COMMENTS OF THE WALT DISNEY COMPANY, 21 st CENTURY FOX, INC. AND CBS CORPORATION

Transcription

1 Before the Federal Communications Commission Washington, D.C In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services MB Docket No COMMENTS OF THE WALT DISNEY COMPANY, 21 st CENTURY FOX, INC. AND CBS CORPORATION Susan L. Fox Vice President, Government Relations The Walt Disney Company 425 Third Street, S.W., Suite 1100 Washington, D.C ( Jared S. Sher Vice President, Associate General Counsel 21st Century Fox 400 North Capitol Street, NW Suite 890 Washington, DC ( Anne Lucey Senior Vice President for Regulatory Policy CBS Corporation 601 Pennsylvania Avenue, N.W., Suite 540 Washington, D.C ( March 3, 2015

2 Table of Contents EXECUTIVE SUMMARY...ii I. MARKET FORCES HAVE DRIVEN THE LAUNCH OF INNOVATIVE NEW VIDEO SERVICES...2 II. THE RELATIONSHIP BETWEEN THE COMMUNICATIONS ACT AND COPYRIGHT LAW...6 III. THE COMPLEXITIES THE FCC IDENTIFIES IN REINTERPRETING THE TERM MVPD WEIGH IN FAVOR OF ALLOWING THE MARKET TO CONTINUE TO EVOLVE IN LIEU OF FCC ACTION...12 IV. CONCLUSION...17 i

3 Executive Summary Market forces and not government intervention have spurred robust new business models for the distribution of broadcast and cable television content via Internet-based and other broadband distribution platforms. Consumers today enjoy an incredible variety of linear and ondemand options for accessing and viewing a wide array of compelling, multiple-genre and highquality video content online. The Video Programmers respectfully submit that market forces will continue to drive video innovation, that there is no market failure to address, and that imposition of additional regulation may limit, rather than increase, the opportunity for consumers to obtain their desired video programming in a myriad of new ways. Moreover, even if the FCC modifies its interpretation of MVPD, Internet services that distribute broadcast programming still would be required to obtain copyright clearances from content owners because an FCC rule change is no capable of altering the scope of the Copyright Act, which does not provide for compulsory licensing of Internet transmissions. Lastly, the proposal to expand the definition of MVPD raises significant and complex questions that could jeopardize the nascent state of the over-the-top market. In short, Commission action is not warranted at this time. ii

4 Before the Federal Communications Commission Washington, D.C In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services MB Docket No COMMENTS OF THE WALT DISNEY COMPANY, 21 st CENTURY FOX, INC., AND CBS CORPORATION The Walt Disney Company ( Disney, 21 st Century Fox, Inc. ( Fox and CBS Corporation ( CBS (Disney, Fox and CBS, collectively, the Video Programmers respectfully submit the instant comments ( Comments in the above-captioned proceeding in which the Federal Communications Commission ( FCC or Commission proposes to interpret the term multichannel video programming distributor ( MVPD to include services that make multiple linear streams of video programming available for purchase by subscribers or customers, without regard to the technology used to distribute the video programming. 1 Thus far, market forces operating largely free of government intervention have spurred robust new business models, including the distribution of broadcast and cable television content via Internetbased and other broadband distribution platforms. Consumers today already have an incredible variety of linear and on-demand options for accessing and viewing a wide array of compelling video content online. The Video Programmers respectfully submit that market forces will 1 See In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, MB Docket No , FCC (rel. Dec. 19, 2014 ( NPRM. 1

