ScreenPlays – Your company has come up with a way for local broadcast stations to get into the OTT arena in a way that could bring live prime time TV to the Internet. Tell us how this works.
Jack Perry – When we looked at this space many years ago and began developing technology for it as early as 2009 one of the things we realized was the people who have been serving us as local broadcasters really have no onramp to the Internet. Most of the devices we carry on our person today have the ability to get content over the top, as we’re now calling it, but don’t have the ability to get broadcast content. So we need to bring the guys who traditionally do the broadcasting into the over-the-top space. We’ve focused on developing a technology to do that.
SP – That technology is tied to the licensing rights the broadcasters have. So does that mean it’s designed to only allow those viewers who are within the broadcast coverage area of a station to see it online?
Perry – It is. We use the digital broadcast signal from each station in the United States to send out essentially tokens within their digital broadcast stream. And then a household either has a connected TV, what we’re now calling a smart TV, or they have a little device we call a Synclink. When either of those devices hears the over-the-air broadcast, it creates an individualized token just for that household and sends it back over the Internet to the TV station. The TV station then re-broadcasts that individualized piece of data to the household, all in a matter of seconds.
When the television on the receiving end hears it, it’s the equivalent of getting keys to content, either live broadcast or on-demand content. The fundamental thing the technology does is guarantee a relationship between the over-the-air broadcaster and the viewer, and only their viewers. Not viewers beyond their reach, because they couldn’t hear the data, not viewers who are thousands of miles away. Just the viewers they serve with their signal.
SP – So there’s no way somebody outside the footprint could hear or see this particular broadcast content. Is there no way that person who’s receiving it could send it on a peer-to-peer basis?
Perry – That’s not doable. Today we send out about 25 million tokens per second, so even if someone could figure out how to grab this encrypted token and send it off to their friends, it only lasts for a matter of a fractional second. That television or the over-the-air device that’s also connected over the Web has to be hearing the signal over the air to stay on over the Web, or all the devices that are on that household’s network as well. So as long as everything is working, the content is opened up.
SP – In the connected TV situation, are you working with the manufacturers to get that client software into the device?
Perry – Any smart TV that has an SDK with it, we just develop off the SDK the manufacturer has. We are working with a number of manufacturers to be preloaded on the set as well. It’s not unlike the challenges a Netflix has had with getting their software onto a set. It’s really not particularly difficult to do today. And then with our own client-side device we essentially mail that out to the viewer and they’re up and running.
SP – So with a connected TV it’s a downloadable app from that particular app environment for that particular brand of television. Is that activated by the consumer saying, hey, I want to watch this online? Is that how it gets put into the TV?
Perry – Not unlike any other app on a smart TV, you have to go to it and activate it. What we do then is we essentially use the television to be in a constant state of listening for these broadcasts and sending the data back to the broadcasters themselves.
SP – In the case of a connected TV I would hypothesize the main interest would be for those on the fringe who may not have good reception, because, otherwise, they could just be getting it off the air and wouldn’t have an incentive to get it online.
Perry – That’s a great point. However, this enables all the other devices in the home to get the broadcast over the top instead. We’re firm believers in broadcast TV. If you can get television over broadcast you should. But how do you get it to other devices that don’t have tuners on them? And, then, once you’ve made a relationship with a viewer if you’re a broadcaster, what other content that you may not broadcast that you’ve acquired the rights to might you be able to offer?
SP – You can create a whole different environment online compared to what’s on live broadcast.
Perry – Right.
SP – With those other devices, that, too, is a downloadable app, and the same thing comes into play? The consumer on their smartphone or on their tablet has the option to ask for that token-receiving client and can then watch their broadcast station?
Perry – That’s right. We try to make it as easy as possible for both the station and the viewer. In our mobile application, which we’ve launched recently in Spokane – we have three stations live in Spokane right now – it’s as simple as going to the Android marketplace or iTunes and downloading the app onto your device, and you’re watching TV in minutes. So it’s really not particularly difficult for the viewer.
SP – Is that the first place this is actually in operation on a commercial level?
Perry – On a commercial level, yes. We also have 28 DMAs we’re currently broadcasting in with private trials.
SP –The stations in Spokane are all separately owned?
Perry – Yes. We currently work with 23 broadcast groups.
SP – So three of those 23 own these particular stations in that market. How are the stations making the consumers aware of this option?
