Don’t let the FCC steal the future

The Internet is supposed to be the future for the creative community, offering vast new opportunities that more than make up for the “creative destruction” of traditional business models.

Well into 2016, it is fair to say that creative professionals have embraced the technological future.  Copyright creators license their copyrighted works to almost every conceivable kind of online service, thereby making possible successful and popular Internet services like Spotify, Netflix, Amazon Prime, and Xbox Live.

{mosads}Creators of TV programming similarly embrace the promise of the Internet.  They foresee an internet that provides vast new opportunities to license TV programming, creates new business models that will increase revenue, and offers consumers innovative new ways to access and enjoy TV programming.

The future of a great many Americans rests on the fulfillment of this promise.  TV programs incorporate a number of different copyrighted works and require the creative inputs of hundreds of different creative professionals.  A TV program is a copyrighted work in its own right, often owned by a TV production company, but also may be derived from a copyrighted script, book, or article owned by an independent writer.  Further, sound recording and musical composition owners license the rights to include their music within TV programs, and at least with regard to musical compositions, are paid for subsequent performances of the TV program.  While the TV program itself may be owned by the production company, hundreds of creative professionals working on the program – directors, writers, actors, composers, and film crews composed of set designers, costumers, grips and cameramen – often receive direct payments (residuals and/or participations) and/or contributions toward health and pension benefits whenever and wherever the program airs. 

If the Internet were to fulfill its promise, exciting new, consumer-friendly Internet services would license these TV programs, thus providing new revenue streams to support all the creators involved in making these programs possible.  Competition between “old” distribution services and new Internet distributors might even bid up the value of TV programming.  Regardless, an expanding revenue “pie” would spur further creativity and improve the livelihoods of creative professionals. 

Unfortunately, it appears the FCC is on the verge of stealing the future from creators of TV programs.  

On March 16, the FCC published a Notice of Proposed Rule Making that will establish new rules for cable and satellite TV set top boxes (known as the AllVid proposal).  The AllVid proposal will require cable/satellite TV distributors to allow a third party to provide cable/satellite subscribers with their own set top box through which to access the TV programming licensed by the cable/satellite TV distributor.  

While this may sound innocuous and even laudatory, the AllVid proposal does not merely allow third parties to sell a TV subscriber a cheaper or better set top box.  Instead, the AllVid proposal allows the third party, who has not paid a dime to license the copyrighted TV programming, to offer their own commercial video service that includes that programming.  In other words, they don’t have to pay for the TV programming, but they are allowed to make money from it.  Given such a great deal by the FCC – free license to operate a service providing copyrighted TV programming – what incentive would such services have to independently create Internet video services and license copyrighted TV programming?  None, of course.

In fact, the FCC may not just be stealing the future from creators, but also the past and present. 

If every entity that wants to offer consumers TV programming can simply piggyback on the existing deals between programmers and cable/satellite distributors by putting their own box on top of a TV, who is going to license TV programming?  Certainly, no new services will strike their own licensing deals. And frankly, it would no longer be economically rational for cable/satellite TV distributors to extend or renew their licensing deals; they may just look to get into the piggyback game themselves.  Call it what you want – a “race to the bottom” or “tragedy of the commons” – but by whatever name, know the AllVid proposal, as currently written, poses a risk to the entire television creative economy and all who depend on it.

Kupferschmid is CEO of the Copyright Alliance.  He previously served as an IP attorney-advisor at the U.S. Patent and Trademark Office (PTO), Director of Intellectual Property at the United States Trade Representative, and Policy Planning Advisor at the U.S. Copyright Office.