Aereo, which tried to turn over-the-air broadcast TV into an Internet-delivered service, has filed for Chapter 11 bankruptcy. Extended legal battles with a number of media companies resulted in a June Supreme Court ruling that created challenges "too difficult to overcome," wrote CEO Chet Kanojia in a blog post.
"We have traveled a long and challenging road. We stayed true to our mission and we believe that we have played a significant part in pushing the conversation forward, helping force positive change in the industry for consumers," Kanojia wrote.
Companies typically use Chapter 11 to gain some financial room to reorganize under court supervision and eventually emerge to continue operating. However, the tone of Kanojia's post implied that the company would likely liquidate.
Aereo launched an innovative business model in 2012. In large cities, people often have difficulty in receiving broadcast TV signals, forcing them to subscribe to cable service, even if they would be satisfied with local stations. So, Aereo built banks of antennas that received signals. Every subscriber had a dedicated antenna in the bank. TV programming would then be relayed over the Internet to the subscriber. Aereo also included a DVR service.
But the upstart ran into legal challenges from a number of companies, including CBS (CBS), the parent of CBSNews.com; 21st Century Fox (FOXA); Disney (DIS); and Comcast (CMCSA). They argued that Aereo was illegally obtaining content without the permission of the rights holders and undercutting their ability to make money because Aereo's system bypassed lucrative cable distribution.
Aereo countered that because there was one antenna per subscriber, the arrangement was no different than these people mounting antennas themselves. The company won initial court battles in Boston and New York City, but the plaintiffs' ultimate appeal to the Supreme Court overturned the rulings. In a 6-to-3 decision, the Supreme Court said that Aereo should be treated like a cable company, wiping away its rationale.
Aereo suspended its service but then argued that if it were to be considered a cable company, that would give it the right to a compulsory license to carry the TV programming in dispute.
However, for a company with limited resources, waiting for lower courts to provide a ruling that would allow it space to operate while being unable to collect revenue proved too costly. Early in November, Aereo fired its employees in New York and Boston to preserve its financial resources.
Aereo will become a reminder that although high-tech celebrates innovation, new business concepts don't always surmount the real-world challenges they face.