paidContent news watch | Broadband

AT&T: The iPhone Was Good, But Not Good Enough To Hold Off A Q4 Loss

2012-01-26T15:30:14Z

A set of quarterly results today from AT&T (NYSE: T) that underscored some of the aftershocks the carrier is feeling in the wake of its failed bid to buy T-Mobile USA. The carrier swung to a loss and failed to meet analysts’ estimates on earnings, partly down to a $4 billion charge it took for ending negotiations with Deutsche Telekom (NYSE: DT), after meeting what appeared to be insurmountable regulatory opposition to the deal.

The $4 billion charge—$3 billion in fees and $1 billion in wireless spectrum to T-Mobile USA—put a big dampener the quarter, which otherwise saw big gains in what the carrier refers to as its “growth engines”: wireless services and specifically those around smartphones; wireline data, including its U-verse TV service; and business services.

Overall revenues were $32.5 billion for the quarter, coming in above analyst estimates according to a poll from Yahoo. Excluding the charges, earnings per share were $0.42, which missed average analysts’ estimates of $0.43. The total net loss for the quarter was $6.63 billion.

iPhone juggernaut. It’s been a year since AT&T lost its exclusive grip on the iPhone in the U.S. but such is the power of the Apple (NSDQ: AAPL) brand in wireless right now, and AT&T’s continuing hold on its original iPhone customers, that the carrier nevertheless continues to get great dividends out of its association with it. AT&T said that it made 7.6 million iPhone activations for the quarter, with overall smartphone sales totaling 9.4 million devices.

AT&T didn’t spell out exactly how many iPhones it sold of those activated—and indeed some could have been bought directly from Apple unlocked. But if you assume that most would have been bought directly via AT&T, that works out to AT&T accounting for some 20 percent of the 37 million iPhones Apple sold in the last quarter, and iPhone accounting for some 80 percent of AT&T’s smartphone sales.

It also shows that despite some of the negative press that AT&T has faced over the quality of its wireless data network, it is still holding on to its customers over competitors Verizon and Sprint (NYSE: S). In its earnings earlier this week, Verizon noted that it had sold 7.7 million smartphones and seen 4.3 million iPhone activations in the quarter.

Correspondingly, AT&T said it saw a 10 percent growth in wireless revenues to $16.7 billion. Wireless data revenue growth is outstripping that of mobile revenues overall: it was $5.9 billion, up nearly 20 percent on a year ago, which AT&T says was driven by internet access, app usage and messaging.

AT&T’s fixed digital content play isn’t doing so bad, either. Revenues for its U-verse high-speed broadband and TV service were up by almost 44 percent over a year ago, and partly offset declines in DSL. Still not by enough: total revenues for wireline services were down by 1.4 percent to $14.9 billion.

AT&T does not break out tablets as an individual category and instead groups them with other non-phone “branded computing devices” like aircards. It said it had its best-ever quarter for the category, with sales of 571,000 with total subscribers now numbering 5.1 million, a rise of 70 percent.

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Boxee Offers New Enticement For Cord Cutters: Broadcast Channels

2012-01-24T19:50:17Z

When people think about ditching their cable or satellite subscriptions in favor of one of the growing number of internet-connected set-top boxes, one of things that gives them pause is the idea of losing access to live TV. Now Boxee, one of the companies encouraging TV watchers to cut the cord, has added a feature that addresses that concern.

Boxee’s Live TV dongle, available for pre-order for $50 device, connects the Boxee Box streaming device (via USB port) to an ATSC antenna, allowing users to access the HD signals of over-the-air broadcast channels including the Big Five Networks.

Now, in addition to streaming video content from platforms like Netflix (NSDQ: NFLX) and Vudu, Boxee users can watch those episodes of Big Bang Theory they’ve been missing. (But Boxee still doesn’t have a digital video recorder option to time-shift this kind of viewing.) And as TechCrunch noted Tuesday, those who get their broadband service through cable providers might also be able to access a handful of basic-cable channels by porting the cable feed through the device. Boxee also released the latest version of its device software, which includes a new user interface to support these channel inputs, among other refinements.

Boxee, which says it has 2 million registered users, ranks third in the so-called over-the-top (OTT) set-top box category, behind Apple (NSDQ: AAPL) TV and Roku. Boxee’s market share is only a small slice of a total category user base that the company says numbers about 15 million. The company argues that its newest enhancements will help it justify having the highest price point in the category—D-Link’s Boxee Box sells for $180. “In one fell swoop, Live TV has allowed us to add 89 of the top 100 shows to Boxee, and to create a seamless experience between broadcast and internet content that Roku and Apple TV can’t match,” Boxee VP of marketing Andrew Kippen told us.

For their part, cable and satellite providers have sensed the threat from the new competition, and have tried to beef up their own product offerings like digital video recording. And while TV services like DirecTV have continued to raise prices across the board, they’ve begun allowing some customers who threaten them with cord-cutting to renegotiate their monthly rates (this reporter was able to have his bill reduced by the satellite carrier from $87 to $57 in December using that leverage).

How widespread is cord cutting? Bain Capital, in figures released last year, found the trend is still in its very early stages. However, the company’s research also determined that one-third of cable and satellite subscribers would give up their subscription for the right alternative. Bain also found that 13 percent of subscribers would prefer a “cable light” option, whereby they access only a handful of basic-cable channels for a much lower price.

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The Digital Piracy Problem Is Riddled With Hypocrisy

2012-01-23T17:57:35Z

In the summer of 2009, I found myself invited to a small party in an old bourgeois apartment with breathtaking views of the Champ-de-Mars and Eiffel Tower. The gathering was meant to be an informal discussion among media people about Nicolas Sarkozy’s push for the HADOPI anti-piracy bill. The risk of a heated debate was very limited: everyone in this little crowd of artists, TV and movie producers, and journalists, was on the same side, that is against the proposed law. HADOPI was the same breed as the now comatose American PIPA (Protect Intellectual Property Act) and SOPA (Stop Online Piracy Act). The French law was based on a three-strikes-and-you-are-disconnected system, aimed at the most compulsive downloaders.

The discussion started with a little tour de table, in which everyone had to explain his/her view of the law. I used the standard Alcoholic Anonymous introduction: “I’m Frederic, and I’ve been downloading for several years. I started with the seven seasons of The West Wing, and I keep downloading at a sustained rate. Worse, my kids inherited my reprehensible habit and I failed to curb their bad behavior. Even worse, I harbor no intent to give up since I refuse to wait until next year to see a dubbed version of Damages on a French TV network… I can’t stand Glenn Close speaking French, you see…” It turned out that everybody admitted to copious downloading, making this little sample of the anti-Sarkozy media elite a potential target for HADOPI enforcers. (Since then, parliamentary filibuster managed to emasculate the bill.)

When it comes to digital piracy, there is a great deal of hypocrisy. One way another, everyone is involved.

For some large players — allegedly on the plaintiff side — the sinning even takes industrial proportions. Take the music industry.

In October 2003, Wired ran this interesting piece about a company specialized in tracking entertainment contents over the internet. BigChampagne, located in Beverly Hills, is for the digital era what Billboard magazine was in the analog world. Except that BigChampagne is essentially tracking illegal contents that circulates on the web. It does so with incredible precision by matching IP numbers and zip code, finding out what’s hot on peer-to-peer networks. In his Wired piece, Jeff Howe explains:

BigChampagne’s clients can pull up information about popularity and market share (what percentage of file-sharers have a given song). They can also drill down into specific markets – to see, for example, that 38.35 percent of file-sharers in Omaha, Nebraska, have a song from the new 50 Cent album.

