A New York court has snipped ivi Inc. 's plan to make a business out of redistributing broadcast TV signals via the Internet in exchange for paid subscription fees.

The Southern District Court of New York on Tuesday ordered the site to shut down its streams after finding that ivi does not fall under certain copyright protections because it does not qualify as a "cable system."

Before Tuesday's preliminary injunction (PDF), ivi was capturing signals transmitted by Federal Communications Commission (FCC) -licensed broadcast TV stations in Seattle, New York, Chicago and Los Angeles, and charging subscribers $4.99 per month to access them via PCs and other broadband-connected devices.



According to court documents, ivi argued in part that it was complying with copyright rules because it was paying $100 per year to the Copyright Office for a compulsory license. It also claimed that it was operating as a cable system for purposes of the Copyright Act and was likewise immune to the rules of the FCC's Communications Act, which allows broadcasters to command higher retransmission fees, because ivi's services were piped via over the Internet.

The court disagreed.

Ivi says it will appeal the decision in the second circuit, and will suspend invoicing for subscriptions immediately.

Why this matters
If the ruling holds up, it could spell the end of ivi and other purported "virtual" MSOs that hoped to replicate its model. It's growing far more likely that distributors in that over-the-top category will have to pay up and adhere to the traditional pay-TV model. (See Comcast-NBCU Rules to Frustrate OTT Players.)

Ivi has been viewed as a cord cutter's dream. Consumers who were inclined to chuck their traditional cable-TV subscriptions could do so knowing that their live, broadcast TV needs could be fulfilled for less by subscribing to a service such as ivi's. Ivi has yet to reveal subscriber totals. (See Cablevision to Pay for World Series Streams.)

For more
For more on ivi's plight and the cord-cutting trend, please check out:

— Jeff Baumgartner, Site Editor, Light Reading Cable