Jon Lutzky attended Streaming Media East, which is a widely acclaimed event in the world for the business of audio and video on the Internet. Bringing together leading companies, minds, and technology; the events are the industry’s meeting place for streaming media professionals desiring to learn, network and make business deals.

David Mazur was a coach: Startup Weekend Music & Gaming is an intense 54 hour event which focuses on building a web or mobile application which could form the basis of a credible business, in the field of music and/or gaming, over the course of a weekend. The weekend brings together people with different skill sets – primarily software developers, graphics designers and business people – to build applications and develop a commercial case around them.

Wednesday, May 2nd

Venture Funding, Investment & Mergers – Leadership in the Entertainment & Technology Space: Broadband, Social Networks, Mobile and Games

The VC and strategic investment community has always led the way in recognizing the newest opportunities in the technology and entertainment space. In this era of economic flux, boom and bust, there are as many interpretations of value, opportunity and investment as there are investors and analysts in the industry. In this session, we bring together a number of the formative players in the Media, Entertainment, Technology finance world who have played a part in the investments, mergers, acquisitions and takeovers over the past few years. At the moment there is more money chasing fewer ready resources, but as the market predictably shakes out, how the relationship between the traditional and new media companies settles will create a fascinating foundation for the next step in growth for our industry. Are we building toward another bubble or are we laying the groundwork for a period of hypergrowth in the convergence space? Media companies are making nine and ten figure bets in this new arms race and what the future holds is anyone’s guess.

Monica Dodi, Managing Director and Co Founder, The Women’s Venture Capital Fund

David Travers, Partner, Rustic Canyon Partners

Steve Masur, Managing Partner, MasurLaw

Kushal Saha, Managing Director, Cascadia Capital

Mike McGlade, Chief Revenue Officer, FastPay

Derek L. Norton, Managing Partner, Watertower Group

Joey Tamer, President, S.O.S. Inc., Moderator

Panel: Licensing Challenges in a Global Community

Jay Rosenthal/Steve Masur/Philippe Perrauex/Vickie Nauman/Cathy Merenda/Richard Conlon

By: Gabriel Goldenberg

Issue: Encrypting signals carried on basic service tier

On October 20, 2011, the Federal Communications Commission solicited comments to a proposal to eliminate the basic service tier encryption prohibition for all-digital cable systems (http://apps.fcc.gov/ecfs/document/view?id=7021738292). This proposal has created a debate that pits the Goliath cable service providers like Comcast and Time Warner against Davidian consumer electronic device startups led by Boxee.

Legislative Background

The prohibition against encrypting basic service tier cable arose from the Cable Television Consumer Protection and Competition Act of 1992.

Cable system operators shall not scramble or otherwise encrypt signals carried on the basic service tier. Requests for waivers of this prohibition must demonstrate either a substantial problem with theft of basic tier service or a strong need to scramble basic signals for other reasons. As part of this showing, cable operators are required to notify subscribers by mail of waiver requests. (47 CFR 76.630)

Congress’ aim was to significantly advance compatibility between cable service and consumer electronics equipment. Congress determined that the rule would have a minimal impact on the cable industry since most cable systems at that time did not scramble their basic tier signal.

With the transition to digital transmission, program carriage agreements increasingly required cable operators to encrypt their programming to ensure that programming is only available to subscribers who have paid for service.

The proposed rule change will allow cable service providers to encrypt their entire cable programming service tier.

Benefits of Encryption

Cable operators applaud this proposed rule change as an effort to “eliminate outmoded regulations,” that were adopted in a very different television broadcast environment. Cable operators emphasize that the potential efficiency and environmental benefits greatly outweigh any harm to consumers.

The prohibition against basic tier encryption was enacted in a very different television broadcasting landscape from the one that exists presently. In 1992, consumers had free access to 60-80 analog channels on their televisions. Satellite service was in its infancy, telephone companies were not yet providing video services, and consumers did not have the ability to stream video over the Internet.

