Slogan for ivi: Cut the cord

‘Cable’ via Internet: pirates or just the inevitable disrupters?

Published in Current, Oct. 4, 2010
By Dru Sefton

On Sept. 13, an Internet TV provider called ivi Inc. began selling worldwide access to 28 broadcast signals, including those of pubcasters WNET in New York City and KCTS in Seattle — without asking for permission or even informing the stations.

The controversial Seattle-based ivi captures and encrypts TV stations’ signals and distributes them through a web app to subscribers who pay $4.99 a month. Service to mobile devices and integration into viewers’ set-top boxes are coming soon, according to ivi’s website. The home page offers the promo, “Watch the Berenstain Bears on PBS!”

Broadcasters’ reaction to the ivi launch was swift. On Sept. 17, 11 content providers, including WNET.org and WGBH, sent cease-and-desist letters, demanding that ivi stop distributing their programming and asserting that copyrights had been violated.

On Sept. 20, ivi founder and c.e.o. Todd Weaver took aim at the 11 broadcasters and shot back with a lawsuit in U.S. District Court in Seattle. He said in a press release that it was “a preemptive move to discourage needless litigation from big media.”

Then on Sept. 28, PBS, WNET.org, WGBH and 22 other plaintiffs returned fire with their own suit in U.S. District Court in New York. They said in part: “The defendants are nothing more than publicity-seeking pirates that use the pretext of a nonexistent [copyright] loophole to exploit the creative efforts of plaintiffs and other broadcast stations and copyright owners for unjust profit.”

Filing along with the pubcasters are a wide range of content owners, including ABC, Telemundo and the Office of the Commissioner of Baseball. They seek damages and a permanent injunction against ivi’s webcasts.

The Seattle company (ivi.tv) says it’s following the same law that allows cable systems to retransmit broadcast signals and pay a negotiated rights fee. Rights owners owners will be compensated, Weaver told Current. “Payment is made every six months, so it is really quite hard to estimate how much right now.”

It’s hard to say how many subscribers ivi has. Spokesman Hal Bringman said it’s a private company and wouldn’t provide numbers. “But I can tell you it dramatically changes by the hour,” he said. Its Facebook page had 47 fans as of Oct. 1; on Twitter, 108 followers.

PBS and WNET declined further comment, pending litigation.

WGBH e-mailed a statement: “WGBH’s position is that unauthorized commercial exploitation of our copyrighted material, and the creative and financial resources that went into their production, is illegal. WGBH is working closely with WNET on this issue to protect public television programming assets.”

Daphne Adair, spokesperson for Seattle’s KCTS, told Current, “We were recently made aware of ivi, but have never heard from them directly. We’ve been in touch with legal counsel and are following the issue closely.”

Weaver said ivi’s service is actually a good thing for pubTV. “First, more distribution, more eyeballs,” he said. “Second, they get paid. Third, they can sign a contract with us to leverage our geolocation, tracking, and potentially even direct donation from their viewers. I could see viewers even having an optional monthly donation for the channel rather than a required subscription.”

Though ivi’s arrival may have looked like a guerrilla attack with great disruptive potential, it was also almost predictable as web technology and economics have made it possible to run something very much like a cable system on the Internet.

“Copyright law almost always lags behind technology,” observes Washington, D.C., comm attorney Ernest Sanchez. Media economics and law may have to adjust again, as they did after traditional cable systems and VCRs established themselves.

ivi is adding station signals every 90 days or so; next up, Chicago and Los Angeles. Ultimately, all pubTV stations could be carried by ivi. “Every market we go into, we retransmit every station that has a good signal, and we work hard to get as many from a market as we can,” Weaver said.

Weaver’s background is on the tech side. He was previously CTO at Impart Media, a digital signage firm; the senior design engineer for Amazon.com; and the software developer for eworks, an entertainment market research company that provides survey kiosks in theaters.