No wonder some clients pay BigChampagne up to $40,000 a month for such data. They use BigChampagne’s valuable intelligence to apply gentle pressure on local radio station to air the very tunes favored by downloaders. For a long time, illegal file-sharing has been a powerful market and promotional tool for the music industry.

For the software industry, tolerance of pirated contents has been part of the ecosystem for quite a while as well. Many of us recall relying on pirated versions of Photoshop, Illustrator or Quark Xpress to learn how to use those products. It is widely assumed that Adobe (NSDQ: ADBE) and Quark have floated new releases of their products to spread the word-of-mouth among creative users. And it worked fine. (Now, everyone relies on a much more efficient and controlled mechanism of test versions, free trials, video tutorials, etc.)

There is no doubt, though, that piracy is inflicting a great deal of harm on the software industry. Take Microsoft (NSDQ: MSFT) and the Chinese market. For the Seattle firm, the US and the Chinese markets are roughly of the same size: 75 million PC shipments in the US for 2010, 68 million in China. There, 78 percent of PC software is pirated, vs. 20 percent in the US; as a result, Microsoft makes the same revenue from the Chinese than from… the Netherlands.

More broadly, how large is piracy today? At the last Consumer Electronic Show, the British market intelligence firm Envisional Ltd. presented its remarkable State of Digital Piracy Study (PDF here). Here are some highlights:

—Pirated contents accounts for 24 percent of the worldwide internet bandwidth consumption.>

—The biggest chunk is carried by BitTorrent (the protocol used for file sharing); it weighs about 40 percent of the illegitimate content in Europe and 20 percent in the US (including downstream and upstream). Worldwide, BitTorrent gets 250 million UVs per month.

—The second tier is made by the so-called cyberlockers (5 percent of the global bandwidth), among them the infamous MegaUpload, raided a few days ago by the FBI and the New Zealand police. On the 500 million uniques visitors per month to cyberlockers, MegaUpload drained 93 million UVs. (To put things in perspective, the entire US newspaper industry gets about 110 million UVs per month). The Cyberlockers segment has twice the users but consumes eight times less bandwidth than BitTorrent simply because files are much bigger on the peer-to-peer system.

—The third significant segment in piracy is illegal video streaming (1.4 percent of the global bandwidth.)

There are three ways to fight piracy: endless legal actions, legally blocking access, or creating alternative legit offers.

The sue-them-untill-they-die approach is mostly a US-centric one. It will never yield great results (aside from huge legal fees) due to the decentralized nature of the internet (there is no central servers for BitTorrent) and to the tolerance in countries in harboring cyberlockers.

As for law-based enforcement systems such has the French HADOPI or American SOPA/PIPA, they don’t work either. HADOPI proved to be porous as chalk, and the US lawmakers had to yield to the public outcry. Both bills were poorly designed and inefficient.

The figures compiled by Envisional Ltd. are indeed a plea for the third approach, that is the creation of legitimate offers.

Take a look at the figures below, which shows the peak bandwidth distribution between the US and Europe. You will notice that the paid-for Netflix service takes exactly the same amount of traffic as BitTorrent does in Europe!

US Bandwidth Consumption:

Europe Bandwidth Consumption:

Source : Envisional Ltd

These stats offer a compelling proof that creating legitimate commercial alternatives is a good way to contain piracy. The conclusion is hardly news. The choice between pirated and legit content is a combination of ease-of-use, pricing and availability on a given market. For contents such as music, TV series or movies, services like Netflix, iTunes or even BBC iPlayer go in the right direction.

But one key obstacle remains: the balkanized internet (see a previous Monday Note Balkanizing the Web), i.e. the country zoning system. By slicing the global audience in regional markets, both the industry (Apple, for instance) and the local governments neglect a key fact: today’s digital audience is getting increasingly multilingual or at least more eager to consume content in English as it is released. Today we have entertainment products, carefully designed to fit a global audience, waiting months before becoming available on the global market. As long as this absurdity remains, piracy will flourish. As for the price, it has to match the Average Revenue Per User (ARPU) generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yielding an advertising revenue that matches the $34.99 Apple is asking for the purchase of the entire season IV. Maintaining such gap also fuels piracy.

I want Netflix, BBC iPlayer and an unlocked and cheaper iTunes everywhere, now. Please. In the meantime, I keep my Vuze BitTorrent downloader on my computer. Just in case.

Based in Paris, Frédéric Filloux is the GM of the French ePresse consortium. He also edits the Monday Note, where this was first published. It is posted here with his permission.

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Let's Try This Again: UK Regulator Revises 4G Auction Terms For Q4 2012

2012-01-12T12:13:55Z

While some operators in some countries (like the U.S. and Japan) have already celebrated birthdays for their LTE services, 4G in the UK hasn’t even been born yet. But now at least it looks like we might have a due date. UK regulator Ofcom today set out new proposals for a 4G spectrum auction to take place sometime in Q4 2012, which could mean the first 4G services coming to market in mid-2013.

This 4G auction—covering unused spectrum in the 800MHz band, along with higher-frequency airwaves in the 2.6GHz band—had previously been scheduled for the first quarter of 2012, and for those keeping track was talked about as early as 2009. Ofcom had to delay that when major operators protested Ofcom’s proposals for how it would allocate spectrum (the combined JV of Orange and T-Mobile and their existing spectrum presented one issue; another was how Three, the smallest of them, would get a fair shake). The regulator’s priorities are to make sure that there are four strong competitors, but it also wants to ensure that it raises the highest amount of money possible from those operators in exchange for the licenses.

The 3G auction in UK in 2000 raised a ridiculous amount of money for the UK government: £22.47 billion ($35.4 billion), with Orange, Vodafone (NYSE: VOD) Airtel (now just called Vodafone), O2 (then owned by BT (NYSE: BT) and called Cellnet), One2One (now known as T-Mobile) and new entrant Hutchison Whampoa (now called Three) all winning spectrum. Operators in the UK and elsewhere in Europe ended up having to write down some of the value of those costly 3G projects.

The advantage of a delay is that it has given Ofcom a chance to revisit some of the requirements that it will put on would-be 4G operators. It should be noted that so far it is staying out of saying what kind of services should run on those 4G networks, although it looks like LTE is the most-preferred technology among those operators.

And the disadvantage of the delay? Despite the UK government’s constant claims of being a digital leader, the UK is not very trailblazing in this case. Ofcom notes that mobile data demand in Europe is expected to grow by more than 500 percent in the next five years. For those in the UK who like to use mobile services, hopefully this delay to 4G auctions and commercial rollouts will be the last.

Some of the highlights from the consultation released by Ofcom today (full documentation can be found here):

—98 percent cover: Ofcom proposes that 4G services will cover “at least” 98 percent of the UK population. That’s higher than 3G today, and represents an increase on the 95 percent requirement originally laid out in Ofcom’s first consultation. The UK government is investing £150 in building out coverage to “not-spots”, and one option Ofcom lists is to potentially link up one of the bidders with this government scheme to support that rollout. It will effectively mean that more remote parts of the UK will be using mobile broadband in place of fixed broadband to be connected.

—Competition: This time around, Orange and T-Mobile are bidding as one in their Everything Everywhere venture, bringing the existing mobile network operators down to four, not counting the possibility of another company emerging and bidding for spectrum. Ofcom said today that it believed “at least four” was the right number of operators in 4G to ensure effective competition.