5 continue to drive video innovation, there is no market failure to address, and imposition of additional regulation may limit the opportunity for consumers to obtain their desired video programming in a variety of new manners. 2 Thus, Commission action is not warranted at this time. I. MARKET FORCES HAVE DRIVEN THE LAUNCH OF INNOVATIVE NEW VIDEO SERVICES The NPRM underpins the need to reinterpret the statutory definition of MVPD on one core premise: that the continued evolution in Internet delivery of video programming services requires regulatory intervention to provide nascent, Internet-based video programming service providers with competitive access to video programming. 3 That premise is misplaced because market forces already incentivize, and will continue to incentivize, broadcast stations, cable networks and other licensors of video programming to make content available to innovative, Internet-delivered, distribution platforms. As described below, the Video Programmers are already committed to evolve their distribution strategies to meet consumer demand for access to content enabled by Internet distribution, whether linear networks showing programs at prescheduled times or on-demand access to specific programs and events. Specifically, the Video Programmers already have entered into market-based agreements with Internet-based distributors to make available to consumers a variety of linear programming channels. Almost ten years ago, the Disney-ABC Television Group was the first media company to license full-episode video programing to the itunes store. 4 Since then, the Disney-ABC 2 NPRM at 25 (noting, we also wish to ensure that our rules do not impede innovation by imposing regulations on business models that may be better left to develop unfettered by the rules applicable to MVPDs ; see also NPRM at 26, 44, 51 (recognizing imposition of certain MVPD requirements on Internet-based programming services could have certain negative consequences. 3 NPRM at 1. 4 Press Release, The Walt Disney Company, Disney, ABC & Apple Announce Deal to Sell TV Shows Online Hits to Include Desperate Housewives, Lost and That s So Raven 2

6 Television Group launched its own Emmy Award winning full-episode player as well as three TV Everywhere products WATCH Disney Channel, WATCH Disney XD, and WATCH Disney Junior all of which offer live streaming as well as an extensive offering of on-demand episodes to authenticated users. These WATCH apps joined WATCH ESPN, ESPN s app and on-line platform for sports fans with live access to ESPN s premier networks as well as on-demand video. Most recently, the ABC Owned Television Stations launched WATCH ABC, a live linear stream of the owned ABC stations including national, local, and syndicated broadcast programming to authenticated viewers on desktop, mobile and connected devices. 5 The Disney- ABC Television Group also has been working cooperatively with its broadcast affiliates so that ABC affiliates are able to launch the WATCH ABC app in markets outside of those where Disney owns television stations. To this end, Hearst Television, Inc. has announced that it hopes to roll out WATCH ABC in its ABC-affiliated markets in the coming months. 6 Fox first began offering full-episode entertainment content over the Internet on an electronic-sell-through (download basis in Over the past decade, Fox has greatly expanded Internet distribution of its content via websites, including FOX.com, FXnetworks.com, and NatGeoTV.com, as well as mobile applications including FOX NOW, FX NOW and NatGeoTV. More recently, Fox has expanded distribution of these applications to Internet- (Oct. 12, 2005, available at Saul Hansell, NBC, Following ABC, Will Sell TV Shows on itunes, N.Y. Times, Dec. 6, 2005, available at 5 In addition to the WATCH services, Disney has made its content available in various other ways to meet consumer demand. For example, it has extended its on-air delivery of ABC News content to the innovative Yahoo!-ABC News Network. Disney also has launched Disney Movies Anywhere, a simple, streamlined way for fans of Disney movies to manage and enjoy their collection of Disney, Pixar and Marvel movies on multiple devices. 6 Brian Stelter, ABC to Live-Stream Its Shows via App, N.Y. Times, May 12, 2013, available at 3

