The Beginning of the End of Expensive Programming Bundles?

Alleging antitrust violations, Cablevision filed a lawsuit against Viacom late last month. Cablevision claims that Viacom is illegally forcing it to carry and pay for 14 lesser-watched ancillary channels that its customers do not watch in order to have access to must-have programs like Nickelodeon, MTV and Comedy Central.

Cablevision’s complaint asserts that Viacom engaged in a “per se” illegal tying arrangement in violation of the federal antitrust laws. It also asserts that Viacom has engaged in unlawful “block booking,” which is a form of tying that conditions the sale of a package of rights on the purchaser’s taking of other rights.

Cablevision contends that Viacom abused its market power over commercially critical networks and coerced the company by threatening to impose massive financial penalties unless Cablevision complied with Viacom’s demands. Cablevision also alleges that Viacom’s conduct harms Cablevision and its customers, impairing competition by making the cable provider pay for and carry networks that many subscribers do not want to watch, while other networks are excluded from distribution, thus preventing Cablevision from being able to differentiate its services and harming subscribers.

The practice of tying lesser-watched programming to must-have programming is rampant in the video programming business, driving  up the cost of video services and preventing video providers from offering consumer friendly bundles. NTCA has actively advocated against the practice, seeking legal and regulatory relief at the FCC and on Capitol Hill. We will be watching this lawsuit closely, hopeful that it signals an end to the stranglehold programmers have held on video service providers and the beginning of a new era of consumer choice.

Court Rules Verizon Violated STB Patents

Last week, a federal judge ruled that Verizon must cease using two patents owned by interactive TV firm ActiveVideo Networks, issuing a permanent injunction effective May 23, 2012.

In the meantime, until the permanent injunction is in place, the court ruled that Verizon must pay ActiveVideo $2.74 per FiOS TV subscriber per month starting December 1. For Verizon, which has about 3.98 million FiOS TV subscribers, this works out to about $10.9 million per month.

Active Video, an interactive TV vendor whose largest client is Cablevision, initially filed suit against Verizon back in May 2010. In August 2011, the court concluded that Verizon’s FiOS TV violated four of five patents asserted by ActiveVideo and awarded the company $115 million in damages. Later that month, ActiveVideo filed a motion for a permanent injunction against the telco barring it from using two of the patents in its video-on-demand (VoD) service. And just last month, the court added at least $24.1 million in supplemental damages and interest to the amount Verizon owes ActiveVideo.

“There is no doubt that ActiveVideo suffers indirect losses when Cablevision suffers direct losses from Verizon’s infringement,” Judge Jackson wrote in the order released last Wednesday. Read more

VOTW: Leading the Orchestra

And last but not least, our video of the week (VOTW), brought to you by Viodi TV.

The recent announcement by Affinegy of its Home Portal v2.0 software and related announcement that Cablevision is deploying it, is further evidence of the growing importance of the converged home to service providers’ business plans. Viodi TV  caught up with Affinegy CEO Melissa Simpler at the Parks Associates Connections conference, where she discusses Home Portal v2.0.

In addition to the discovery and simplification of devices on a home network, the Home Portal v2.0 software effectively allows service providers to create personal data clouds for their customers. The Affinegy software, which identifies the devices on the home networks, serves as an orchestra leader of sorts directing the devices as to where to stream data.

AMC Network in Play?

Spun off last week by Cablevision, the former Rainbow Media Holdings may be the acquisition target for one of several media companies. Rumor has it that Disney, News Corp. and Time-Warner each may have an interest in buying the newly renamed AMC Networks.

AMC Networks owns AMC, IFC, WE TV and the Sundance Channel. AMC also owns IFC Films and international programmer and TV program distribution unit. Speculation is that a deal for AMC Networks could run in the $3 billion range.

None of the organizations has commented publicly on the rumor. Of course if a deal is to go through it will provide the wining content provider with even more market power in retransmission consent negotiations.

