Court Says You Can't Innovate If It Would Negatively Impact NBC's Business Model

from the of-course-not dept

While there's been a fair amount of focus lately on the legal status of Aereo, the company offering broadcast TV over the internet by setting up a bunch of individual antennas and letting people access them online, there's also the ivi case. ivi, if you don't remember, offered what sounds like a very similar service to stream broadcast TV over the internet (for a fee). However, it used a completely different legal theory, believing it had found something of a loophole in the Copyright Act; namely Section 111 which allows cable providers to rebroadcast content for a compulsory payment to the Copyright Office.

The district court was not impressed, and basically said that ivi was trying to do an impressive tapdance -- defining itself as a cable provider to be able to use Section 111, but then claiming it was not a cable provider under the Communications Act. On appeal, ivi has lost again (pdf and embedded below), as the appeals court went a simpler route, and pointed out that reading the legislative history of Section 111 makes it clear that it was not intended to be used by services over the internet.

While I had bounced around on this earlier, I actually think that the court is probably right here, in terms of what Congress' intent was.

There still are some troubling parts to the ruling, mainly concerning purely faith-based claims by Judge Denny Chin that a service like ivi creates irreparable harm to the TV networks. Chin specifically claims that if ivi streams the videos online it hurts the networks:
First, ivi's live retransmissions of plaintiffs' copyrighted programming over the Internet would substantially diminish the value of the programming.
I don't see how that's true at all -- and it's certainly not obviously true. In fact, it could increase the value of the programming by making it easier and more convenient for more people to watch. Judge Chin tries to back up this statement by arguing that because the TV guys often sell ads targeted at specific segments and times, this could mess with that:
Plaintiffs broadcast their copyrighted programming to various communities at different scheduled times, for example, based on time zone or local network provider. For this reason, negotiated Internet retransmissions -- for example, on Hulu.com -- typically delay Internet broadcasts as not to disrupt plaintiffs' broadcast distribution models, reduce the live broadcast audience, or divert the live broadcast audience to the Internet.

If ivi were allowed to continue retransmitting plaintiffs' programming live, nationally (and arguably, internationally), over the Internet, and without plaintiffs' consent, ivi could make plaintiffs' programming available earlier in certain time zones than scheduled by the programs' copyright holders or paying retransmission rights holders. ivi's retransmissions of plaintiffs' copyrighted programming without their consent thus would devalue the programming by reducing its "live" value and undermining existing and prospective retransmission fees, negotiations, and agreements. ivi's retransmissions would dilute plaintiffs' programming and their control over their product.
But... that makes no sense. If that's true, then one could just as easily make the same argument about VCRs or DVRs. Yes, they disrupt the "traditional" way that a certain industry's business model works, but that doesn't necessarily mean that it's automatically diminishing the value of the original. After all, the TV guys made the same arguments about both VCRs and DVRs and now most of them admit that the DVR has actually helped their business by increasing the value of shows by making them more easily watchable by people. There's no reason to think the same thing wouldn't be true here.

In the end, as we argued from the beginning, the situation with ivi and Aereo (and Zediva and others) is silly. They're all looking for loopholes in the law to do what should clearly be allowed anyway. But because of the ridiculously expansive nature of copyright law, which is allowing legacy players to kill off new technologies, such things aren't allowed. And we end up with results like this, where an interesting concept (even if it tried to jump through crazy legal hoops) is flat out declared to break the law and shut down. Innovation be damned. NBC has to sell you more diapers via the commercials it's always sold in prime time. And you're not allowed to mess with that.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    icon
    ChurchHatesTucker (profile), Aug 28th, 2012 @ 11:00am

    Oy

    Shouldn't antenna manufacturers be concerned here? If someone were able to pull in broadcasts across time zones or political boundaries, imagine the chaos that would ensue!

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      The eejit (profile), Aug 28th, 2012 @ 11:09am

      Re: Oy

      It'sa worse than that - what would happen if you condensed all current bandwidths into one easy-to-use cable? The tech is out there right now in current experimentation phase, known as "Moebius fibre".

