Aereo] was well prepared that there was going to be controversy. I think what we didn't quite anticipate, in all fairness, was the media likes to talk about media, so it became sort of this hyper jacked up thing," Kanojia said. "It went, in 18 months, from sketching on a napkin to a national policy debate, and in 24 months the U.S. Supreme Court, which was totally unexpected...As much as we knew that there was controversy, the velocity with which it took off was a little shocking. We sort of tapped into some raw nerves."
According to the court filings from November 20, Aereo's operations were largely funded by nearly $100 million in equity investments. The company has about $20 million in remaining cash, equipment, and intellectual-property assets. In his letter to customers, Kanojia said:
The U.S. Supreme Court decision effectively changed the laws that had governed Aereo's technology, creating regulatory and legal uncertainty. And while our team has focused its energies on exploring every path forward available to us, without that clarity, the challenges have proven too difficult to overcome.
Kanojia is a serial entrepreneur whose first business, Navic Networks, was acquired by Microsoft in 2008 for--reportedly--more than $200 million.
In his letter to customers this week, Kanojia seemed to reflect further on the past three years, and his massive undertaking.
"We feel incredibly lucky to have had the opportunity to build something as meaningful and special as Aereo," he wrote. "With so many shifts and advances in technology, there has never been a more perfect time to take risks, challenge the status quo and build something special."