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TV Technology at Edge of Legal Frontier

July 6, 2005

LOS ANGELES — Days after the Supreme Court weighed in on digital copyright infringement issues in the MGM v. Grokster case, select consumer electronics chains began stocking a product some predict could spark the entertainment industry’s next showdown over intellectual property rights.

New to the shelves of Best Buy and CompUSA this month is Slingbox, a brick-sized device that enables viewers to route the live television signal coming into their homes to a portable device anywhere on the globe via broadband connection. Slingbox costs $250 and has no subsequent subscription fee; several stores sold out on the first day.

Created by San Mateo, Calif.-based company Sling Media, Slingbox is the most prominent example of a handful of new ventures trying to repeat what TiVo achieved through time-shifting with technology capable of what loosely is referred to as place-shifting. Leading place-shifting firms even have drawn interest from cable operators interested in potential partnerships.

But a mechanism that transplants a live video feed also could potentially relocate its marketers to a federal courtroom, where they could raise questions about content transmission.

“I’ll bet there will be a Supreme Court ruling sometime in the next decade specifically addressing this issue: Does the consumer have the right to place-shift as they do time-shift their content?” said Ted Shelton, chief operating officer of Orb Networks, a competitor to Sling Media that offers its own place-shifting software online free of charge.

Orb has been on the market since January, collecting 30,000 subscribers with a software-only technology that requires a TV tuner card and also can transmit other forms of media stored on a hard drive.

Place-shifting is problematic to many copyright holders because it sidesteps what is known in legalese as proximity control, which restricts the distribution of content to specific regions and times. It’s a standard contractual stipulation for the Motion Picture Assn. of America, whose member studios license distribution rights to movies for distinct territories; the National Football League, which considers geographic limits the linchpin of lucrative television deals, including its Sunday Ticket pact with DirecTV; and local television stations, which pony up millions of dollars for exclusive territorial rights to all kinds of programing.

“Slingbox is one manifestation of what we assume will be a cascade of similar products that are meant to manipulate our signals in ways that we think will be harmful to the network-affiliate business, if not the law,” CBS executive vp Martin Franks said.

Putting aside the piracy risks, place-shifting critics offer plenty of scenarios that put the technology in murky legal territory.

Two Slingbox subscribers could send each other programing unavailable in their respective areas; an East Coast viewer could stream “Survivor” to the West Coast three hours early. The West Coast viewer could return the favor by providing access to a premium channel the East Coast viewer doesn’t pay to receive.

Sling Media CEO Blake Krikorian knows full well the implications of his product. Mindful of the backlash that derailed Napster, he and rival executives have been busy reaching out to various sectors of the entertainment world in hopes of educating and collaborating. He envisions a host of new revenue opportunities for content owners but realizes Slingbox requires an industrywide paradigm shift.

“The Internet has changed the meaning of what proximity and geography is,” Krikorian said. “Hollywood needs to step up and deal with it. If it’s disrupting existing business relations, we need to figure out how the next business models evolve that make it a win-win for the consumer and the industry.”

Krikorian is a Silicon Valley veteran whose love of baseball spurred him to develop Slingbox; he just wanted to catch live broadcasts of San Francisco Giants games when he was out of town. Now he could end up redefining “remote control” with a versatile contraption that drew huge buzz at January’s Consumer Electronics Show.

“I’ve seen their product, and it’s fantastic,” said Fred von Lohmann, senior staff attorney at the Electronic Frontier Foundation, a San Francisco-based group that lobbies for digital rights on behalf of Web users against the studios and labels. “To see it is to want it.”

Slingbox could have been dubbed Re-DirecTV: It attaches to your cable box (analog or digital), satellite receiver, digital video recorder or directly to the television monitor and diverts the signal to a laptop loaded with Slingbox software. Eventually, Slingbox will be able to transmit to cell phones, PDAs and other portable devices that connect to the Internet.

Slingbox might be ideal for keeping tabs on the Giants while vacationing in Bora Bora, but Krikorian believes the product will be more popular for less far-flung applications like sneaking a peek at daytime soap operas on your office cubicle’s desktop.

Slingbox isn’t alone in the place-shifting category. There are a few other, more expensive hardware offerings for place-shifters that have found little traction with consumers, including Sony’s Location-Free Portable Broadband TV and TV2Me. More market entrants are expected.