       

      reply to this | link to this | view in chronology ]

    •  
      identicon
      Anonymous Coward, Aug 28th, 2012 @ 11:22am

      Re: Oy

      Shouldn't antenna makers have to pay a fee to access the data that the networks are transmitting? I mean, if I try and break into someone's cellular phone conversation, I could be thrown in jail. Why should these antenna makers, and let's call them what they are, unlicensed communication transmission interceptors, be free to allow anyone and everyone to view content that's valued at billions of dollars for free? And it's not like it's hard to find these people; they put these infringement devices out for everyone to see on their roofs!

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Drew, Aug 28th, 2012 @ 1:29pm

        Re: Re: Oy

        I imagine the networks have already drafted proposals for a BBC-style "TV license fee" to cover this very "problem".

        Of course the fact the the BBC is ad-free and non-profit will not register with them.

         

        reply to this | link to this | view in chronology ]

  •  
    icon
    Zos (profile), Aug 28th, 2012 @ 11:07am

    second paragraph, second to last line "clear that it was no"
    unless you've taken up typing in brogh i think you missed a t.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Aug 28th, 2012 @ 11:17am

    Isn't the real issue that ivi was trying to monetize the content of the broadcasters by only paying a nominal fee? Just like Aereo. but they weren't paying at all.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Mike Masnick (profile), Aug 28th, 2012 @ 11:32am

      Re:

      Isn't the real issue that ivi was trying to monetize the content of the broadcasters by only paying a nominal fee?

      Well, the law says that it's fine for cable providers to do exactly that. So it seems a bit odd that internet providers can't, no? Besides, remember that we're talking about over-the-air broadcasts here, which are given out for free. All ivi does is *expand* their audiences.

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Aug 28th, 2012 @ 11:51am

        Re: Re:

        Well, it expands audience without paying (a fair share) for content. I think the issue is not whether it is a good idea but how much compensation should be paid for retransmission rights. And in the case where broadcasters make the content available themselves on the internet, why do they have a duty to promote a competing product comprised of their own content?

         

        reply to this | link to this | view in chronology ]

        •  
          identicon
          ldne, Aug 28th, 2012 @ 12:19pm

          Re: Re: Re:

          "Well, it expands audience without paying (a fair share) for content."
          Broadcast TV is FREE to viewers, it is funded by advertising and the value of the advertising is in the size of the audience. Services like this one actually increase the value of the broadcast, not reduce it, as the broadcaster could then go back and raise the advertising rates based on the expanded number of viewers provided by the service. since it's live and not recorded it is a direct expansion of the viewing of audience of the time slot. Except that broadcast dweebs are to entrenched and stupid to realize that they just shot down a potential money maker for themselves.

           

          reply to this | link to this | view in chronology ]

        •  
          icon
          The eejit (profile), Aug 28th, 2012 @ 12:53pm

          Re: Re: Re:

          Becuase they do that. ALL THE TIME. This is lieterally adding "...on the internet" to something, and suddenly it's not legal.

          It's easy to play the game when you're the only one in town.

           

          reply to this | link to this | view in chronology ]

        •  
          identicon
          JEDIDIAH, Aug 28th, 2012 @ 12:56pm

          Corporate Welfare.

          > I think the issue is not whether it is a good idea but how much compensation should be paid for retransmission rights.

          Yes, and that number is ZERO.

          Broadcasters simply should not get to double dip. The value of a broadcast is not decreased because more eyeballs can see it. That's just stupid and crazy talk.

          ALL channels with commercials should be free to rebroadcast by anyone so long as the original show and all of it's commercials remain intact.

           

          reply to this | link to this | view in chronology ]

          •  
            identicon
            Anonymous Coward, Aug 28th, 2012 @ 1:11pm

            Re: Corporate Welfare.

            The flip side of that coin is that parasites ought not to be able to profit from content they haven't paid for.

             

            reply to this | link to this | view in chronology ]

            •  
              icon
              John Fenderson (profile), Aug 28th, 2012 @ 2:35pm

              Re: Re: Corporate Welfare.

              Why not? That's a serious question.