Today, the digitalization of cable means that only about 20 basic tier channels are available to consumers without a set top box. A very large majority of digital cable customers have some sort of premium cable service which requires a set-top box or CableCARD. Additionally, consumers have been increasingly accessing premium broadcasting through satellite television, their phone companies, and over the internet through services like Hulu. Proponents of the elimination of this FCC rule claim that very few consumers would actually be affected if all digital cable becomes encrypted.

Repealing the FCC’s prohibition against encrypting digital cable will allow cable companies to hasten the transition to all-digital service, improve service quality and reliability, and reduce service change response times and service visits. Digital cable makes possible two-way communication through consumers’ televisions. This provides advanced interactive services to consumers like video-on-demand and interactive program guides.

Additionally, encrypting the entire digital cable spectrum will have the additional benefit of allowing cable service providers to activate and deactivate service remotely without sending a service technician to the activation site. This will theoretically reduce costs for consumers by reducing the number of technicians needed to perform these types of task as well as the associated vehicle costs of transportation for technicians. Reduction of activation trips will have the environmental side benefits of reducing gas consumption and vehicle emission pollution.

Negative Effects of Encryption

Opponents of the encryption plan argue that this just the latest effort by the cable lobby to try to bolster declining cable television subscription numbers.

http://blog.boxee.tv/2012/02/08/cable-companies-want-government-to-help-them-increase-your-bill-limit-competition/

Detractors are quick to point out that there are few advantages to consumers from the promulgation of this proposed rule change. Encryption of the digital signal would inconvenience millions of consumers while producing environmental benefits that are miniscule at best.

Cable Television Consumer Protection and Competition Act established a policy that the United State government wanted broadcast channels to be freely available. This proposal would be a divergence from that policy without a necessarily compelling reason to do so and it would create new challenges for consumers to economically receive the broadcast channels on their televisions.

This proposed rule change will mean that televisions that connect directly to cable antennas, devices like Boxee, tv-tuners built into computer video cards, and numerous standalone tv-tuner boxes will no longer be able to get broadcast channels if they will be able to work at all. While data on how many consumers actually use these devices is murky since cable companies do not track ClearQAM use, it is estimated that there are millions of such devices in use. Industry groups have suggested that many consumers use devices that rely on ClearQAM in addition to premium cable service subscriptions that rely on cable decoder boxes or CableCARD devices.

Additionally, detractors claim that the proposed cost savings to consumers and environmental benefits are merely illusory. Encrypting the basic service tier will force consumers to purchase additional set top boxes, costing consumers hundreds of dollars a year in equipment rental fees, and earning cable companies millions of dollars in additional revenue.

Cable service providers advocating for this proposed rule change tout the cost savings and environmental benefits of requiring fewer service technicians to go on-site to activate and deactivate cable service. Advocates for the status quo argue that the reduction of service calls will be minimal since many of the major cable service providers, including Comcast, TimeWarner Cable, Charter and Cox, already offer self-install kits. Moreover, the set top boxes that cable companies rent out to subscribers to decode cable signals actually consumer more energy than ClearQAM alternatives such as video cards and devices like Boxee Live.

To view the FCC proposed rulemaking and public comments: http://apps.fcc.gov/ecfs/proceeding/view?name=11-169

To add your own comment:

http://apps.fcc.gov/ecfs/upload/display?z=11d3j

(Proceeding 11-169)

Last week, the Second Circuit handed down its long-awaited decision in the Viacom v. YouTube copyright litigation. Although those on each side of the argument claimed that the decision fell in their respective favor, the Court’s rulings in its complex, 39-page opinion did not provide a clear “win” for either the content industry or the tech industry. Some issues were seemingly answered, but then remanded for further fact finding. In short, this opinion did not provide definitive answers as to whether YouTube’s actions have removed it from the DMCA’s safe harbor protection. In fact, it makes us wonder – should Mark Zuckerburg close his Facebook account in light of this decision?

