Someone Has to Pay for TV. But Who? And How?


Thread Starter
Apr 24, 2006
this was in the ny times recently..thought everynone might want to read it.........

Digital Domain
Someone Has to Pay for TV. But Who? And How?
Illustration by The New York Times

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Published: May 7, 2006
THEY will take my remote control away only when they pry it from my cold, dead hands.

This thought followed my first reading of a patent application for a new kind of television set and digital video recorder recently filed by a unit of Royal Philips Electronics at the United States Patent and Trademark Office. The design appears to threaten the inalienable right to channel-surf during commercials or fast-forward through ads in programs you've taped.

A second, calmer reading of the patent application revealed that the proposed design would uphold the right to avoid commercials, but only for those who paid a fee. Those disinclined to pay would be prevented from changing channels during commercials. If the viewer tried to circumvent the system by recording the program and skipping the ads during playback, the new, improved recorder would detect when a commercial segment was being displayed and disable the fast-forward button for the duration.

As a business proposition, the concept appears dead on arrival: what consumer would voluntarily buy a television designed to charge fees for using it? When I spoke last week with Ruud Peters, the executive in charge of intellectual property at Philips, to learn how it would be pitched to consumers, he explained that the patent application had no connection to any Philips products in the pipeline. And, he explained, the notion of temporarily crippling the remote control to protect advertising is already out there and did not originate with his company.

But limiting remote controls is a possibility that could be realized in a new technical standard — M.H.P., for multimedia home standard — that the television industry is contemplating for the future. Neither broadcasters nor television manufacturers, whose joint cooperation would be necessary, have yet to adopt the standard. If the television industry embraced M.H.P., broadcasters could insert special signals to immobilize the remote control during commercials. If this came to pass, Mr. Peters said the Philips technology would "give consumers the freedom of choice" — "freedom" defined as exercising the option to pay a fee in order to regain the use of the remote control.

Philips's pay-to-surf proposal may be the first of its kind, but we should expect to see other ideas that would not have appeared in days past, when advertising-based television thrived. Today, the digital video recorder is slowly, but surely, tunneling through the television industry's foundation. Ten million homes had DVR's in 2005, according to Forrester Research; the number is expected to jump to 15 million this year, 30 million next year and 42 million in 2010. Scientific-Atlanta, which supplies set-top boxes to all the major cable companies, reports that fully half its boxes going out today are equipped with DVR's.

What this means for traditional advertising can be divined in data collected by TiVo, which has 4.4 million subscribers. Davina Kent, a TiVo vice president, said that when its customers watch recorded programs, they skip 70 percent of the commercials.

This has not escaped the notice of advertisers. Josh Bernoff, a principal analyst at Forrester, predicted that "next year, you'll see significant decline in TV ad spending as a result of digital video recorders."

The television industry has not figured out how best to respond. Four years ago, Jamie Kellner, then head of the Turner Broadcasting System, remarked in an interview in CableWorld magazine that viewers who used DVR's to fast-forward past commercials were committing "theft," then a moment later described it as "stealing the programming." He did allow trips to the bathroom as a noncriminal exemption.

The remarks brought instant criticism outside the industry. But he anticipated the adoption curve for DVR's when he said in the same interview that broadcasters needed to come up with a "new model" for collecting revenue from consumers who used recorders to skip commercials.

CBS OnDemand, which rents commercial-free episodes for a modest fee as low as 99 cents, but which must be viewed within 24 hours of downloading to a PC, is one experiment. (Those CBS downloads reveal just how much time commercials occupy in the traditional broadcast: with commercials stripped out, a 60-minute program may run as short as 41 minutes.) The abundant network program offerings at iTunes, which cost $1.99 but do not go poof after a set time, is a work in progress, too. An industrywide hardware standard that could immobilize remote controls, and the related Philips pay-to-surf proposal, are also in the mix of possible responses to the industry's quandary.

I have not paid close attention to the online offerings of single television episodes because my DVR works well and the fast-forward function on my remote works very, very well. (The button I've programmed to perform a 30-second skip is holding up beautifully, even though it is pressed as emphatically as a hospital button connected to a morphine pump.) Why would I ever buy what the DVR effortlessly records at no cost? Even if I were to feel a twinge of concern that by skipping ads, I am violating an implicit contract that Mr. Kellner asserted exists between broadcaster and viewer of ad-supported television, I take comfort in the knowledge that no such contract exists.

James Boyle, a law professor at Duke University, said that broadcasters offer a program knowing that only a fraction of the audience watches the commercials. Advertisers, he added, buy nothing more than "an option on a probability," and the viewer is no more obligated to watch every commercial than a driver is obligated to read every billboard.

The trickiest legal issue posed by DVR's is not ad-skipping, but something even more basic: the right to freely make a copy of a program for personal use in the first place. My assertion of an inalienable right to fast-forward through commercials would be rendered moot if the creators of the program that I am racing to rejoin were permitted to fully exercise the protections of copyright and impose control over the copying of their creative work.

Since the dawn of the videocassette recorder designed for home use in the mid-1970's, we have copied copyrighted television programs with impunity, enjoying the "fair use" exemption granted for this, a private, noncommercial purpose. The legality of home copying based on "fair use" was enshrined in a Supreme Court decision, Sony Corporation v. Universal City Studios Inc., handed down in 1984.

That decision addressed copying with a Betamax videocassette recorder, and it remains the key decision that protects copying with DVR's today. But the more one looks at how the court arrived at its decision in the Sony case — a 5-to-4 squeaker — and at how recording technology has changed and new business opportunities have opened since then, the more difficult it is to see how a majority of the court could possibly uphold the same position today.

The courts uphold "fair use" only when it doesn't harm the commercial value of the copyrighted work. At the time the suit was brought, skipping ads during playback on a clunky tape machine was hardly worth the considerable trouble. At the trial, survey data showed that only about 25 percent of recorded ads were skipped. In the face of testimony by Fred Rogers of "Mister Rogers' Neighborhood" on PBS, who welcomed home copying of his program, the movie studios that brought the lawsuit failed to convince the judge that VCR copying of televised movies was hurting their business.

WOULD indisputable evidence that DVR's facilitated ad-skipping make a difference if the Sony case were decided today? Paul Goldstein, a professor at Stanford Law School, thinks that it might. "If you were working with a clean slate, and everything was the same except for the ad-skipping rate — that's a compelling fact that could have made a difference," he said.

Randal C. Picker, a law professor of the University of Chicago, pointed to the commercial availability of network programs at places like iTunes as another enormously important change to be considered by the court if a case like Sony were litigated today.

How to pay for free television is the overarching but unanswered question, Professor Picker said. Speaking as a viewer, he said: "I want the other guy to watch advertising. But we can't all not watch."

Randall Stross is a historian and author based in Silicon Valley.

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