               

              reply to this | link to this | view in chronology ]

            •  
              icon
              Mike Masnick (profile), Aug 28th, 2012 @ 2:43pm

              Re: Re: Corporate Welfare.

              The flip side of that coin is that parasites ought not to be able to profit from content they haven't paid for.

              That may be the most economically clueless statement I've ever read.

               

              reply to this | link to this | view in chronology ]

            •  
              identicon
              Anonymous Coward, Aug 28th, 2012 @ 3:39pm

              Re: Re: Corporate Welfare.

              Tell that to Disney.

               

              reply to this | link to this | view in chronology ]

            •  
              icon
              JMT (profile), Aug 28th, 2012 @ 5:41pm

              Re: Re: Corporate Welfare.

              I'm sure that sounds good when you repeat it to your self, but what you're actually saying is they ought not to be able to profit from FREELY DISTRIBUTED content they haven't paid for. But can you actually explain why? Given that the networks only benefit from this service, at no cost to them, why do they deserve any extra money?

               

              reply to this | link to this | view in chronology ]

          •  
            identicon
            Anonymous Coward, Aug 28th, 2012 @ 1:15pm

            Re: Corporate Welfare.

            Also, I believe one issue raised in this debate is that these rebroadcasters include commercial-skipping technology in their offerings. That kind of sinks your argument.

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              Anonymous Coward, Aug 28th, 2012 @ 1:35pm

              Re: Re: Corporate Welfare.

              "Also, I believe one issue raised in this debate is that these rebroadcasters include commercial-skipping technology in their offerings. That kind of sinks your argument."

              I'm not an expert on this case, I only know of what information was in this article. It's a live broadcast through the internet, and nothing in the article led me to believe that they're stripping out commercials, or any other such thing. If this service IS doing that, then the case makes a bit more sense. Even going off the quotes though, it really doesn't sound like that was happening.

               

              reply to this | link to this | view in chronology ]

              •  
                identicon
                Anonymous Coward, Aug 28th, 2012 @ 1:56pm

                Re: Re: Re: Corporate Welfare.

                Not certain about ivi but I believe that such was the case with Aereo.

                 

                reply to this | link to this | view in chronology ]

                •  
                  identicon
                  Anonymous Coward, Aug 28th, 2012 @ 4:57pm

                  Re: Re: Re: Re: Corporate Welfare.

                  Not certain but I think you don't know how to do any fact checking before pulling "facts" out of your ass.

                   

                  reply to this | link to this | view in chronology ]

          •  
            identicon
            Anonymous Coward, Aug 28th, 2012 @ 2:25pm

            Re: Corporate Welfare.

            It is a very touchy subject. To be able to get good advertising they need to be able to show to the advertisement agency that they are getting their monies worth, meaning they need some reliable and "unbaised" way of measuring how many people watch them.
            If Aero and ivi are not able to provide a thirdparty reliable measurement of their number of viewers they commercials are completely worthless for the network!
            The other primary point is that they can make a profit on their charge and thus, they have to take a loss on their profit from only one paying subscriber.
            Of course there is the politician-directed argument that the cable service will have to fire employees, because they no longer have as big a demand for cable technicians and the like, but on the internet we can probably ignore that argument.

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              Drew, Aug 28th, 2012 @ 3:35pm

              Re: Re: Corporate Welfare.

              These viewers would be just as measurable as any others that are statistically sampled and surveyed by the Nielsen Company.

               

              reply to this | link to this | view in chronology ]

        •  
          identicon
          Anonymous Coward, Aug 28th, 2012 @ 4:54pm

          Re: Re: Re:

          You're way off base here. If any money should be changing hands, it should go from the TV network to the broadcaster (ivi). ivi is making it so that tv channels which are already being broadcast free, no strings attached, into the air for pickup by an antenna in the local geographic area, are now being picked up and sent through an internet connection to someone who specifically wanted to watch that very content. Someone who OPTED IN, you might say, to advertisements and content from that TV network. That's only a good thing considering the alternative is that they don't see the ads or programming.

