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Video Business

October 13, 2003

Washington—The Federal Communications Commission last week gave HBO and Starz Encore what they wanted in the regulatory treatment of subscription video-on-demand services.

In its final memorandum and order implementing the "plug-and-play" agreement between cable operators and consumer electronics manufacturers, the commission left it up to individual cable and satellite TV operators to determine the level of copy protection applied to SVOD services (VB, 9–15).

In comments to the commission, Starz had argued for lumping SVOD in with conventional pay-TV and non-premium services, which under the new encoding rules must allow consumers to make at least a single-generation copy.

HBO had urged placing SVOD in the same copy-protection category as pay-per-view VOD, which can be designated "copy-never," preventing all consumer copying.

In its comments, HBO argued that its service contains far more original programming than Starz Encore's and that allowing it to be copied would undermine a critical aftermarket for its original series on VHS and DVD.

In its split-the-baby decision, the FCC formally classified SVOD as an "undefined business model" for now, allowing individual service providers to determine how to treat it.

In practice, that means HBO will be able to require "copy-never" status as part of its affiliate agreements with individual cable operators. Starz, on the other hand, can require copy-once treatment.

"For Starz Encore services, we will encourage our affiliates to allow a one-time copying right for all their customers," Starz Encore Group chairman John Sie said in a statement. "We will join with our affiliates to oppose any effort—at the FCC or in the courts—to erode the rights of affiliates and consumers under this ruling."