Q&A With William Craig, President and CEO of iCraveTV

By now, it's likely everyone in the streaming business knows about the story of ICraveTV (http://www.icravetv.com). It may well be the stuff of legends in the not too distant future.

iCraveTV, a small Canadian company, drew some attention last year when it was discovered to be webcasting U.S. and Canadian TV signals (from NBC, CBS, ABC, PBS, FOX) over the Internet. Once the broadcasters and movie companies caught wind of this story, the MPAA (Motion Picture Association of America) and other entities filed suit against iCraveTV to get it to stop its "theft and unauthorized performances of U.S. copyrighted films and television". The battle was taking shape: new media against old.

On February 28th, old media won. iCraveTV decided to settle its case and agreed not to broadcast TV signals. But that's not the end of iCraveTV. According to President and CEO William Craig, iCraveTV has gone back to the drawing boards to figure out how to stream its programming to specific countries--something that was his intention all along. Although he will first target Canada, webcasting U.S. programming is still something he wants to do. During our talk, Craig revealed that his company was developing a system called "iWall" to effectively create a private network for each country so that content can be distributed to an estalished region and not to the entire world.

In a phone interview Craig talks about the case, the settlement, the iWall and other plans for his company in this rebuilding stage.

Streaming Media Newsletter: What does the settlement with the MPAA mean?William Craig: It means we don't pay their lawyer's fees, we're not facing penalties. And it means we won't be sending Canadian signals into the U.S. with broadcast services on them. Until there's legistative change. If that's allowed, then we're allowed to get into the streaming business.

Q: Do you believe that the Canadian legislature will clarify or change the laws?

A: There's a different set of considerations on the Canadian side. Under Canadian side, we said we would not do free over-the-air broadcast streaming until somebody else gets into the business. So if they have the tariff, or ends up like we did and we expect the broadcasters to take THEM to court, then we're allowed to get back in business. Without a legislative change, we need a court decision.

Q: So you weren't willing to go that far and go ahead with the court case?

A: Well, here was our problem: We were advertiser-based and the advertisers were staying away in droves because of the litigiation. And if we had two to three years of litigiation there was no prospect of that changing.

Now we're still very much in business. We're in the midst of developing something we call the iWall, and we're negotiationing with speciality [cable] channels and satellite channels for carriage on our service. But that will be a subscription-based model rather than an advertiser-based model.

We're going to create something that's not Internet rights, but something called ICAN rights, which stands for Interactive Country Area Network. The problem more conventional program suppliers have with the Internet is that is no regional [control] to it. There's no way to really control the signal other than the honor system which is what iCraveTV tried to do.

Q: Yes, it really wasn't technology, it just required users to enter data like a Canadian area code to enter.

A: Exactly. It didn't have the third party verification. We had been working on developing a system where we can verify that somebody is or is not in Canada. The real problem is not the Canadian-only ISPs, the problem are the overlapped ones that service both US and Canada. AOL, for example, has about 2 million customers in Canada and they all show up on the Internet as coming from Virginia. So those people are considered to be in the U.S. and that doesn't help us. So we figured a way out of that.

Q: Do you use IP addresses or does that not help you at all?

A: No, that doesn't help. It's one of five components that we're using.

Q: And I assume you're not at liberty to reveal what they are?

A: No we're not. We're pulling this together and we're going to apply a patent for it. But we think we've got it nailed and we've learned a lot through this process. This wasn't an academic exercise for us, this was a project for survival so we think we've come up with something.

Q: Any more details on the iWall technology?

A: It's server-based, so it's not a firewall where the server will not send signals to anyone who's not in Canada. It has hardware and software at the server but nothing new out in the field.

Q: Are there pay-per-view or subscription models possible with this?

A: Oh yeah, if we pull this off, it's going to dramatically alter program distribution on the Internet. Now the conventional programming is going to get on because the problem even Jack Valenti's people had was, as soon as you go over the Internet, it's all over the world. So they're being dumped into a market, they don't want to be dumped into. So they want to have some level of control, so we are proposing to give them that control. With that control they will have an amazing ability to start exploiting the distribution of their service to certain countries. So in other words, a CBS can go on ICAN and distribute their programming to just inside the U.S. Because in the past, the rights holders say "No no no, you can't put it on, because it'll up in Hong Kong." Well this system will get rid of all of that.

Q: Didn't the Canadian companies also take--

A; Well yes, they have the same problem and that's why we have to build the iWALL for specialty channels as well. This isn't just for broadcast.

Q: Any timetable for the iWall?

A: We hope to be able to show it to people in five to six weeks time.

Q: At NAB?

A: That would be great if we could do it. We'd like to find some form to show it.

Q: Actually you may not be very welcome at NAB. [Laughs]

A: Well...[Sighs] Actually we're now finding that the specialty channels are starting to talk here [in Canada]. At the end of the day, the broadcasters know they want to get their service out, just the program suppliers are nervous about when somebody signed up a Canadian or Buffalo station it would end up all over the world. The program suppliers put tremendous pressure on the broadcasters, saying "Look, we want to renegotiate all of our programming deals." That caused the broadcasters to be most concerned.

Q: So how did you decide to get into this business model of re-transmitting broadcast content? Did you not expect to be sued? It did seem like it was theft, as the MPAA claimed.

