Capital Currents - Online video uncertainties
The industry will find the best way.
A year and a half ago, I wrote about the regulatory uncertainties associated with online delivery of video programming services. The uncertainties still haven’t been resolved, but more entities with a variety of business plans have entered the marketplace.
I wrote about ivi.tv. At one point, ivi’s plan was online delivery of cable programming services, but it was never able to work out contract agreements with programmers. So it then planned to offer about 30 off-air TV stations using the compulsory copyright license afforded to cable operators. Ivi planned to pay copyright royalties that would go to broadcasters. But broadcasters claimed that ivi was not a cable operator and went to court. Ivi now says it is waiting for the 2nd Circuit Court of Appeals to rule if ivi fits the definition of a cable system under copyright law.
I wrote about Sky Angel. Unlike ivi, Sky Angel was apparently able to work out carriage contracts with a number of cable programming services. But in 2010, Sky Angel complained to the FCC that it had an agreement with Discovery Communications to carry several of Discovery’s program services, but Discovery unilaterally decided to terminate the agreement. When Sky Angel filed a program access complaint against Discovery, the FCC’s Media Bureau ruled that program access rules do not apply to online providers because they do not meet the statutory definition for a multichannel video programming distributor (MVPD) – they fail to offer “channels” of programming as defined by Section 602 of the Communications Act.
Sky Angel appealed the Media Bureau decision to the FCC commissioners, and in response, the FCC has decided to start a proceeding to determine whether these online providers can qualify as MVPDs. The legal question revolves around terms like “MVPD” and “channel” used in the 1984 and 1992 Cable Act amendments to the Communications Act – and what Congress meant when it adopted those terms.
The eventual decision may have significant consequences. FCC rules require cable-affiliated programmers to make their programming available to MVPDs on nondiscriminatory rates, terms and conditions. They require broadcasters to negotiate retransmission consent agreements with MVPDs. And they provide a compulsory copyright license for cable carriage of TV stations. MVPDs also have certain obligations under FCC rules, such as delivering emergency alerts. But it’s clear that the advantages to ivi and Sky Angel of a favorable ruling would far outweigh the costs.
For broadcasters, the outcome is more complex. An FCC decision favoring ivi would give broadcasters the opportunity for more revenue through retransmission consent agreements. Broadcasters would love to have their stations available on any laptop or tablet anywhere. But they would lose geographical control of their signal. Presumably, every Sunday I could watch any NFL game being broadcast anywhere.
Meanwhile, interest in online video delivery has grown because there is evidently user demand, and there are new entities jumping in with new business plans. For example, Barry Diller’s Aereo service claims to have installed an antenna farm somewhere in New York City to receive off-air broadcasts. Each Aereo subscriber would have a personal antenna. Programming would be received off-air and delivered online to a laptop or tablet, either live or after recording on Aereo’s DVR, regardless of location. Since the subscriber would rent a personal antenna, Aereo would not be providing a program retransmission service; it would be providing an antenna rental service. Or so the story goes.
Then there is Satellite Direct, which claims to give you 3,500 HD channels, from all over the world, delivered to your laptop or tablet for a one-time fee of $50. Others claim it’s a scam.
The latest business approach comes from Nimble TV. Remember TV Everywhere? That was the cable industry brand name for an online delivery service that would be provided to existing cable subscribers. Evidently, TV Everywhere is bogged down in contract disputes, or authentication issues, or something. No problem. Nimble TV will act as your TV Everywhere agent. They will subscribe for you and deliver cable programming to your laptop or tablet, no matter where you happen to be.
Traditionally, there have been strong barriers that prevented viewers from watching programs where they wanted to watch it. The cable or satellite box is nailed down to a single location. And broadcasters and MVPDs sometimes had contracts that gave them the exclusive rights to carry a program in a particular geographical area. They paid more for exclusive rights.
Slingbox was the first to attack geographical exclusivity, but only the first. It was one way to give viewers what they want, but not the only way. In the end, regardless of what the FCC decides in the current proceeding, the industry will come up with the best way to give viewers exactly what they want. Viewers will pay more for this capability, Hollywood and the NFL will rewrite contracts to get a bigger cut, and everyone else will fall into line.