The storm clouds are gathering for TV streamer Zattoo. After a court in May told it to block movies broadcasted via Germany’s ARD and ZDF channels following action by Universal and Warner Bros., it’s now yanked MTV’s four German channels from the service, reportedly fearing further legal action. Zattoo has stopped airing MTV Networks’ MTV, Viva, Nick and Comedy Central channels, as well as Tele 5, a German channel showing US movies.

RapidTVNews: “According to MTV Networks (NYSE: VIA) Germany, Zattoo has cancelled the carriage contract because it feared legal consequences instigated by third parties which claim that the service doesn’t resemble conventional cable distribution. The contract concluded between the company, which operates the three channels and Zattoo contained a special cancellation clause in the event that Zattoo incurred copyright problems.”

Zattoo works by re-broadcasting channels to a desktop app using peer-to-peer delivery - the streams include channels’ own TV ads but Zattoo inserts its own when viewers switch channels and open the app. Universal and Warner Bros. protested that Zattoo should not sell ads in to its movies. The company claims to operate in the UK through a legal loophole which allows free-to-air programmes to be re-aired, and has been building direct carriage relationships with other channels (I watched the Champion’s League final whilst making kitchen in the dinner this way). Even if Zattoo can be legally sure of selling its ads in to carried channels’ streams, the increasingly slim CPMs commanded for such things may mitigate against building a large business.

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