Perry – That’s the beauty of what we’re doing as a company. We have a relationship with the TV station, and we have a relationship with the viewer. All of us are incented to connect with each other. So the TV stations are ending their newscasts or they’re doing periodic updates throughout the day, saying, to get us online go to the iTune store or the Android marketplace and download the app. In one instance last week a TV station promoted they were going live on Syncbak, and within hours 1,400 viewers in Spokane downloaded the app and started watching TV live.
SP – That was the first instance of that station doing this?
Perry – Right.
SP – And 1,400 people got it?
Perry – Within a few hours.
SP – Wow. That’s amazing.
Perry – We also had one instance here in San Francisco we’ve powered that just ran a brief 30-second news story about going over the top, and 568 people went to the iTune store and downloaded it within half an hour. Clearly there’s interest for live television on all devices.
SP – How long has the longest one in Spokane been running?
Perry – We’ve had these trials, our friends-and-family trials, running about six months.
SP – So it’s all gone broad just in recent weeks.
Perry – That’s right.
SP – Aside from that anecdotal kind of feedback is there any larger sense of participation and how this is resonating with the community?
Perry – I think it’s resonating fairly well with the viewers who hear about, who are downloading the app and using it. Our biggest issue today is can we go fast enough for the broadcast community. As a company we’re setting ourselves up to go much, much faster, because we haven’t run into a TV station that hasn’t wanted to do it. They all want to do it.
SP – When you say faster, do you mean in terms of executing on the apps, on the devices? What do you have to do if you’ve already built it?
Perry – We have built it, and we have a number of stations that are ready to deploy it to the market. It’s one thing to have a friends-and-family test; it’s another thing to say anyone and everyone can download the app and start watching TV.
SP – So you have to have people on site to help them and make sure it’s all working?
Perry – No. we spent three years in the development of this technology. When I first started the company I thought we were going to have to on site to every TV station and install the hardware. Now Fed Ex does the work for us. They back a truck up and take away our hardware, and with a quick five-minute phone call we have them up and running as over-the-top broadcasters. It’s really that easy today.
SP – So there is a hardware installation, not just software. They have to have some kind of server to run this token distribution system. That’s the time-consuming aspect you’re talking about?
Perry – No, that part isn’t time consuming. It’s how quickly can we manage a thousand TV stations to get them up and running. Once we send the box out the chief engineer typically opens it up and installs it before they even call us, because they’re pretty excited about getting it.
Really, the question is how many markets do we take live and how quickly do we do it. This has never been done before. No one has taken live broadcast TV and put it on the Web and said whoever can tune in, tune in.
I’m of the mind to take a little more conservative approach. Go fast but be conservative while we’re going fast and get it right. The last thing we want someone to do in an experience as a viewer is to try to tune in to watch TV and it not be there. So we’re working very hard on the quality assurance and the testing. A lot of things are happening in the background of our technology. We’re managing all the rights of individual day parts. We’re pulling in ads. We’re taking out ads. It’s not as easy as one might think.
SP – That’s where I wanted to go next. In terms of the stations that have launched in Spokane, what amount of their programming they do on air is actually showing up online at this point?
Perry – One of our stations has an hour a day. Another station has built a 24/7 hybrid broadcast Internet channel. What I mean by hybrid broadcast is they have certain parts of the day they’ve cleared with their syndicators; they have certain parts of the day they’ve created themselves, and in this case they have a sports channel that runs 24/7. Throughout the course of the day we’re toggling on and off their Internet broadcast channel so viewers in Spokane have something to watch all the time. They’ve probably cleared 10 to 12 hours of what is otherwise available over the air, and the other 12 is filled with their sports channel and their weather channel.
SP – Is this an independent station or network affiliated?
Perry – In Spokane we’re with the CBS, Fox and NBC affiliates. And I would expect we’ll bring in the rest of the affiliates in that market as well.
SP – Are they getting some of that network programming cleared at this point or is it more syndicated stuff they’ve lined up independently?
Perry – Today we’re starting out with syndicated, the off-net stuff. But I would imagine over time you’ll start to see clearances happen. What our company really has worked hard at doing is going all the way upstream to the ultimate rights holder of the content and showing them the technology works. If you can give them a comfort level, I think you’ll get much further.
SP – Where does that stand now in your discussions?
Perry – Warner Bros. has cleared the content in Spokane, I believe for all three of the stations. We’re thrilled about that. You’ll start to see some of the other major studios clearing content in the next one to three months perhaps. And I think by fall you’ll see a considerable amount of content.
SP – On the primetime side, that content, too, is not necessarily under the sole control of the broadcast network. It’s bought with license rights from other places. Do they have to go back through those channels?