The king of time-shifting also is involved in place-shifting, albeit somewhat differently: TiVo’s new TiVoToGo offering allows subscribers to send programing to a portable platform. When TiVoToGo was announced, it was denounced by the MPAA and NFL as a copyright violation, but both relented once TiVo agreed that TiVoToGo would only transmit programs that already were recorded.

Slingbox and others can transmit recorded and live programs, which could draw fire from any number of quarters. The MPAA is studying place-shifting technology but has no set course of action.

“We’re hopeful Slingbox will incorporate technology that will respect copyright,” said Dean Garfield, vp and director of legal affairs at MPAA. “You don’t have the authority to retransmit license work without negotiation or authorization.”

No media-driven entity is being more zealous in this area than the NFL, which blitzes copyright infringers with the speed of a lottery-pick defensive lineman.

With a little trading of account information, Slingbox subscribers conceivably could make end runs around the NFL’s blackout rule, which eliminates the local broadcast of a game that isn’t sold out, and Sunday Ticket, the subscription package delivering out-of-market games via DirecTV, which paid the NFL $3.5 billion over five years for exclusive rights through 2010. The NFL declined comment.

Slingbox also could wreak havoc with affiliates by impairing local advertisers, who provide targeted commercials, and syndicators, whose content comes with strings attached related to timing and exclusivity.

“I would be shocked if this were used for commercial purposes and it wouldn’t be a copyright problem,” said Greg Schmidt, vp development and general counsel at LIN TV Corp., which owns 23 TV stations in the U.S. and Puerto Rico.

The potential for piracy might be Slingbox’s least objectionable attribute. Slingbox does not engage in file sharing; video can’t be sent to more than one device at a time. But that comes as small comfort to CBS’ Franks, who singled out Slingbox as a security concern at the network’s annual affiliates conference last month in Las Vegas.

“Even if you take it at face value that it is a one-to-one transmittal device, I don’t think it will be very long before some hacker in Cupertino posts on the Web the way to modify it, the way they modify a TiVo, that turns it into something that can be tapped by 50 people,” Franks said.

To Krikorian, place-shifting boils down to a simple principle: Shouldn’t the consumer be entitled to view the content they pay for at home elsewhere? It’s a revolutionary concept at a time when programers are eyeing new ancillary revenue streams by charging viewers additionally for each new platform including the Internet and cell phones, where TV content will be repurposed.

In Krikorian’s view, Slingbox actually could help affiliates who are seeing these new platforms erode the whole notion of localism. Rather than be concerned with attracting the eyeballs of visiting viewers who aren’t likely to respond to local advertising because they will spend most disposable income in their home market, affiliates could be empowered by Slingbox to send ads to their viewers out of market, enabling them to shop when they return.

Place-shifting also conceivably could help affiliates face down their viewers’ biggest distraction — the Internet — by replanting the TV signal where they lose viewers’ attention most: the computer, particularly at work.

“The product allows me to reach the consumer in so many ways that they were starting to lose people,” Krikorian said. “Broadcasters would love to reach you while you’re at work.”

Place-shifting companies know they can’t go it alone. They are talking to anyone in the entertainment industry who will take their meetings, and that has included broadcasters, production companies and distributors.

“Some technology companies have said, ‘We can do it, and screw you,’ ” said Orb’s Shelton. “We’ve seen this before with Napster. It’s not an effective business model.”

One industry sector said to be keenly interested in place-shifting is cable operators, who sources say see the technology as an inducement for its subscribers to bundle high-speed data with video. Like TiVo, Slingbox or Orb eventually could be embedded into operators’ set-top boxes.

One potential problem: Cable operators and the programmers that maintain concerns over copyright violations often are inside the same conglomerates. Comcast Corp. and Time Warner Cable declined comment.

The telecommunications firms already have taken notice. Sprint has partnered with Orb, which is sold with its broadband product as Sprint Personal Media Link. Orb also has a deal with Sony Pictures Digital to run trailers of its upcoming movies. Shelton sees this as a way for the Hollywood establishment to dip its toe into uncharted waters and “think through the economics and technology issues necessary to go to the next step,” he said.

If place-shifting catches on, it raises an additional question as to how those viewers will be tracked. Nielsen Media Research already is at work on a variety of technologies that would measure place-shifted viewing but no timetable is on the horizon.

“They are on my dance card,” said Scott Brown, Nielsen senior vp strategic relations, marketing and technology. Brown said he envisions Slingbox meeting the same gradual success that fueled digital video recorders.

Reuters/Hollywood Reporter

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TV Technology at Edge of Legal Frontier


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