What’s interesting is that Ofcom proposes keeping aside some of the 2.6GHz spectrum for a group of new entrants to use for new services (such as those on educational campuses). It’s not clear whether that group would count as one of Ofcom’s “at least four” operators and what other allowances they might get.

—New deadline: Interested parties now have 10 weeks to comment on these proposals with a final decision coming in 2012 and the auction starting a few months later.

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What The Burst Of Hollywood A-Listers Will Mean For Online Video

2012-01-11T20:13:11Z

Tom Hanks. Louis C.K. Lisa Kudrow. Kevin Spacey. David Fincher. Bill Maher. Jennifer Lopez. Judy Greer. Steven Van Zandt. Morgan Spurlock. Ed Begley, Jr. Heidi Klum. What do these Hollywood A-Listers (or near A-Listers) and other stars all have in common? They’re all involved in original online video projects which are helping upend the Hollywood ecosystem, legitimize the online medium and further fragment audiences. Each no doubt has his/her own reasons for getting involved, and taken together they’re creating momentum that is going to draw in even more talent.

Of course, the big news this week was Tom Hanks partnering with Yahoo for the animated series “Electric City.” Hanks, one of Hollywood’s most bankable stars, said he was drawn by the opportunity to make “ambiguous attractive” which feels like another way of saying he’s searching for greater creative freedom. While creativity may be motivating Hanks, in Louis C.K.‘s case, it seems more about tweaking the System and proving that when presented with a compelling offer (in this case a $5 DRM-free download of his “Live at the Beacon Theater” special), people will behave properly (i.e. pay rather than steal).

All of these initiatives are risky, but the prerequisites for them to succeed are firming up as well. Most important, established companies like YouTube (NSDQ: GOOG), Yahoo (NSDQ: YHOO), AOL (NYSE: AOL), Netflix (NSDQ: NFLX) and Hulu are leading the charge, and seem ready to invest in and deficit finance these productions. Each has meaningful original content initiatives, underpinned by their sizable audiences and monetization capabilities (whether ad-supported or subscription-based). They are each doing their part to create an ecosystem of third-party production houses gaining expertise in digital, and therefore poised to help subsequent stars succeed in the online medium. Often big brands are getting involved early on, enticed by customized, high-value opportunities.

In addition, there are countless independent online vide sites that are attracting big audiences, increasing their content quality and building their own brands. In this group are sites and producers like Machinima, Revision3, Maker Studios and others.

One final - and crucial - piece to the picture are the connected TVs and devices that allow audiences to experience these new shows in a familiar and high-quality, lean-back mode. Watching short clips on computers jump-started the online video industry, but to make it a mainstream entertainment experience requires conforming to viewers’ expectations. The proliferation of connected TVs, gaming consoles, Blu-ray players, tablets, Rokus, Apple (NSDQ: AAPL) TVs, etc. is creating a massive user base that can tune into these online-only productions as easily as flipping conventional channels.

And that brings us to the question of what impact all of these initiatives will have on the traditional Hollywood ecosystem. I think it’s inevitable that audience fragmentation will increase further. Just as cable TV networks have splintered broadcast TV audiences over the last 30 years, online is now going to sub-divide all of TV. Many on-demand viewers are already oblivious to what channel a particular program actually appears on; to this audience there will be no big behavior leap required to navigate to Tom Hanks’ or another star’s new online show. Discovery will be facilitated by emerging personalized aggregation and recommendation mechanisms.

Hollywood is entering a brave new world, driven by audience changes, technology advancements and the shifting interests of its own biggest stars. How it adapts to all of this is yet to be determined.

Will Richmond is president and founder of Broadband Directions LLC, a market intelligence, publishing and consulting firm specializing in broadband-delivered video, which he established in 2003. Will edits and publishes VideoNuze, a daily online publication widely read by broadband video decision-makers.

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Who Says There Are Too Many Android Tablets! Orange/Huawei Add One More

2012-01-10T14:01:31Z

CES, currently in full swing in Las Vegas, promises to bring out another wave of Android tablets, to add to the 40+ that were on the market before the week even started (if you don’t count e-readers built on the platform; if you do, it’s more like 50). Sound flooded? Not if the price and product are right—or so the thinking goes at France Telecom’s UK mobile operator Orange.

Orange today is introducing a new Android tablet, the first to come with Orange’s own branding instead of that of the tablet-maker. Called the Tahiti, the device, Orange tells me, was built by Huawei, sports a seven-inch screen and runs on Android Honeycomb, Google’s tablet-optimized version of the platform.

Possibly the most unique selling point—or at least the one that Orange is touting above others—is its price point. The 3G and WiFi-enabled tablet will cost users a mere £69.99 ($108), in addition to a commitment to a 24-month, £25/month contract. That sounds potentially reasonable until you work out the total cost: £669.99 ($1,036). That includes two gigabytes of data, 1 GB of which is during “quiet time” when fewer people use Orange’s network.

Prior to this, Huawei had developed two of its own-branded tablets to-date; both have seven-inch screens like the Tahiti. The IDEOS S7 is marketed as a content-friendly device, while the higher-specced MediaPad was the company’s first foray into using the Honeycomb OS.

By comparison, the Tahiti looks very much like the MediaPad (pictured) in its button-free face and camera positioning in the upper corner of the device. It may well be the MediaPad but under a different name. That would be a clever way for Huawei to shift stock further than its own retail steam might allow.

Orange tells me this is the first time it has launched an own-branded tablet in the UK, and the first time that it is selling this specific product. But that does not mean that it is new to the game. The company launched another own-branded tablet last year, which it distributed through its operations in Spain, Poland, Romania and Slovakia around the concept of offering inexpensive tablets against pricier branded products like the iPad.

That first tablet was a rebranded IDEOS S7, Orange told me at the time. Clearly that did well enough for them to try the concept out again with a more expensive tablet in a more developed market.

The Tahiti looks anything but exotic, so why the name? It could be a play on a type of fruit, the Tahiti Orange, AKA the Persian Lime. The other connection: Orange already has a line of own-brand handsets named after various destinations (San Francisco, Rio, Monte Carlo, Barcelona and Atlanta).

Dish Super-Sizes The DVR As Part Of Turnaround Effort

2012-01-10T02:20:20Z

Struggling satellite TV carrier Dish Network (NSDQ: DISH) christened what it called a company “relaunch” with a new digital video recorder that can record 2,000 hours of content and record up to six shows in once. If that doesn’t cover your time-shifting needs, and your last name isn’t Duggar, you might be watching too much television.

Announced during an afternoon press conference at CES, the company’s spiffy new “Hopper” DVR was the highlight among numerous Dish Network announcements, as the Englewood, Colo-based satellite TV carrier looks to recover from several tough years filled with subscriber losses. In fact, appearing at the Las Vegas press conference alongside a live kangaroo—the new Dish mascot—CEO Joe Clayton even rolled out a new logo, terming the press conference a “relaunch of the company,” according to published reports.

Coupled with a sidekick box called the “Joey” – subscribers can put up to four of those in places like bedrooms and bathrooms—the Hopper is part of a new service Dish calls Prime Time (NYSE: TWX) Anytime. Up to six live programming signals can be recorded at once and up to four can be played back at one time. Among the other news from Dish Monday:

>> Dish will begin bundling broadband with its video services this summer (base bundle price: $79.99 per month). The company is partnering with satellite communications company ViaSat Inc. to provide up to 12 Mbps of data transfer.

