The Evolution of Conventional TV Viewership - Fordham Intellectual Property, Media & Entertainment Law Journal
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The Evolution of Conventional TV Viewership

The Evolution of Conventional TV Viewership

Now that the 2012-2013 television season finally underway, the networks have a new nemesis to deal with. Meet Alki David, the Hollywood billionaire at the helm of one of the world’s largest TV-streaming services, FilmOn, and the proverbial thorn in the side of network television. In the days of a culture littered with technology, many viewers, especially those in younger demographics, want their television to be streamed live directly to their mobile devices or on the Internet. By responding to these desires, David has, in turn, angered all of the major television networks.

Networks are generally reluctant to stream live television because their revenue model does not support such a practice. Simply put, the modern television industry is supported by advertising dollars. But, advertisers purchase space during particular programming based upon Nielsen ratings. Today, Nielsen ratings continue to be calculated only by conventional set viewership, largely discounting the masses of viewers who now watch programming on the Internet. Furthermore, networks are also afraid of how streaming will affect their relationships with cable and satellite companies. Cable and satellite companies expend billions of dollars to networks to air some of their programming. (Think: USA’s Law and Order: SVU marathons.) A network will use this money to purchase new shows from studios, which are largely interested in protecting their revenue from DVD sales and paid-for digital platforms like Hulu and Netflix.

FilmOn threatens this revenue scheme by using millions of small antennas to retransmit live television, movies and original content to computers and mobile devices for a monthly subscription fee. In addition, FilmOn has secured licensing deals with electronic companies such as Lenova, who sells their devices with FilmOn software preloaded. Consequently, David has been sued in federal court by CBS, NBC, ABC and Fox for copyright infringement. The networks allege that he infringed upon their rights by co-opting their network feeds to service his customers.

The suit against David is not a novel one. David is just one of the many who are trying to break the stronghold of the massive television industry held by just a few major players. Also on the scene is Barry Diller, of Aereo. Aereo is also a TV-streaming service, and a judge has previously upheld its legitimacy, concluding that the service was merely capturing public airwaves and transmitting unique signals to individual subscribers.

The Aereo ruling focused primarily on the 2008 decision by the U.S. Court of Appeals for the Second Circuit, Cartoon Network LP v. CSC Holdings Inc. (a case often known as Cablevision). Like the one antenna, one subscriber model Aereo employs, the court in Cablevision found that a DVR service did not infringe on the networks’ copyrights because the service allowed viewers to make an individual copy of a television show.

It was exactly this ruling that David hoped to rely on. His initial reliance on a telecommunications law that essentially allowed cable systems to carry local stations by paying small compulsory licensing fees was discounted. The networks posited that the law was never intended to have that function, and successfully obtained a preliminary injunction against FilmOn. But, David was undeterred and after the Aereo ruling, likened his own company’s system to that of Aereo, even going so far as to change the name of the streaming operation within the company to (which, incidentally, is experiencing a lawsuit of its own). David reasoned that with 2.5 million antennas in major cities all around the country, the judge’s finding that individual antennas were assigned to individual subscribers should apply to the FilmOn system as well.

Whether David’s approach is the correct way to keep up in an ever-evolving industry, the fact of the matter is that the modern television industry as we know it is, and has been, undergoing a distinct change. The number of viewers that watch live television has seen a sharp decline since the advent of digital video recorders like TiVo. Moreover, a significant number of viewers take to network Web sites to catch their programs as they are uploaded (generally the following day). And, with the hard-to-ignore, pervasive effect of electronic devices like Smartphones and tablets, maybe David is onto something. He isn’t the only Hollywood player taking note of the changing landscape of television viewership–his board of directors includes Charlie Sheen and Ice-T.

Certainly, it cannot be argued that today’s television viewership statistics leave networks something to desire. NBC, for example, is constantly updating their programming to return to their late 90’s Friends-era supreme reign, axing cult hits like 30 Rock and focusing their efforts on The Voice to keep up with ABC’s Dancing With the Stars and Fox’s American Idol, programs that consistently rank at the top of Nielsen ratings. These shows, however, largely hit home with older demographics. Americans over 65 are watching more television than ever before, but for 3 quarters, viewership under 35 has decreased. Although, here’s the thing: it is not that youths’ amount of television consumption has changed, it’s just that their platform for consumption has.

If the younger demographic is to be found on the Internet, then perhaps instead of shortening the seasons of shows that resonate with their age group (Community backlash anyone?) to increase their revenue stream, networks should make the jump to live streaming. That way, they attract younger viewers who are most comfortable using their technological devices to catch programming.

It is undeniable that for this to happen, the industry would need to update their revenue model. For this to work, Nielsen ratings would have to expand their conventional viewership to include the Internet and mobile devices, because while whether I watch Parks and Recreation on NBC’s webite or my DVR does not affect me much, as it stands, it makes a world of a difference to Nielsen. However, it should be noted that Nielsen has updated their metrics system to keep up with the changing times before. In the 2008 season, they introduced a new metric known as C3 that accounted for playback viewership as it became clear that digital video recorders had drastically changed the way television was being viewed.

Is FilmOn’s business model the way to compromise between what viewers want (unlimited access) and what networks want (money)? That remains to be debated, but what is known for sure is that mobile technology has forever changed the definition of conventional viewership.

Shelby Schwartz

Shelby Schwartz is a second year student at Fordham Law School and a member of IPLJ’s staff. She hopes to turn her passionate television watching into a career in entertainment law. She is an avid Tina Fey enthusiast, and, incidentally, hopes that can somehow translate into her fallback career.