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Omniverse to Shutter Operations, Cut Ties to HovSat

Jeff Baumgartner
6/19/2019
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Troubled OTT-TV service provider Omniverse One World Television has elected to sever its business ties to HovSat, the New Jersey-based private cable operator, unwind its business operations and unload its equipment and other assets.

That decision came to light in a joint report and discovery plan filed June 18 with a California district court linked to a case led by The Alliance for Creativity and Entertainment (ACE) alleging that Omniverse distributed pay-TV programming via the Internet without authorization. The joint report from the plaintiffs and defendants followed a meeting between the parties on June 3.

Omniverse's decision to close down arrives more than two weeks after it halted the marketing of live OTT-TV services to single-family customers and shifted its focus to apartments and other multiple-dwelling units. That announcement came after Omniverse said it reviewed content rights believed to be held by HovSat, which purportedly held a long-term deal with DirecTV affixed with "no limitations" regarding distribution and delivery method.

Before shutting down its OTT-TV service on May 31, Omniverse worked with several master resellers and other distribution partners further down the chain, including Flixon, TikiLive, Vista TV, Clikia, VivaLiveTV, SiliconDust and SkyStream, among others. According to Flixon CEO James Smith, its brief relationship with Omniverse led to dozens of deals with ISPs and put it on a path toward a more significant distribution deal with CenturyLink that was never consummated.

Tossing HovSat under the bus
In a position made to the court, Omniverse pins much of the responsibility for the assumed legality of the service it was marketing on HovSat, as well as Omniverse's apparently naïve interpretation of HovSat's agreement with DirecTV.

"To the extent there was any infringement, such infringement was, on information and belief, without malice or bad intent by Omniverse or its management and was caused or contributed to by third-parties such as HovSat," Omniverse explained to the court.

HovSat has apparent ties to Hovnanian Enterprises, a Matawan, NJ-based home builder and residential community developer with operations in multiple US states. HovSat is believed to be owned by Shant Hovnanian. However, the court document filed Tuesday claims that HovSat's business registration in New Jersey was revoked in 2012.

Omniverse acknowledges that it is not a "licensed broadcaster or re-broadcaster of media content but understood that it was marketing technology and other media delivery services through its joint venture partner, HovSat."

Heaping another pile of responsibility upon HovSat, Omniverse claims that it was also "understood" that HovSat "was licensed to distribute live TV under a distribution agreement or series of agreements between HovSat (or Hovnanian affiliates) and DirecTV." Omniverse also claims that it was under the belief that DirecTV held the right to distribute and sub-distribute content.

HovSat-Omniverse JV formed in 2017
The court filing sheds more light on the Omniverse-HovSat relationship, noting that the two parties inked their joint venture on Nov. 1, 2017. That, Omniverse said, provided HovSat, Omniverse and appropriate "affiliates" with the ability to distribute TV programming over-the-top based on the understanding of the DirecTV agreement. Omniverse, referred to as OmniSat in the agreement, said it also was given clearance to co-locate technology and other equipment at HovSat's facility in New Jersey for the offering. In a previous interview, Omniverse CEO Jason DeMeo, who has adamantly opposed any claims that his company was knowingly engaged in piracy, said HovSat operated headends in Freehold and Tinton Falls, NJ.

Omniverse also claims that investors advanced it "millions of dollars" for the equipment and infrastructure used for the resulting TV streaming service. It also cited SotalCloud, TikiLive and Vista TV as its streaming partners for the venture, and noted that conditional access technology was used to keep the video streams properly protected.

Omniverse likewise said it paid "substantial sums" to HovSat with the understanding that DirecTV, in turn, was receiving the appropriate fees from HovSat. But it's not clear to Omniverse if all of those dollars were indeed relayed to DirecTV. Omniverse told the court that the "DirecTV production did not reflect the receipt of large license fees from HovSat even though large payments were made to HovSat by Omniverse."

That caused "substantial concern" to Omniverse and its investors, Omniverse added, noting that funds are currently due to HovSat for the alleged license rights, but that payments have been suspended in light of recent events.

Omniverse said it also plans to investigate its rights to indemnification from HovSat and "related entities" and threatened that it might sue HovSat and various third parties as a result.

Omniverse said its accounting records and tax returns will show that it has not profited from the operations of the OTT video offering but has instead "lost substantial sums."

Flixon's Smith estimates that his company lost between $800,000 and $1 million from its ill-fated relationship with Omniverse.

Details on HovSat-DirecTV deal still hard to find
Full documentation of the purported 100-year HovSat-DirecTV agreement have yet to reach the court.

Omniverse claims that it made "many demands on HovSat" to prove and corroborate its license relationships and for material assistance in defending the claims in the suit to little avail. Omniverse said it also agreed to a subpoena to DirecTV to obtain what was expected to be archived records dating back to the 1990s and early 2000s between Hovnanian entities and DirecTV and predecessor companies, but said the subpoenas have not produced records of significance earlier than 2003.

"It is not known if such records will be found in discovery or not," Omniverse said. "Mr. [Shant] Hovnanian is apparently in Armenia and his attorneys have not come forward to support the legal position of HovSat." Shant Hovnanian is also a defendant in a US civil tax enforcement proceeding filed last fall involving about $16 million in alleged penalties.

Next steps
The June 18 joint filing outlines several proposed deadlines to the court. In most instances, Omniverse wants more time than ACE does.

For example, the ACE side wants to close fact discovery on Sept. 20, 2019, while Omniverse is asking for Jan. 24, 2020, as it seeks time to depose people with knowledge of HovSat and its affiliated companies.

Omniverse said it also intends to rev up third-party subpoenas and other discovery needed to "follow the money" paid to HovSat for what Omniverse believed to be license rights.

Omniverse is also asking that a trial not get underway until Aug. 3, 2020.

Both sides agreed that formal settlement discussions are unlikely to be productive until the court has a chance to adjudicate summary judgement motions.

Catch up on the Omniverse saga:

— Jeff Baumgartner, Senior Editor, Light Reading

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