>> Dish will expand its Blockbuster Home package by adding 3,000 kid-friendly titles to the library. Titles available for streaming on demand include Veggie Tales, Inspector Gadget, Goosebumps, Heathcliff, I Spy and Strawberry Shortcake.

>> Dish is also expanding the amount of Latino-targeted programming available through Blockbuster home, adding more than 3,000 episodes of telenovellas.

>> The company touted a new adapter that lets subscribers watch live programming on devices including tablets.

In November, Dish reported that it had lost an additional 111,000 subscribers in the third quarter, bringing its total customer count below 13 million. Through September 30, Dish’s subscribers were down nearly 20 percent for 2011.

Disney, Comcast And Why TV Everywhere Alone Is Not Enough

2012-01-05T19:47:21Z

Yesterday’s press release from Disney (NYSE: DIS) and Comcast (NSDQ: CMCSA), announcing a comprehensive new ten-year distribution agreement covering over 70 different services is a testament to the idea that improved access to programming is key to maintaining the appeal of the traditional multichannel pay-TV business model.

The deal grants Comcast sought-after multi-platform streaming and on-demand rights for 70 different Disney, ABC and ESPN programming services. This is the essential vision of “TV Everywhere” - anywhere/anytime/any device access to the full range of cable and broadcast programming, with the caveat that you have to be an authenticated subscriber to pay-TV services.

While I’m a long-standing proponent of TV Everywhere, yesterday’s Disney-Comcast deal flags an important fallacy: important as it is, TV Everywhere alone will not immunize the multichannel model from subscribers’ frustration with rising fees/limited packaging options or the appeal of new over-the-top competitive challenges. Yes, on-demand delivery to multiple devices is a must, however, it needs to be combined with significant innovation in packaging and pricing to meet consumers’ evolving expectations. While there are various lower-priced and more flexible programming options sprouting up around the industry, they either have important disincentives (e.g. reduced broadband speeds or elimination of VOD access) or lack serious promotion.

The essential element of the multichannel model is that a whole bunch of diverse channels are bundled together into a one-size fits all lineup. This approach was critical in pay-TV’s early days; by exposing viewers to various unknown channels and nurturing them with small monthly carriage fees, they got the sustenance needed to thrive longer-term. While there’s still merit to the idea of variety, the problem is that the overall cost of the multichannel bundle is now sky-high, and its affordability is further exacerbated when broadband, phone and other miscellaneous charges (e.g. HD, additional outlets, etc.) are added in.

The key driver of pay-TV’s affordability problem is the increased cost of all programming services. But, as I’ve written numerous times (links below), there’s no single programming category more culpable than sports. Everywhere one looks in the sports world, profligacy abounds: broadcast rights, monthly carriage fees, players’ and coaches’ salaries, team valuations, ticket prices, etc. And, as I’ve pointed out numerous times as well, the “skeleton in the closet” problem is that much of this profligacy is being paid for by multichannel subscribers who are only casually interested in sports or aren’t fans at all.

If you’re wondering how things got to this point, I highly recommend “Those Guys Have All The Fun: Inside the World of ESPN” the best-selling book which chronicles, through hundreds of interviews with principals, the network’s evolution from start-up to current powerhouse (I read most of it during the holiday break). The salient passage lies on pages 406-411. That is where the story of how ESPN won its first full-season NFL broadcast deal in 1998, as part of a broader package with ABC, is discussed. The multi-billion dollar bid was funded by an astounding 20 percent increase in ESPN’s carriage fee for each year of the deal (by Hearst CEO Vic Ganzi’s calculation, it took ESPN’s fee from $.40/month/subscriber at the beginning to $3.20/mo/subscriber at the end).

Of course, these higher fees were recaptured by pay-TV operators through their own higher rates. But it’s not fair to focus solely on ESPN; as the book explains, ESPN was perpetually bidding against Ted Turner’s irrational extravagance. Then came competition from Fox Sports, accompanied by the emergence of all the Regional Sports Networks (“RSNs”). And don’t forget the broadcast networks’ sports rights deals, which are lately being funded in part by expensive new retransmission consent fee deals with pay-TV operators. Put them all together, and as I’ve previously explained, a big chunk of what all pay-TV subscribers spend each month goes solely to cover sports-oriented channels’ fees.

That brings us back to Disney-Comcast and what’s likely to unfold in the video landscape over the deal’s ten years. For sports fans and entertainment fans, TV Everywhere’s multi-platform/on-demand access is terrific. However, Comcast and other operators must accelerate their efforts to address subscriber segments individually, so they can choose - and pay for - only what they value. For non sports fans that would mean eliminating expensive sports channels, but without impairing their broadband and voice services. Maybe for single male sports fans, it would mean eliminating unwanted kids’ programming. And so on.

I see signs that Comcast understands this, and a company spokesperson I talked to emphasized it does. Nonetheless, for most average subscribers who might call in to inquire about lower prices or programming flexibility today, the choices are very limited. Inevitably this will deter younger “cord-never” prospects from ever subscribing. And it will cause the economically-challenged - particularly non sports fans - to seek out and opt for cheaper entertainment-oriented OTT options. Importantly, it will also galvanize everyone outside the multichannel ecosystem (Apple, Google, Amazon, YouTube, independent producers, etc.) to become even more aggressive in their attacks on the incumbent pay-TV world.

TV Everywhere is a great concept, but if incumbents believe that it alone can preserve the multichannel model, they’re mistaken. What’s also needed is dramatically more affordable, specialized bundles that match consumers’ interests. If these alternatives don’t materialize and receive real promotion then we can expect a lot of disruption to the pay-TV world over the next ten years.

Ex-Cablevision COO Rutledge Turns Up As Charter CEO

2011-12-20T00:30:23Z

It’s trite but in this case quite true: Cablevision’s loss is Charter’s gain. Tom Rutledge, the deft cable operator who abruptly left Cablevision (NYSE: CVC) late last week, will head St. Louis-based Charter (NSDQ: CHTR)—opting to run his own shop rather than continue the delicate balancing act of running the telecom operations of a public company controlled by the Dolan family.

With James Dolan as CEO, Rutledge, who had been president of Time Warner Cable (NYSE: TWC) before joining Cablevision in 2002, had two options at Cablevision—accept that COO was as high as it goes or leave. (No option available like the Steve Burke play at Roberts-controlled Comcast (NSDQ: CMCSA)—buying NBC Universal.) He has been COO since 2004, overseeing local, which includes Newsday and News 12 Networks, Cablevision Media Sales, and Rainbow Networks before it spun off to become AMC Networks.

Analysts and investors like Rutledge; BernsteinResearch’s Craig Moffett called him “the hands-down best executive in the industry.” As the WSJ’s Shira Ovide noted, the company lost $505 million in market cap in heavy trading the morning after Rutledge’s resignation was announced and closed down nearly 9 percent at $12.75. It gained back a little ground, closing Monday at $13.

But Cablevision’s share price has been dropping for months over concerns that the broadband-and-digital voice-fueled growth has plateaued and its vulnerability to competitor Verizon FiOS. Rutledge’s resignation, preceded by cable head John Bickham, adds to those concerns. Cablevision is looking for someone to head the cable operations but not for a Rutledge successor as COO.