7 connected set-top boxes and game consoles, such as Roku, Amazon FireTV, Google Nexus Player, and Microsoft Xbox, as well as Internet-connected TVs. These websites and applications offer on-demand episodes and in many cases linear programming, primarily to authenticated users who subscribe to the corresponding linear channels via pay TV providers. Fox-owned broadcast stations also make live linear streams of their national, local, and syndicated broadcast programming available to authenticated viewers via their websites and station apps. In addition, Fox has negotiated numerous private agreements with Internet-based distributors such as Amazon, Hulu, and Netflix for the distribution of on demand content on a subscription basis. Fox also owns one-third of Hulu. In October 2013, Fox expanded its Internet services to offer live linear streaming of sports content through FOX Sports GO, an interactive sports programming website and application that simulcasts the linear streams of Fox Sports 1, Fox Sports 2, FOX College Sports and FOX Deportes, as well as select sporting events airing on the FOX broadcast network and Fox s regional sports networks, for authenticated users. In November 2014, Fox entered into an agreement with Sony to deliver live linear streams of its cable networks and its owned and operated FOX stations as part of Sony s PlayStation Vue overthe-top ( OTT subscription television service. For almost a decade, CBS has been introducing a number of digital video services in a variety of business models, including free ad-supported, subscription on-demand, and electronicsell-through, on a variety of platforms to best determine how it can meet the growing interest of its audience for online, mobile, and connected device video content. This has included making its video programming available to viewers through third-party offerings such as digital sales of CBS s current and library primetime entertainment series through itunes, Amazon Instant Video, 4

8 Google Play, and numerous other online stores as well as making significant amounts of content available online at no cost to viewers. More recently, in 2014, Sony announced the launch of its PlayStation Vue TV service, which offers access to scores of linear programming networks, including cable and broadcast offerings from CBS, FOX, FX, FOX Sports, YES Network, National Geographic Channel, NBC, NBCSN, CNBC, Telemundo, Bravo, E!, Oxygen, Sprout, Syfy, USA Network, BET, CMT, Comedy Central, MTV, Nickelodeon, VH1, Discovery, TLC, Animal Planet, Oprah Winfrey Network, HGTV, Food Network, and the Travel Channel. Moreover, earlier this year, DISH launched Sling TV, an OTT television service that includes linear content from ESPN, Disney, TNT, TBS, Food Network, HGTV, and the Cartoon Network, among others. Similar services from other new entrants are reportedly in the works as well. These new offerings supplement an incredible assortment of online on-demand options that enable consumers to view literally tens of billions of television shows each year through providers such as Netflix and Hulu. And these services are but the latest in a long line of efforts by the Video Programmers to make their content more widely-available to consumers using Internet-based distribution platforms. The content distribution developments described above occurred in, and were nurtured by, the operation of a free market largely devoid of regulation. If anything, the Video Programmers have demonstrated their eagerness to make their cable and broadcast television content available to viewers on Internet-based distribution platforms, as they emerged, through private, market-based copyright licensing agreements. No FCC policy or rule has been needed to facilitate that result. Indeed, given the rapid pace of change in the video ecosystem, it is hard to imagine that any regulatory regime could have been, or would be, nimble enough to adapt appropriately to the continuously evolving nature of consumer demand for broadband video. 5

9 The Video Programmers respectfully submit that the Commission s current regulatory structure which has let the market drive innovations in online distribution of television programming strikes the right balance. Simply put, modifying the definition of MVPD is not necessary at this time because market forces already incentivize content providers to make programming available on any number of platforms and in ways that are best suited to meet consumer demand. Nor for the reasons set out immediately below would the proposed modifications have any real practical effect in achieving their stated ends, even if they could otherwise be justified as needed. That is because Internet distribution of programming will continue to be governed by privately-negotiated copyright licenses, regardless of whether OTT providers are classified as MVPDs for purposes of FCC rules. II. THE RELATIONSHIP BETWEEN THE COMMUNICATIONS ACT AND COPYRIGHT LAW In the NPRM, the Commission briefly acknowledges that Section 111 of the Copyright Act provides cable systems with a compulsory license to retransmit performances of broadcast content (subject to certain requirements, but it does not undertake any substantive discussion or analysis of the interrelationship between the Communications Act and copyright law. 7 The copyright and communications laws arise from separate statutory sources with entirely different 7 NPRM at 66. The Commission requests comment on how expanding the definition of MVPD in the Communications Act to include some Internet-based distributors interrelates with copyright law. Id. Nothing the FCC does in this proceeding will have any impact on whether Internet services may utilize the compulsory license in Section 111 of the Copyright Act to retransmit programming. As discussed below, courts and the Copyright Office, which Congress entrusted with administering the Section 111 license, have correctly concluded that Congress never intended Section 111 to apply to any service that distributes broadcast programming over the Internet. The Commission cannot change that conclusion by altering its interpretation of the term MVPD in the Communications Act. 6

