One of the claims we regularly hear from supporters of online newspaper paywalls is that even if it decreases page views, it can actually increase ad revenue, because the publisher has a lot more information about the audience and can sell that for more -- and, in theory, the audience is more loyal and engaged. We still haven't seen that in practice, of course. And it's worth pointing out that Cablevision, who put up a disastrously ill-conceived paywall for the newspaper Newsday, is now reporting that ad revenues continue to decline pretty substantially. To be fair, some will point out that Cablevision doesn't care that much, and is really just trying to use Newsday to stop people from dumping their cable TV/broadband offerings. That may be true -- and the same report does note that Cablevision added both TV and internet subscribers -- but it's worth pointing out for other news publications who make the claim about how paywalls can boost ad revenue.
While Cablevision may be fairly innovative in delivering broadband services, its foray into the content business has been a bit of a disaster. As you may recall, Cablevision bought the local newspaper, Newsday, two years ago. Going in to the deal, the company admitted that it didn't know much about the business, but planned to talk to newspaper experts. As we noted at the time, that seemed like a bad idea, because it was "newspaper experts" who were driving newspapers into the ground. True to form, Cablevision decided the best thing to do with Newsday was to spend $4 million redesigning and putting up a paywall that drove away some writers and convinced 35 people to sign up in its first three months. Yes, 35. Of course, Cablevision insisted that the goal was really about reducing churn by offering the newspaper website to Cablevision cable TV and broadband subscribers, but it still seems like a pretty big failure all around.
So it's a bit surprising to hear that Cablevision is apparently trying to expand in the content business by buying the blog network Gothamist, which has a series of city-focused local blogs. The deal is relatively cheap, but it makes you wonder what Cablevision is planning to do with that content. First of all, most of the blogs in the network cover cities where Cablevision has no presence at all. The only exception is Gothamist itself, which focuses on New York City -- even as Cablevision is more focused on neighboring Long Island. Is Cablevision now going to put up a paywall around the blogs to?
On the whole, it looks like Cablevision is just confused about the online content business, and buying some blogs doesn't seem likely to clear that up any time soon.
Ah, the patent wars. As you're probably aware, TiVo spent years fighting a big legal battle with EchoStar/Dish Networks over some patents on DVR technology. TiVo won big, and then immediately turned its patent lawyers on some other companies including Verizon. In Verizon's response to TiVo's lawsuit, it went nuclear back, accusing TiVo of violating Verizon's patents on DVR technology -- including a patent that the world's biggest patent hoarding firm, Intellectual Ventures, gave Verizon for the purpose of being used against TiVo.
So is it any surprise to hear via Broadband Reports that Verizon is now suing Cablevision, claiming patent infringement on its set top box/DVR offerings as well? Cablevision and Verizon have had a really nasty battle going for years on Long Island, with all sorts of dirty tricks being played by both sides. But patent infringement? Given the odd timing of this lawsuit coming so quickly on the heels of the counterclaims against TiVo, you have to wonder if Verizon "woke up" to the fact that it could use these patents against Cablevision, only after provoked by TiVo.
6,367,078: Electronic program-guide system with sideways-surfing capability
7,561,214: Two-dimensional navigation of multiplexed channels in a digital video distribution system
6,055,077: Multimedia distribution system using fiber optic lines
5,864,415: Fiber optic network with wavelength-division-multiplexed transmission to customer premises
6,381,748: Apparatus and methods for network access using a set-top box and television
The three in bold are found in both lawsuits. Now, to be fair, before looking at the details, I was guessing that Verizon would also be using the patent it got from IV, but that patent (5,410,344) appears to be the one patent that Verizon is asserting against TiVo, but not against Cablevision. I have no idea if this is because nothing Cablevision does is covered by that patent, or if Verizon has limitations on what it can do with the IV patent. Still, given the overlap here, the timing, and the fact that many of these patents are pretty old, you really have to wonder if the lawsuit from TiVo and the scouring of patents for a countersuit also gave Verizon the idea to sue its arch-nemesis in the Long Island market over the same issues.
