Time Warner Cable is facing litigation from at least one of Hollywood’s majors in a matter of days over its iPad app that transmits live TV channels within a subscriber’s home, according to a programming executive with knowledge of the situation.
“I think it’s just days away,” said the source, who added that Time Warner Cable is no longer in discussions with programmers. “If we allow this without litigation, everyone will do it tomorrow. If we litigate, we have a chance to win.”
Time Warner Cable did not immediately respond to a request for comment Thursday.
The imminent legal action is the latest escalation of tensions since the cable operator launched an app last week on Apple’s popular tablet that delivers 32 cable networks including Discovery Channel and Fox News Channel.
Cablevision is also planning to launch an iPad app that goes a step further than Time Warner by making a subscriber’s entire channel package — including broadcast networks, VOD and content stored on DVR — available on the app.
Distributors believe that as long as the app is restricted to viewing within the subscriber’s residence, the iPad is no different than any other TV in the house.
But programmers believe tablets aren’t covered under existing carriage agreements and will require a new set of rights to be negotiated. Revenues are a sore subject since iPad viewing isn’t measured, meaning it won’t be factored into a program’s rating (for those Time Warner Cable subscribers who happen to be Nielsen family members).
“They’re upset because Nielsen can’t yet capture all that data,” said Richard Greenfield, an analyst with BTIG Research. “I think there’s a lot of debate going on among the programmers as to what is and isn’t allowed.”
As the only company that has gone public with its beef, Scripps Networks Interactive, parent company of Food Network and HGTV, put it, “(Scripps) has not granted iPad video streaming rights to any distributor and is actively addressing any misunderstandings on this issue.”
Negotiations are delicate enough that no conglomerate is willing to address the iPad issue on the record. There have been rumors that Time Warner Cable has received cease and desist orders.
The hardline stance against Time Warner Cable may be also be designed to give Cablevision pause.
A Cablevision spokesman couldn’t specify the date its app would be deployed, but the company has said it would be in the first quarter. “We have no change in plans,” the spokesman said.
Tom Rutledge, Cablevision’s chief operating officer, reaffirmed the company’s intent to follow through with the app as recently as March 1 at an investor conference hosted by Morgan Stanley.
Rutledge drew a distinction between authenticated TV Everywhere broadband services, which he defined as adhering to an “out-of-the-house rights structure,” and the house-bound iPad app.
“The location is the definition of the content,” he said.
The oddity of the conflict is that the cable industry’s TV Everywhere mandate was all about making content its subscribers paid to get on their TV available on digital platforms. But the loggerheads over iPad exemplifies how difficult it’s been to come to terms on making that mandate a reality. Some industry observers say Time Warner Cable has grown so impatient with how slowly programmers are making shows available for broadband viewing via authentication that the cabler is forcing the issue.
Many distributors are trying to capitalize on the app craze, though offerings to date from Comcast, DirecTV and Verizon have limited their capabilities to on-demand viewing and channel navigation. One notable exception is Dish Network through its Sling offering, which has long allowed subscribers outside the home to access live content.
In a research note issued Wednesday, BTIG’s Greenfield raised the possibility that Dish has managed to sidestep legal issues because Sling pulls a signal off the subscriber’s own set-top box, not a cloud-based server.
But Comcast has made it clear that its Xfinity app will eventually include live programming. And though Time Warner Cable cherry-picked channels from the stables of Walt Disney Co., Discovery Networks and Viacom to name a few, the operator plans to match Cablevision’s breadth once it can overcome certain technical and resource issues.
“We will be adding channels as we become technically able to do so,” a spokesman said.
Giving programmers another new revenue stream may not be an appetizing prospect for operators already smarting from bruising negotiations with broadcasters over retransmission-consent fees.
Cablevision has been a tough opponent in that arena and isn’t afraid to take on bigger companies to defend technology it wants to implement. Consider the five-year legal battle waged over Cablevision’s right to deploy a remote-storage DVR, which Cablevision ultimately won.
More recently, the major studios and nets have proved in blocking online access to broadcast programming via Google TV that they will play defense when broadcast’s advertising base is endangered. And the market penetration of the iPad dwarfs that of Google TV, which came nowhere near becoming the sensation Apple immediately had on its hands with its tablet.
Apple has sold an impressive 15 million iPads in less than nine months. While not quite critical mass, it’s just a matter of time before this market will matter.
“Right now this is not a big deal for either side because there’s so little viewing,” Greenfield said. “But where this could be two years from now is what scares programmers.”