Documents filed by Aereo with the U.S. Copyright Office have finally disclosed how many subscribers they had for their streaming service and the numbers show, it simply wasn’t a service that many consumers wanted. At the end of 2013, Aereo had only 77,596 total customers. About 27,000 of those were in the NYC area, 12,000 were from Boston and 10,000 from Atlanta. For all the talk by those in the industry and members of the media of how “innovative” or “disruptive” Aereo was, the reality is that the only number that matters for a subscription business is how many customers it has. That’s it. That number determines revenue, P&L and whether or not the company survives with their offering in the market. [See: Barry Diller’s OTT Service Aereo Is Dead On Arrival]
Aereo failed because they didn’t understand the market they were in and set expectations with themselves, that were completely unrealistic. They argued that the cable companies model of bundling channels was bad, yet Aereo themselves bundled all their channels into one monthly fee as well. For all the talk by Aereo of a la carte, Aereo didn’t allow you to pay only for the channels you wanted. You had to pay a monthly fee to get channels broadcast in foreign languages, even if you couldn’t watch them. In reality, Aereo was just like the cable TV model, but with less choice, poorer video quality, less device support and fewer options overall.
The CEO of Aereo said they could sign up 350,000 subscribers in the major cities, yet the company ran out of capacity and had technical issues in NYC, when they had less than 7% of that number of customers. When management and Barry Diller are out in the public saying that between 25M-30M people wanted their service, it shows just how out of touch they were with the market. Consumers want choice, they want subscription services with a deep catalog of content to choose from. They want high-quality video, with support on all devices. Aereo didn’t have any of these with limited device support, small number of channels and streaming video quality that was on average, a third of what services like MLB.TV offer today.
Aereo raised $100M, yet couldn’t even scale the business to 100,000 subs. At 100,000 subs, that would be less than one tenth, of one percent, of the cable TV subscription market. Aereo didn’t fail because of the U.S. Supreme Court ruling, Aereo failed from day one because it was selling a service in the market that not enough consumers wanted. Aereo should be a lesson to others that just because technology allows you to bring a service to the market that does not mean the service is something consumers want, or are willing to pay for. If there is no tangible business model behind the technology you bring to the market, then how the service works does not matter. Aereo put technology before business, and that always leads to failure, when it comes to consumer services.