New York-based Cablevision has been one of the more innovative cable providers out there over the years. It's been mostly ahead of the competition in broadband speeds, and pioneered some interesting bundled offerings well before many other providers. It also fought and won its case to offer a remote DVR where other providers caved. That's not to say Cablevision doesn't have its own issues (and it certainly appears to have no clue how to run a newspaper). But, on the whole, when it comes to the actual technology side, you have to give Cablevision credit for really trying out new things and giving customers increased value.
One of its latest offerings is a pretty smart idea -- letting subscribers move internet content to their TVs remotely. Now, lots of tech savvy folks have set up systems to do this themselves, but this actually sounds like it makes it quite easy for users to do without having to setup any hardware or run any wires or anything, as it's all done over the internet. You send whatever you want to a Cablevision service, and then you can just turn on your TV to a specific channel, and you'll have access to the content. If it works, it sounds pretty cool.
But... are there problems looming? Apparently, you'll be able to send internet video as one of the types of content, and Broadband Reports found out that this includes content from sites like Hulu. Now, you may remember that Hulu has been pressured by its content partners/owners to keep its content (most of which originated on TV) off of TVs. There's simply no good reason for this, but it looks like Cablevision is now enabling that functionality as well -- even as Hulu has worked to block TV access from a variety of different devices and services. Seeing as NBC appears to be the major voice behind many of Hulu's blocks, and NBC is in the process of being acquired by Comcast (assuming regulatory approval), that could make for an interesting battle between Comcast and Cablevision down the road...
With lots of people finding it rather amusing that a grand total of 35 people have subscribed to Newsday's paywall, a Newsday exec has responded by saying the purpose of the paywall was never about getting people to pay in the first place. It's all about reducing churn from cable subscribers. While the exec claims that those mocking the low number of subscribers ignored this, that's not at all true. In fact, at least in our case, the very title of our post about Newsday's paywall was all about how it was designed to reduce churn for Cablevision subscribers. The bigger point that people were making wasn't specifically about Newsday, but to alert all of those other folks who seem to think that people will jump up and pay for online access to their local newspaper. As Newsday is discovering, that's not the case.
Furthermore, if the goal was just to reduce churn, with no interest in getting outside subscribers, why offer a subscription plan at all? Why not just limit access to those who subscribe to Cablevision? Claiming no interest in signing up outside subscribers is shown to be a lie in the fact that they set up a system specifically to do just that.
Like many, we were amazed at the decision by Cablevision to try charging $5 per week (yes, per week) for its paywall to Newsday content online. The newspaper itself is not particularly good and doesn't really provide all that much in the way of excess value compared to what else is out there. And $5/week is extremely high. Yet, even so, we're a bit surprised that after three months, the paper has a grand total of 35 paying subscribers. Yes, 35. I'm sure that extra $175/week comes in quite handy. Oh right, they also saved on the salary of their popular columnist who quit, rather than have his work hidden behind a paywall.
To be fair, Cablevision never really seemed to view this much as a direct source of revenue, but rather as a churn reducer for its cable subscribers, who can get to the Newsday website for free. Still I doubt there are really that many people who decide not to drop their Optimum Cable service just because they get free access to Newsday online. I can't imagine that the $175, in any way, makes up for the drop in visitors and ad revenue. According to multiple online tools, the general estimate is that Newday has lost 50% of its web traffic since putting up the paywall. And in return, they get $175/week. Nice one, Cablevision.
As copyright-watchers are well aware, recently there was an important case that went through the US court system over whether or not cable company Cablevision could provide a remote DVR service. Effectively, Cablevision was setting up a bank of TiVo-like devices at its own datacenter, and allowing users to record and playback shows as if they were recording them on a DVR settop box sitting under their television. The only real difference is where the box is (or, you might say, how long the wire is between the TV and the DVR). Since it's already well established that time-shifting is perfectly legal it was difficult to see how anyone could make the argument that Cablevision's setup was infringing. The only difference was the length of the wire. But, of course, the TV guys objected strenuously with bizarre analogies that didn't make much sense.