Ovide also mentioned how relieved Rutledge must be to not to have to commute by helicopter to Cablevision HQ on Long Island anymore. Now, though, he’ll be commuting to suburban St. Louis, where Charter is headquartered. Not to worry, though—the intricate employment agreement filed today with the SEC includes commuting costs and travel on the company jet.

Now controlled by private equity firms Apollo Global Management and Oaktree Capital Management, Charter has its own issues. Once the linchpin of Paul Allen’s plans for a wired world, the company was over leveraged with an almost Byzantine financial structure that took bankruptcy to resolve. Neil Smit helped right the ship before leaving to run Comcast’s cable operations. His successor Michael Lovett was in place little more than a year before announcing his plans to resign. Rutledge will join the company now part time and succeed him as CEO Feb. 13.

Charter is the fourth-largest cable operator with 4.4 million basic video subscribers; Cablevision is fifth with 3.2 million.

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France Telecom's Orange Looks To 3D And Xbox For New TV Bells And Whistles

2011-12-16T14:20:54Z

With the growth of over-the-top services that let users access the video they want over the internet (and often, for free), those companies offering pay-TV have to look for more bells and whistles to keep fickle consumers interested in their services. The latest offerings in this area come from France Telecom’s Orange, which has signed deals with Microsoft (NSDQ: MSFT) to offer Orange TV via the Xbox platform, and France’s answer to Google’s YouTube (NSDQ: GOOG), Dailymotion, for an online 3D channel.

Orange says the Xbox service will include 30 channels via the Xbox live platform, including its on-demand and premium channels that it offers through its Orange TV service. It will be available initially only in France. Meanwhile, the Dailymotion service will see Orange launching a new, free 3D channel on the Dailymotion platform. That will be available everywhere, although the content is all in French.

The Xbox service will include the ability for those who have Kinect for Xbox to use voice and gesture controls with Orange’s TV service—perhaps the biggest way that this differs from the other ways you can already access Orange TV via set-top boxes, connected TVs and the Internet.

While there have been a lot of 3D services and devices launched in the last year or so, it remains to be seen whether this is a gimmicky add-on that comes and goes, or whether consumers really have the appetite for such products. The Kinect enablement, however, is a keeper: the technology has provided a huge boost for Microsoft in the past year and it’s likely we will see more competing TV services entering the market in the year ahead.

For that reason, Microsoft has been busily ramping up its own Xbox/Kinect TV offerings: not only is it enabling TV services itself, but it is signing up IPTV providers, in addition to Orange, to the service—most notably, Verizon and Microsoft have announced that FiOS will also be on the platform.

Gaming consoles are a good channel for pay-TV providers to keep tapping: a survey from Nielsen yesterday revealed that video is already a very popular use of these consoles. In the U.S., 14 percent of Xbox 360 time, 15 percent of PS3 time and 33 percent of Wii time is being spent on video viewing, watching channels like Hulu, Netflix (NSDQ: NFLX) and ESPN.

And IPTV providers really need all the help they can get: they launched services relatively late compared to other pay-TV products from satellite and cable providers, in addition to all the OTT competition. Pyramid Research forecasts that IPTV will be installed in only one percent of all broadband enabled homes worldwide by 2012.

Of course, the Xbox service will also give Microsoft a boost in marketing its consoles in the French market, where France Telecom (NYSE: FTE) is the IPTV leader and will be selling the console in its stores as part of the deal. It looks like it is the only IPTV provider in the market to team up with Microsoft exclusively for the Xbox/Kinect service, at least for now.

Meanwhile, the Dailymotion channel shows how Orange is also using the OTT route to market its own services, and possibly grow its traffic there as well.

The service includes what looks like a selection of content from the carrier’s existing paid 3D channel—which incidentally is also available via the Xbox service. It includes Mag3D, a 30-minute 3D gadget program, as well as some TV and film content. It will also be featuring user-generated content: Dailymotion users have the option of designating their videos as 3D for them to appear in the channel.

As this line-up is designated as “for launch”, there is a chance we’ll see Orange launching more, and possibly paid, services on the channel. It already notes that it will have a mobile version of the service available by February 2012.

Orange, which is a 49-percent owner of Dailymotion, has used the investment to further its business reach online before, including an advertising deal announced earlier this year.

Related

The Albert Pujols Deal Shows What's Wrong With The Pay TV Business

2011-12-12T19:49:41Z

When baseball great Albert Pujols signed a staggering 10-year, $254 million deal with the Los Angeles Angels of Anaheim last week, he became over-the-top’s (OTT) new best friend. That’s right, everyone including Netflix (NSDQ: NFLX), Hulu, YouTube (NSDQ: GOOG) and Amazon (NSDQ: AMZN), plus countless online-only content producers, should have been celebrating Pujols’s new riches. Why? Because the Pujols deal is the latest example of how pay-TV seems determined to price itself out of reach for certain segments of the population, opening up a huge window for OTT to succeed.

The Angels’ ability to pull off the Pujols mega-contact falls right in right in line with my post earlier this year, “Not a Sports Fan, Then You’re Getting Sacked for At Least $2 Billion Per Year,” where I explained that massive player contracts and sports rights programming fees are being subsidized in large part by non sports fans. Because sports networks like ESPN (NYSE: DIS), TNT and regional sports networks (“RSNs”) are included in the most popular tiers of digital programming, all subscribers to those tiers—whether they are rabid fans or couldn’t care less about sports—are paying for them. Between their broad subscription bases and high monthly carriage fees, these networks have attained huge financial firepower.

In the Pujols situation, the Angels appear to have leveraged a new 20-year, $3 billion rights deal with Fox Sports West to afford Pujols, as well as star pitcher C.J. Wilson, who also nabbed a 5-year, $77.5 million deal last week. As the LA Times reported, Major League Baseball apparently allowed Angels owner Arte Moreno to opt out of his prior carriage deal with Fox (NSDQ: NWS) last year, just halfway into its 10-year term, allowing him to renegotiate dramatically higher fees. Moreno capitalized on Fox’s anxiety that Time Warner Cable (NYSE: TWC)—which earlier this year poached the Lakers’ TV rights from Fox and broadcaster KCAL beginning in 2012—might alter the balance of power in the LA market especially if it also gets the Dodgers’ TV rights.

This turn of events are great for Moreno as the Fox deal and the addition of Pujols and Wilson clearly increase the value of the Angels (though it remains to be seen how these high-priced new players will translate to the Angels winning on the field; here in Boston we know the correlation between expensive free agents and winning ball games is tenuous at best). The problem of course is that Fox will now be going back to pay-TV operators in the LA area asking for higher carriage fees. Most operators will acquiesce and in turn raise their rates to cover their increased costs. In unrelated remarks last week Liberty Media’s CEO Greg Maffei complained about this dynamic, saying it was “a tax on every American household,” which drew a swift reply from News Corp.‘s COO Chase Carey who said the industry should “respect the business models we built.”

And that brings us back to why the OTT crowd is cheering, again. As the cost of basic digital service has soared to $60 or $70 per month, amid the financial squeeze many Americans face, it’s no secret that pay-TV has created an affordability problem for itself. This is particularly true for the post-college cohort that had already shifted its viewing behavior online. These “cord-nevers,” facing uncertain employment prospects, are simply being priced out of the market. They, and plenty of others - particularly non sports fans - will increasingly consider whether they can get by without pay-TV, simply by relying on lower-cost OTT alternatives.