10 legislative purposes, and the Copyright Act and the Communications Act confer separate and distinct rights and obligations on MVPDs seeking to carry television broadcast signals. 8 Specifically, the Copyright Act permits certain cable systems, within the meaning of the statute and under certain conditions, to avail themselves of the Section 111 license to retransmit performances of copyrighted programming contained in television broadcast signals, even where the cable systems have not secured the authorization to do so from the copyright holders. The Communications Act imposes a separate obligation on cable systems and other MVPDs, as separately defined in that statute, to obtain retransmission consent from television broadcasters as a prerequisite to carrying broadcast signals. The definitions contained in the two statutes as well as the purposes for which Congress enacted those statutes, which necessarily control their sweep, are substantively different. The Copyright Act and the Communications Act each use distinct definitions of cable system, with the Section 111 compulsory license available only to cable systems as defined in the Copyright Act, and not to MVPDs more broadly. This is a critical point of distinction, for even if, as proposed, the Commission modifies its interpretation of MVPD to encompass Internet delivery of broadcast signals, those MVPDs would not be entitled to a compulsory license under Section 111 as it has been authoritatively construed. In consequence, any would-be distributor would still have to obtain copyright licenses for the content contained in the signal. For nearly two decades, the Copyright Office has consistently and repeatedly concluded that services distributing television content over the Internet are significantly distinguishable from cable retransmissions of broadcast signals and, accordingly, are not cable systems entitled 8 See U.S. Copyright Office, Satellite Home Viewer Extension and Localism Act, Section 302 Report, 55 (Aug. 29, 2011 ( Section 302 Report ( retransmission consent was conceived as involving only the right to retransmit a station s signal, and did not include a general right to make a public performance of the works transmitted by that signal. 7

11 to the Section 111 license. 9 The Copyright Office has further clarified that a compulsory license for the retransmission of broadcast television content over the Internet would have to come from newly enacted legislation and not existing law. 10 From time to time over the past decades, in recognition of the increasing role of the Internet in the distribution of video programming, the Copyright Office has evaluated proposals to expand the compulsory licensing regime to Internetbased broadcast programming services. In declining to interpret the Section 111 license in this way or to recommend a change to the statute to do so, the Copyright Office has concluded that the Internet market is thriving and continues to grow without any statutory licensing in place. The economic rationales for compulsory licensing are waning, and less justifiable, in light of the success of the Internet. 11 The Copyright Office further observed to a point that undercuts the premise of the NPRM that private negotiations between content providers and all types of distributors have given consumers the programming they desire. Statutory licensing has not been needed to provide millions of hours of local and national television content. A new video marketplace has developed free from government regulation and with the ability to quickly respond to consumer demand. 12 The Copyright Office has affirmed this position on at least three separate occasions over the past six years, most recently in July Multiple international agreements to which the U.S. is a party also prohibit the application of compulsory licenses to the Internet retransmission of broadcast signals. See Copyright Office Section 302 Report at 49 & n Copyright Broadcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the Comm. on the Judiciary, 106th Cong (2000 (statement of Marybeth Peters, The Register of Copyrights. In the more than fifteen years since the Copyright Office first advised Congress that Section 111 does not include Internet services, Congress has taken no action to extend compulsory licensing to such services. 11 U.S. Copyright Office, Satellite Home Viewer Extension and Reauthorization Act, Section 109 Report, 19 (June 30, 2008 ( Section 109 Report. 12 Section 109 Report at 87. See generally Section 302 Report. 13 See Letter from Jacqueline C. Charlesworth, General Counsel and Associate Register of Copyrights, U.S. Copyright Office, to Matthew Calabro, Aereo, Inc. (July 16, 2014 ( In the view of the Copyright Office, internet retransmissions of broadcast television fall outside the 8

