Television

Subscribe to Television via RSS

For the film and media distribution industries, this year has been action-packed.  Production budgets are skyrocketing and new digital services have been announced or are launching with each passing month. The streaming wars are upon us. Moreover, the FCC recently voted to treat streaming services as “effective competition” to traditional cable providers (or MVPDs), thereby triggering basic cable rate de-regulation in parts of Hawaii and Massachusetts.

The distribution landscape took yet another unexpected legal twist this week. On November 18, Assistant Attorney General Makan Delrahim announced that the Antitrust Division of the Department of Justice would ask a federal court to terminate the “Paramount Consent Decrees” (the “Decrees”), which have prohibited movie studios from engaging in certain distribution practices with movie theaters since the 1940s. The DOJ filed a motion to terminate the Decrees in federal court in the Southern District of New York on November 22, 2019.  Notably, the DOJ cites streaming services and new technology as a few of the many reasons that the Decrees may no longer be necessary in what the DOJ official sees as today’s highly competitive, consumer-driven content market. Given the volatility of the content licensing space, film licensors and licensees will have to carefully consider how the DOJ’s actions will affect their content rights and options going forward.

Fair use can be one of the most difficult issues that copyright lawyers have to address due to decades of varying court rulings applying the multi-factor balancing test, particularly in the face of new technologies that use, modify, and aggregate data in ways not envisioned under the Copyright Act. The Second Circuit’s February 2018 fair use decision in the dispute between Fox News Network, LLC (“Fox”) and TVEyes, Inc. (“TVEyes”) added yet another wrinkle to fair use jurisprudence when the court emphasized market effect over transformative use, seemingly a departure from recent trends in the application of the balancing test. (See Fox News Network, LLC v. TVEyes, Inc., 883 F.3d 169 (2d Cir. 2018)).  In recent weeks, the Supreme Court denied TVEyes’ petition for certiorari, leaving in place the appeals court’s decision; and Fox and TVEyes settled the case, stipulating that TVEyes may no longer make available, distribute, or publicly perform or display Fox’s copyrighted video content.

TVEyes is likely to be an important decision for future fair use cases within the Second Circuit.

In an effort to modernize communications, the Federal Communications Commission (“FCC”) decided to allow cable operators to deliver general subscriber notices required under so-called Subpart T rules (47 CFR §§ 76.1601 et seq.) to verified customer email addresses. This decision was announced through a Report and Order on November 15, 2018. This update is part of the greater trend towards using electronic communications and electronic contracting to replace paper as supported by the federal Electronic Signatures in Global and National Commerce Act (“E-Sign Act”) and related state laws. The E-Sign Act allows electronic records to satisfy legal requirements that certain information to be provided in writing if the consumer has affirmatively consented to such use. However, the E-Sign Act allows federal agencies like the FCC to exempt a specified category or type of record from the normally required consent requirements if it makes the agency’s requirements less burdensome and does not harm consumers. In this case, based on an understanding that it would be impractical for cable operators to attempt to receive permission from each individual customer prior to initiating electronic delivery of these general notices, the FCC waived the consent requirement pursuant to their discretion under the E-Sign Act.

Since 2008, cable customers have been suing cable operators across the country claiming operators violate the antitrust laws by forcing customers to lease set-top boxes from the operator to access “premium” cable services.  Plaintiffs claim that the operators have “tied” one product (the service) to another product (the box) and that the arrangement is a per se violation of the antitrust laws (i.e., unlawful regardless of any alleged pro-competitive benefits).

The lawsuits have taken a number of different paths—with some surprising twists and turns:

  • The first jury trial resulted in a verdict against Cox in 2015.  But the trial court then set aside the verdict on the grounds it had rejected earlier on summary judgment.
  • When another operator agreed to settle claims in a Philadelphia case, the district court refused to approve the deal, finding that the settlement class was not “ascertainable.”  But last week, the Third Circuit quietly reversed in a summary decision, ruling that ascertainability is not relevant where the parties have agreed to the settlement class definition.
  • Meanwhile, the FCC has jumped (back) into the fray by proposing rules to force cable operators to “Unlock the Box” —or, perhaps, give the FCC the keys.

A number of courts have dismissed set-top box tying claims for failure to plead or prove that the cable operator has sufficient “market power” to coerce a customer into leasing the set-top box because cable operators face competition from “overbuilders” and/or satellite services.  Others dismissed because there was no proof that anyone would have sold stand-alone boxes “but for” the alleged tying.

Just before the Labor Day weekend, however, the Second Circuit established a new and different path.  In Kaufman v. Time Warner, No. 11-2512-cv (2d Cir. Sept. 2, 2016), a panel affirmed 2-1 the district court’s ruling that the plaintiffs failed to allege market power.  But that ruling was only a backstop.  The majority’s principal ground for affirming dismissal was that premium cable services and the interactive boxes used to access them are not separate products at all.  As such, the fundamental premise of any “tying” claim—two otherwise separate products tied together by the seller—simply does not exist.

Negotiations between television channels/networks and pay TV operators are a breed apart.  The stakes are high and the consequence of failure – a “dark” screen – is all too public.

But the critical factor that sets these negotiations apart is the actual regulation of the negotiations under three main categories of rules.

  • Broadcasters may invoke “Must Carry” status or seek to negotiate terms for “retransmission” under FCC rules requiring “good faith” negotiations.
  • Program Carriage rules protect channels and networks from certain abuses by operators. Conversely, Program Access rules ensure operators have certain rights to license programming.
  • The FCC also has issued a series of orders in connection with mergers and other transactions, some of which allow an arbitrator to pick one offer or the other in “night” baseball-style arbitration when certain networks and operators cannot agree on terms of carriage.

On August 26, 2016, the FCC Media Bureau ruled that broadcasters are limited to the first bucket above, the Must Carry/Retransmission Consent rules. (In re Liberman Broadcasting, Inc. v. Comcast Corp., MB Docket No. 16-121 (Aug. 26, 2016).  This is significant because it comes in the midst of an ongoing debate over the Retransmission Consent rules and the FCC’s “totality of the circumstances” test.  Generally speaking, a party to a retransmission consent negotiation may seek to demonstrate, based on the “totality of the circumstances” of a particular retransmission consent negotiation, that the other party breached its duty to negotiate in good faith.  Under the Media Bureau’s ruling, broadcasters may look solely to the Retransmission Consent rules to regulate their carriage negotiations.

On August 29th, a Ninth Circuit panel unanimously held that the FTC has no power to challenge “throttling” of unlimited data plan customers by mobile broadband providers as an “unfair or deceptive act.”  The panel found that a core source of FTC authority (Section 5 of the FTC Act) does not apply to any “common carriers” that are subject to regulation under the Communications Act of 1934.  (FTC v. AT&T Mobility LLC, No. 14-04785 (9th Cir. Aug. 29, 2016)).