Startup online cable operator ivi TV, which retransmits broadcasters signals over the Internet, is continuing its battle to overturn an injunction that temporarily--it hopes--shut them down. In a conversation last week, ivi CEO and founder Todd Weaver said the online cable company already was profitable when the judge shut it down, beating its own projections by six months. And, he said, don't be surprised to see another online cable-style delivery vehicle roll out in the near future, this one backed by broadcasters.
Nevertheless, Weaver says he'll continue the battle, facing "enormous" legal bills, but with the support of consumers who very early on decided ivi TV was a simple, inexpensive alternative to endlessly escalating cable bills.
FierceOnlineVideo: Why didn't you ask permission to carry the broadcaster's channels?
Weaver: We did. They said "no." Just like they did when cable started, and like they did again when satellite started. We even said we'd pay the same or more for their channels than cable or satellite does today, limit their content to their market, and report all the increased viewers to Nielsen so their advertising rate card goes up. The answer was then and still is today "no." That offer still stands by the way, sadly the major broadcaster networks won't be agreeing to have us pay them to distribute their channels under a contract, they would rather sue us because we compete with their own distribution.
Cable, satellite, and the broadcasters see a benefit from and a governance under the FCC's retransmission consent. The benefit to cable and satellite is that the broadcaster's cannot just say "no" they need to negotiate and provide their channels in good faith. But when we ask the FCC if we are categorized, and if we can get a license, like cable and satellite, the FCC tells us, "you are not governed, not categorized, so there is no license to get." Meaning we don't get the benefit of, nor governance under retransmission consent. So we go back to the broadcasters ask for permission anyway, and they say "no."
FierceOnlineVideo: So the FCC regulations that help cable and satellite don't apply to ivi?
Weaver: Right. The benefits and regulations don't apply. The funny thing is that we'd be happy to pay broadcasters if we could have the same terms as cable and satellite. But the broadcasters refuse.
FierceOnlineVideo: But doesn't retransmission consent help broadcasters?
Weaver: Its arguable which side benefits more, but it benefits both sides. Broadcasters who elect retransmission consent under the FCC must negotiate with cable and satellite, and cable and satellite must get contracted consent for carriage rights. The FCC tried to strike a balance to provide competing forms of distribution the right to carry broadcaster channels, while ensuring broadcasters can negotiate contracted terms for their channels.
FierceOnlineVideo: Would you like the FCC to govern you?
Weaver: Sure. Yes, if the end result is that all forms of distribution have equal access to content.
FierceOnlineVideo: How can you carry these broadcast channels legally?
Weaver: The same way cable and satellite do. By paying the royalty for the legal right. Every cable and satellite company pays a royalty to the Copyright Office giving them the legal right to carry broadcast channels. The royalty rules and rates were enacted by Congress to allow all forms of distribution current and future to be able to carry broadcast channels to subscribers. There is no greater permission needed than a congressionally approved royalty system.
FierceOnlineVideo: Why don't others leverage this royalty payment?
Weaver: They do. 16,000 companies pay this royalty.
FierceOnlineVideo: What makes you different?
Weaver: We're new!
FierceOnlineVideo: There must be more to that...
Weaver: Yes there is, when cable was new broadcasters sued them. The Supreme Court said what cable was doing was not copyright infringement. The outcome of that case spurred Congress to create the royalty payment. To give credit to Congress, they wrote who would qualify for the royalty quite broad on purpose to include new and innovative forms of distribution.
So twenty some-odd years later Satellite comes along. They're new but fit within the qualifiers for the royalty, make the royalty payment. But that doesn't stop the broadcasters from suing. The broadcasters sue, Satellite is temporarily shut-down under an injunction and it was later reversed on appeal. Satellite was deemed at the end of their trial to fit under the royalty payment.
So here we are the third form of distribution, fitting within the qualifiers for the royalty. But that doesn't stop the broadcasters from suing.
FierceOnlineVideo: You believe the district judge who granted an injunction is wrong like in the Satellite case?
Weaver: Judges are people. People make mistakes. We believe the judge made a mistake here. It is why the appeals process exists, and we will be appealing.
FierceOnlineVideo: What's the time frame for the appeals process?
Weaver: Appeals for just the injunction is a multiple step process, last week we started the process when we filed a motion to stay the injunction in District Court (a couple weeks), then we file a motion to stay the injunction pending the appeal with the Second Circuit (a couple more weeks), then we file the actual appeal (a couple months). Any one of those steps could result in a reversal of the injunction.
FierceOnlineVideo: You knew there was a lawsuit coming the minute you turned the signal on... why'd you do it? Do you really think ivi can make it happen down the road, or will you end up trailblazers with a footnote?
Weaver: We know we're right on the law, and even though we knew the broadcasters would not like competition and sue as they've done twice in the past, we factored that in as a price of admission. Yes we really think we will get it reversed on appeal since...Continued
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