We ask this question to illustrate the lingering uncertainty that tech companies face with respect to liability for knowledge of infringing content on their websites. Section 512(c) of the DMCA provides a safe harbor from liability for online service providers whose users upload copyright-infringing content. However, an online service provider is disqualified from this safe harbor protection if it has knowledge of specific instances of infringing content on its site and does not act expeditiously to remove that content. This knowledge can be actual knowledge, or can be what is referred to as “red flag” knowledge, i.e., an awareness of facts and circumstances from which infringing activity is apparent. In the YouTube case, the Second Circuit held that the District Court interpreted the DMCA correctly – that in order to be disqualified from the safe harbor, knowledge of infringement, whether actual or red flag, must be specific and not merely a general awareness.

Although YouTube affirms a high standard for demonstrating knowledge – which, on its face, is good news for the tech industry – the Court then held that the District Court’s summary judgment for YouTube was premature. After reviewing the facts on record, the Court found that a reasonable juror could conclude that YouTube had actual knowledge of infringing activity, or was aware of facts and circumstances from which specific infringing activity was apparent. Thus, the District Court erred in granting summary judgment.

Specifically, the Court gave weight to several internal email exchanges in which YouTube’s founders identified video clips uploaded by users and discussed whether those clips should remain online. In the emails, specific videos are discussed, including “budlight [sic] commercials” and a “CNN space shuttle clip.” Furthermore, the words “clearly infringing, official broadcast footage” were used with regard to Premier League football (soccer) footage, and the words “blatantly illegal” were used in reference to video clips of Viacom television shows including Family Guy, South Park, MTV Cribs, Daily Show, and Reno 911. The Court believed that these aforementioned emails could indicate the type of specific knowledge necessary to be disqualified from the safe harbor protection and incur liability for infringement (in contrast, the Court did not find the requisite specificity in the general knowledge that an estimated 60% to 80% of all material on YouTube was infringing).

Which brings us back to Mr. Zuckerberg…. If Mark Zuckerberg is logged in to his Facebook account and, while browsing through his friends’ photo albums comes across infringing content, does Facebook now have knowledge of specific infringement sufficient to incur liability? If, for example, one of Zuck’s friends has posted still photos from Hollywood movies or other material that could be considered “clearly infringing” or “blatantly illegal,” could Facebook fall outside of the safe harbor for those specific instances? If the emails in the YouTube case may be sufficient to constitute knowledge, then perhaps Zuckerberg’s comments on an infringing photo would constitute knowledge of that infringing material.

In summary, although the YouTube decision affirmed the necessity for specific knowledge of infringing activity before incurring liability, it leaves open, for the time being, the type of knowledge that would rise to this level. Tech companies should follow this case on remand in order to remain apprised of the answers to this question.

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MasurLaw is a full-service transactional law firm focused on the media, entertainment and technology sectors.

On March 8, the Jumpstart Our Business Startups (JOBS) Act passed in the House of Representatives by an overwhelming majority (390 – 23). This bipartisan piece of legislation is also quite likely to pass in the Senate. The Act aims to make it easier for individuals to invest in startups and for privately-held startups to raise much-needed capital.

The JOBS Act is actually a legislative package comprised of six bills. The most talked about component is the crowdfunding bill titled the Entrepreneur Access to Capital Act. This Act recognizes the tremendous growth of crowdfunding, thanks in part to online platforms such as Kickstarter and Profounder, and loosens securities regulations in order to allow startups to take advantage of this new method of financing. Currently, those who contribute to a Kickstarter project may receive gifts and other tokens of appreciation, but do not receive an equity stake or otherwise receive any type of return on their investment. This is due to SEC regulations that prevent an investor from receiving equity for crowdfunded investments and limit investments from individuals to no more than 35 “accredited investors,” i.e., individuals with assets below $1 million or annual income of less than $200,000. The Entrepreneur Access to Capital Act will change this by creating certain registration exemptions for crowdfunded securities. Under the Act, an individual will be allowed to invest up to $10,000 or 10% of his income (whichever is less) per year. Startups will be allowed to offer securities to these individuals without registering with the SEC, in aggregate amounts up to $1,000,000, or up to $2,000,000 if investors are provided with audited financial statements.