12 Importantly, in 2012, the United States Court of Appeals for the Second Circuit ( Second Circuit expressly reviewed the question of whether Internet retransmissions of television broadcasts qualify for the Section 111 license and, in so doing, concurred with the Copyright Office s view on the matter. 14 Specifically, the Second Circuit concluded that Congress did not intend for 111 s compulsory license to extend to Internet transmissions. 15 Following the Supreme Court s decision in American Broadcasting Cos., Inc., et al. v. Aereo, Inc., two different courts were asked to revisit the question whether Internet-based services that retransmit television broadcast programming to customers could qualify for the cable compulsory license in light of the Court s treatment of Aereo s activities as highly similar to those of traditional cable systems. Each of these courts reaffirmed that such services do not qualify for the cable compulsory license. 16 Therefore, the law remains clear that Internet-based services that retransmit broadcast television signals are not entitled to avail themselves of the Section 111 license. 17 scope of the Section 111 license. ; Letter from Jacqueline C. Charlesworth, General Counsel and Associate Register of Copyrights, U.S. Copyright Office, to Yelena Calendar, FilmOn.com, Inc. (July 23, 2013 (same; Section 302 Report at 48 ( The Office itself has opposed (and continues to oppose the formation of a statutory license for the retransmission of broadcast signals over the Internet. ; Copyright Licensing in a Digital Age: Competition, Compensation and the Need to Update the Cable and Satellite TV Licenses, Hearing before the House Comm. on the Judiciary, 111th Cong. (Feb. 25, 2009 (Statement of the Register of Copyrights, Marybeth Peters ( [I]t must be noted that the Copyright Office is not in favor of a statutory license for the retransmission of broadcast signals over the Internet.. 14 WPIX, Inc. v. ivi, Inc., 691 F.3d 275, (2d Cir. 2012, cert. denied, 133 S. Ct ( WPIX, Inc., 691 F.3d at CBS Broadcasting Inc. v. FilmOn.com, Inc., 2014 WL , at *2-3 (S.D.N.Y. July 24, 2014; Am. Broadcasting Cos., Inc. v. Aereo, Inc., 2014 WL , at *5 (S.D.N.Y. Oct. 23, Congress has made clear that it alone should decide the terms and conditions on which new types of retransmission services receive compulsory licenses to retransmit broadcast programming just as Congress did when it crafted new compulsory licenses for satellite carriers rather than amend Section 111 to include satellite. See 17 U.S.C. 119 & 122 (containing several statutory licensing conditions different than those in Section 111. As the 9

13 In the end, even with the NPRM s proposed modification, the same legal process for rights clearance will continue to apply to Internet distribution of broadcast programming as has been applied over the last decade or so. And there is no sustainable reason to believe that this process will be problematic going forward. In fact, statutory licenses have never been afforded by the Copyright Act to cable or satellite systems for the transmission of content by cable networks. Distribution of cable network programming is, and always has been, determined by private, market-based negotiations and agreements. 18 Those same rules apply today without market disruption to the online video marketplace for the retransmission of both broadcast station and cable network content. Indeed, one needs to look no further than the emergence of Sony s PlayStation Vue and Sling TV, not to mention the tremendous growth of Netflix, Amazon Prime and itunes, to prove the proposition, embraced by the Copyright Office, that private negotiations for rights licensing are no bar to the evolution of new and dynamic Internet-based content distribution platforms. Simply put, reclassifying OTT providers as MVPDs would neither have an impact on how rights are licensed nor on the ability of such providers to distribute video programming via the Internet. The reinforcing, and telling, point here is that a reclassification of online video services is not necessary. Broadcast content is being licensed and made available on Internet-based platforms. For example, as described above, the Disney-ABC Television Group has been an innovator in the area of online distribution of broadcast programming and, over the past several legislative history of these provision explains, In enacting each [compulsory] license, Congress has traditionally considered the unique historical, technological, and regulatory circumstances that affect each industry. Among other differences, the local character of cable systems and the national business model of DBS have resulted in differential public service, carriage, and taxation obligations that ought to be objectively reviewed before Congress enacts sweeping changes H.R. Rep. No at 9 ( The NPRM appears to fail to consider that the Section 111 compulsory license applies to broadcast content alone, and has no application with respect to the retransmission of cable network content, whether over the Internet or otherwise. NPRM at

