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Not Ready for Prime Time: Omniverse Distributors Pick Up the Pieces After Pay-TV Deals Fall Apart

Jeff Baumgartner
6/13/2019
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James Smith says he wanted to believe everything that Omniverse One World Television and its CEO, Jason DeMeo, were saying and selling.

"It just looked really good," Smith, the CEO of Flixon Media, recalled when the opportunity to work with Omniverse and develop and launch a premium-level OTT-TV service across the US arose about two years ago.

As a company with a master distributor deal with Omniverse, Flixon and dozens of its partners were in a position to market and sell competitive packages of pay-TV services, including premium offerings like HBO, via the Internet at attractive prices that often undercut those from other OTT and traditional video service providers. A low-priced, full-freight line-up of television programming would be a cord-cutter's dream and be viewed as an attractive option for big and small broadband service providers that were eager to add TV to their data bundles.

Smith said he believed Omniverse possessed a joint venture with a New Jersey-based private cable operator called Hovsat, endowed with distribution rights that gave Flixon and its various partners the legal green light to stream live TV packages to a wide range of connected devices across the US.

But he said those beliefs began to evaporate late last year as major programmers like Discovery Communications began to apply pressure on Flixon about its OTT offerings. Flixon's concerns were amplified in February 2019, when the Alliance for Creativity and Entertainment (ACE) sued Omniverse, alleging that Omniverse was distributing TV programming via the Internet without authorization. That case, with the California Central District Court, is ongoing.

Omniverse initially argued that it was doing everything legally, pointing to a purported 100-year contract Hovsat has with DirecTV affixed with "no limitations" concerning distribution and delivery method. However, on May 31, Omniverse, following a review of the content licensing rights held by Hovsat, ceased the marketing of live OTT-TV services to "single dwelling residential customers" to instead focus on apartments and the broader multi-dwelling unit market.

Omniverse's fate, in that case, has not been handed down by the court, but the lawsuit and other troubles associated with Omniverse have affected Omniverse's various resellers and distribution partners, execs claim.

Smith: Deception has led to loss of dollars, reputation
Flixon and Omniverse officially cut ties before Omniverse pivoted to focus solely on MDUs at the end of May, but Smith says he feels deceived by Omniverse and its leadership, and that this deception has done harm to not only his company but to the ISPs and other distribution partners that Flixon had signed on along the way.

"I feel like I've been brought into a scam. That's the most annoying thing about this," said Smith. "It's not the revenue we've lost… it's about the relationships that we've built. That's the real downside."

But Flixon Media, a business registered in the US that is headquartered in Cyprus and also operates an office in Kerala, South India, did lose a bundle. According to Smith, Flixon, which employs about 25 people and has no physical presence in the US, lost between $800,000 to $1 million throughout its two-year affiliation with Omniverse. "We didn't make a cent out of this," Smith said.

But before things went south, Smith believed Flixon would profit from the Omniverse partnership.

Before teaming up with Omniverse in late 2017, Flixon's business centered on web marketing, generating leads and building websites and landing pages. "But we've always wanted to look at having our own product," Smith said.

Flixon, he said, researched dozens of ideas and white-label offerings before coming across Omniverse's solution. Smith liked what he saw.

Flixon then engaged with Omniverse and, despite having no background in TV and broadcasting, entered into a distribution deal with Omniverse and the development of the Flixon TV service, Smith said.

Smith said Flixon's engagement with Omniverse started in late 2017 and followed with a small-scale pilot of the OTT-TV early in the following year. During those days, Smith said he "definitely" believed that Omniverse's way of doing business was legitimate.

"He [DeMeo] always told us he had a contract with Hovsat," Smith said, recalling that he did see a document showing that Omniverse and Hovsat had indeed had a joint venture agreement.

Flixon, he recalled, paid Omniverse a $25,000 set-up fee and was to pay a minimum guarantee to Omniverse of $25,000 per month.

"We were told that all things would be provided and that it would be [a] plug-and-play TV service," Smith said.

But he said Flixon ended up spending a lot more on app development because the middleware provided wasn't reliable or stable enough for Flixon's purposes, so the company ended up contracting another third party to develop apps for a wide range of streaming platforms.

"We ended up getting dragged into a really big, deep hole," Smith said, estimating that Flixon spent about $75,000 in additional money just for the additional app development, and has lost as much as $1 million when all costs linked to the Omniverse partnership are rolled up.

But once the technical pieces were in place, Flixon began to make progress with a model in which it would team up with various partners, including ISPs, to sell OTT-TV packages based on the purported Omniverse content streaming rights. Smith estimates that Flixon had signed up about 65 ISPs as distribution partners, as well as SkyStream Technologies, a company that markets and sells Android TV media players. About ten in that group had gone live by the time Omniverse shut down its residential service on May 31.

Smith disagrees with an earlier assertion by DeMeo to Light Reading that Omniverse's distribution partners worked on a commission-based business model akin to how the prepaid mobile market works.

"That's never been the case," Smith said. In Flixon's instance, he said the company would pay a minimum guarantee of $25,000 per month to Omniverse. Some projects he was privy to had guarantees as much as $100,000, Smith said. "We would pay the minimum guarantee regardless of whether we had ten clients or 4,000 clients," he said.

Smith said Flixon's master distribution agreement with Omniverse was for $16 per user on the basic TV tier, and Flixon would charge its distributors about $22 per subscriber, with more money paid for higher-level premium tiers.

Omniverse officials and members of its legal team have not responded to multiple requests seeking comment and reaction to Smith's version of events and his description of the financial structure of the former agreements between Flixon and Omniverse.

Other companies believed to have similar master reseller deals with Omniverse include TikiLive and VistaTV. TikiLive declined to comment for this story. VistaTV has not returned messages seeking comment about its experience with Omniverse.

Next page: SkyStream also drawn by the allure of Omniverse

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