New Competitor Benefits from NYC Retrans Battle

New Competitor Benefits from NYC Retrans Battle
January 3, 2011

The retransmission battle between Fox TV and New York-area multichannel video programming deliverer (MVPD) Cablevision has provided a boon for new startup ivi TV. The Internet broadcaster increased subscriptions during a nearly month-long programming blackout last October by more than 320 percent.

The benefits provided ivi TV by the brinksmanship between Fox and Cablevision are ironic, given the heated litigation initiated against the company by content providers such as Fox, CBS, Disney, and more than 20 other broadcasters and sports leagues. The networks allege ivi TV “pirates” television signals for online rebroadcast.

Todd Weaver, ivi TV CEO and founder, claims the majority of its new subscriptions are former Cablevision subscribers. Cablevision reported an estimated loss of 8,000 subscribers in its skirmish with Fox.

The battle between network content provider Fox and multichannel video programming deliverer (MVPD) Cablevision erupted last fall when the network demanded more money from Cablevision for the retransmission rights of Fox programs.

Disregard for Consumers’

New York City has become the Bunker Hill of retransmission battles, with the October donnybrook only the latest dispute in an escalating war between MVPDs and content providers.

The first few minutes of the 2010 broadcast of the Academy Awards, for example, were blacked out until Time Warner Cable (TWC) agreed to pay an additional per-subscriber fee to local ABC affiliate Channel 7 for retransmission rights. Three million New Yorkers were affected.

In late 2009, Fox and TWC resolved a lengthy, often bitter, retransmission negotiation that threatened programming for millions of television viewers in New York, Dallas, Los Angeles, and other cities. At issue was Fox’s demand for an additional $1 per month from TWC for subscriber. While a threat of a blackout of Fox programming seemed imminent – including a blackout of the network’s broadcast of the Sugar Bowl post-season college football game – the two parties agreed to extend their existing contract before settling for an undisclosed amount on New Year’s Day 2010.

Traditionally, content providers eschewed dinging MVPDs for additional fees per subscriber. Instead, they would leverage existing programming to convince MVPDs to carry new boutique channels or simply request the MVPD pay a higher set fee regardless the number of subscribers.

The October fight left some 3 million Cablevision subscribers without Fox programming, including games 1 and 2 of the Major League Baseball World Series, several National Football League football games, and a variety of popular Fox entertainment programs such as Glee and House. That showed a disregard for consumers, said ivi’s Todd Weaver.

Guerrilla Warfare

Launched in September 2010, Seattle-based ivi TV won over disenfranchised Cablevision subscribers with a guerilla marketing campaign that featured teams of marketers handing out “Keep Calm, ivi’s On” flyers on New York City streets.

Subscriptions have been free so far, but ivi TV has announced plans to charge subscribers $4.99 a month eventually. Access to the service is granted by downloading an application to a broadband-equipped computer equipped with a Linux, Windows, or Mac operating system. The company initially served the Seattle area, and it seized the opportunity presented by the October blackout in New York City. It has announced plans to deploy in Los Angeles and Chicago.

No sooner had the company launched, however, when it found itself in the middle of legal turmoil. After receiving cease-and-desist letters, Weaver filed a lawsuit in federal court, which prompted countersuits from broadcasters asserting. “There are no ‘copyright technicalities’ that allow defendants to steal plaintiffs' broadcast signals and copyrighted programming and to fence that valuable intellectual property via the Internet.”

Weaver, however, contends ivi TV, like some 16,000 other companies such as AT&T's U-Verse, pays the Copyright Office to retransmit over-the-air broadcast stations, as all other cable companies do, in strict compliance with U.S. copyright law. He also argues ivi TV is functionally no different from a cable provider and therefore should be allowed to utilize the same statutory license tool to continue to rebroadcast the primary transmission from broadcast stations.

'Challenges for Copyright Law’

Andrew Scott, associate attorney with Scott & Scott LLP in Southlake, Texas, says the case exemplifies the difficulties of administering copyright law in an ever-changing technological environment. “New media technologies always will create unforeseen challenges for copyright law,” he said.

“For example, in the 1950s and ’60s, cable television providers battled broadcasters over the cable operators’ right to retransmit broadcast television signals to cable subscribers. After numerous courtroom scrapes, Congress stepped in with Section 111 of the Copyright Act, which established a statutory fee to be paid by cable broadcasters in return for the right to rebroadcast television signals.”

FCC Favoritism Claimed

According to Trevor Doerksen, CEO of MoboVivoFrom, a company that provides “video everywhere” service, the Federal Communications Commission’s regulations, crafted by Congress as part of the 1992 Cable Act, deliberately slight the cable industry, putting government in the position of picking winners and losers in the marketplace. He identifies ivi TV as a winner that probably wouldn’t have done nearly as well if the FCC regulations put together by Congress had been drafted more fairly.

“Government regulation of the broadcast industry gives massive advantages to cable, broadcast, and other media outlets like Fox, Disney and so on,” said Doerksen.

“From the earliest days of radio and television broadcasting, government has picked winners and losers given a finite supply of spectrum suitable for wireless transmission. Today, the government continues to manage this finite resource for mobile phones, over-the-air HD, and so on.”

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois. Bruce Edward Walker (bwalker@heartland.org) is managing editor of Infotech & Telecom News.