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Seattle startup ivi TV sought to build a business by transmitting the most popular network TV shows over the internet, but today that idea l…

Ivi Tv Logo Hires
photo: Ivi

Seattle startup ivi TV sought to build a business by transmitting the most popular network TV shows over the internet, but today that idea looks like a dead end, at least for now. ivi TV CEO Todd Weaver has vowed to fight on and seek an appeal, but in the meantime, ivi TV will have to shut down most of its broadcasts, following an order issued today by a New York federal judge.

Judge Naomi Buchwald’s order has a tone of astonishment that ivi TV was even bold enough to set up such a system. “To place defendants’ argument in real-world context, they assert that for the payment of approximately $100 a year to the Copyright Office (the payment for a Section 111 compulsory license) and without compliance with the strictures of the Communications Act or plaintiffs’ Consent, that they are entitled to use and profit from the plaintiffs’ copyrighted works.”

ivi TV argued that it should have been classified as a cable system under U.S. law, and a few weeks ago several public-interest groups weighed in to support the Seattle company. But Buchwald was nowhere near accepting that argument. ivi TV isn’t a cable system, she wrote, and “absent defendants’ skewed interpretation of the statutory text and administrative record, there is absolutely no basis for holding otherwise.”

The court battles began quickly after ivi TV’s launch last year, but this decision was delayed because of a skirmish over venue; the parties disagreed whether the case should be heard in Seattle or New York.

Lawyers representing the TV networks weren’t authorized to comment on their win, but forwarded my inquiry to their clients. ivi TV CEO Weaver struck a combative pose in his statement on the verdict, saying that people want more than the “one-size-fits-all television offerings” currently available: “This fight is for the people and their right to choice and control over their own entertainment — and it will continue. The oppressive big media networks must open their doors to innovators or they will inevitably fall.”

If you ask me, the demise of U.S. television networks is far from a sure thing. But having said that, Buchwald’s decision strikes me as short-sighted for a few different reasons. When I interviewed ivi CEO Todd Weaver last year I was initially very skeptical of his whole project. Sure, offering a ton of channels for $4.99 a month online sounds like it could be a great business. But how on earth is devising a system to grab TV programs, re-transmit them, and charge for them not an obvious copyright violation? Of course, there was an exception (a compulsory license) for cable systems. But isn’t it a huge stretch to claim that broadcast over the internet is a “cable system?” The architecture of the internet is wholly different than television cable systems. Surely, I said, Congress knew what a cable system was when it last revised the relevant law in 1976. If it had wanted to use broad language that would include all kinds of technologies, it could have simply done so.

Here’s the kicker: That’s exactly what Congress did. Weaver offered some background on how satellite TV systems had to fight a similar battle to win recognition years ago, but what really convinced me that ivi should have a case was just reading the relevant section of the law. The definition of “cable system” is near the bottom of Section 111 of the U.S. Copyright Code. A cable system is a facility that “makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public.” It would have been easy enough to write that section without putting in “other communications channels.” That phrase didn’t get in by mistake.

Why this broad definition? When copyright law was being revised in 1976, cable service was developing as something of a natural monopoly in most places, since it wasn’t feasible to have six different entities running wires into homes. So Congress revised copyright law to give the semi-monopolistic cable industry the right to get the best TV content available for a low, low price–it only makes sense to “future-proof” the law by making sure that if new technologies eventually come about that compete with cable, they should be able to get that same deal.

Buchwald suggested that part of the whole bargain Congress was authorizing was that the cable companies would have to be regulated by the FCC. True enough, but her suggestion that ivi TV was trying to avoid FCC regulation seems off-base. Weaver has said he approached the FCC when setting up his business but they basically refused to regulate him, because his business was on the internet and they don’t want to appear to be regulating the internet. (That’s consistent with the current political firestorm over net neutrality, where the FCC and supporters of the new rules run from the phrase “internet regulation” like it’s a forest fire.)

The judge’s decision also relies heavily on Copyright Office interpretations and rules about what constitutes a cable system. That’s very close to letting the rooster guard the proverbial hen house. The Copyright Office, like the Patent and Trademark Office, has a strong tendency to view the established, incumbent businesses that pay various fees as “customers,” and to adopt their view of the world. Consulting the Copyright Office about who should win in a legal dispute between the biggest copyright holders in the world and a brand new company that could upset their business model is bound to be a self-fulfilling prophecy.

Buchwald should have given at least given ivi TV a chance to show that the short phrase “other communications channels” truly has the broad meaning that Congress intended. It’s likely that they had new technologies and new companies in mind when they wrote that–and that would be the best outcome for a competitive market, for consumers, and in the long run, for industry.

ivi Ruling 02.22.2011

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  1. Anthony Bontrager Wednesday, February 23, 2011

    Joe, the issue is not whether ivi can be classified as a cable system but can it rely on the compulsory license scheme as outlined in US Copyright law. The answer here is unequivocally NO as they do not meet the definitional requirements. Here the compulsory license scheme is available to what are called “secondary transmissions” of broadcast content. These secondary transmissions are essentially only available to Multi-Dwelling Unit (MDU) providers, satellite carriers, educational providers and non-profits. ivi fits none of these definitions.

