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New breed of pirates challenges television’s old guard

The Canadian television industry was built on piracy. More than four decades ago, the federal government granted cable companies permission to pull in the signals that float into the country from TV stations on the other side of the U.S. border, and retransmit them to paying customers.

The set-up gave viewers strong and dependable signals for both U.S. and Canadian stations, and made the early cable guys rich as they built out a collection of federally approved geographic monopolies. It also meant that, during prime time, domestic broadcasters that owned Canadian rights to the popular U.S. programs were able to substitute their own signals on top of those channels, packaged with the ads that they sold. The piracy suited everyone (except, perhaps, the local stations whose signals were being lifted.)

But now a new generation of pirates has sailed onto the scene, and unless the industry rediscovers its own pirate mentality it could soon be walking the plank.

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That's already happening in the U.S. Last week, an appeals court in New York upheld a ruling in favour of Aereo, the insurgent TV service that plucks broadcast signals from the airwaves and sends them over the Internet to a customer's device of choice – be it a traditional TV set, a tablet device, a PC or Mac computer, or a smartphone.

Even though broadcasters aren't compensated for their signals in Canada, they are in the U.S.: Last year, retransmission fees, as they are called, amounted to more than $2.3-billion (U.S.). Aereo may be small, but it represents a huge threat to that income, so the broadcasters took the company to court and lost – twice now. Which is why, on Monday of this week, Chase Carey, the COO of News Corp. said its Fox TV network was thinking about pulling the signal off the air and distributing it only over cable, where Aereo couldn't grab it without paying.

A few hours later, the chairman of the Spanish-language network Univision said it might consider becoming a cable-only operation too. And on Tuesday, Les Moonves, the CEO of the CBS network, told the New York Times he supported Mr. Carey.

For Jean-Philippe Vergne, this is just another turn of capitalism's screw. An assistant professor at the Richard Ivey School of Business, he recently co-authored a provocative book arguing that, far from being dangerous to business and society, piracy should be recognized as a major element in the evolution of capitalism.

In The Pirate Organization, which he adapted for a talk last Friday at Western University's own TEDx conference, Mr. Vergne and Rodolphe Durand note that, throughout history, the development of an industry has tended to follow a predictable pattern: "It is not all about competition. It occurs in waves, it expands into new territories using monopolistic controls – then free trade kicks in," he said. "One big important actor that contributes to shaping the rules of the game in those new territories (is) pirates."

Yes, it's an awfully benevolent view of pirates, and it manages to ignore the whole nasty side of, say, murderous Somalis terrorizing the high seas. But Mr. Vergne isn't even sure those desperadoes really belong in the same category as, say, a suburban teenager torrenting Scary Movie 5 before it opens in theatres this weekend.

"Why do we use the same words for copying files illegally on the Internet and looting a ship's cargo? What's the connection?" he asks. (The Pirate Organization also explores "bio-piracy," which would include such actions as the Supreme Court of India's recent rejection of an attempt by the drug-maker Novartis to patent protect a new formulation of an old cancer drug.) "Beyond the old-fashioned sea piracy – for which there is a definition provided by the UN – the other forms of piracy: online piracy, pirate radio, bio-piracy, there is actually no definition for those terms, in any legal code anywhere."

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That's one reason the debate is so vitriolic. "Everybody's scared, because we lack the tools – the conceptual tools, the legal tools – to understand what (piracy) means and what's going on."

But as the incumbent companies wait for the development of suitable definitions, pirate firms are blithely pushing the boundaries of acceptable behaviour: This week, the CEO of Aereo, Chet Kanojia, was in Washington, pressing his case with U.S. lawmakers.

For the moment, Canadian broadcasters are safe from the threat posed by Aereo and the dozens of others disrupting the U.S. TV landscape. But a little fear would do them well. At an industry conference last month, the chair of the CRTC asked TV executives and producers whether they had a "healthy discontent with the way things are." He was telling them, really, to think like pirates, to disrupt their own businesses – for their own good, and the good of the country. Because he knows that, if they don't, the real pirates are going to wreak hell when they get here. It's just a matter of time.

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About the Author
Senior Media Writer

Simon Houpt is the Globe and Mail's senior media writer, charged with covering the industry's transformation. He began his career with The Globe in 1999 as the paper's New York arts correspondent, covering the cultural life of that city through Canadian eyes. More

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