As Cablevision and Fox Battle, the Winner May Be Upstart Ivi TV

If there's an irony to the battle between Cablevision (CVC) and News Corp.'s (NWS) Fox, it's that the blackout of Fox stations affecting 3 million New York and Philadelphia-area viewers is benefiting an upstart service that the media giants would rather not have viewers discover: ivi TV.

Ivi (pronounced like 'ivy') streams live feeds of New York's major television stations, including Fox's WNYW-TV, which has been blocked to Cablevision's customers since Oct. 16. But with the World Series set to air tomorrow on Fox's stations, Cablevision subscribers are stampeding to ivi's service, according to the closely held company.

Since the blackout started, ivi TV's subscribers from the New York area have jumped by 320%, with 300% of those coming from homes with Cablevision connections, says ivi Chief Executive Todd Weaver. The company, based in Seattle, doesn't disclose subscriber numbers, although Weaver says his service's subscriber base is bigger than many small-sized cable operators. That's remarkably fast growth for a service that started in only September. "We're growing faster than any cable company has ever grown," Weaver says.

A Simple Approach

For consumers, ivi works in a remarkably simple way: after downloading an application that works on Macs, Windows and Linux computers and agreeing to pay $4.99 per month, viewers can watch broadcast TV from any computer with a broadband connection. Currently the service offers the New York-area broadcast stations, as well as those in Seattle. Next on line will be Los Angeles-area stations, followed by Chicago. Ivi is also in discussions with cable networks to add live streams beyond broadcast, Weaver says.

But what may be a boon to consumers is a curse for media companies, which sued ivi in federal court just 15 days after the service debuted. The broadcasters, which include Fox, are suing ivi and Weaver for allegedly pirating television signals for rebroadcast online. But Weaver says his service is legal and operates the same way a cable-operator does: it pays broadcasters through the compulsory licensing fees set up by Congress, which is what cable and satellite re-transmitters pay when they re-transmit a television broadcast.

Regardless of the outcome for the lawsuit, Cablevision subscribers in New York and Philadelphia are assured of being able to watch the World Series tomorrow, even if the blackout continues, as long as they can access ivi. The use of blackouts as a marketing driver was part of ivi's plan, Weaver says, adding that Cablevision's fight with Fox just after its debut was "an immediate benefit."

"The industry has seen a lot of [blackouts] over time," Weaver says. "As we have been getting everything ready and looking at the markets we were going to capture, we remembered the Oscar blackout, we realized as blackouts become longer and longer, it'll be a benefit to us. We hope more occur."

Blackouts Increasing

That's likely to happen. According to Bloomberg News, TV blackouts in the U.S. have reached their highest level in a decade and may grow in frequency. Why? Because pay-TV operators such as Cablevision are resisting paying higher fees sought by broadcasters and other content providers. In this year alone, according to Bloomberg, there have been five blackouts, affecting about 19 million pay-TV customers.

One aspect of ivi's surge in new customers that's not known is how many of the Cablevision subscribers are opting to cut their cable subscriptions, Weaver notes. "Some people are telling us they've cut the cord and canceled their cable," he notes, but others say they won't cancel their cable or satellite service until ivi has a specific cable channel that they want. That suggests, not for the first time, that consumers want a la carte pricing for television content.

As for the cable companies, Weaver says the end lesson may be that the fight between Cablevision and Fox illustrates how big media companies are "the dinosaurs of distribution."