           

          reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Aug 28th, 2012 @ 12:03pm

        Re: Re:

        I'm not sure on this point but isn't the compensation formula in effect so cable companies (who are obligated to carry local channels) don't have to negotiate with local stations over royalties? If that is the case, it seems that abuse is clear as the whole "local" component goes out the window. Again, I don't have a problem with the concept, only that such retransmitters pay an appropriate share for the cost of the content.

         

        reply to this | link to this | view in chronology ]

      •  
        icon
        RyanRadia (profile), Aug 28th, 2012 @ 4:57pm

        Re: Re:

        Mike - in general, the law doesn't allow cable providers to retransmit broadcast signals by paying a nominal fee. There are actually two statutes that limit how cable providers may retransmit broadcast signals.

        Section 111 of the Copyright Act requires cable providers to pay broadcasters a nominal fee. ivi is indeed paying that fee, asserting that it's a cable provider covered by the statute.

        But there's more. A section of the Communications Act, 17 U.S.C. § 325(b), requires cable providers to obtain consent from broadcasters before retransmitting their signals. (There are some exceptions to this rule, such as when cable providers are retransmitting broadcast signals to "unserved households".)

        ivi boldly claims that it is a cable system for purposes of the Copyright Act, but not a cable system for purposes of the Communications Act.

        Therefore, while cable companies typically pay on average33 cents per subscriber per month to each broadcaster whose signal they retransmit, ivi is paying a tiny fraction of that.

         

        reply to this | link to this | view in chronology ]

  •  
    identicon
    Lord Binky, Aug 28th, 2012 @ 11:44am

    Wait wait wait... So if my business doesn't make money from nothing instead of diverting money from something else people would be paying for instead, then my business is illegal? But they told me that printing money was illegal too. This sucks.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Lord Binky, Aug 28th, 2012 @ 11:50am

    Take that earth lovers.

    If atmosphereric changes allow the broadcast to travel beyond what they specified as their coverage area, does that mean they get to sue nature or physics or whatever? Is it considered a natural disaster?

    Or can we sue broadcasters since they are required to only broadcast a certain range. It's only fair that they keep their transmissions out of my yard if they can decide where their transmissions go.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Aug 28th, 2012 @ 11:55am

    "Plaintiffs broadcast their copyrighted programming to various communities at different scheduled times, for example, based on time zone or local network provider. For this reason, negotiated Internet retransmissions -- for example, on Hulu.com -- typically delay Internet broadcasts as not to disrupt plaintiffs' broadcast distribution models, reduce the live broadcast audience, or divert the live broadcast audience to the Internet."

    This is possibly the dumbest argument I've ever heard. What do they care if their TARGET AUDIENCE see's it at 5pm or 7pm? The ads are targeted on an AUDIENCE, not a timeslot. Ads aren't targetted to people that watch TV at a specific time, they're targetted to people that would watch a specific show. Shows are (in theory) run at times when large segments of the target AUDIENCE are available to watch it, ergo, this business model actually INCREASES the value of the programming, as MORE of the target AUDIENCE gets the ads.

    Now, if they were stripping out ads to do this, that would be a different story. You could also make a case about localization of ads as well, but for major programming, that's likely an internation only issue, and frankly, I couldn't give a flying fuck because said programming isn't (usually) legally available internationally anyways. Ergo, it's money left on the table, not money out of their pocket.

     

    reply to this | link to this | view in chronology ]

    •  
      identicon
      Anonymous Coward, Aug 28th, 2012 @ 12:11pm

      Re:

      Ads aren't targetted to people that watch TV at a specific time, they're targetted to people that would watch a specific show.

      The audience of people watching TV during a weekday afternoon would be different than those watching from 7-9 pm and different than those watching at 3 a.m. don't you think?

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Aug 28th, 2012 @ 12:47pm

        Re: Re:

        "The audience of people watching TV during a weekday afternoon would be different than those watching from 7-9 pm and different than those watching at 3 a.m. don't you think?"