14 years, has launched the WATCH suite of services to provide both live streaming as well as ondemand programming to authenticated users. To stress, the ABC Owned Television Stations are currently streaming much of their local broadcast schedule as part of the Watch ABC digital applications by contractually obtaining and sublicensing the copyright clearances for the content that is streamed. ABC is working with its non-owned broadcast affiliates so that they may rollout their own Watch ABC apps in their local markets under the same private licensing model. As noted above, Hearst Television, Inc. plans to launch the WATCH ABC service in its ABC markets. CBS makes significant amounts of its video content available through a variety of online and mobile services. CBS has made current primetime entertainment programs available to consumers on an ad-supported, free-to-the-public basis, just like over-the-air television, through CBS.com since 2006 and other websites since In addition, CBS has provided its programming to the CBS-affiliated stations nationwide to make available to consumers online and on-demand on their station websites. CBS also makes its programming available through innovative third-party offerings, including striking a deal to permit the Sony PlayStation Vue television service to distribute CBS s owned affiliates in the markets where Sony offers service. Independently-owned CBS affiliates will also have the opportunity to participate if PlayStation Vue is available in their markets. Finally, CBS has recently launched CBS All Access, a directto-consumer subscription service that currently delivers a linear simulcast of each CBS-owned affiliate s over-the-air stream to subscribers in its DMA, as well as an extensive video-ondemand offering of current and past-season programming. For each of these ventures, CBS privately obtained the necessary programming clearances. 11

15 Fox, likewise, makes available online a wide variety of programming from its broadcast stations and the FOX Network. As a result, as is the case with CBS, the Sony PlayStation Vue service will include Fox s owned local broadcast stations in numerous markets nationwide. And Fox too is working cooperatively with its affiliates so that they also may make their stations available as part of the Sony service as well as other new services to come. Notably, in both instances CBS and Fox each successfully negotiated their private agreement with Sony without any need of an FCC rule change. All of these innovative services have been possible as a result of private copyright license and sub-license agreements entered into to meet consumer demand for streamed content. III.THE COMPLEXITIES THE FCC IDENTIFIES IN REINTERPRETING THE TERM MVPD WEIGH IN FAVOR OF ALLOWING THE MARKET TO CONTINUE TO EVOLVE IN LIEU OF FCC ACTION In the NPRM, the Commission seeks comment on the policy ramifications of its proposed re-interpretation of the term MVPD. Indeed, as described below, the proposal raises a host of complex questions with far-reaching regulatory and policy implications, which, precisely because of the rapid and dynamic evolution of the Internet delivery of content, are particularly unpredictable in effect. It is, therefore, imperative that the FCC act only where needed to address a market failure (which for reasons set forth above, does not currently exist and even then, deliberately to adopt a framework that allows market forces to continue to drive innovation and investment in the video programming market and avoid adopting a regulatory scheme that may unintentionally impede this new marketplace. The Video Programmers address below a handful of the matters raised in the NPRM for the purpose of highlighting the complexities of modifying the definition of MVPD. Scope of Linear Program Interpretation. The FCC asks a number of important questions regarding whether and how it should limit the scope of the definition of MVPD in the 12