Perry – The network in this case would license it, and they, of course, have their network affiliate model they work with. That’s a little different than the local affiliate going directly to the syndicators.
But, clearly, if you can respect the upstream rights holder and you can get everyone paid, and if you can maintain order, and order being that whatever affiliates you get over the air are the same ones you get over your handheld device or your tablet or whatever, that’s a pretty good place to start. Order is what needs to be maintained, and people just want to get paid for their content. So I think you’ll see some things happening in the coming months.
SP – One of the interesting questions that arises in that situation is you have the triangulation of the national broadcast network, the local affiliate and then the cable company that the local affiliate has negotiated retransmission consent with, and so in terms of that triad and licensing for primetime for multi-device access from the broadcast viewer, does that cable guy have to come into that discussion?
Perry – No.
SP – That cable guy is trying to do the same thing. He’s trying to get the license rights, and he’s looking at the iPad as an extension of the set-top box, and as long as it’s coming over the managed network, he thinks he has the rights to distribute that, and maybe not even bothering to negotiate the rights to that. So then there’s this sort of competing conflict there as to who’s sending this stuff out and where it’s coming from if it’s from the same local broadcast source.
Perry – When I look at this world, it’s the broadcaster who owns the rights to broadcast to particular viewers in their market. And it doesn’t matter if the viewer is a cable or satellite subscriber or uses an antenna. That broadcaster owns the rights. To me tablet or an iPhone or an Android device is just an extension of the broadcast itself, which is meant to be free over the air.
SP – Like the cable guys are saying it’s an extension of the managed network set-top.
Perry – Right. And that may be the case with the pay-wall channels, HBO or Bravo or what have you. But when it comes to broadcast, that’s intended to reach all of us all the time.
SP – Would you say this is an area that hasn’t been resolved where if somebody were to challenge it legally, it’s not like some solution is already written in stone out there.
Perry – The approach we’re taking is to get the rights first before we take the content to the Web. So I don’t anticipate any challenges coming about because we already have the rights.
SP – You’re not assuming anything.
Perry – You know there have been companies that have tried. ivi.tv came and went.
SP – In a flash.
Perry – FilmOn came and went. Aereo is a little more interesting because they’ve posted a big investment from Barry Diller. My response to Aereo is we thought of all that long ago. There’s nothing novel there. We put the antenna in the home where the rights are, and then we start the process of delivering content over the top. Look, if rights are at an antenna farm somewhere, great, but I don’t think they are. I think they’re in the home where the broadcasts go.
SP – With 23 station groups involved it sounds like a lot of people in the broadcast industry have bought off on this as their ticket for getting into this space.
Perry – I think so. When I started the company I approached the NAB about my idea, because I felt that if the National Association of Broadcasters didn’t like the approach, I wasn’t going to get very far. They were kind enough to put in some seed investment in the company. And at the same time the Consumer Electronics Association became an investor in the company as well. So I figured if I could get the device manufacturers talking to the broadcasters, and they all agreed this is a good approach, then we were off to a pretty good start. So far, so good.
SP – What about the advertising piece? You mentioned that earlier. Is that another whole rights discussion or is it a matter of dropping those ads and inserting different ads based on sales online.
Perry – When you look at the advertising space there are different rights issues. Most can be solved if you can keep it in market. And that’s what our technology does. In the cases of some of our stations, they’ve gone out and cleared the music rights or clip rights. Once they’ve explained to the rights holder we’re keeping this in market, we don’t want it to go beyond the market, here’s a number to call Syncbak to talk about how the technology works, it typically goes very fast.
SP – Because everyone is getting more exposure.
Perry – Everyone is getting more exposure.
SP – And they’re not paying anymore for it.
Perry – Well, it’s a free market system. If someone feels they’re not getting the right value, they’ll ask for something when they re-up.
SP – What is your prediction as to, number one, when there might be actual primetime broadcast network programming showing up on some of your affiliates and, number two, when you’ll be in a large number of markets?
Perry – I think we’re in 35 markets with our technology deployed. Twenty-eight are streaming to friends and family. I think 2013 will likely be the year when you see broadcast television go over the top to smart TVs.
SP – Do you a think a large share of those in test mode will go commercial this year?
Perry – I think you’ll see various tests going on. Can’t announce a specific network today. But you’ll see one major network is deploying our technology in two markets very soon to go live 24/7 streaming to connected TVs.
SP – We want to hear about that when it happens. Jack, thank you so much.
Perry – Thank you.