FilmOn CEO: FCC 'extremely positive' toward virtual MVPDs, Aereo's subscriber numbers 'really pitiful'

with Alki David, founder and CEO of FilmOn

David (Source: FilmOn)

Change is inevitable. That's the mantra being carried by Alki David, founder and CEO of FilmOn. The outspoken executive made the rounds at the FCC last week, attempting to rally support for a Notice of Proposed Rulemaking (NPRM) circulated by agency Chairman Tom Wheeler that could change the definition of an MVPD. If the proposed rules are approved by the commission, FilmOn could get a chance to legally retransmit broadcast and cable networks' content over the Internet.

Given the murky situation around the legality of the company's service, it's unclear why FilmOn is still operating--even as its fellow linear OTT provider, Aereo, shells up in a non-operating survival mode to await the FCC's rulemaking. FilmOn has faced fines and injunctions in various cities across the United States, yet its website is still streaming signals--albeit not from any major U.S. broadcasters at present. Samantha Bookman, editor of FierceOnlineVideo, chatted with David following his latest FCC visit to get his view of the climate at the commission, an overview of FilmOn's business model, and how he sees the OTT landscape evolving in the near future. The following is a transcript of that conversation edited for clarity and brevity.

FierceOnlineVideo: You visited the FCC Thursday to chat with commissioners about the NPRM that was circulated by Tom Wheeler. What are your thoughts on how the commission views the idea of redefining MVPDs?

David: Well you know, we traversed all the offices of the FCC and the Media Bureau today. … I was surprised because all the commissioners were extremely positive without any negative kickback at all. One of them even suggested to tell the others--they can't talk to each other, you know--that they should push for a November window (to discuss the NPRM), because it's a very light agenda.

The feedback was very encouraging. We'll finally get MVPD status, which we've been fighting for since 2010. Whether we persuade the Copyright office is another thing, but we have three litigations going. Probably … two out of three courts are favorable (to us) right now. (Our status) would be favorable to all courts if the FCC recognizes us.

Whether or not we get the luxury of compulsory licenses is not as relevant. We just put out 300 letters to broadcasters in the 200 markets that we're in, asking if they would elect us to must carry status. We've already had very favorable responses and more are coming in daily.

That sets us up for reaching out to the cable companies. We now can go back to Discovery, Scripps (and negotiate to carry their programming).

FierceOnlineVideo: Can you provide a little background on FilmOn? Many in the U.S. have only heard of you from the legal controversy swirling around the company, but you operate pretty much worldwide.

David: Worldwide, we have over 720 channels. We have 45,000 videos, podcasts and audiocasts online. We own the world's largest private film and television library. We own (the original film negatives and masters of) 35,000 movies--and those represent some extraordinary verticals, content genres.

Then there is the traffic we have. We did over 2 billion ad calls this month across 69 million uniques. Thirty percent of that was in the U.S., and half via mobile.

We're a force to be reckoned with now. It's inevitable that broadcasters will want some of those eyeballs.

FierceOnlineVideo: You started FilmOn in 2008, relaunching it from your original company 111 Pics. OTT video has become incredibly disruptive since then, and now programmers and broadcasters (HBO and CBS) are jumping into standalone streaming.  Did you ever think you'd see that?

David: It's inevitable. Short term… maybe (broadcasters) can litigate, lobby, twist some district judge to put the brakes on. But the ones willing to stick in the fight will eventually win. (Companies and regulators should) do what is right. What benefits the public.

A lot of content owners we have online are unable to get on the air. We have a mixed bag of content (owners, creators), have 6,500 affiliates including Lenovo, Intel, and other big companies. You can't stop innovation, technology, and the will of the market.

Having said that, I also got the sense at FCC that there was definitely an agenda. There may be some back room politics going on. Maybe Time Warner Cable or Comcast are (pressing) the issue.

FierceOnlineVideo: Do you think Comcast and Time Warner Cable--even as they prepare to merge into a mega-entity--see OTT services like FilmOn as competitors?

David: Yes, definitely yes. I do see that. We're different, we're an MVPD. The definition of what we are is an MVPD. We are in keeping with the times, and the times is social media, social TV, interactive content, linear content, VOD … We're all that under one roof.

FierceOnlineVideo: A lot of online video's growth and innovation has been driven by consumer demand. Can FilmOn keep up with that?

David: We're a very small company, 100 people. We're very nimble. We have a great content aggregation team. In 2009 I licensed the entire Paramount library… that turned out to be a financial disaster, which I learned from. I spent millions promoting it. At the time, DRM policies were forced on us by the studios.

As a result of the (current) litigation and the refusal of networks to deal with us … desperation is the mother of invention. That has probably helped shape the platform and its intricacies. We have an affiliate program, you can log on and create automatically your own branded version of FilmOn. You can share in ad revenues of the platform.

We created a great affiliate system originally intended to partner with cable systems. Going to (operators) like Cablevision and cable shows, people (in that industry) are not prepared to move with the times. So we turned to the consumers. We have over 6,500 affiliates today.

We're very rich in content. We're very big in Europe and the Middle East. We're also our own CDN so, should net neutrality fall away we'll be able to deliver our (service).

FierceOnlineVideo: With that established content and ad revenue base, why go after the same local TV market as Aereo?

David: Less than 5 percent in the U.S. of our revenues could be attributed to local TV (currently). The reason why is … when an audience member, a viewer comes on the site, they expect their local station to be on there. It feels Mickey Mouse-ish if you don't offer them that. From a consumer and product standpoint, it's very important.

Our audience is primarily 18-40, not over 50, which is the traditional local TV demographic. It's the icing on the cake to what we do.

FierceOnlineVideo: Aereo announced that it's shuttering its Boston office and laying off most of its remaining employees. Can you comment on that?

David: Aereo's business model exists solely on local TV. There isn't enough money there for that. There really isn't. The numbers … of subscribers they have is really pitiful.

People are not watching that (broadcast) content most of the time. That's the big monster in the closet that people are scared of releasing, is the transparency of the numbers. That's the value of the Nielsen data. It's the currency … everybody knows the king has no clothes, and everybody's complicit.

Again, it's inevitable. If we're not here, somebody else will pick up the mantle of change and it will happen.

FilmOn CEO: FCC 'extremely positive' toward virtual MVPDs, Aereo's subscriber numbers 'really pitiful'