The catch: Section 111

In its lawsuit filed in Seattle, ivi describes itself as “an entity that receives over-the-air broadcasts of television content that originates with others.” Those signals are known in copyright parlance as primary transmissions. Through its app, ivi says, it provides secondary transmission of that programming. Section 111 of the Copyright Act provides for a compulsory license for cable systems that retransmit broadcast signals to their subscribers.

According to the Copyright Office, cable operators submit statements of accounts and royalty fees every six months to the Licensing Division of the Copyright Office. The Licensing Division invests those fees in U.S. Treasury securities until royalties are scheduled for distribution. Copyright owners then file claims for royalties.

The broadcasters’ Sept. 17 cease-and-desist letter to ivi disagreed on the interpretation of Section 111. “If indeed that is ivi’s view, ivi has misread Section 111 and the 30 years of jurisprudence underlying that provision,” it says. That section, the broadcasters contend, provides “cable systems,” not online retransmission services like ivi, with such a license.

Therein, a loophole. Two federal agencies appear to differ on just what a cable system is.

The FCC defines it as “a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community . . . ”

However, the Copyright Office defines a cable system as “a facility, located in any state . . . of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the [FCC], and makes secondary transmissions of such signals or programs by wires, cables, microwave or other communications channels to subscribing members of the public who pay for such a service.” A crucial point: It adds that an entity can meet this definition for copyright purposes, even if the FCC doesn’t recognize it as a cable system.

“So the U.S. Copyright Law clearly states you can be a cable system under U.S. Copyright even if you fall outside the FCC definition,” Weaver said. “If the FCC decided to regulate the Internet, and we can fall under its umbrella, we will be more than happy to get the benefits of the FCC and abide by the governance.”

In an interview with Light Reading Cable, a telecom analysis website, Weaver said that ivi plans to add cable networks to its service by negotiating carriage deals with the networks and undercutting cable operators’ prices by offering customers the smaller packages of channels that they want.

Another darned paradigm shift?

Signal repeaters like ivi are just the latest disruptive technology to hit the TV world, according to Sanchez, a longtime pubcasting communications attorney in Washington, D.C. “If you look at this historically, cable TV was illegal during its early existence. Entrepreneurs were pulling signals off the air and redistributing them by wire in places where those signals weren’t available. That took years to get sorted out by Congress.”

Ditto when VCR users began recording shows off the air for their own use. “Within a few years, millions of people had them,” Sanchez said. “It took several years to get to the Supreme Court. On a practical level — and believe me, courts cannot ignore practicality — there were 3 million or 4 million people that would have been declared criminals. The court wasn’t going to do that.”

In those same ways, ivi “challenges all the economic models and paradigms” that rule commercial as well as public TV, Sanchez said.

The cage-rattlers from Seattle would agree. As ivi said in a Sept. 21 press release, “Broadcasters fought against cable companies, then joined them. Broadcasters then fought against satellite companies, then joined them. Now it is our turn. History has a habit of repeating itself — and it is unfortunate they cannot learn from that and realize we strongly support broadcasters and their program suppliers helping them monetize, increase their eyeballs, and ultimately get paid.”              

Comments, questions, tips? seftond@current.org

Web page posted Oct. 4, 2010
Copyright 2010 by Current LLC

A COMMERCIAL FOR IVI

"Cut the cord" slogan shows up in this commercial: ivi TV brings live TV to the Internet, posted on YouTube.

LINKS

Website of Seattle-based web-video operator ivi.

Bloomberg reports Sept. 27: Disney, CBS, Fox Sue Ivi for Streaming Shows on Web.

Litigation is just a way to camouflage attempts to stifle competition, says ivi principal Weaver in VentureBeat.com.

How Copyright Royalty Arbitration Panels (CARPs) set rates of royalties paid to rights holders in cases where Congress granted a "compulsory license" to cable operators or public broadcasters or other classes of media.

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