The appeals court sided with Cablevision, saying that such a service doesn't infringe, and the Supreme Court chose not to hear the appeal, so this ruling stands, at least in the Second Circuit, for the time being. But what was most telling about the actual appeals court ruling was how the judges had to contort themselves into all sorts of odd ways to make such a ruling make sense under the law. The conclusion clearly made sense. Copyright law wouldn't make any sense at all if the length of a wire could change something from infringing to non-infringing. And yet, there were ways to read copyright law that would have found in favor of the networks. The issue is really twofold. First, technology advances faster than copyright law, and the conditions that were in place when the law was written aren't the same as what happens later. Second, to deal with this our esteemed elected officials simply apply duct tape-like patches to copyright law, adding new definitions and categories, that didn't exist before. But, then when new technologies come along, the question is what categories do the resulting outputs fall into, and the arguments are often about who gets to categorize the output to their benefit.
It appears that the US is not the only country going through this sort of debate. I've been alerted to a recent ruling in Singapore that actually comes to a different conclusion and finds infringing behavior on the part of the service provider. The story here is slightly different. In this case, the company is RecordTV -- a separate service, rather than provided by the cable company itself. Also, it's a web-based service, rather than a TV-based one. Users log in and can designate which shows (only from Singaporean channels that broadcast over-the-air) they want to record, and the service will record those shows and make them accessible to that user only for a limited amount of time. There is one
other complicating factor, in that the way RecordTV works has shifted over time. Initially it would record a show once and allow anyone who requested that recording to access the single file. But later it switched to keeping a separate recording of each show that someone requested, which seems massively inefficient in terms of storage.
What's stunning again, however, as you read through the ruling is how conflicted the judge appears to be. There's a ridiculous amount of "on the one hand, on the other hand, but on the other other hand"-type reasoning found throughout the ruling, which you can see below:
It's also interesting to see that, despite this ruling being in Singapore, under Singaporean rule, the discussion spends a lot of time looking at the Cablevision case in the US (and some other US and UK cases as well).
So, why does the judge come to a different conclusion? Well, it almost feels like it depended on which eventual flip of the coin came up which way. The judge agrees with the basic ruling in Cablevision that it is not the service provider who is liable for direct infringement. As in the Cablevision case, it's the end users who "pushes the button" and thus is actually responsible for the action. All good. But, the lawsuit also focused on a secondary level of infringement, and here the court found that RecordTV, while not liable for the actual recording, could be found liable of secondary infringement in the later transmission of the content.
This seems like a total headscratcher. So a user is responsible for recording the file, but not responsible for then accessing it (recognize that the user accessing the file is the same as the service provider transmitting it)? How does that make sense?
There is a second issue also, which is that the court had trouble with the fact that RecordTV meant to be a commercial enterprise in which it would make money by having ads. It used this issue as one of a few factors that removed a "fair dealing/fair use" defense by the company. Again, though, there's a lot of "on the one hand, on the other hand" type debates in the ruling until the judge basically says that under the law, as it stands, the site is guilty of infringement. But even it seems really troubled by what this means from a practical perspective:
I leave open the possibility that such a DVR or VCR product or service, operating remotely or locally, digitally or via analog means, could amount to fair dealing under our Copyright Act only for the non-commercial facilitation of end-users' time shifting. As we have seen earlier... it is inconsistent that the VCR is permitted to be sold at a price (in stores) but the [remote] DVR (through advertising revenue) is not, but until the occasion requires, I shall not make any pronouncements on this anomaly.
And there you are. Even the judge seems to recognize that it's silly to find one service infringing and the other not, but basically says that with the way copyright law is set up, that's the ruling that makes sense.
Finally, this should be worrisome on all sorts of levels for a variety of online services that seek to replicate perfectly legal analog equivalents. The fact that where a storage device is stored or how long a wire is could totally change the legality of a product should suggest that something is seriously wrong with copyright law.
One of the reasons why the NY Times eventually did away with its old "paywall" was that its big name columnists started complaining that fewer and fewer people were reading them. We've suggested in the past that newspapers who decide to put up a paywall may find that their best reporters decide to go elsewhere, knowing that locking up their own content isn't a good thing in terms of career advancement. So, with Cablevision deciding to put Newday behind a paywall, it didn't take long for some of its columnists to start to bailing. The NY Times is reporting that Newsday columnist Saul Friedman quit and did so while publishing an open letter on why paywalls are a bad idea, while also telling the NY Times that he knew his column was popular with people outside of Newsday's footprint, and he was upset that those people would not be able to read his column and that he wouldn't be able to send out links to his columns.