        Yes. The only difference being what time of day their leisure time is. The ads are just as relevant to each group however. We are judged by what we watch, not when we watch. 9-5 jobs are the norm, ergo, time slots are based around 9-5 work schedules. The core concept of advertising is, you run ads that are relevant to people who will watch the show. It seriously does NOT matter what the local time is. You can play My Little Pony and Lost in the same time slot, and the ads will be different because they're for different audiences.

        This move only hurts the cable companies, who should be striking a deal to collect usage data to charge more for ads instead of throwing money at lawyers to get a court order to leave money on the table. Fucking idiots.

         

        reply to this | link to this | view in chronology ]

      •  
        icon
        harbingerofdoom (profile), Aug 28th, 2012 @ 12:58pm

        Re: Re:

        you are correct. however, unless this particular service in question is stripping out the ads then its no different than a vcr or dvr in so much as when the ads are seen.

         

        reply to this | link to this | view in chronology ]

      •  
        icon
        Mike Masnick (profile), Aug 28th, 2012 @ 2:42pm

        Re: Re:

        The audience of people watching TV during a weekday afternoon would be different than those watching from 7-9 pm and different than those watching at 3 a.m. don't you think?

        So you think DVRs and VCRs are should be illegal too?

         

        reply to this | link to this | view in chronology ]

    •  
      identicon
      Ed C., Aug 28th, 2012 @ 12:14pm

      Re:

      There are some cases were ads can be time sensitive. For instance, a contest that requires phoning or texting entries before 8pm is useless at 9pm. But, yes, it's really about the gatekeeper mentality. They get so used to the restrictions imposed by the mechanics of their particular business model or medium that they can't see the opportunities created where those restrictions don't exist.

      It's like telling a lunatic artist with a paintbrush clinched in his teeth that he's free, he doesn't have to wear the straightjacket anymore. Only, he insist that he can't paint without it!

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Aug 28th, 2012 @ 12:57pm

        Re: Re:

        "There are some cases were ads can be time sensitive. For instance, a contest that requires phoning or texting entries before 8pm is useless at 9pm."

        LIVE rebroadcast. As such, that isn't an issue at all. This is seriously an example of the gatekeeper mentality causing the network to pay their lawyers to make the network leave money on the table. It boggles my mind.

         

        reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Aug 28th, 2012 @ 12:27pm

    the appeals court went a simpler route, and pointed out that reading the legislative history of Section 111 makes it clear that it was not intended to be used by services over the internet

    I have a problem with courts trying to divine congressional intent from a record that:
    a) can be edited at a later time than the actual discussion of a bill, and
    b) is usually limited to the words of a few outspoken representatives.

     

    reply to this | link to this | view in chronology ]

    •  
      identicon
      Anonymous Coward, Aug 28th, 2012 @ 2:43pm

      Re: Copyright office is the definitve authority?

      Even worse - the court relied on the Copyright office's interpretation of the law.

      Chin said that while the statute is unclear on whether online retransmission services constitute cable systems, ... the interpretation of the agency which oversees the compulsory licensing scheme, the federal Copyright Office, eliminates any question.

      "The Copyright Office has maintained that §111's compulsory license for cable systems is intended for localized retransmission services; under this interpretation, Internet retransmission services are not entitled to a §111 license," Chin wrote. "Internet retransmission services cannot constitute cable systems under §111 because they provide nationwide—and arguably global —services."


      ( http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202569184934&thepage=2 )

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        Anonymous Coward, Aug 28th, 2012 @ 8:48pm

        Re: Re: Copyright office is the definitve authority?

        Why do you object to the judge relying on the Copyright Office, other than their interpretation? Who'd be more qualified the FAA?

         

        reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Aug 28th, 2012 @ 2:24pm

    It's amazing to me that original intent (Congressional/Founding Fathers)is taken into consideration by the courts mostly when it benefits some company.

    But almost never seems to add to the Liberty of the individual.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Anonymous Coward, Aug 28th, 2012 @ 4:09pm

    "ivi creates irreparable harm to the TV networks."

    Why should govt. established broadcast monopolies, and laws in general, be about serving corporate interests. Shouldn't they be about serving the public interest? How is a corporation being harmed by being denied a privilege that should have never been granted to them in the first place, a privilege that goes against the public interest.

     

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This