Is TWC iPad App on WiFi Part of Cable Network?
Michael Greeson, Founding Partner
April 8, 2011
On Thursday, Time Warner Cable formally requested that the U.S. District Court for the Southern District of New York issue a declaratory judgment on the issue of whether TWC’s new iPad app that enables live TV to be streamed to the platform while being used in the home is within the purview of its existing carriage agreement with Viacom, who along with Discovery, Scripps, and FOX had demanded that TWC pull much of their content from the offering.
According to TWC legal counsel, TWC has the right “…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.” The legal filing is seen as by TWC to head off lawsuits by the content networks. Good luck with that!
Whether or not distribution over an IP network in the home constitutes part of TWC’s “cable system” is at the root of this debate. PayTV operators like TWC and Cablevision believe they should be able to do so without paying the studios extra. The studios, of course, see it differently, which leads to threats of lawsuits and TWC pulling 12 channels from its iPad offering.
So what’s really at stake here? First, there is the issue of audience measurement. There is as yet no established method to measure audience viewership on an iPad (though Nielsen and others are working to develop such systems). Without measurement of viewers, networks lose valuable ad dollars.
Second, these studios see this as a “land grab” on the part of cable operators who want to own the app through which the content is enabled and presented. The studios, of course, want to own the app, giving them a direct-to-consumer path that (while authenticated by the pay-TV operator) the studio would control. ESPN, for example, announced on Thursday its own WatchESPN app, which enables ESPN subscribers using Time Warner Cable, Bright House Networks, and Verizon FiOS TV to access live feeds of ESPN, ESPN2, ESPNU, and ESPN3.com on their iPhones, iPads, and iTouches. This is positioned as an extension of the operators’ ‘TV Everywhere’ services and, as such, is sanctioned by both the operator and ESPN and can be accessed by the viewer both in and out of the home - imagine that!
So what purpose does the PayTV operator serve in this scenario? They are the benevolent gatekeepers that authenticate a viewer’s ESPN subscription by requiring PayTV subscriber credentials to be entered before content can be accessed. While a legitimate defensive move on the part of operators to fend off the threat of web video, their status in this new distribution scenario is not much more than the “dumb pipe” provider of which so many have warned. If studios like ESPN are able to go direct-to-consumer to any net-connected device with only operator authentication, the operator still gets the residential subscription fee, but their presence in the viewing experience is significantly diminished.
As The Wall Street Journal noted this week, this entire issue is tied up in a labyrinth of competing financial interests that defy simple solutions. Should video-enabled net devices like the iPad be considered secondary TVs connected to the cable plant, or are they something completely different for which operators must negotiate separate carriage agreements? Are IP networks - whether the operator’s last-mile WAN or the consumers’ in-home WiFi - really part of the cable infrastructure defined in these carriage agreements?
There is no doubt that longstanding industry protocols are being challenged by the new technological innovations. This issue, however, is of greater significance than many comprehend and it threatens to disrupt the entire consumer video value chain.
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