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Summary:

Ivi streams live TV from broadcasters like ABC, CBS, NBC, Fox and PBS, but it didn’t sign a single contract with any of these companies. Instead, it relies on a clause in U.S. copyright law that allows cable TV providers to retransmit over-the-air broadcast content.

ivi

Now this is ballsy: Seattle-based Ivi Inc. introduced software today that relays live TV feeds online from some 40 broadcasters, including ABC, NBC, CBS, Fox and Telemundo.

The company claims its application offers “more content than Hulu”, but it hasn’t signed contracts with a single broadcaster. However, Ivi founder and CEO Todd Weaver believes his company’s offering to be perfectly legal. In a phone interview he claimed Ivi is “an online cable system,” and as such is protected by U.S. copyright law.

How’s that possible? In the U.S., cable and satellite TV providers can legally retransmit broadcast content without striking any deals, as long as they pay semi-annual fees to the U.S. Copyright Office: fees which then get distributed to rights holders.

Ivi has already filed paperwork with the Copyright Office to pay these fees. It’s questionable whether broadcasters see eye-to-eye with Ivi on this, and Weaver admitted that lawsuits are not out of the question. “What we expect is a typical knee-jerk reaction from the industry,” he told me.

However, he said that Ivi eventually wants to help broadcasters make money. The company plans to work with Nielsen to provide its viewership numbers, and it also wants to help sell local ad inventory, which it promises will be more effective than on cable TV. “We have the ability to do targeted ads,” said Weaver, and he promised the ability to actually purchase products straight from within an ad further down the line.

For now, Ivi is working on growing its audience, and the company is targeting various hardware platforms, from the iPad to Boxee, Roku and the Google TV in order to do so. Ivi is using P2P technology to distribute its live streams, but the company is using a number of servers for seeding.

I briefly tried the application today, and it’s pretty snappy. A first channel starts playing immediately upon launch, and channel changing also works with minimal buffering. The player offers the ability to pause and rewind current broadcasts as well as access a basic EPG, but that’s about it for now.

Some menu items hint at future plans for on demand and pay-per-view shows, but these aren’t implemented just yet. Weaver told me that he hopes to have pay-per-view shows up and running within the next three months. Ivi is available for free testing for 30 days, and charges around $5 a month after that.

Liz Gannes first reported about Ivi in early 2009.

Related content on GigaOM Pro: New Business Models For Pay TV Services (subscription required)

  1. Seems like it is better to ask forgiveness than it is to ask permission in this industry.

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  2. It seems like Mr. Weaver is getting poor advice. This is a quote from the FCC’s own document describing retransmission rights: “The Communications Act prohibits cable operators and other multichannel video programming distributors from retransmitting commercial television, low power television and radio broadcast signals without first obtaining the broadcaster’s consent.” (http://www.fcc.gov/mb/facts/cblbdcst.html)

    My understanding is that the line in your article–”In the U.S., cable and satellite TV providers can legally retransmit broadcast content without striking any deals, as long as they pay semi-annual fees to the U.S. Copyright Office — fees which then get distributed to rights holders.”–is completely false. Broadcasters can demand payment for their retransmission rights if they so choose, and the payments go to the broadcasters, not the Copyright Office.

    Ivi is subject to the same rules and regulations as cable operators “and other multichannel video programming distributors.” Mr. Weaver is about to find that out.

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    1. This whole area is pretty messy, which has led to some of the recent retrans disputes… essentially, U.S. Copyright Law instituted a compulsory license for broadcast channels in 1976, with royalties being passed through the U.S. Copyright Office. The 1992 Cable Act amended this by adding the idea of retransmission consent, which the link you provided is explaining pretty well.

      Ivi’s take on this, as far as I understand it, is the following: They’re claiming that they are a pay TV provider just like any cable company, and as such have a right to a compulsory license. At the same time, they argue that the Cable Act doesn’t apply to them because they’re not actually operating physical cable infrastructure.

      It’s a bit of a reach, to be sure. The again, it’s not unheard of that new forms of transmission are treated differently. Satellite for example doesn’t have quite the same rights and obligations as cable.

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      1. They’re trying to have it both ways–they’re a cable operator when it suits them and they’re not when it’s not to their benefit. No court is going to let them get away with that.

        And, even if you resolve the broadcast retransmission rights, you still have the issue of interfering with the contracts of syndicators who license exclusive rights to their programming to individual stations in each market. Ivi is exposed to potential litigation from 20+ broadcasters, every major U.S. network, every studio that operates a broadcast syndication arm, and every independent syndication house selling programming into the New York or Seattle markets.

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    2. He Len,
      The point is IVI is offering what people want, and the cable companies have no choice but to consider the inevitable, they may opt to work with his company to make it work, especially when every year hundreds of thousands may continue to cut the cord, IMO why should I pay $60 a month to watch 3 channels an hour or two a night, if that, CABLE is just not worth it anymore!

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  3. You don’t launch a business on a technicality. Ivi I would assume has no outside funding as no VC in their right mind would fund a company that is trolling for a lawsuit from day one.

    For Ivi’s sake, I hope they have sound legal advice and a huge war chest of cash because they are going to get so sued.

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  4. I for one hope that he has found a loophole to get through. Can you imagine how great online video would be if all distributors paid the same amount for the content? No more exclusive deals with one company while leaving others in the dark. The studios wouldn’t be able to create bidding wars for their content because it would be about maximizing the total number of view and not just the bottom line. We’d also see thousands of innovative companies spring up overnight. I’d rather live in a world where everyone has the same content, then in a balkanized state where you must subscribe to five different services just to get access to 25% of the content. If they do get through this loophole, it’d force the studios and broadcasters to move forward, instead of clinging onto their dieing business models.