    I’d also draw your attention to numerous earlier claims by ivi that they are NOT a cable company, which adds more fuel to the speculative fire that they are claiming to be anything they can in order to avoid paying fair compensation to copyright holders. Its a shame actually as most, if not all, of the broadcast groups are open for business and interested in licensing their content to Internet based platforms provided certain legal and contractual issues are met.

    I talk further about the ivi situation and their flawed legal position in a blog post I wrote last year. You can find it at http://www.anthonybontrager.com/2010/11/23/state-of-play/

  2. this_guy_is_a_tool Wednesday, February 23, 2011

    the previous poster is a tool

  3. Hi Anthony, thanks for your comment. I guess I am just trying to break this down to its fundamental question—did Congress want only a certain type of technology or a certain type of company to have access to the benefit of the compulsory license? Or was the intent that many types of technologies/companies should be able to access this benefit and have a level playing field? It seems to me, based both on the text of the law (again, why add “other communications channels?”) and the history of related cases, that it’s much more likely Congress intended for the latter policy. That also seems like the policy most likely to benefit the public and encourage innovation.

    You say ivi is trying to avoid paying fair compensation — I wonder if you feel the same way about cable companies? Because all ivi is asking to do here is pay the same rates that the cable companies pay.

  4. Anthony Bontrager, your embarrassing posts that are blatant attempts at a commercial for your “services” to license need to go away. At least make an intelligent comment that isn’t a shameful and poorly disguised attempt at getting work. Clearly, you have too much time on your hands. There must be a rock waiting for you to crawl back under it.

  5. Anthony Bontrager Wednesday, February 23, 2011

    Joe, yes, for the compulsory licensing scheme it is designed for specific types of entities to be able to participate. Cable companies and similar MSO’s are required to enter into re-transmission consent or must carry agreements with local broadcasters in order to access their signals. Not only does this dictate the rates that cable co’s pay for carriage on a per-subscriber basis, but it also deals with distant signal and other issues specific to local broadcasters. If ivi were truly looking to pay the same rates and abide by the same rules, they would have found a willing audience with the local broadcasters. However, ivi’s attempt to simply pay $100 to the copyright office for these distribution rights is blatant in its attempt to avoid paying current market rates. It’s too bad actually as their interface looked like it had some promise.

  6. Joe, even if IVI had qualified as a cable system, they still would have had to comply with the “must-carry / retransmission consent” portion of the Communications Act. Per this act, the broadcasters – not the system operators – choose whether they are minimally compensated per the Copyright Act (must carry) or whether they negotiate for compensation at the risk of not being carried if they cannot come to an agreement (retransmission consent).

    Why should a cable company be forced to pay $0.50 or $1.00 per sub per local channel while IVI retransmits for free? If IVI were to win, does that mean the cable companies no longer have to pay the fee?

    You are right that satellite companies faced the same issue of rights – but the Communications Act laid out the rules and they too had to comply. The relevance is not a “cable company” but an “MVPD” which connotes and conveys certain rights per the Act – the relevant portion in this case being adherence to the must carry / retransmission consent.

    IVI sorely missed the boat, and quite frankly their arguments were immature. They had no chance, and have no chance on appeal unless the Communications Act is deemed to be unconstitutional. Unlikely.

  7. Anthony Bontrager Wednesday, February 23, 2011

    Mike, well said.

  8. The cable and satellite compulsory licenses have long been outdated, unnecessary and marketplace distorting. Now we can add that they impede the introduction of new television distribution competition.

    I am old enough that I was in the room when the cable compulsory license deal was struck between cable, broadcasting and Hollywood. Cable got a compulsory license for one reason. Everyone thought it would be unduly burdensome for a cable operator to have to negotiate with the owners of each program on the broadcast channel’s schedule. No one thought of the possibility that the broadcast channel could act as a “rights aggregator” and offer the cable operator a single source for all of the program rights on the channel’s schedule. Then Time, Inc. created the first cable channel, HBO, and performed that exact rights aggregator role.

    Today cable and satellite operators contract in the free market to license the carriage of hundreds of cable channels without any compulsory license – the channels act as rights aggregators. The carriage of broadcast channels could be handled in the same way. The problem is that because of the existence of the compulsory license, local channels typically do not seek the right to sub-license the network and syndicated programs they license for their schedule. The best policy would be to phase out ALL the compulsory licenses over a 12 or 18 month period. During that time the local channels could secure all the programming rights they need to act as rights aggregators – just like the cable channels do. Then, every TV distribution platform – cable, satellite, online, etc. (including ivi) would be free to contract in the marketplace to retransmit the local stations. And, the phase out of the compulsory licenses would enable us to repeal all the regulations that were adopted to compensate for the market distorting effects of the compulsory license including the FCC’s must carry, retransmission consent, network non-duplication and syndicated exclusivity rules.

  9. Frank Frank Frank Monday, September 26, 2011

    everyone nos the pig corporations always wins in the us. set up ur website in costa rica or cuba and thumb ur nose at uncle sam

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