A: First of all it wasn't theft because we had filed with the Canadian copyright board for a tariff that we would have been spending a percentage of our gross revenues on, and that went into a fund that paid not just Canadian programmers but American programmers. The fund last year paid, 75% of it went to Americans. So we were proposing to pay for this--we always have. The problem was the leakage into the U.S. And that's when the MPAA got into this concern about it being a. . .theft. But that wasn't our intention. Our intention from day one was to restrict it to Canada. That's why we had the barriers up.

Q: So you really didn't have a chance against the MPAA?

A: I think we did. We would have been fine in court, I think we had a good case. My view was that we would prevailed, because we asked the broadcasters and the MPAA to show us people that were doing it [picking signals up illegally] and they couldn't show us anybody. And the judge didn't order a shut down, the judge just ordered "Don't bring it into [the U.S.]." The judge didn't say "iCraveTV stop", he said "iCraveTV stop coming into the U.S.". And at that time we didn't have this iWall capability. So we say sometimes it makes sense to take one step back. In football, you go backwards before you throw the ball forwards. That's what we're looking at doing.

Q: So you're marshalling the forces?

A: Yes, and this time though we'll have negotiated deals with the specialty [cable] channels and they will have to be satisfied that the iWall works. Using the iWall and isolating it to Canada, our feeling is, we can do that. It's just a plain distribution right. The Internet rights are something different, that's WWW (World Wide Web) and we're not in the web at that point.

Q: So you're making Canada into its own intranet, then?

A: Yup and we can make one for the U.S. using the same technique. So we'd be able to go to MTV or CNN or whatever and say "Look, we an do a deal with you and just distribute it in the U.S."

Q: You have to work out individial deals with all the speciality networks?

A: We do. We've met with 15 of them and it's been very positive so far, but they all want to see the iWall work.

Q: Have you talked with any U.S. cable channels?

A: In Canada we have open access on the Internet, so that's not an issue up here like it is down there.

Q: So you haven't given up on the U.S. market?

A: Oh no, not at all. We're very much interested now; before we were trying to avoid the U.S. market. But now with this new system we want to start talking to the various programmers and see if we can offer our service as "iCraveTV U.S." so we can isolate the U.S. just like we isolate Canada and provide programming only to the U.S. But it would have to be on a subscription basis not an advertiser supported business.

Q: Why's that? Is it the problems with the lawsuit?

A: No, it's because these guys are used to paying subscription fees and they don't really make advertising available to make it worth our while to insert commercials. It'll be a monthly or yearly fee, just like a tier on cable or satellite.

Q: Do you think that's viable?

A: You know, a couple of years ago, no. Today, yes. If anything we're seeing with e-commerce that people are starting to spend hundreds and hundreds of dollars a month on the Internet. Like books and services. So I think it's worth a shot.

Q: Will it require broadband, especially if it's a pay model?

A: It'll be 56K and 128K up. We'll have two speeds.

Q: What about the music or radio angle? Would you start some subscription site like that? ICraveRadio?

A: Yeah, but everybody's doing that. That doesn't give us a unique feature. My problem with that is I don't know how you'd get the ads to stay up. I don't know what the economics of that are. Because a lot of people just minimize the advertising and just listen to the radio station.

Q: So you haven't had to pay any settlement costs?

A: That's right.

Q: Oh that's not a bad deal, I guess.

A: Exactly. The legal bills alone, if we were to be found guilty, would have been huge, enough to kill an elephant. The U.S. Copyright Act is not very forgiving. It's not open to what intents were; it's just "did you do it or didn't you?" Our argument is that we didn't do it. In the worst case scenario, the computer user came up after we gave them due warning not to do it. We shouldn't be sued (because we're a legally operating enterprise in Canada), they should be sued. Because we were operating legally in Canada.

Q: Is that why you went up there to Canada, because laws are easier up there?

A: No, just the law allows it up here. The purpose was not to get into the U.S. We weren't trying to be cute, we were trying to operating something for Canadians in Canada. And CRAVE stands for Canadian Radio and Video Entertainment, so our intents were just to service Canada.

Q: So you weren't looking or expecting to be sued?

A: Exactly right. We were not trying to draw a lawsuit. We were trying to operating in our little country up here to the north and not intefere with your commerce down there. Now we would love to offer over-the-air broadcast stuff in the U.S. but the law has to change before we do that.

Q: Any likelihood of that, you think?

A: I don't know, it's up to the U.S. Don't know. The American system is pretty rigid, but there are a lot of changes going on.

Q: You mentioned earlier that you're waiting for someone else to do this. Do you know of any company planning something like this?

A: No, there was a rumor about a company in Montreal called ChumpTV, but I haven't heard anything more than rumors. But if someone else were to light up, and they weren't challenged then we'd be able to get back on the air. But we want to stay in the streaming business.

Q: You mentioned pay-per-view, are you partnering with any companies out there or do you want to start something yourself?

A: We'd be happy to talk to somebody about that, we just haven't gotten that far.

Q: So how is your company operating now?

A: At the moment we're in the developmental stage-there's no revenues coming in. Back to the drawing boards. A lot of equipment and a lot of knowledge.

Q: So what's next for you?

A: The next thing is to perfect the iWall and negotiate agreements with speciality and satellite channels and provide service to Canada-only and the U.S.-only with a subscription approach. And that's where we're headed next.