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 — 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.

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Companies: ivi

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

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Anonymous Coward says:


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!

Mike Masnick (profile) says:


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.

Lord Binky says:

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.

Anonymous Coward says:


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?

Anonymous Coward says:

“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 — 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.

Anonymous Coward says:


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.

Ed C. says:


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!

ldne says:


“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.

Anonymous Coward says:

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.

Anonymous Coward says:


“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.


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.

Anonymous Coward says:


“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.

Anonymous Coward says:

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.

Anonymous Coward says:

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.

Anonymous Coward says:

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.”

( )

Anonymous Coward says:

“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.

Anonymous Coward says:


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.

RyanRadia (profile) says:


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.

JMT says:

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?

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