Oh, one other thing? Mr. Friedman is 80 years old and worked for newspapers for over 50 years. In other words, he's not just some "young kid who thinks everything online should be free" as we're so often told is the real problem. News organizations that lock up their content are increasingly going to discover that it's more and more difficult to attract top talent when compared to publications that actually help raise the journalists' profiles.
When Cablevision first bought Newsday, Charles Dolan admitted the company knew very little about the newspaper business, but promised to consult widely with newspaper experts in coming up with a plan. That seemed like a really really bad idea, since all the newspaper experts we've seen don't seem to even recognize what business they're really in. But, it looks like that's exactly what Dolan did. Back in February, the company announced that it was going to put up a paywall for its content. Since there had been no update or any action since then, I'd actually begun to wonder if the company was rethinking that idea. No such luck. Apparently it just took a bit of time to fully plan out Newsday's self-destruction.
Let's be absolutely clear what this is. It is not a plan to build a 21st century news organization. It's a plan to try to reduce churn elsewhere, by putting up a slight hurdle for Cablevision cable customers and Newsday newspaper customers to prevent them from leaving. Cablevision's customer base and Newsday's subscriber base overlaps quite a bit, so for plenty of those folks there will be no change at all. But this won't do anything to actually help the news organization grow. Those who don't subscribe to the paper edition or who use a competitor for broadband (like Verizon Fios which is pushing hard in Cablevision's market) will simply go elsewhere. While the NYC papers don't cover Long Island news quite as completely, they do a pretty good job with the basics, and other local news sources will fill in the rest. Cablevision is basically saying that it's giving up in the online news business. It's an admission that it doesn't know how to compete. This won't help it sign up new customers, and may only barely help it prevent old customers from leaving.
It's basically a suicide play for Newsday. This is really a disappointment, since Cablevision -- amazingly -- had actually been one of the most forward thinking cable companies out there in terms of offering real value on the broadband side of things. But apparently it bought Newsday as an asset to let it wither away.
Well, here's a bit of good news this Monday. It appears that the Supreme Court has listened to the Solicitor General, and refused to hear the appeal concerning Cablevision's remote DVR offering. This is good for a variety of reasons. We've discussed how this is an important case on a variety of levels, but also a tricky one. The appeals court ruling got the right results (saying a remote DVR was legal, and that buffer copies were not infringing) but really had to twist itself into a knot to explain why -- demonstrating just how ridiculous copyright law is these days.
The basic facts are quite straightforward. A DVR, such as a TiVo that sits next to your TV is perfectly legal. Time shifting content has been shown as legal, and not infringing by the courts in the past. That's great. However, Cablevision effectively built a remote DVR. It sat in Cablevision's datacenter, rather than next to your TV. Otherwise, it did exactly the same thing. From a user's perspective, it was almost identical. You could save shows and forward and rewind shows. Functionally identical. Hollywood insisted that by moving where the box lived, it somehow made it illegal, coming up with absolutely ridiculous arguments about how it's like Cablevision setting up a gun for someone to shoot by pushing a button -- ignoring that in the equivalent reality, no one's getting shot, they're just doing something that's already been found to be perfectly legal (time shifting).
That said, this question is hardly over. While the appeals court decision came to the obviously correct conclusion, the fact that it did so in such a roundabout, and at times tortured, way, actually suggests that we'll be seeing this issue come up elsewhere in other courts in some manner. Eventually there's likely to be a split of some sort, and perhaps then the Supreme Court will weigh in. Still, given how screwed up the Supreme Court seems to get when it comes to copyright, delaying that seems like a good thing. It's quite strange that the Supreme Court seems to do such a good job with patent law, but gets totally twisted around when it comes to copyright law. Still, in the meantime, Cablevision can move forward with its remote DVR, and at the least, folks in the Second Circuit can rest assured that buffered copies are not infringing.
