February 29, 2000 5:15 PM PST

iCraveTV.com exec discusses his start-up's short life

In the course of three painful months, iCraveTV.com chief executive Bill Craig has learned that Internet David and Goliath stories don't always end with a giant-killing.

Founder of the first service to put a broad range of ordinary TV stations on the Net--from Simpsons cartoons to NFL football games--the Toronto-based Craig launched iCraveTV in late November to international press and huge amounts of Web traffic. It looked like the start of a new chapter on the Internet, in which the Web entrepreneurs might finally push old-guard television Online TV may spark Net battle services online.

The surprise appearance of the service closely followed a legislative attempt by Yahoo and America Online to protect their rights to do essentially the same thing in the United States. Neither company will admit to actual plans for online TV, but they don't want to be told they can't add television to their sprawling online services.

Craig's iCraveTV service, which offered 17 U.S. and Canadian TV stations online, turned those larger companies' vague ambitions into reality. But there was a catch.

Craig hadn't asked the broadcasters' permission to use their signals online, and they were furious. Three different coalitions, including TV stations and movie studios on both sides of the border, and even the National Football League sued.

At stake, the angry broadcasters said, was nothing less than their ability to control--and thus create--TV shows. Motion Picture Association of America head Jack Valenti called the service "one of the largest and most brazen thefts of intellectual property ever committed in the United States."

From his office in Canada, the soft-spoken Craig did his best to smooth the waters. He offered to pay the broadcasters copyright fees. He warned his site's visitors that it was meant for Canadians and began looking for a technological way to stop the signals at the border.

The battle turned uncomfortably personal for a few weeks, as opponents dredged up his own past U.S. court battles--a now-settled child support issue and an earlier dispute with former employer Fox Sports.

Ultimately, the legal pressure proved too much. Craig still thinks he had the legal high ground, at least in Canada. But the threat of years of litigation, and the risk of more than $100 million in damages if he proved to be wrong, brought him to the bargaining table.

He agreed this week to shut down the broadcast version of his site forever--or at least until someone else challenges the broadcasters and wins, which could amount to the same thing. Instead, he's looking for a way to figure out from where people are logging into the service. Then he wants to sell a subscription-based service in partnership with pay channels like CNN and MTV.

CNET News.com asked Craig what he thought his experience meant for the future of online TV.

News.com: What was the vision for iCraveTV?
Craig: ICraveTV still can be many things. But our initial foray was to pick up freely available over-the-air television stations--that anyone can pick up with a regular antenna--and to make them available in what we were calling a companion format on the computer screen. Under Canadian law, this can be clearly done, in our view. What we ran into was the lack of apparent security between the United States and Canada on the Internet.

How did you hit on the idea originally? What prompted you to do this?
I was fascinated that my sons--two sons, one is 19, the other 15--before they would sit down to a computer in the home, they would try to make sure the TV set was either on or strategically located next to the computer so they could watch a television picture while they surfed the Net, or did video games.

I asked my oldest son, "Why isn't there TV there? That's a TV set you're looking at, the computer screen."

And he said, "Well, Dad. That hasn't been done yet."

That led me on the search for why not, because that's a very logical thing.

The companion concept was to have it as a window, always there on the screen. Like my sons were using the television set, which was a companion in the room to keep them distracted during download periods. But I think a lot of the major media people were waiting to have a model that was more like the regular television set where you have a full screen presentation and you fully look at it.

Did you wrestle with whether you should ask the permission of the broadcast companies or not?
Under Canadian law, you're not required to get their permission. I think if I went around to the individuals who ended up suing us and asked them for permission ahead of time, I don't think I could have genuinely said they would have granted it. My problem was: Which one of the hundreds of rights holders do you go to first and ask them to be confidential on an idea?

We did send them letters the day before, telling them what we were up to, and we indicated to people clearly that we were going to go to the copyright board of Canada and pay a fee, which would have been retroactive to day one. So our conscience was very clean in term of rate payments.

You must have been aware that the blocks keeping U.S. residents off the service were fairly permeable.
We had people click back a terms-of-use agreement. And then we had a warning, a short couple of sentences that made it very clear that you had to be in Canada. We felt that those layers were pretty adequate for what our needs were, which was to keep non-Canadian viewers off the site.

We relied on people's honesty and integrity, and that proved not to be adequate to the circumstances.

What ultimately prompted the settlement talks?
I think both sides discovered that we were pretty much in agreement on many things. One, that rights holders should be paid for their product. Two, there should be isolation (of the TV signals) at the border. The thing that differentiated us was control. Should we be able to pick something up without negotiating for it?

But that was the hundred-million-dollar question.
Right. We said, "Look. We're good business people. We're trying some new things here. But this is not David with a stone and a slingshot trying to kill Goliath; this is us trying to cooperate with some very large and powerful people who have excellent product that should be displayed."

So we took a view that we wanted to work with the rights holders. We agreed that we would not do broadcast streaming that we were doing in Canada until it was clearly determined by the (government) that it's OK to do it. If someone else is able to do it, then we want to be able to come on at the same time.

Is that a realistic proposition, now that everyone else has seen the broadcasters come down on you with their lawsuits about as heavily as possible?
Who knows? There are 30 million Canadians out there. Who knows who might have the gumption, if you will, to try it? But it would be a tough call before you put the capital into it and want to take on something that clearly these people do not want to have happen. They made that eminently clear.

The law is one thing, but then there's also the realm of practicality.

So in your opinion, this is still legal under Canadian law. There just needs to be an official ruling addressing the issue.
Right. We did not admit guilt to anything here. But we would not engage in that debate. It would have to be up to someone else.

What's next for you? You've got a large investment in this, and you say you still see a future.
Well, yes. There is some good that comes out of this. We've determined the sincere importance of defining network boundaries. We've got to figure out a way to independently figure out where people are located. The Internet is not going to get class A programming until that's fixed.

For the medium term then, the system of broadcasting being a regional, geographically based system is going to be maintained, despite the fact that the Internet is really international.
Well in the U.S., from what we've been able to observe, there's no clarity on the legality of transmitting over the air free signals on the Internet. Some people might want to dispute that, but we never intended for this to be Trojan horse or back door into the U.S.

We've discovered that is important to have this iWall developed--the idea of figuring out with those ISPs that cross the border, like AOL, how to determine whether a person is located in Canada or outside of Canada and deal with them accordingly. This has been a real challenge.

You can't go to www.cbs.com and watch CBS television, and you won't be able to do that until they have assurance that it won't leak out of the United States. But when and if that happens there will be a tremendous amount of energy developed that will be good for all of us.

I've been asking programmers and broadcasters to adapt to the Internet. But the Internet also has to adapt to the broadcasters and the programmers if it is to go to this next level. That's the challenge for all of us.

 

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