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  5. To timekeeper’s earlier point, the industry does not have time to sit around and wait — nor does innovation stand still. Regarding Len Feldman’s misguided comment: ivi expects to see a lot of knee jerk reaction from the
    industry, the old guard. Big Media is just like Big Oil or Wall Street. They will fight to the death to maintain their strangle hold on the consumer. ivi is an innovator who wants to help content owners, channels and broadcasters make money on-line and on new devices. ivi, in fact, is not governed by the FCC. No doubt, Big Media will send armies of high priced lawyers into battle in their attempts to keep consumers from “cutting the cord.” They will ultimately lose the war just as landline phone companies and manufacturers of buggy whips meet the fate of the dodo bird. We do not broadcast in any
    way that is governed by the FCC and therefore we are not within the umbrella of the FCC, but we are on the side of consumers who demand choice. Working together, we create a greater pool of money and give consumers’ choice. The
    music industry wishes they could go back in time and partner with innovative companies who offer new revenue streams like ivi does. It’s not too late for broadcasters and cable companies to embrace change, but it’s quickly reaching a tipping point.

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  6. iCraveTV.com tried this exact model in 1999 and was quickly sued out of existence.
    http://en.wikipedia.org/wiki/ICraveTV

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  7. Commenter Joe mentioned that iCraveTV did the same thing back in 1999. That is true. iCraveTV was based in Canada and was trying to skirt U.S. copyright laws that way, but I guess they didn’t bet on Canada being so buddy-buddy with U.S. copyright stakeholders.

    However, the very idea that this is illegal is preposterous. The major networks broadcast their signal, for free, for anyone to pick up using antennas. Why would they want to sue companies like this into oblivion?

    The answer is simply they are trying to maximize their profit. They use price discrimination to offer content to other networks at higher prices.

    What is different from ivi vs an ‘old school’ television distribution system? They both use cables (or wireless) to bring the content into the house, both charge for their content so that they can then pay for the distribution costs. I think there is a strong argument that ivi may be able to claim to be a legit ‘cable’ company. Make no mistake, the major cable companies – Comcast, Verizon, Time Warner, et al, are going to try to sue them into oblivion. I hope they can hold out, or have some decent groundswell support to stay afloat.

    Think about niche content companies – HBO, Discovery, A&E, etc. Why wouldn’t they want to offer a-la-carte programming? They may ‘want’ to, but again this comes down to money.

    They have deals in place with major cable operators to offer their channel in packages. So let’s say a cable provider has 500,000 ‘package’ subscribers. A&E might charge $.75 per subscriber per month, earning them $375,000 a month.

    If they go a-la-carte with ivi, they might get away with $5 a month. Let’s say X % of ivi subscribers go for it, I can’t imagine they currently have more than a 2k subscribers right now – and even at a very generous 10% purchase rate, thats only about $1000 in subscription costs.

    Thereon it becomes a numbers game. If ivi can grow its subscriber base to 500,000 and 10% adoption of a special channel at $5 a month, thats $250,000 a month revenue for the content network. Now we are talking.

    So will ivi succeed? I sure hope so. I think the ‘establishment’ is going to do their best to sue them out of the water, but they are in the wrong… ivi is the future of TV.

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    1. ddrager, you are precisely right in your analysis. Despite how much certain monopolistic entities might not like it, we are, in fact, legal. ivi is ‘in it to win it’ championing consumers’ choice, while also offering the industry a life vest and a ready-built solution to both stave off cord-cutting and create new revenue streams. A la carte is the natural evolutionary step and it’s here today.

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    2. Comcast should be afraid. Very afraid. This is probally illegal 10 years ago but this is 2010 and it is difficult for cable companies to argue illegal transmission over the Internet when they are rushing to do TV anywhere over the Internet. There will be hundreds of IPTV start-up like this soon. With Google tv, apple tv and Matrixstream iptv and Netflix nibbling at cable, Cable is doomed in the long term.

      Ultimate winners are the consumers.

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      1. Maybe Comcast trottled internet is better than the rest of the internet. I would love to see comcast argue this one in court.

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  8. Regardless of the legality of this I love what they are doing. Right now there are serious gaps in the delivery of Digital TV to the antenna – as a case and point, I can get about 15 channels in manhattan with an average digital anetenna but out in eastern long island i can get zero. So in going to digital TV service we have taken a huge step backwards in coverage – to the point where, in more rural areas you almost have to get cable or satellite just to get what you are supposedly entitled to get over the airwaves for free. This addresses that issue for anyone with broadband.

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    1. Wow, a ten-percenter weighs in. That’s who uses the precious broadcast spectrum, just ten percent of viewers. The government should subsidize a lifeline service of satellite-delivered local channels to the ten-percenters and auction off the broadcast spectrum that the other 90 percent of us never use. That way cell phones would not drop calls so much because of scarce spectrum, and the auction revenue from cell providers would more than cover the cost of subsidization to ten-percenters.

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  9. [...] CEO Todd Weaver told us last week that he fully expected a “a typical knee-jerk reaction” from the broadcast industry. The company said today in [...]

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  10. Actually Len Feldman, you’re wrong. There are “Exceptions” and the payments DO go to register of copyrights.

    It is all written in plain black and white here:
    http://www.copyright.gov/title17/92chap1.html

    What they’re doing is completely legal.

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