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Barry Diller: Young people will fuel Aereo's growth

"The idea of you paying thousands of dollars a year for a package of cable channels that you don't watch doesn't make any sense," Diller said.

IAC's Barry Diller wants to see TV move to the Internet.

RANCHO PALOS VERDE, CA -- Barry Diller is happy that the broadcast networks have sued Aereo. It has helped the startup he funded get some high visibility.

Aereo delivers local, over-the-air TV broadcasts via the Internet to subscribers. Antenna/DVR technology has caused a flurry of lawsuits from TV broadcasters, including ABC, CBS (CNET's parent company), Fox, NBC Universal, and Telemundo. The networks allege that Aereo violates their copyrights and that Aereo must pay them retransmission fees.

The court rulings so far have ruled in Aereo's favor, and the company has filed a complaint against CBS seeking to prevent further lawsuits.

From Diller's point of view, the broadcasters are getting paid by the advertisements that run on their programs, similar to any home with an antenna on the roof or TV.

"I am not trying to take away from them. It's a free over-the-air signal," said Diller, chairman and senior executive of IAC, during an interview at the D11 executive conference here. "I don't want to beat up broadcasters. ... I want to move from closed systems to Internet systems, and the more you can get video to the Internet, the better it will be."

"Any incumbent wants to guard their wall as aggressively as they can," Diller added. "We are not pulling money out of broadcasters, but then I have an ax to grind."

Speaking at the D conference later in the day, Anne Sweeney, co-chair of Disney Media Networks and president of the Disney/ABC Television Group, called Aereo "opportunistic piracy." "It's taking advantage of our content for their own gain," she said.

Diller is betting that the younger generation will take to Aereo and other Internet services that try to break the closed systems and the bundles of channels that are part of cable packages.

"The idea of you paying thousands of dollars a year for a package of cable channels that you don't watch doesn't make any sense," Diller said. He calculated that 90 percent of households with a cable bundle basically subsidize the 10 percent who want to watch ESPN.

Diller looked to Apple, Amazon, and Microsoft, in particular, to help move TV to the Internet.

"If Apple can invent, they will come up with a good product and it will further the dominoes falling," he said. "I can't imagine anyone enjoys the navigation system of cable. Trying to get a program to record on cable is maddening."

Diller has big ambitions for Aereo, which is rolling out to 22 cities, in addition to New York and Boston, over the next several months. If Aereo works, and reaches 15 to 20 million subscribers, then it can make its own programming and drive it through the system, similar to Netflix, he said.

Diller said that the closed systems of the broadcast and cable networks will eventually fall, but it will take a while.

"If you say long, long, long term, I doubt cable or satellite will be around," he said.

If the legal battles between the broadcasters and Aereo are any indication, it will be a prolonged battle indeed.