Aereo’s Fuzzy Legal Legacy

While the FCC seems to have backed off for now from a proposal to update the regulatory definition of multichannel video programming distributors (MVPDs) to include certain types of over-the-top services, the battle over how the law should treat online video rages on along other fronts.

aereo_antennaOn Wednesday, a redacted copy of an opinion issued under seal last month by U.S. district court judge Rosemary Collyer, concluding that OTT broadcast service FilmOn X was not entitled to the compulsory license that cable and satellite services rely on when they retransmit copyrighted content contained in broadcast signals, was released to the public. And even with the redactions, it’s now clear that Judge Collyer took a 180-degree different view of the question than U.S. district judge George Wu took last year in ruling that FilmOn was, in fact, entitled to the compulsory license.

The two questions — who qualifies as a MVPD under FCC regulations? and who qualifies for the compulsory copyright license MVPDs rely on? — are legally distinct, but closely related. Read More »

Trouble By The Bundle

Stop me if you’ve heard this one before:

“We understand the temptation for the FCC to take credit for resolving this impasse, but their intervention had nothing to do with it. We were very close to a resolution well before Chairman Wheeler got involved. In fact, the FCC process actually delayed the resolution, because it added more issues to negotiate, which lengthened DISH’s service interruption, not shortened it.”

That was Sinclair Broadcasting doing its best impression of Comical Ali, a.k.a. Mohammed Saeed Al-Sahaf, the hapless former Iraqi spokesman, insisting that the FCC’s unusual and urgent intercession in the retransmission consent negotiations between Sinclair and Dish Network had nothing to do with the outcome.

comical_ali_nothing_to_seeDish and Sinclair had been negotiating for two and half months without reaching an agreement, Sinclair had triggered the nuclear option by yanking 129 local stations from Dish subscribers in 79 markets, but within hours of FCC chairman Tom Wheeler blasting the blackout and summoning the parties to an “emergency meeting” at the commission, mirabile dictu, all issues were resolved and the blackout was lifted.

Yet one thing had “nothing to do” with the other. Hmm.

The actual substance of the dispute between Dish and Sinclair was no laughing matter for the future of the pay-TV business, however, nor was Wheeler’s intercession, whatever its effect. Read More »

Broadband Rubicon Crossed? Cablevision, CBS Reach OTT Retrans Deal

Cablevision is boasting today of becoming the first cable or satellite provider to offer CBS’s OTT channel, CBS All Access, to its broadband subscribers.

The multiyear deal between the network and the MSO includes retransmission consent for CBS-owned stations and continued carriage by Cablevision of Showtime, CBS Sports Network and the Smithsonian Channel, in addition to CBS All Access.

“This comprehensive new agreement builds on our strong relationship with CBS and ensures that every Optimum customer gets the highly popular CBS content they want across multiple platforms and screens,” Cablevision EVP of programming Tom Montemagno said in a statement. “As the first distributor to agree to provide tony_sopranoCBS new Internet services, Cablevision continues to expand its portfolio of next-generation offerings, connecting customers to the programming they value when and where they want it.”

For those who have paid attention to Cablevision in recent months the CBS deal is no big surprise. The MSO has been drifting away from the traditional pay-TV model since it introduced its “Cord Cutter” package earlier this year that included broadband service and an over-the-air antenna for tuning in broadcast channels. It was also the first operator to offer Hulu to its broadband subscribers and was a launch partner for HBO Now. But the CBS deal represents the first time that Cablevision — or any other MVPD — has licensed an OTT service as part of a broadcast retransmission deal.

I’m not sure other cable ISPs would see that as something to boast about. Read More »

Retransmission Discontent

Last week’s meltdown among media company stocks seems to have subsided for now, but not before wiping out $60 billion in market value. Shares of Viacom fell 17 percent between August 4 and August 11; Discovery Communications and 21st Century Fox each fell 13 percent; Disney shares dropped by 11 percent; Time Warner by nine and Comcast (NBCUniversal), CBS and Starz all fell by mid-single digits.

