Rabbit TV: We'll Pay Retrans Fees

Rabbit TV, the online video aggregation service, wants to pay broadcasters to distribute their programming over the web.

In a press release Thursday morning, parent company Freecast said it is "prepared to pay NBC, CBS, ABC and Fox the same $5 monthly per-subscriber retransmission fee paid by cable companies in the current #1 demographical market, New York City, across all 210 DMA markets nationwide."

The offer from Rabbit TV follows the US Supreme Court's recent ruling that found online streaming company Aereo Inc. to be "for all practical purposes a traditional cable system." In theory, if Aereo -- or any other online video company -- qualifies as a cable operator, it could negotiate with TV programmers to distribute their content. However, when Aereo applied for a compulsory license that would allow it to act just like a cable company after the court's decision, the US Copyright Office balked. While the copyright regulator did not deny Aereo's petition, saying it would wait for further court guidance, it did tell the company that "in the view of the Copyright Office, Internet retransmissions of broadcast television fall outside the scope of the Section 111 license." (See Aereo's Cable Status Denied by Copyright Office.)

Rabbit TV currently has a confusing array of products and features, including an online subscription service ($10 per year), a USB stick for computers that authenticates paid users, mobile applications, and an Android set-top. It also reports a total of 2.3 million paid subscribers, which the company notes far exceeds Aereo's subscriber base. Re/code uncovered documents filed with the US Copyright Office indicating that Aereo had fewer than 80,000 subscribers at the end of last year.

CBS Corp. (NYSE: CBS) CEO Leslie Moonves told the recent Fortune Brainstorm TECH conference that he was open to talking to Aereo about content licensing, although the company has never approached him directly. However, if online video companies like Aereo and Rabbit TV were to negotiate retransmission fees like cable operators, it could make it very difficult to keep subscription costs below a threshold that consumers are willing to pay.

In addition, it's not clear how Rabbit TV would handle the distribution requirements of delivering broadcast television en masse over the web. Netflix Inc. (Nasdaq: NFLX), for example, has invested heavily in building out its distribution infrastructure, and the company is in heated battles with broadband providers over how to manage the costs of last-mile delivery to consumers. (See Net Neutrality Fight Peaks at FCC Deadline.)

If you want to keep up with all the latest Aereo-related developments, then check out our OTT video channel on the site.

Regardless of what Rabbit TV does next, the Supreme Court's ruling on Aereo has opened up new questions on how TV distribution models will be allowed to evolve. It may be some time before those questions are effectively answered.

— Mari Silbey, special to Light Reading

smkinoshita 7/24/2014 | 4:42:17 PM
What's Rabbit's Strategy? I have to wonder what Rabbit's strategy is with this approach.  The risks sound considerable, which to me means that they think it will be worth the gamble to move forward as quickly as possible, that they have some inside information we don't, or this is a tactical mistake.
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