16 event that it proceeds to change the rule. For example, the Commission queries how many programming streams an entity must provide to be deemed a provider of multiple channels of video programming; whether to exclude from the definition of MVPD the streaming of live sporting events or other discrete, intermittent events that occur at prescheduled times ; and what bright-line tests the FCC could use to evaluate whether to exclude certain entities from the proposed definition of MVPD. 19 Any bright-line test, whether based on number of streams, frequency of events, or otherwise, necessarily would draw arbitrary, and in many cases, irrational lines to define which entity qualifies as a MVPD. Under a definition based solely on the number of linear streams being distributed, services like WATCH ESPN or FOX Sports GO, which enable viewers to access any number of events at any particular time and thus may, at any time, be delivering content streams of events, could be considered MVPDs simply because they provide more than 20 streams of video at times, but not others. Such an inflexible test could lead to regulatory arbitrage, as entities could provide more or fewer streams or services based upon whether they deem it beneficial to qualify as MVPDs. In addition, the Commission s tentative conclusion that it should not include in the definition of MVPD an entity that owns the video programming it distributes 20 is overly simplistic, as it does not accurately reflect the realities of how video programming is distributed in the market. In particular, this proposal, based on ownership of programming, does not recognize that most programmers who distribute their own programming online do not necessarily own the copyrights to the underlying content. 21 Indeed, although ABC owns the 19 NPRM at NPRM at 26. The Commission cites CBS s new streaming service as an example of the type of stand-alone programming service that would be excluded from this definition. The WATCH suite of products and FOX Sports GO also would fall into this category. 21 As the NPRM acknowledges, a programmer licenses content from various content creators, aggregates the content into a network, and then licenses the network to MVPDs for 13

17 WATCH ABC service, just as CBS owns the CBS All Access service and Fox owns the FOX Sports GO service, none of these entities hold the copyrights to all of the programs included in the services. Thus, the proposal to interpret the definition of MVPD to exclude distributors who make available only programming they own would not serve its intended purpose and not work as a practical matter. Available For Purchase. The Commission also asks in the NPRM whether supplemental online linear video services made available to paying cable or direct broadcast satellite ( DBS subscribers should be considered to be available for purchase such that they would fall within the scope of the proposed definition of MVPD. 22 Disney and Fox have contractual arrangements with cable, DBS, and telco providers to make streamed broadcast and other video programming content available to authenticated subscribers (i.e., viewers who must sign in to verify that they subscribe to a participating cable, DBS, or telco provider. Authenticated offerings are newly-developing services, and the Commission should not attempt to include these offerings within the scope of the proposed definition of MVPD because, to do so, likely would stymie the development of this nascent market and harm viewers who otherwise benefit by having access to their desired video programming in additional locations and on additional devices. Moreover, the FCC should not enact regulations to allocate or otherwise assign a portion of cable or satellite subscription fees to authenticated online services because there is no practical way to trace general subscription fees specifically to supplemental online linear video services as the Commission asks in the NPRM. 23 Indeed, authenticated online distribution. NPRM at 67. Although this observation was made in the context of cableaffiliated content, it applies equally to broadcast programming networks, which combine programming from a variety of sources, including network-owned and third party-created content. 22 NPRM at NPRM at

