I wrote, it seems, in haste a while back when I slammed ivi for being thieves.

Now, having seen the product in action, I was struck that ivi is less than I thought met my eye. And that makes it less illicit… but also less of an interesting business model.

Simply, ivi has a couple of ubse-Slingboxes running… one in NY and one in Seattle. They offer local TV from the two markets, obviously representing the East and the West. There are some international sports channels, that I assume are being broadcast somewhere.

What ivi is not is competition for Hulu, which is a rerun streaming business, not a live TV business. Same with Netflix.

What ivi seems to be after, for now, is the right to compete with cable for a slice of the pie. And really, there is no clear legal reason why they should not be able to do so. They have said repeatedly that it is their intention to pay royalties to the broadcasters, the same as cable TV does, based on revenues.

The law states: “Secondary transmissions. A secondary transmission is the basic service of retransmitting television and radio broadcasts to subscribers. The statute requires all U.S. cable systems, regardless of how many subscribers they have or whether they are carrying any distant signals, to pay some copyright royalties. However, instead of obliging cable systems to bargain individually for each copyrighted program they retransmit, the law offers them the opportunity of obtaining a statutory license for secondary transmissions.”

Of course, in the last couple of years, broadcasters have been pushing past the law and insisting that cable providers pay more than copyright royalties for retransmission. But this is irrelevant to the law, though it may be seen as very significant by the networks/studios. We’re also on the road to cable and satellite nets streaming their content for subscribers, so allowing outside businesses to compete on delivery of content, especially sports, is not a happy possibility.

The law was designed around a now antiquated system. Cable nets were, essentially, local monopolies and national oligopolies. Each city made their deal with the cable net that would wire their town. And the requirement that cable nets run all local broadcast channels was fundamental. The royalty was a minor cost. The idea was that each cable deal in each city/town had to service the local community and not separate them from local broadcasters.

When satellite came in, it was not, at first, functionally capable of handling the broad base of local channels in every market satellite served. I am pretty sure that even DirecTV is still short of 100% coverage of local stations. The technology has evolved and satellite companies quickly learned that delivering local stations was a service that customers wanted… as opposed to having cable for local stations – or worse, rabbit ears – and satellite for the rest. HD made it even more of an issue, as local stations and the networks they are attached to converted fully to HD.

But here comes an outsider, saying they want to play by the rules that were prescribed over a decade ago, and they have caught the window between the business situation and the law. I think they are actually right about the law on this.

However, the law should change. Quickly.

Some might consider it a conservative position, but I am a supporter of very strong and specific copyright rules, now more than ever. Every piece of programming is already spreading out over many outlets of many kinds of delivery… and the spectrum of delivery possibilities is expanding. At the same time, the value of any one delivery system is decreasing. Don’t get me wrong. Hollywood is a big fat pig. But as we continue down this road, the margins will tighten and every kind of revenue will be more and more important to capture.

I believe that, for instance, Warner Bros TV, should have every right to sell every kind of rights to a show they paid to produce. They should be free to sell, for instance, NBC, a show for network broadcast and go down the check list of other delivery possibilities, yes or no, each one. How many reruns? Hulu or some other rerun streaming? Cable and satellite companies streaming NBC content for subscribers? Great. Pay for it. Pay enough to cover it all. Or don’t. Because someone will.

In theory, a company like ivi could decide to place their content gathering tools in, for instance, every NFL city. Suddenly, they have a version of NFL Sunday Ticket, with streaming to other devices included, for $5 – $6 a month instead of the $300 or so that DirecTV charges. It may be legal right now… but you can see how this devalues both DirecTV and the NFL, which sold those rights to DirecTV and the networks for billions of dollars.

We are beginning to emerge from the days of piracy and 2″ screens into a real digital future. The Old School still fights to hang onto the ideas they have been familiar with for a long, long time. Ironically, I believe that it is Old Thinking that movie studios are getting serious about shorter theatrical windows, not new thinking. They are trying to force something that has NEVER worked. The six-week window is silly. They would have a hard time with most films doing much in VOD day-n-date, much less six weeks out.

Bob Iger was quoted the other day as believing they have an audience that wants movies in a shorter window and are willing to pay premium “fight” prices. Well, he must have his own polling company because I have never seen or herd of a single study or experiment that has returned that result. All the history that I know of suggests that younger moviegoers are driven by must-see and go in those first couple of weekends and that adults are rarely concerned with must-see and will wait months for a DVD. There will, of course, be exceptions. A movie like Music Box’s The Girl With The Dragon Tattoo and the two films that followed… adult focused… book readers interested… limited theatrical… probably still doesn’t do killer business with fight pricing at 6 weeks… but at double the regular VOD price, sure… that could be a success. Mega-movies might get some traction on opening weekend, even at fight prices. But really, if you are going to spend $40 to see Harry Potter 7a on opening weekend, do you really want to watch it on your TV… even your really big TV?

But I digress…

I’ve written it before, but the Netflix deals for content from studios are not revolutionary, they are simple commerce. Netflix is paying more than anyone else, so they get the rights. Starz’ deal with Sony has been fat enough to keep things happy for now, but with the fees Netflix is now paying, you have to wonder where that goes. HBO is doing its own streaming project because, clearly, they see a strong enough future upside to invest in the idea. Verizon’s TV network on the tiny phone screens has been a loss leader for content providers… but those rights are becoming more valuable daily.

Anyway… I find myself fighting on both sides of this issue. One one side, the cost of production and distribution in this country is INSANE. On the other hand, the filmed entertainment business is in the middle of a 30% – 40% reduction and another 30% because rights are being given away or taken because of legal loopholes instead of sold is potentially an ice age for this business. The music business has recovered, somewhat, but the hard costs of making music are not anything close to the hard costs of making movies and television. This isn’t oil painting. And there is no sympathy in the world for Hollywood filmmakers.

And back to ivi… $300 a season for DirecTV’s Sunday Ticket exclusive NFL package is a rip-off. $150 would be fair. Free (or $$ a month paid to someone who isn’t paying more than royalties) is the seismic event that collapses the pyramid. Extrapolate that out across every content creator and first distributor.

And note, if this all collapses, it will be under the weight of excessive greed and the arrogance of believing that the DVD bubble can be replaced or that the main job is to replace that bubble. No one to blame but those who keep chasing rainbows instead of building solid businesses that are not reliant on bubbles, but can take advantage when they do happen.

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