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three judges review our appeal, and we are right on the law. We'd rather take our chances in the judiciary than trying to lobby against the NAB's budget in Congress and wait forever for the FCC to regulate the Internet or not.
FierceOnlineVideo: What does Congress require to qualify for this royalty?
Weaver: Both Copyright Law and the Copyright Office have a five point test. If you meet the definition of all five you don't infringe copyright, period. Those five points are:
1) a facility, located in any State -- check
2) that receives television broadcast signals -- check
3) and makes secondary transmissions of such signals -- check
4) by wires, cables, microwave, or other communications channels -- check
5) to subscribing members of the public who pay for such service -- check
FierceOnlineVideo: Did you pay the Copyright Office the royalty?
Weaver: Yes.
FierceOnlineVideo: Did they accept it?
Weaver: Yes.
FierceOnlineVideo: What is the royalty payment?
Weaver: It is a small percentage of gross revenue. So if we were a billion dollar company it would be millions of dollars in royalty.
FierceOnlineVideo: Obviously, the broadcaster's are unhappy with the royalty payment...
Weaver: The broadcasters have never been happy with the royalty amount. But they need to take that up with Congress who enacted it, not sue us, and me personally. The Copyright Office just issued requests for comment on the royalty and rate. That would be the appropriate venue for the broadcasters to lobby and voice any disappointment with the royalty payment.
FierceOnlineVideo: The broadcasters filed a complaint against you with the FCC?
Weaver: No. Isn't that telling? The broadcasters who refuse to give us permission, will complain about us not negotiating under FCC retransmission consent, but refuse to file a complaint with the FCC, since they know we are not governed by the FCC.
FierceOnlineVideo: AT&T U-verse and Verizon FIOS use the Internet like you do...
Weaver: Of course they do. There is no difference, we are IPTV, they are IPTV. The list of Telcos providing IPTV who pay the copyright royalty is actually quite long.
FierceOnlineVideo: They pay the same royalty percentage you do?
Weaver: Yes. Exactly the same calculations of gross revenue. The percentage changes slightly for local versus distant signal distributions.
FierceOnlineVideo: But they're not being sued...
Weaver: Because they are big companies. They provide a physical set-top-box box computer, we provide a downloaded application that turns your computer into a set-top-box. The difference to a consumer is zero, the difference in copyright law is zero, the difference to the broadcasters is to sue.
FierceOnlineVideo: You mentioned local versus distant, how about the fact that you distributed channels nationwide?
Weaver: Cable and Satellite all distribute to out-of-market locations, the royalty percentage is higher for distant location delivery. Congress knew full well when they enacted the royalty terms that distant signals help the public. Congress did put a mileage limit for the US-Canadian border of 150 miles, but left it wide open within the US. We limit entirely to the US, not allowing any international viewing at all. If the broadcasters would agree to let me carry them, rather than refuse, we technically can limit to whatever area they would want to under a contract.
FierceOnlineVideo: What, in your opinion, is at the heart of this?
Weaver: Money and competition. Broadcasters own or license the content they distribute to the public. They are owners and distributors. And like any owner and distributor of something, they hate competing forms of distribution, be that cable which they tried to sue away, satellite which they tried to sue away, or us which they are trying to sue away. Broadcasters initially had one source of revenue, Advertising. Once Congress enacted the copyright royalty payment the broadcasters had two sources of revenue, Advertising plus copyright royalty. In the '90s a third source of revenue was added under the FCC, retransmission consent. At that time and ever since, the broadcasters have had three sources of revenue, Advertising plus copyright royalty plus FCC retransmission consent.
FierceOnlineVideo: But you don't pay under FCC retransmission consent?
Weaver: We would if we could. And we would be happy to pay broadcasters a fair rate if they would let us.
FierceOnlineVideo: So you would pay the same as cable or satellite does?
Weaver: We'd love to.
FierceOnlineVideo: But your prices would go up to subscribers?
Weaver: Correct, our per channel cost would go up, but we'd still provide small packages per market or a la carte options to keep offering consumers smaller priced subscription options.
FierceOnlineVideo: How can you fit within the Copyright Law but not the FCC regulations?
Weaver: Copyright Law is something everybody must follow, and we do. The FCC is something that if governed by, you must follow. Two distinct, separate, and independent areas of the government. The broadcasters did not file a complaint with the FCC, they opted to sue us for Copyright infringement. We follow all the laws, pay the royalties, and would be more than happy to have a contract with the broadcasters, be that equivalent to what the FCC would provide with retransmission consent, or something else that is fair.
FierceOnlineVideo: Does this royalty system work for cable channels?
Weaver: No. Only over-the-air broadcast stations, which is why we negotiate specific carriage contracts and pay the content owners of cable, independent, or international channels a per subscriber fee. Which is why you haven't seen ESPN, HBO, or Food Network on our service until we negotiate specific carriage rights with them.
FierceOnlineVideo: Last summer, you talked to a lot of content providers, and you were pretty sure you had some deals coming in. What happened?
Weaver: We have added some independent channels, more will be added, and some new packages, larger channels are still in negotiations, but most large channels are waiting on a reversal ruling.
FierceOnlineVideo: When will we see ESPN, HBO, or Food Network on your service?
Weaver: Every channel has its difficulty with carriage, all relating to the timing of addition to our service, be that ESPN owned by Disney who also owns ABC that is listed in our lawsuit, to HBO that currently restricts its content to distribution with physical set-top-boxes connected to televisions, or Food Network that is grappling with their existing contract terms and what to charge on a per account or per device price instead of per household. Being the first online cable company means we are pushing the status quo to think hard about the future.
FierceOnlineVideo: But you will pay whatever the channels want?
Weaver: Yes. Within reason of course, but if ESPN said they wanted 5 bucks a sub from us, we'd obviously do it. If ESPN wanted to be a la carte for $19.99/mo, people would pay it, and we'd love to carry it. The average price per sub is just over 20 cents per channel. Highly niche content ends up having a place in the online world too, where an all painting channel charges $1.99/mo and fans of painting pay. UFC and other pay-per-view events could set their price and we'd guarantee monetization for every viewer. It's obviously the way of the future.
FierceOnlineVideo: So broadcasters are suing you to keep out competition even though you would pay them?
Weaver: Yes. They are conflicted as owners of content and distributors, we compete with them on distribution, we do a better job, and that makes the media giants very angry. Which brings us to the question... is it better to be right, or rich? I believe it is better to be right, and we will fight for that, even against the richest media companies in the world who will try everything to crush us.
FierceOnlineVideo: In the end, do you think ivi gained many allies? Have you managed to win over any of the content providers?
Weaver: Yes we have an overwhelming support base and many allies. We are the little guy doing everything properly, we are just new, and it is making people question the industry.
We know most large content owners are waiting to see the outcome of our appeal, so I'd say we have many content fans, even within departments (other than legal) within the plaintiff list.
FierceOnlineVideo: Do you see a different model, perhaps a broadcaster-free model of ivi emerging?
Weaver: The model is the same, with broadcaster channels or not, but content equals quantity of subs, so the size of ivi depends on the size of the content. With broadcaster content we will grow faster and add more premium channels quicker, without broadcaster content it will take longer.