In fairness, it’s not just sports fees that have soared; as the LA Times also pointed out last week that programming costs at many entertainment-oriented networks have also increased rapidly, which in turn drives these networks to also demand higher carriage fees too. Then there are the broadcast networks’ successful efforts to collect retransmission fees from pay-TV operators. All of this is contributing to pay-TV getting more expensive all the time. But the sports networks in particular are a pain point, because they are so much more expensive on a per channel basis, and because essentially all subscribers are asked to foot the bill. Pujols is obviously not literally OTT’s best friend; rather he’s just the latest face of a far larger trend in sports and the pay-TV industry.

Even as all this is happening, the choices available online, and the ability to watch them via connected devices, is improving. It’s a situation that OTT providers will almost certainly capitalize on.

Related

Post Its $3.6 Billion Cable Deal, Verizon Puts Brakes On FiOS Expansion

2011-12-09T13:21:22Z

Last week, Verizon announced a $3.6 billion deal to buy wireless spectrum from cable operators and resell their pay-TV services. This week, Lowell McAdam, Verizon’s CEO, started to lay out how that deal will impact other services operated and sold by the carrier: it looks like it will not continue to build out its FiOS broadband and IPTV network when it finishes the current planned phase.

The company has also said that it will not extend a trial it had been running with DirectTV since last year—although this will not be because of the agreement that it signed with Comcast (NSDQ: CMCSA), Time Warner Cable (NYSE: TWC) and Bright House Networks and is now awaiting approval from regulators.

The cable deal will not only give Verizon a significant lift in wireless spectrum assets—SpectrumCo, the cable JV, will be handing over 122 spectrum licenses for advanced wireless services, which cover 259 million POPs—but it will also allow the carrier the chance to bundle its wireless services with pay-TV operations that extend far beyond the current footprint of the company’s FiOS fiber-optic network.

At the UBS Media and Communications Conference this week, McAdam noted that as a result of this, it would no longer have a need to aim for a costly build out fiber-optic connection into all homes after it reaches a target of about 18 million. “We are going to build out what we said and not any more,” he told the conference (via transcript on Verizon’s site).

Meanwhile, the company also looks to be ending another venture, but it is apparently unconnected to the cable deal: the company is concluding a trial that it started last year with DirectTV offering TV, satellite and broadband access via an LTE receiver on the satellite dish. “The trials are done because the trials were scheduled to be done. This is not linked in any way at all,” a spokesperson told FierceWireless today.

McAdam played down the idea of how, exactly, it would push innovation on its FiOS service while at the same time reselling services from its competitors:

“This obviously, as you can imagine, was the topic of deep discussion with Comcast and Time (NYSE: TWX) Warner,” he told the audience at the UBS conference. “The theory is, though, that all boats will rise, so FiOS will not be disadvantaged in any way. If I put my Verizon hat on, we think that the FiOS platform is the strongest platform and each partner can take the core product and do some innovation on top of that if they choose to…FiOS will have a bunch of very good products that will come that, frankly—and come faster than it would have come if we tried to do it on our own.”

Verizon has been the subject of speculation this week over whether it would be launching a streamed service that would compete with the likes of Netflix (NSDQ: NFLX). Some have suggested that it could partner with Netflix competitor Redbox on the project.

Related

Cable Operators To Sell Verizon Advanced Wireless Spectrum For $3.6 Billion

2011-12-02T15:41:34Z

A big move for Verizon Wireless (NYSE: VZ) today, and something of a seismic shift for the cable industry as it moves away from its fixation on offering its own wireless services to complement their broadband, TV and phone offerings: Verizon has agreed on a deal to pay $3.6 billion for advanced wireless spectrum from Comcast (NSDQ: CMCSA), Time Warner Cable (NYSE: TWC) and Bright House Networks, which it will use for LTE mobile broadband services.

As part of the deal, the cable operators have also entered into a reselling agreement with Verizon: the cable operators will resell Verizon’s wireless services, and Verizon will resell the cable operators’ products.

The wireless reselling option sounds like great news for Verizon, especially if the operators offer it at a better rate than any other mobile service. Currently Sprint (NYSE: S) is a preferred partner for mobile services, so this could be a move away from that, although that has not been made clear in today’s statement. What is equally unclear is how and if Verizon will position cable services vis a vis its own FiOS TV and broadband packages.

The companies also say they will be forming an “innovation technology joint venture” to work on better integration of wireless and wireline products and services.

SpectrumCo, the JV of the three operators, will be handing over 122 spectrum licenses for advanced wireless services, which cover 259 million POPs. Comcast, as a 63.6 percent owner of the JV, will get $2.3 billion, while Time Warner (NYSE: TWX) will get $1.1 billion for its 31.2 percent stake. Bright House will get $189 million for its 5.3 percent stake in the JV.

The deal marks a big move in the consolidation of wireless assets in the U.S., and comes at a time when smaller operators, consumer groups and regulators are raising the alarm bells around a proposed merger between AT&T (NYSE: T) and T-Mobile, for the amount of market power that the two operators will have combined, and what that would mean for free-market competition.

This news today could go some way to explaining why Verizon has been so quiet about the AT&T merger proposal with T-Mobile: it had a cable card up its sleeve.

As with the AT&T/T-Mobile merger, this deal will need to get regulatory clearance to go ahead.

The news also comes as other pay-TV operators have been rethinking their wireless propositions.

At one time, it was a given that major cable operators should be thinking of owning wireless assets to deliver quadruple-play bundles of services to their consumers covering TV, broadband, phone and mobile. Now, the benefit of owning that network, operating it, and investing in it are not so clear.

For starters, mobile contracts tend to be tied to individuals, while the other services are for households. Although some buy cellular services in family plans, not all do.

But there is also the issue of economies of scale. Newer, and therefore smaller, mobile operators find it hard to compete with larger providers not just for handset procurement, but also in terms of investment to build out advanced networks.

Just last week, Cox announced that it would be discontinuing its wireless service offerings, citing both of these reasons for its decision.

Related

Sprint Steps Up Yet Again To Support Clearwire With Up To $1.6 Billion

2011-12-01T17:13:13Z

Clearwire (NSDQ: CLWR) will live to fight on thanks to a cash infusion from its good buddy (or frustrated spouse, depending on how you see things) Sprint (NYSE: S), which has agreed to spend as much as $1.6 billion in payments to use Clearwire’s WiMax network over the next several years. As bleak a year as it has been for Clearwire, things would have gotten much worse without Thursday’s agreement.

There are two components to the deal. Sprint has agreed to spend $926 million, of which around $620 million will be spent in 2012, in order to access Clearwire’s WiMax network. Sprint also uses WiMax as its 4G network technology but can augment its reach with access to Clearwire’s network. Under the new deal, Sprint will be able to use that network through 2015 but it has only committed to the next two years.

Sprint has also agreed to help Clearwire fund its decision to build an LTE network, which given the lack of interest in WiMax among consumers and handset makers is vital to both Sprint and Clearwire’s future. Sprint agreed to pay Clearwire up to $350 million to help fund that network assuming Clearwire can hit certain targets by June 2013.

Without this new investment from Sprint, Clearwire might not have been able to make a vital interest payment on its substantial debt that was due today. Its stock had fallen to nearly $1 a share before rebounding Thursday on news of the deal.

Related

Report: Apple To Give 4G A Shot In Arm With Next-Generation iPad, iPhone

2011-12-01T15:49:14Z

We’ve seen some significant strides for LTE in the past year—with some big names like Verizon and AT&T (NYSE: T) getting behind the fast mobile broadband technology and rolling it out for the masses. The latest reports on what Apple (NSDQ: AAPL) is cooking up could be another boost: Apple is supposedly looking to include LTE capabilities in the iPhone and iPad devices that it is releasing next year.

