FilmOn Verdict a Prelude to OTT War

Poor Aereo. Proving that timing is everything, online video provider FilmOn Content Systems Plc has now succeeded where the earlier Internet TV darling failed.

In a major victory for FilmOn, US District Court Judge George Wu in Los Angeles rendered a verdict late last week determining that the company could be granted a compulsory license for retransmitting broadcast TV signals at a discount rate. The decision was the same one that Aereo sought when it appealed for classification as a cable company in 2014 after failing to justify its practice of freely retransmitting broadcast signals to subscribers over the Internet. (See Aereo Seeks Pay-TV Operator Status.)

While Aereo went on to lose its case in court and declare bankruptcy, however, FilmOn not only got the verdict it desired, but also managed to position itself as a critical player in a war for TV distribution rights that's only just getting started.

Acknowledging the controversial nature of the decision, Judge Wu authorized an immediate appeal of the verdict to the Ninth US Circuit Court of Appeals. He also agreed that broadcasters could maintain their preliminary injunction against FilmOn until that appeal is decided.

Want to know more about the impact of web services on the pay-TV sector? Check out our dedicated OTT services content channel here on Light Reading.

The legal drama surrounding FilmOn comes at a time when the industry is already in hot debate over the future of over-the-top video providers. The Federal Communications Commission (FCC) has indicated that it plans to issue an order this fall allowing for some OTT companies to attain status as multichannel video programming distributors (MVPDs). During a recent speech at the Brookings Institution, FCC Chairman Tom Wheeler explicitly referenced plans to give OTT providers access to the same content rights as traditional pay-TV companies. The move follows a Notice of Proposed Rulemaking (NPRM) on the topic that the FCC released last December. (See A Video Rose by Any Other Name? and FCC Chairman Talks Up SDN/NFV.)

Comments on the NPRM have been numerous and varied. (See To Be or Not to Be an MVPD.)

Most recently, CBS Corp. (NYSE: CBS) and Verizon Communications Inc. (NYSE: VZ) both filed new motions on the subject. CBS expressed concern over the proposal, suggesting that FCC intervention would be "a troubling and unnecessary interference into private licensing negotiations." CBS also noted its worry that new FCC rules might apply to programmers' own OTT applications and "urged that new rules seeking to promote innovation and competition in video distribution should not apply to content providers who simply want to continue developing new ways in which consumers can access and enjoy their content."

Arguing the opposite position, Verizon reiterated in its filing that it favors the idea of certain OTT providers gaining status as MVPDs. Although Verizon is an incumbent MVPD with its FiOS TV service, the telco is also planning the launch of a major new OTT service for later this summer. (See Verizon Closes AOL, Hints at Summer Launch.)

In its capacity as an OTT provider, Verizon would benefit from new FCC rules. However, the company also emphasized that it believes "OTT video providers should not be subject to ill-fitted legacy cable regulations, such as franchising, must-carry, and technology mandates."

The OTT battle is heating up.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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