Media CEOs complained, and many analysts concurred, that the sell-off was overdone, and that neither the actual earnings news that triggered it nor the underlying fundamentals of the business justified such a drastic repricing. It certainly wouldn’t be the first time that the market overreacted to events in the short term.

FCC_buildingIn fact, the stampede out of pay-TV stocks last week felt more like the release of pent-up anxiety among investors than a reaction to any particular bit of news. It began when Disney issued a small downward revision to its earnings forecast for its ESPN unit, which it blamed on “modest subscriber losses” from cord-cutting. The adjustment was a small one, but Disney chief Bob Iger has been among the most outspoken media CEOs in arguing that cord-cutting is a limited and manageable phenomenon, and that ESPN is well-positioned to profit from changes in the pay-TV business. If even Disney couldn’t paper over the impact of cord-cutting on ESPN, investors seemed to conclude, then maybe the problem really is as bad as we feared.

Similarly, ratings woes on linear TV channels are not new. But when Viacom reported a 9 percent drop in ad revenue from its cable networks investors seemed to take it as confirmation that even well-established media brands are losing pricing power in the advertising market. Read More »

OTT Retransmission: The Next Net Neutrality

Come the fall, the Federal Communications Commssion’s consideration of its proposal to reclassify some over-the-top video services as multichannel video programming providers (MVPDs) is likely to become the agency’s next highly divisive issue, reprising the same ideological and partisan differences that marked the debate over net neutrality.

Last month, FCC chairman Tom Wheeler confirmed that the commission will take up the proposal in the fall, and indicated that he favored making the switch, which would grant online video distributors (OVDs) the same program access rights as cable and satellite providers while also imposing some of the same restrictions and FCC sealrequirements. But in a speech to the Churchill Club in Palo Alto, Calif., last week, Republican commissioner Ajit Pai, who had dissented at great length from the FCC’s net neutrality rules, laid down the gauntlet again.

“This morning, I would like to make clear that I strongly oppose this proposal,” Pai said. “Given the remarkable success of the over-the-top video industry, the burden should be on those who favor new regulations to prove what’s wrong and explain why we should change. That case just hasn’t been made.”

As with his opposition to net neutrality rules, Pai’s analysis of OVD reclassification leans heavily on standard conservative “free market: good; regulation: bad” framing. Beyond the boilerplate, though, he raises an issue that I also noted in a previous post here on OVD reclassification: Changing the FCC’s definition of who qualifies as a MVPD, by itself, will not guarantee OVDs will be able to retransmit broadcast signals on the same terms as cable and satellite providers because the FCC has no authority to convey a license to the copyrighted programming contained in those signals. Traditional cable TV systems operate under a compulsory license, created by Congress and administered by the U.S. Copyright Office, that gives them automatic permission to rebroadcast copyrighted programming in exchange for paying statutory royalties. Read More »

Bad Sports: ESPN Sues Verizon

No U.S. television network is more invested in, or has benefited more from the dynamics of the bundle than ESPN. The combination of must-have programming for a key segment of the pay-TV audience, and the must-carry leverage of its sister-broadcast network ABC, has given the Disney-owned sports network the power to command the highest per-subscriber carriage fees in the industry, ensure placement on basic tiers, and compel carriage of ancillary networks like ESPN Classics and ESPN Deportes.

espn_sportscenter_logoFor those pay-TV subscribers not in the ESPN demographic, however, that leverage has acted like a tax, imposing higher costs for networks and programming they don’t watch, yielding what amount to windfall rents for ESPN. Those windfall rents, in turn, have given ESPN the wherewithal to pay the skyrocketing rights fees for live sports. Thoseinflated rights fees, in turn, have become the primary economic engine of most professional and big-time amateur sports while acting as a formidable barrier to entry for would-be competitors to ESPN, yielding a virtuous cycle that reinforces ESPN’s dominant position within the pay-TV ecosystem. Read More »