Verizon Falls Short in STB Dust up with Cablevision

Last Friday, a U.S. International Trade Commission judge tossed claims that Verizon made against Cablevision Systems on set-top box patents. Verizon filed the complaint and suit against the cable MSO in early 2010.

Verizon claimed that three Cablevision set-top boxes (STBs) violated five patents held by the telco. Verizon released the following statement last Friday: “Our pursuit of this action reflects our long-established commitment to protect and enforce our intellectual property rights.”

Cablevision responded: “This is a significant victory for Cablevision, the judge rejected four of Verizon’s five claims in the case and the fifth had already been invalidated by a Virginia court. We are obviously pleased and will continue to defend ourselves vigorously as the process continues.”

Verizon is currently preparing a second case for review citing two additional patents that it believes Cablevision to be violating. If Verizon is victorious, the court will block Cablevision from importing three digital set-top models from Cisco, key hardware which subscribers use to record programs on the MSO’s new network DVR service.

In related news, ActiveVideo, an interactive TV vendor whose largest client is Cablevision, is waiting for a decision in a suit filed against Verizon for similar patent infringements in May 2010.

Cable Companies and Viacom Square Off Over Live TV iPad Apps

Time Warner Cable (TWC) and Viacom have each filed lawsuits in U.S. District Court in New York’s southern district related to the cable company’s iPad application, which allows viewers to watch live TV in their homes.

TWC first launched the controversial application last month and it immediately set off a firestorm of controversy related to video content rights. TWC initially offered about 30 cable networks, however, in the face of substantive opposition, the cable provider temporarily removed more than a dozen channels from its iPad line up.

In a pre-emptive legal move, TWC filed a request for declaratory judgment that says the cable company can transmit Viacom programming — such as MTV, Comedy Central and Nickelodeon — to any device in a customer’s home.”We have steadfastly maintained that we have the rights to allow our customers to view this programming in their homes, over our cable systems, without artificial limits on the screens they can use to do so, and we are asking the court to confirm our view,” Time Warner Cable general counsel Marc Lawrence-Apfelbaum said Thursday. “With over 360,000 downloads of our TWCableTV™ app, it is clear that our customers welcome the convenience and flexibility our new app provides.”

In a separate lawsuit, Viacom asserts that TWC doesn’t have that permission under the current licensing agreement. Viacom also acknowledges that Time Warner Cable’s actions “will interfere with Viacom’s opportunities to license content to third-party broadband providers and to successfully distribute programming on its own broadband delivery sites.” Viacom is countersuing for breach of contract and copyright violations and is seeking injunctive relief and damages. Read more

Amid Controversy, Cablevision, TWC Launch Live TV iPad Apps

Time Warner Cable (TWC) recently announced the launch of the TWCable TV app for the Apple iPad, allowing video customers to stream live, linear television to the device at no additional charge.

TWC’s application requires customers to subscribe to both its television package and broadband service, and it is currently restricted to in-home viewing. To use this feature, customers download the app from the iTunes App Store, launch it, log in and scroll through the channel lineup to select preferred programming. TWC was the first out of the gate with this  live streaming application, although many of its competitors already offer video on demand (VoD) services to the iPad.

TWC initially offered about 30 cable networks, however the cable provider soon faced opposition to its distribution strategy from several major cable networks. Late last week TWC abruptly removed 12 channels from its iPad app. Viacom, Fox Cable Networks, Scripps Networks and Discovery Communications were minutes away from filing their legal paperwork when the cable provider agreed to remove their channels, according to three people with knowledge of the planned filing.

Distributors such as Time Warner and Cablevision assert that their existing contracts with content providers allow them to turn iPads and other devices into TV sets. In fact, TWC said in a statement that it believed it had “every right to carry the programming on our iPad app” and it would consider its legal options.

For their part, the content providers expect additional payment for streaming to a tablet device, maintaining that it constitutes a new distribution channel. Content providers may also be worried about the security of their programming. Down the line the consumer will want — and expect – to take his tablet with him outside the home, and, as a result, the content might be accessible to hackers who can grab the signal without paying for it. Read more

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