In sum, the Entrepreneur Access to Capital Act will allow more individuals to invest in privately-held companies. This, in turn, will give startups a larger pool of smaller investors, who do not need to be accredited, and more places to turn for funding in order to keep their businesses growing. In deciding whether to use crowdfunding, startups should be mindful that this new type of investor will be a legitimate stockholder and have the same rights under the law as any other traditional type of investor.

The other bills that comprise the JOBS Act remove additional hurdles that startups face when it comes to raising funds:

• The Reopening American Capital Markets to Emerging Growth Companies Act will create a new category of securities issuers called Emerging Growth Companies (EGCs), whereby certain SEC regulations would be phased-in over a period of 5 years for businesses with less than $1,000,000,000 in annual gross revenue during their most recently completed fiscal year. EGCs can retain their status for the full five years unless they first 1) exceed $1 billion in revenue during a fiscal year; 2) issue more than $1 billion in non-convertible debt during a 3-year period; or 3) become a large accelerated filer.
• The Small Company Capital Formation Act will increase the offering threshold for companies exempted from SEC registration from $5 million to $50 million.
• The Private Company Flexibility and Growth Act will raise the shareholder registration requirement threshold from 500 to 2,000 shareholders of record.
• The Access to Capital for Job Creators Act will remove the SEC ban on advertising and solicitation for companies offering securities under Regulation D.
• The Capital Expansion Act will increase the number of shareholders permitted to invest in a community bank from 500 to 2,000.

Generally, the above-mentioned bills will help startups by increasing investment, increasing the length of time before a startup is required to go public, and removing onerous regulations during a company’s early stages. If the JOBS Act is passed by the Senate, which it seems poised to do, startups will soon be faced with a more welcoming environment for growing their businesses.

Sources:

H.R. 3606 – Jumpstart Our Business Startups Act: http://thomas.loc.gov/cgi-bin/query/D?c112:3:./temp/~c112ov1lp6

http://www.cio.com/article/702049/Something_Good_Coming_Out_of_Congress_

http://www.businessweek.com/magazine/crowdfunding-dont-call-it-an-ipo-11172011-gfx.html

The Internet has completely changed the way the public consumes media.  Amidst this change, content aggregators and blogs such as the Huffington Post have risen to prominence largely due to content created by other media outlets.

At this year’s South by Southwest Interactive Festival, a major issue of debate has been the problem of attribution as related to content aggregation and blogging.  Many traditional media outlets have argued that these parties are driving traffic to their own websites with content originally derived from the traditional media outlets, without providing proper attribution.

Two panels at the festival addressed this issue directly, calling for uniformity in attributions amongst bloggers and aggregators.  A panel led by Simon Dumenco of Advertising Age announced the creation of the Council on Ethical Blogging and Aggregation, an organization dedicated to creating standards for the blogging and aggregating community.  Modeled similar to the American Society of Magazine Editors, the Council’s main goal is to advise on best practices in the industry. Currently, the Council is comprised of David Granger, Editor-in-Chief of Esquire; James Bennet, Editor-in-Chief of The Atlantic; Adam Moss, Editor-in-Chief of New York; Elizabeth Spiers, Editor-in-Chief of The New York Observer; Mark Armstrong, Founder of Longreads.com; and Jacob Weisberg, Chairman and Editor-in-Chief of Slate.

Many have already come forward to mock the Council and its goals. These critics see the council as powerless and another confused attempt by traditional media to structure and add barriers to speech on the Internet.

The other approach discussed at SXSW, the Curator’s Code, was received with a little more popularity. The brainchild of columnist Maria Popova and designer Kelli Anderson, the Curator’s Code attempts to nail down a system for attribution by creating two new identifying signals, ᔥ and ↬.  The ᔥ symbol (called via ) indicates that information came directly from another source while the ↬ symbol (called hat tip) indicates that information was inspired by a source.  Although gaining some of popularity, the Curator’s Code still faces the major hurdle of obtaining widespread adoption among the Internet community.

