Start-Up Rides Copyright Gray Area to Offer Live TV Online

Seattle based ivi will pay royalties — but not retransmission fees — while offering customers major networks for $4.99

If ivi, Inc. is to be believed, the cable business is about to have another challenger — and customers will get a new reason to cut the cord.

The Seattle based start-up is launching an app on Monday that it says will give viewers live access to more than 20 channels including networks such as ABC, NBC, CBS, Fox, The CW, and PBS — all for just $4.99.

Moreover, unlike video on demand services such as Hulu or Netflix — which have also been seen as a threat to the cable industry — ivi will offer its customers real-time news and sports.

One thing that seems suspect, however, is that ivi says that no contracts are in place with any of the networks. Indeed, networks contacted by TheWrap did not seem to be aware of the start-up’s existence, let alone its plans to retransmit their content.

“We’ve made efforts to notify and talk with a select few networks and channels that we felt would be early adopters and that’s where we got the answer we expected — that the content involves multiple parties and an agreement would take years of legal review,” company founder Todd Weaver told TheWrap.

But the 18-person start-up says it found a legal way around that long and drawn-out process. Ivi says technicalities within the copyright law are allowing them to broadcast the networks; in return, it plans to pay the networks royalties for the programs it airs.

“We are very innovative in what we are bringing the table, and its going to shake things up,” Weaver said. “We are conforming to the law in the same way that cable did when it launched 40 years ago. We don’t think the story ends tomorrow and we fully expect things will drag on with legal challenges and lobbying for a while.”

Nevertheless, Weaver said the service represents a boon to the networks and content creators by providing them with alternative revenue streams.

“We do get that initial knee-jerk reaction from folks who are worried that they must protect their content, but we do expect that to change when they see we’re actually monetizing their content,” Weaver said. “It’s similar to Apple selling singles rather than a whole album. By that point though, the whole industry had been gutted by pirates, so we’re trying to save this industry before it gets gutted too.”

Clearly, ivi is operating in a legal gray area. It argues that its status as a cable company allows it to have servers set up in several markets — initially New York and Seattle — that receive transmissions of television signals that originated with other servers and then retransmit them through their app. Yet, because it is online only, ivi maintains it is not governed by the Federal Communication Commission (FCC) and consequently does not have to pay retransmission fees in the way that a Comcast or Cablevision would.

Instead, it uses copyright law to calculate the royalty payments it owes the various networks.

In the case of cable companies, ivi plans to hammer out individual retransmission deals and says that several pacts are in the works. Those will be available to customers on an a la carte basis.

For now, the app is available as a 30-day free trial, before the $4.99 base package price kicks in. In addition, an upgrade offering DVR functionality is available for 99 cents.