Linear TV Channels’ Foe Grants Second Life

The IPTV platform will affect linear channels just as much as program rights holders.

On one hand, IPTV will increase linear channels’ national penetration by adding another platform to cable and satellite. On the other, if not dealt with properly and urgently, IPTV will deprive channels of a necessary new revenue stream, especially when over-the-air TV channels relinquish their unnecessary terrestrial frequencies (perhaps to form their own Wi-Max networks).

Traditionally, companies are unwilling to offer licenses for new uses that do not have identifiable counterparts and associated business models in the world with which they are comfortably familiar. But IPTV doesn’t permit a wait-and-see option: The effect of the linear channels’ and rights holders’ refusal or delay in granting international rights for IPTV transmission is an unknown quantum of infringements. But, in IPTV’s case, as we’ll see below, the word “infringement” could already denote an unfair bias.

IPTV platforms are mushrooming all over the world and soon, if not quickly dealt with, could present enormous strategic, logistical and legal challenges. It is sufficient to remember that IPTV is already considered a “cable bypass” and will soon effectively replace satellite TV distribution. However, since satellite TV platforms are the best content aggregators of all, it’s possible that for them, exchanging a satellite set-top box for an IPTV box could represent another winning strategy.

At the end of 2006, there were an estimated 250 IPTV operators worldwide. And during the same year, there were 3.6 million IPTV subscribers (of which 2.4 million were in Europe). According to U.K.-based research firm Canalys, the top five IPTV providers accounted for over 60 percent of all subscribers. Soon, Telcos all over the world will operate an IPTV platform. According to U.S.-based Infonetics Research, by 2010, revenues for IPTV equipment alone will reach $44 billion.

With the must-carry laws in effect in most parts of the world, linear channels broadcast over the air can be retransmitted simultaneously in any areas where the signal is picked up (including spillovers). This means that a channel like, for example, Switzerland’s SSR, could be retransmitted by cable, satellite, IPTV and cellular video operators in all surrounding countries.

Requests for geofiltering (or regional blocking of) programs for which SSR doesn’t have rights are superseded by National and European laws. In this case, cable and other operators pay a fee to collection agency AGICOA, which, in turn, compensates the rights holders.

In order to properly deal with IPTV, linear channels must take into consideration must-carry, spillovers and simultaneous retransmission rights outside their coverage areas.

Content providers (i.e., rights holders) have to take into account territorial rights, language rights, windows and regional laws.

At times, rights holders cannot enforce the language of their contracts, because the laws of the country to which the program was licensed supersede the contract.

Establishing their own rights administration infrastructure, the linear channels can effectively monitor licensed transmissions from the beginning, without risking losing control of the process in the long run.
Management of digital rights begins and ends with the ability to monitor transmission of the protected works. IPTV transmissions are digital and occur in a networked environment. By encoding programs with copyright management information and using complementary software, it’s possible to automatically identify when and where each program is transmitted.

Under proper supervision, from a seemingly complex nature, IPTV could become a simple way of extending reach and revenue streams. But rights contracts’ language has to be refined, especially with regard to union agreements. Under current definitions, sales often involve royalties, usually in the range of a few percentage points. But, if the rights were subject to a license, the rights holder could receive royalties of up-to-50 percent of the revenue derived from the license fee.

For linear channels, licensing to IPTV platforms will be a two-tier proposition: licensing the channel’s simultaneous retransmission as well as VoD sales. Each channel’s licensee fee could be on a per-sub basis, while VoD sales (available after the original broadcast) share a portion of consumer spend. Naturally, if the channel doesn’t have the VoD or international simultaneous rebroadcast rights to some of its transmitted programs, it has a few options: request to act as a clearinghouse for the rights holders; geofilter the programs (for areas outside its domain –– for Italy, for example, it would exclude the surrounding countries; or acquire language rights (instead of territorial rights).

Retransmission rights to IPTV platforms could be granted either on an exclusive or non-exclusive basis, knowing that the IPTV operators themselves will be on the lookout to spot pirated services. In addition, some IPTV platforms could be limited geographically (i.e., North America) or operate worldwide.

Another advantage to IPTV is that it could replace the DVD and, with it, the piracy associated with DVDs. The industry is already experiencing a diminished level of DVD piracy due to Internet downloads and digital cable VoD services. Prior to the ubiquity of broadband, large-scale piracy of physical products, such as CDs and DVDs, required an organizational infrastructure, manufacturing facilities, distribution channels and lots of capital. Moreover, the means by which software pirates were able to distribute these DVDs was limited to face-to-face transactions.

Technicalities of IPTV

To Frank Childs of Boston’s PeerApp, a specialized peer-to-peer (P2P) company, “Internet-based video and music already consume 70 percent of broadband traffic, forcing Internet service providers to scramble for ways to manage the growth.”

This streaming and downloading for now excludes IPTV, which, in Childs’ view, represents just a small portion of Internet traffic.

For reference, according to a report by Bruce Benson of FTI Consulting, the U.S. streamed over 14 billion music videos way back in 2003. YouTube is currently streaming over 100 million videos per day.
With the thousands of IPTV platforms expected to develop in the next five years, the Internet could become very congested, reducing picture quality, among other problems.

