502 Bad Gateway

502 Bad Gateway

Hollywood and the Media world were shocked by a Federal Circuit Court’s ruling on July 16 that Alki David‘s FilmOn X was entitled to retransmit network’s signals under the compulsory license sections of the Copyright Act. Eriq Gardner of The Hollywood Reporter broke the news calling it a “legal earthquake” and saying, “FilmOn wins a potential landmark ruling — one that will set up a high-stakes appellate showdown with the broadcast establishment.” Here are five things you need to know about the media reaction to the ruling:

1. Some in media played up the obvious. There are several more steps in the long fight FilmOn has waged to bring the law up to date with the way consumers watch television now. One pundit who is definitely watching out for the Networks to maintain their stranglehold is Harry A. Jessell on TVNewscheck.com, but even he pointed out that the FCC is likely to follow suit when it updates its rules this fall–making FilmOn a full-fledged MVPD.
And, he wrote, the Networks may have already shot themselves in the foot:

“Ironically, however, the networks have been opposing the FCC initiative, seeing it as a perpetuation of the old compulsory license regime that has over the years robbed them of full value of their programming. Keep in mind that the networks are, as CBS CEO Les Moonves has pointed out, primarily programmers — copyright owners — rather than broadcasters.
Just last week, representatives of Disney, CBS, Fox and other non-broadcast programmers made the rounds at the FCC arguing against the rule making.
In light of Thursday’s ruling, they might want to reconsider that opposition. It signaled that they could end up losing, something I’m not sure they ever seriously considered before.”

2. This wasn’t actually a shock. It’s just that the media took its eye off the game. FilmOn filed an Amicus brief on Aereo’s behalf in February 2014 that argued the compulsory license facts with the Supreme Court. As TV Mix reported: “It was in the amicus brief FilmOn filed on behalf of Aereo with the Supreme Court in April, and it was in discussion, and the subject of lawsuits, going back to 2009: If the streaming TV company qualified as a cable company, than it could also invoke the copyright act of 1976 to get compulsory license. That means it has a right to stream broadcast signals to paying customers, so long as it paid royalties to the Copyright Office.”

After the ruling against Aereo, which had argued with SCOTUS that it was NOT a cable provider, the Amicus FilmOn had filed got media attention and the ball got ruling toward the July 16 ruling. Back in June 2014, in Wall Street Journal, BTIG analyst Rich Greenfield, perhaps the most widely known and influential in the tech industry, then declared FilmOn’s business plan “Financial Nirvana.” And went on to say in his interview with journalist Keach Hagey that he believes the FCC will eventually have to classify online video providers as MVPDs, as companies like Dish, Verizon, Sony and others come out with Web-TV services. “It is hard to imagine the FCC not revising its definitions,” Greenfield said. Aereo declined to participate in the story.

In Forbes, disinguished tech journalist Mark Rogowsky compared the Supreme Court’s decision to the legal ruling on Barack Obama‘s Affordable Care Act in 2012–in which the penalty for not carrying insurance was deemed “a tax” and by doing that the overall ACA was deemed legal. Rogowsky points out that David has been making this argument for 4 years. “Our argument in 2010 was we’re a cable system,” Rogowsky quotes David saying. “Judge Buchwald didn’t understand U-verse and Fios was the same essential technology.”

3. Many have said FilmOn succeeded where Aereo couldn’t. That’s a “yes and no”. FilmOn succeeded in changing the landscape of television (as Forbes predicted in September of 2014 when it named it one of the top ten companies disrupting TV). But FilmOn was not trying to do the same thing Aereo was. FilmOn had always argued it should be a cable system paying fees via compulsory license. Aereo argued it was not a cable company and owed no fees to the networks at all.

4. Some Network defenders cling to the fact that there are more court cases to come. Of course there are. But unlike Aereo which had a user base of 30,000 or so, and no original content offering outside what it retransmitted from the Nets, FilmOn has a global user base of 65 million monthly uniques, over 600 linear channels of licensed and owned content. More importantly, it has revenue through its ad sales and subscriptions, so it can continue to pay lawyers to keep going.

5. Is it the end of the world? It doesn’t sound like it. In an interview with Reuters, FilmOn’s lawyer Ryan Baker said, “The broadcasters have been trying to keep their foot on the throat of innovation. The court’s decision today is a win for technology and for the American public.”