Courts could eventually help Netflix, Google and others in cable wars

Image representing Netflix as depicted in Crun...

I’ve argued in this space that Netflix, Amazon Prime and other “over the top” online video providers can only be as successful as the conglomerates who own studios and networks allow them to be, since they decide what content to license, and the terms of those licensing agreements.

Therefore, I said, it seems unlikely that these newer players could dis-intermediate the traditional structure of the cable industry, which has served the entertainment industry so well financially.

While this may prove to be true, the situation is complicated by precedent that would prevent the studios from simply freezing any video provider out, according to Fritz Messere, dean of  SUNY Oswego‘s School of Communication, Media and The Arts.

In an interview Wednesday, Messere said that if the studios decided to create onerous terms for non-traditional providers of subscription-based TV shows and movies, federal courts would likely step in and force those programmers to negotiate terms commensurate with those offered to cable and satellite companies.

“The reason I think that is that cable didn’t like the idea of a home satellite industry, before direct broadcast satellites came about,” Messere said. “And Congress and the FCC forced programmers to sell to home satellite customers through the cable company at the same rate.”

He refers to the Satellite Home Viewer Act of 1988.

Beginning in 1980, wealthy consumers could mount gigantic C-band satellite dishes and receive broadcast and satellite signals for free. As the decade progressed, those signals were, of course, scrambled, creating a market for companies that would sell bundled programming packages to C-band dish owners.

William Roberts, senior attorney with the U.S Copyright Office, explained the dilemma that developed, during testimony before a Senate Banking Committee in 2000:

“These program packagers, who were typically the same concerns that sold the dishes as well, needed to clear the copyrights to the broadcast signals that they were delivering to their customers. In 1986, satellite providers first approached the Congress seeking creation of a compulsory license under the copyright law, similar to that enjoyed by the cable television industry, that would allow them to easily license broadcast programming without engaging in costly face-to-face negotiations with the copyright holders of each and every broadcast program.”

Before the Act was passed, C-band owners often ended up paying fees much higher than cable bills, due to these complicated one-show-at-a-time agreements.

To be sure, the landscape is far different today. There are many more pay-TV providers, a much bigger video-game industry, DVD/Blu-ray, and an entire mobile market that few could have even dreamed of in 1988.

Messere also points out that the big cable and fiber operators have video-on-demand platforms that are more or less equivalent to Netflix and its peers. “How can you offer VOD on the one hand, and not want to offer the same [content] to the [online video] providers on the other hand, when you have the opportunity to make money from the transaction?”

There is a further complication, which is that on a “level playing field,” the programmers would argue, Netflix would be charging its customers as much per month as the cable operators charge. $40 for the most basic plan, rather than $8.

“So it’s something we don’t know the ultimate answer to,” Messere acknowledged. “But I would think that if you’re a programming provider, you almost have to provide universal programming, if asked.”

— David B. Wilkerson