According to this report from Nikkei Business (in Japanese; translation here), the Japanese carrier NTT Docomo is gearing up to release a new iPad and iPhone next year that will work on its LTE network by this fall.

The article cites officials close to the matter, and says the details were ironed out in at meeting in mid-November.

If the report is true, this could be one of the biggest boosts for LTE yet. This is why: LTE offers users network speeds that carriers like AT&T claim can be ten times faster than those of 3G data network. That translates into a much better experience on data-heavy streamed services like video, games and music. Given Apple’s track record for making devices that get people using a lot of mobile content, this could be a match made in wireless heaven.

This is not the first time that we have seen reports that Apple is gearing up to include LTE capabilities in its devices. Among the more recent, a report in MacRumors back in August highlighted that there was code for LTE in iOS 5 and that Apple was hiring experts in the technology.

This is, however, possibly one of the first times that we’ve seen Apple and LTE linked up with a specific operator for deployment.

DoCoMo (NYSE: DCM) is not likely to be the only operator working with Apple towards and LTE phone, but it is definitely a good one to have on side. The Japanese carrier is a veritable granddaddy as far as the technology goes—it has been deploying LTE commercially as far back as 2005, although it only launched it first LTE-enabled smartphone in November 2011. That was the Samsung Galaxy II S.

Other markets like the U.S. are showing a big appetite for LTE. A recent report from NPD noted that one in every five smartphones purchased in the U.S. is now 4G-ready. That could include LTE devices, but also those that work on HSPA networks (the “4G” promoted by T-Mobile USA).

If this report turns out to be true, it’s worth asking how Apple is going about incorporating LTE capabilities into its devices. As IntoMobile and others have pointed out, different countries and carriers are not using the same frequencies for their LTE services. Each device has to be tooled to work in those different bands. Will Apple be the first to go with a chipset that can handle multiple LTE flavors, or will it take the route more travelled and work out LTE on a country-by-country basis?

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Power To The People: ISPs, Media, Users Face Off In EU Legal Triple-Whammy

2011-11-25T00:05:43Z

Consumers in Europe may be feeling the smarting bite of the economic winter settling in around us, but when it comes to internet and mobile usage, there is some small relief coming: a series of legal actions point to host of new rights for private individuals. UK regulator Ofcom has now outlined rules for how ISPs need to communicate broadband speeds to consumers; the European Commission said it is preparing to enforce a Citizens’ Rights directive for communications services in 16 member countries that have yet to implement them; and a European court ruled that ISPs cannot use filters to monitor whether and how a user consumes unlicensed content.

In the UK, Ofcom has laid out areas that ISPs need to address to make it clearer to consumers how internet traffic is managed on those ISPs’ networks.

They included the requirement that ISPs will need to provide details to users on actual average network speeds, rather than peak speeds at optimal times; disclosure to users about when broadband speed may get intentionally reudced, for example, when a subscriber is using peer-to-peer downloading software (eg, BitTorrent); disclosure about any specific services that might get blocked.

In other words, the kind of information that ISPs should have been giving consumers for years already, but have not.

Although this sounds like bad news for ISPs, I actually think this can only be a good thing: some consumers will not pay attention to these details anyway, but those who do will have more information to make the right choice not about about which internet provider they choose to use, but also clarity on what kinds of services might be more difficult to use, and why.

ISPs should probably get on the case with this so that they can manage their messages well, before the regulator, probably more unflatteringly, does it for them: Ofcom says if ISPs do not start to disclose this information themselves, it will use its powers to “introduce a minimum level of consumer information under the revised European framework” that the UK accepted into law in May 2011.

Interestingly that very same European framework came up in a separate matter this week, when the European Commission named and shamed the 16 member countries that had yet to implement the new framework.

That framework (more details here) covers not only the kind of consumer information on broadband usage that Ofcom is now tackling in the UK, but also requirements for how users can switch mobile operators more quickly and easily, more requirements about safeguarding consumer privacy and details about growing infrastructure, including refarming radio spectrum to use it for wireless services.

The Commission says that it has now embarked on legal proceedings against 16 countries—Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Italy, The Netherlands, Poland, Portugal, Romania, Slovenia and Spain—that have to implement the rules, and will likely fine them for being late, although that can take years to work through the system so is perhaps not too much of a threat to those countries that have yet to do anything.

That list is a mixed bag: it includes both countries that you could classify as “mature” markets for broadband as well as those that are still at an earlier part of their growth and—in the case of some such as Greece, Italy, Portugal and Spain—have much more significant economic issues to worry about at the moment. Incidentally, the seven that have approved that framework include the UK, and those European rules are now providing the backbone to the regulations that Ofcom has now set out for UK ISPs.

In truth, it’s not all that surprising to see both France and Belgium on that list. For one, France has enacted some of the most stringent rules in Europe around the prosecution of private users based on their consumption of unlicensed media content, and is actually seeking to extend them. The so-called “Hadopi” law in France is a three-strikes-style system aimed at those who download illegal media files (eg free music or films that have not been licensed by their rights owners), and just the other day French president Nicolas Sarkozy said that he would like those rules extended to users who also stream such content.

Belgium, meanwhile, has been at the center of a heated legal case that people have been likening to the SOPA directives currently making their way through legal hoops in the U.S.

The specific case in question had to do with Belgian ISP Scarlet, which had been sued by Belgian content rights-holding group Sabam for allowing its subscribers to download unlicensed content on its network.

The case has been making its way through the courts for years already, but this now seems to be the definitive ruling: Sabam wanted Scarlet to implement a filtering system to block illegal content; but the court ruled that this would interfere with Scarlet’s business and also violates consumers’ privacy, based on the European directives that are being applied in the UK right now, and are being enforced by the Commission to implement elsewhere.

That seems to put an end to one way for rights holders to go after those who consume unlicensed, free content, but it doesn’t end the discussion altogether. According to the New York Times, the ruling does not affect whether ISPs can outright block certain sites on their network (as long as they tell consumers what they are)—as BT is currently being requested to do over the site Pirate Bay—or for specific violators to be cut off from their internet services (a la Hadopi).

That leaves the door wide open for years more of struggles between consumers, rights owners and broadband providers over the best way of making sure that when a song gets heard, or a film gets downloaded, someone, somewhere gets what’s coming to them.

Related

The Morning Lowdown 11-23-11

2011-11-23T13:27:20Z

Some of the stories people are talking about this morning:

» Nokia (NYSE: NOK) Siemens to Cut 17,000 Jobs (WSJ; Press release)

» James Murdoch quits the boards of Sun and Times (London Evening Standard)

» Why Might A Publisher Pull Its E-Books From Libraries? (paidContent)

» Lovefilm Gets Its Defence In Early: Buys Netflix’s Ad Slots (paidContent)

» Zinio Raises $20 Million For Digital Newsstand (Techcrunch)

» Tribune Co. to pay former CEO Randy Michaels $675K in settlement (Chicago Tribune)

» Time (NYSE: TWX) Out acquires Keynoir as part of its ecommerce strategy (NewMediaAge)

» Dear Dish Network: Your Spam Makes Me Sad. Please Stop (AllThingsD)

» How Microsoft’s Business Actually Could Collapse (Business Insider)

» Dallas Morning News publisher: 7-day-a-week publication ‘sustainable for another decade’ (Poynter)

The Latest Chinese Export: Tencent's QQ Mobile Browser, Via GetJar

2011-11-22T10:54:35Z

We’ve observed a lot of western companies looking to cash in on the explosive growth of China’s mobile population by taking their products into the country. Now here’s an example of a Chinese giant looking shop its own mobile services abroad: the internet portal Tencent is now distributing its QQ mobile browser in the GetJar app store.