For more information on the discussion of attribution at SXSW, the Council on Ethical Blogging and Aggregation or the Curator’s Code, please check out these links:

http://www.nytimes.com/2012/03/12/business/media/guidelines-proposed-for-content-aggregation-online.html

http://www.curatorscode.org/

http://news.cnet.com/8301-13506_3-57395270-17/two-ideas-for-handling-content-aggregators-attribution/

http://gawker.com/5892453/we-dont-need-no-stinking-seal-of-approval-from-the-blog-police

http://www.mediabistro.com/fishbowlny/good-luck-council-on-ethical-blogging-and-aggregation_b55696

http://www.theatlantic.com/technology/archive/2012/03/the-curators-guide-to-the-galaxy/254294/

Senior Partner Steve Masur served as a mentor for four startups at the first Transmission Innovation Camp, part of the Transmission Global Summit 2012 in Victoria, British Columbia.

The start-ups were handpicked by Transmission’s international advisory board as companies working at the intersection of creative content and technology and were paired with some of the leading decision-makers and experts in the content and technology industries.  The four-day accelerator boot camp provided valuable assessments of each startup’s business plan in programs like Why Won’t It Work, and gave the startups valuable opportunities to receive one-on-one advice in an intimate setting.

In addition to the usual elevator pitches and product demos which characterize such events, the startups were forced to challenge their presumptions and define their businesses in new ways through a series of facilitated exercises created by The Value Web, best known for its work with the Davos Economic Development Summit.  For example, in one exercise, each CEO was given an hour to create and shoot a television commercial advertising the product of one of the other start-ups in the camp.

For more information on Innovation Camp, please visit:

http://www.thevalueweb.org/general/transmission-global-summit-2012-innovation-camp-2/

http://www.transmitnow.com/transmission2012/innovation-camp

On March 6, 2012, our senior partner Steve Masur moderated a dinner panel on the FCC’s new Connect to Compete initiative at the Urban Media Summit in New York. The panelist included James M. Assey Jr. (Executive Vice President of National Cable & Telecommunications Association), John Rubey (President of AEG Network Live), Karla Ballard (Chief of Strategic Development of Media and National Partnerships & Senior Vice President of One Economy Corporation), and Quincy D. Jones III (Composer, Musician, Film Producers, and Author).

The recently unveiled Connect to Compete initiative is an attempt to bridge the digital divide preventing lower-income families from accessing computers and Internet.  Through Connect to Compete, corporations and nonprofits have partnered to increase broadband adoption, digital literacy, and access to equipment and training tools for disadvantaged communities across America.  The program targets low income families with at least one child eligible for the free National School Lunch Program.

In short, the Connect to Compete program is three-pronged.  First, cable providers are offering broadband Internet access to eligible families for $9.95 plus tax per month.  Second, these families are also being offered the opportunity to purchase inexpensive computers loaded with the Microsoft Office suite.  Families have the choice between a $150 refurbished computer from Redemtech or a $250 brand new computer from Microsoft.  Third, the program hopes to promote digital literacy through various in-person and online courses aimed at effectively using technology to educate and work.

The digital divide has become an increasingly problematic issue in America.  Only about 46% of low-income families in America have adopted broadband at home compared to the over 90% of higher income families.  This threatens to increase the wealth disparity in the country as over 50% of all jobs require technology skills, and this number will increase to 77% over the next decade.  In terms of education, Internet and computer access have been strongly correlated to academic achievement.  One study has found that students with broadband at home are 7% more likely to graduate high school. Further, consumers with broadband at home have been estimated to be able to save more than $7,000 per year.

Computer and Internet access are no longer a luxuries but necessities.  Connect to Compete acknowledges this and attempts to tackle the problem head on.  For more information on the Connect to Compete initiative and the Urban Media Summit, please visit:

http://connect2compete.org/

http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-310924A1.pdf

http://www.digitalhollywood.com/UrbanSummitNewYork.html