18 streaming services are offered as part of cable and DBS subscription services in response to consumer demand for such services. Good Faith Negotiations. The FCC asks how to construe broadcasters good faith retransmission consent negotiation obligation if it were to adopt the proposed linear programming interpretation of MVPD. 24 As appropriately observed in the NPRM, Section 325 of the Act prohibits all MVPDs from carrying a broadcast signal without consent, and the Commission should not take any action in this proceeding that would or could abrogate this statutory requirement. Moreover, the FCC should not modify the good faith negotiation requirement in any way that could be deemed to obligate broadcasters to obtain online rights for the copyrighted works contained within a broadcast signal. The FCC simply does not have jurisdiction over copyright matters and it lacks the authority to adopt regulations that would have the effect of requiring broadcasters (or cable networks for that matter to negotiate, either retroactively or prospectively, for the right to sublicense content to other distribution platforms. If the FCC were to require broadcasters to engage in copyright negotiations they would not otherwise entertain solely to enable a third party Internet-based MVPD to distribute certain programming, the Commission effectively would be conferring on OTT distributors the equivalent of a compulsory copyright license in derogation of FCC authority and in complete conflict with the Copyright Office s position. Moreover, FCC intervention in copyright would increase the cost of programming, which, in turn, could have the unintended consequences of reducing the amount and/or quality of programming available in the marketplace. Such a result clearly is to the detriment of viewers, and, thus, would not serve the public interest. 24 NPRM at 45. See supra at 9-10 (explaining that compulsory licensing does not apply to cable programming. 15

19 Network Affiliation Agreements. The Commission asks how network affiliation agreements limit, prohibit, or otherwise impact local stations ability to grant retransmission consent to Internet-based MVPDs. 25 While the terms and conditions of network affiliation agreements have always been a matter of private contractual negotiations, each of the Video Programmers is working with its affiliates to ensure that network content will be available to their local viewers in a variety of manners. 26 Content owners whether a broadcast network, a cable programmer, or other copyright owner should be permitted to determine the best means by which to distribute their own content to viewers. 27 Consumer demand for streamed video content has been, and continues to be, sufficient to drive the market for expanded digital distribution of broadcast content. Accordingly, the FCC should refrain from taking any action in this proceeding that would or could undermine the ability of a distributor of copyrighted programming to offer such programming in the way that it deems appropriate for consumers in a free market environment. 25 NPRM at See Amendment of Parts 73 and 76 of the Commission's Rules Related to Program Exclusivity in the Cable and Broadcast Industries, 3 FCC Rcd 5299, 5319 (1988 (recognizing that networks and affiliates are free to determine, based on their own best business judgment, [how] best... to compete in the marketplace and most efficiently serve their viewers ; In the Matter of Providing Optimum Conditions for Utilization of New Jersey Television Channel Assignments, 56 Rad. Reg. 2d (P & F 487, 7 (1984 ( generally we consider network affiliation contracts properly to be a private agreement between the licensees and the networks. 27 The FCC preciously recognized such right in discussing the good faith negotiating obligation and made it clear that neither the text nor the legislative history of the statutes that directed the FCC to promulgate good faith bargaining obligations indicate a congressional intent to restrict the rights of networks and their affiliates through the good faith or reciprocal bargaining obligation to agree to limit an affiliate s right to redistribute affiliated programming. Moreover, the FCC perceive[d] no intent on the part of Congress that the reciprocal bargaining obligation interfere with the network-affiliate relationship or... preclude specific terms contained in network-affiliate agreements.... In the Matter of Amendment of the Commission s Rules Related to Retransmission Consent, 20 FCC Rcd 10339, (

20 IV. CONCLUSION The Video Programmers respectfully submit that the Commission should refrain from taking further action at this time. Presently, there is no market failure to address. Market forces have successfully driven the creation of new digital business models in response to consumer demand and there is no sustainable basis to conclude that platforms that emerge to meet evolving consumer demand are deprived of a market based opportunity to obtain needed content. Moreover, the proposal to modify the definition of MVPD raises significant and complex questions that would be perilous to resolve given the nascent state of the OTT market. Respectfully submitted, /s/ Susan L. Fox Susan L. Fox Vice President, Government Relations The Walt Disney Company 425 Third Street, S.W., Suite 1100 Washington, D.C ( /s/ Jared S. Sher Jared S. Sher Vice President, Associate General Counsel 21st Century Fox 400 North Capitol Street, NW Suite 890 Washington, DC ( March 3, 2015 /s/ Anne Lucey Anne Lucey Senior Vice President for Regulatory Policy CBS Corporation 601 Pennsylvania Avenue, N.W., Suite 540 Washington, D.C (