A Court Fight With the Future of TV Providers at Stake

Ivi TV, an upstart online pay TV service that’s become a target of some of television’s biggest powers—everyone from the major networks to Major League Baseball and even PBS—will get its day in court on Wednesday.
 
Founded in 2007, ivi TV is the brainchild of Todd Weaver, CEO, who thought that the Internet could be turned into “a virtual cable company.” Like a cable company, ivi charges subscribers $4.99 for access to its channels via a video player that can be downloaded from its Web site, ivi.tv. Of the 70 channels currently offered, about 60 are the major network TV affiliated and owned-and-operated stations in New York, Los Angeles, Chicago and Seattle.

The hearing Wednesday, over whether or not to slap ivi with an injunction that would prevent the fledgling service from continuing to carry the local TV signals, could make or break the company, which launched last fall backed by about $1 million in financing. It’s part of a suit filed by the broadcasters in U.S. District Court for the Southern District of New York last September.
 
This case may specifically be about ivi, but it could have broad implications for online video distributors down the line, as it raises questions about how OVDs should be classified and under what rules or regulations they should be governed, if any. And for the broadcasters, it presents a real challenge: If they can’t stop ivi, they might lose a significant amount of control over how their content is carried on the Web, not to mention how much money they stand to make from it.
 
Ivi argues that under the relevant law it is a cable system and needs only to pay compulsory license fees for the TV stations it carries. The broadcasters contend that ivi should not be classified as a cable system and that, as a result, it needs permission to carry their content.
 
The Federal Communications Commission has stayed out of the dispute and does not classify ivi as a cable system. Ivi’s Weaver has met with all five FCC commissioners, most recently in December.
 
“The FCC told us we are not covered by the FCC. We don’t have to negotiate retransmission consent. The TV networks haven’t filed a complaint with the FCC,” Weaver said. “We’ve found the Gordian knot of content distribution. We can’t untie it, but we can slice right through it and be completely legal and carry the most premium content out there.”
 
In a further signal of the stakes of this case, several public interest groups—Public Knowledge, Electronic Frontier Foundation, Media Access Project and Open Technology Initiative—have gotten involved. On Tuesday, they filed an amicus brief in support of ivi.
 
“A preliminary injunction against ivi would not only deprive consumers and the competitive landscape of a new entrant, but it also would chill other potential startups and their investors from entering the market,” the groups said, adding that the Justice Department underscored the importance of OVDs in its ruling on Comcast-NBC Universal.