For example, if just the Oscars were to be transmitted exclusively via an IPTV platform, there would be over a billion simultaneous streams worldwide, which would surely clog the network. This type of problem has been experienced in many parts of Asia where broadband video adoption has skyrocketed, but international transit links have not kept apace.

To understand the rapid progress in the broadband arena, suffice it to say that in 1997, Web access speeds were 19 kbps. In 2003, broadband was available to over 80 percent of U.S. homes. Consumer adoption is now at 60 percent, with average speeds ranging from 400 kbps to one Mbps.

However, Childs doesn’t see congestion as a problem, but, rather, as a possible opportunity. First, he said, “Video will force broadband subscribers to upgrade to the fastest broadband package available. They will desire a quality experience. ”

Plus, he added: “Congestion will force video platform operators to adopt P2P technology both at their set-top boxes and within their media servers.” P2P handles the delivery of video in a way that efficiently utilizes the network.

In this case, P2P technology will change TV delivery from a “one-to-many” network (typical of the television broadcasting business), to a “many-to-many” network, where the receiver (in this case the set-top box, PC, or home media center) becomes an “exchange.” So, by merging the features of IPTV with the content delivery power of P2P, the sector could effectively manage traffic congestion and enable next-generation content services of the YouTube variety.

At the moment, broadband can be obtained via coaxial cable, optical fiber, DSL (telephone wires) and Wi-Fi (wireless). Each option has its own cost (in the New York area):

Basic Cable: $45 per month
Basic Optical fiber: $40 per month
Basic DSL: $20 per month
Wi-Fi: $18 per month

This cost must be added to that of the IPTV platform. However, in U.S. cities such as Los Angeles, California, municipalities are planning to set up citywide Wi-Fi networks, which will have a free basic service (financed by advertising) and higher-speed offers available for a fee.

Reportedly, more than 300 municipalities in the U.S. have launched plans for similar networks. In some areas of Toronto, Canada, Wi-Fi service is already free.

It’s also important to point out that while the number of users connected at the same time affects all broadband connections, DSL suffers the additional problem of  “crosstalk,” which limits the service to about 60 percent of twisted-pair (copper wire) telephone connections.

Clearing Up IPTV Rights Confusion

For U.S. studios, Internet rights are divided into two different windows: “streaming” and “download.”
Streaming is when a “live” broadcast is transferred, as it occurs, to an online video player. Users can’t fast-forward (if it’s not buffered), since they are only getting enough information to watch the program as it progresses. Once the program is streamed in its entirety, users may be able to watch it in its entirety with full DVD functionality (forward, reverse, pause, etc.), but they won’t be able to save the file onto their computers. 

Downloading is when an entire, complete file is sent to users’ PCs. Once it is downloaded and on the hard drive, it is just like any other computer file that users can access at any time, with full DVD functionality. Downloads can be transferred to set-top boxes such as AppleTV (that uses iPod technology) or Microsoft’s Xbox360, and programs can be seen on regular TV sets (Web-to-TV systems).

The retransmission rights for linear TV networks, which are picked up by cable or satellite providers in different countries (e.g., Italy’s RAI Uno or Germany’s RTL, available on cable in Cannes hotel rooms) are governed, in this case, by European laws that state that, for example, the French cable system has a right to simultaneously re-broadcast distant signals from other European countries. The studios (program or content rights holders) get compensated for their programming through a collection agent called AGICOA, which monitors such activity from its headquarters in Geneva, Switzerland. These simultaneous re-broadcasts can be on any or all platforms: cable, satellite, IPTV and mobile video.

Rights holders license territorial rights (which allow for these kinds of spill-overs from terrestrial or satellite transmissions) and/or language rights for certain areas (e.g., Europe). It is possible that, in the near future, because of IPTV, rights holder could be negotiating language rights.

VoD follows a business model independent of the transport or platform. The form of transport (Wi-Fi, DSL, fiber) or platform (cable, satellite, IPTV)  doesn’t matter.

Cable (coaxial or fiber), satellite and IPTV platforms fall under  “broadband rights” within “permitted means.” Technically, however, cable and satellite are “push-TV” types of platforms, while IPTV (which can connect with any broadband —Wi-Fi, cable or DSL –– to a TV set) is of the “pull-TV” model that competes with both cable and satellite. In effect it is a “cable bypass,” and, even though IPTV has been described as “a normal cable that uses Internet protocol,” for rights holders, IPTV transmission should be an additional right (IPTV rights), better defined as a “language right.”

Currently, for simultaneous IPTV re-transmission purposes, linear channels such as RAI are supposed to assure “regional blocking” (or geofiltering). Appropriate digital rights management will identify when and where each program is transmitted and, if transmission is found to be occurring outside of Italy, it blocks reception of the signal. However, if the laws of the EU somehow conflict with these rights holders’ requirements, channels like RAI can claim that the rules are blocking them from effectively doing anything to minimize simultaneous retransmissions.

In any case, rights holders require all licensing channels to use their “best efforts” to minimize piracy and cure any incidents that are within their reasonable control.

In the U.S., over-the-air broadcasters are said to welcome the licensing of their linear channels to IPTV platforms as an alternative to cable (which doesn’t pay royalties to them). And, like cable, IPTV can provide local TV stations with localized coverage much better than satellites can.