Under the terms of the deal, GetJar will be distributing QQ browser, which is available for iOS, Android, Symbian and Java devices, as part of Tencent’s strategy to take its products to a more global audience. The move comes as we are seeing more activity from Western companies to expand their business in China, too. Most recently, Apple (NSDQ: AAPL) finally started to accept payments in Yuan on its Chinese App Store.

The deal is not exclusive as such: Tencent already offers its QQ browser through the Apple App Store, for example, although it is in Chinese so fairly unapproachable for those who don’t speak the language.

Tencent claims that its QQ browser is one of the fastest on the market. Because it is run as a cloud service, on Tencent’s XCloud architeture, users can also use the browser to securely store software, pictures and other files as part of the offering. Mobile QQ browser is built for mobile through cloud services.

In China, QQ browser is the second most-popular mobile web browser, according to November figures from Ai Media Consulting (via China News). It has a 27 percent share of the market, with the UC Web browser at 65 percent. (Opera is in third with six percent, and the browsers that are dominant in the West such as Safari on iOS, or Android’s web browser, don’t even seem to register.)

That share in China alone gives QQ significant penetration. As of last month, China had 1 billion mobile users, with 102 million on smartphones, according to the Ministry of Industry and Information Technology.

That means that if the market share estimates are accurate, QQ has potentially 270 million users, since the browser is also available for feature phones on networks slower than 3G.

It will be interesting to see if the QQ browser will be able to get much traction in Western markets, where people largely default to using mobile web browsers that are pre-loaded on to devices: meaning iOS users use Safari, Android users use Android, WP7 users take Internet Explorer and so on.

Possibly because China is one of those places where mobile internet growth is outpacing that of fixed growth (fixed lines are actually in decline; and there are currently 150 million broadband lines), we’ve seen a lot of innovation—probably more than you get in the West—from tech companies in the country to target mobile users.

It’s not unusual for an internet portal like Tencent to make and distribute mobile phones, app stores, games, payment systems, messaging apps and mobile browsers. Others that have also followed this route include Baidu (NSDQ: BIDU) and Alibaba. On the Android platform alone, there are dozens of companies operating app storefronts distributing apps for the OS.

Related

France Wants To Tax ISPs To Fund Music, Add Streaming To Three-Strikes Law

2011-11-21T16:01:20Z

Away from the Eurozone crisis, France’s president Nicolas Sarkozy has come up with one way to raise more funds in his country for one struggling media sector: taxing another one that appears to be doing alright. And in a speech to other European politicians, he said he also wanted to extend the country’s anti-piracy regulation, Hadopi, to cover streaming services, too.

According to reports in the French press (here, here and here are three links), Sarkozy, during a speech in Avignon during a culture confab with European politicians, laid out plans to create a national center of music that would be funded by taxes on ISPs.

He also discussed the possibility of a new extension to the country’s Hadopi laws to cover streaming.

The speech follows on from a proposal sent to the Minister of Culture, Frederic Mitterand, in September for the tax and creation of the Centre National de Musique.

This is not the first time that France has proposed taxes on online business to fund the music industry. Last year, the Zelnik report, masterminded by music industry executive Patrick Zelnik, proposed taxes on online ads and ISPs, with the proceeds to be used for special cards to be distributed to the French public to spend on “legitimate content.”

In both the current tax proposal and Zelnik’s, the idea is that traffic across the internet to consume streamed music and other forms of free content, both legal and illegal, are making it impossible for the originators of that content to monetize it properly.

The Zelnik report did not seem to get very far, although France did go ahead with its content card proposal.

This more recent proposal seems to have a closer, existing precedent: There is already an arrangement between TV channels and the film industry in the country, in which revenues from commercial TV operators are funnelled into film production.

In that case, many TV channels produce their own films, while in the case of ISPs and the music industry, the money would go to a new organization that would distribute those funds to musicians and music performances.

Hadopi. Later in the speech, Sarkozy turned his attention to Hadopi. He noted that since the introduction of three-strikes law, piracy in France had been reduced by 35 percent.

But since the law was introduced, the growth of fast broadband, and better streaming technology, has given rise to a new piracy threat, from the likes of Megavideo and other streaming sites that distribute unauthorized premium content for free online.

The mention of policing streamed content is only that so far—a mention. At this point it is not illegal in France to watch pirated streamed content, and according to this report from the AFP, apparently it is still hard to track, too.

For starters, it would require cooperation from ISPs, something that we are already starting to see in some countries like the UK.

Related

Video Ad Networks BrightRoll, YuMe Raise New Millions

2011-11-16T17:26:37Z

As online video’s growth shows no sign of slowing down, broadband video ad network BrightRoll has raised a $30 million third round to extend its ad exchange and mobile offerings, two areas that are still small, but also rapidly attracting more marketer activity. Separately, YuMe, a video ad network that has turned its attention to connected TVs, has received a $12 million round from Samsung Ventures and Translink Capital, as it tries to pioneer the burgeoning broadband TV ad arena.

The two fundings come during a month of explosive activity in the video space.

Earlier this month video search engine and advertising firm Blinkx placed new shares representing 1.8 percent of the company to acquire Melville, NY-based search marketing firm Prime Visibility Media Group for $36 million. At the same time, the European video ad network Smartclip was acquired by video and content network Adconion, which wants to integrate Smartclip’s in-stream and connected-TV advertising formats in to its own offering.

Also in November, Adobe (NSDQ: ADBE) bought Auditude, which operates a platform for managing online video ads.

It’s been said many times that online video is the fastest growing segment of internet advertising. This year, U.S. online video advertising revenues of around $2 billion, eMarketer says, while the total online ad market will be about $30 billion. Video is attractive to advertisers for obvious reasons: it tends to command more attention than text or audio alone, and therefore provides the kinds of engagement metrics that brand marketers value.

But video advertising’s rise, which has been gathering speed since the depths of the 2009 ad recession thanks to the growing penetration of broadband connections in general, is not growing unimpeded. For one thing, media buyers still complain of the lack of premium inventory as well as the lack of easily comparable measurements.

The extension of video to the ad exchange space could help spur even more spending by marketers in the space. BrightRoll certainly commands a lot of the spending going on in online video. The company claims to manage 2.25 billion video ads per month, or nearly 1 out of every 3 U.S. video ads served, citing data from comScore and BrightRoll internal reporting.

The app economy also shows a great deal of promise in opening up more premium video ad inventory. There too, BrightRoll has planted a flag early, as it claims its mobile network currently generates more than 250 million monthly pre-roll video impressions across 6,000 mobile apps and websites. Impressive numbers to be sure, but in terms of the overall online space, this is only the beginning and there’s room for competitors to move in and take a greater share of market.

Hence the huge funding round, which comes four years after BrightRoll raised a $5 million second round. This latest funding came from new investor Trident Capital, which led round, and was joined by existing backers True Ventures, Scale Venture Partners and Adams Street Partners, and Comerica Bank. Release

Last month, YuMe produced a study showing that major ad categories are ramping up their online video ad spending. For example, consumer packaged goods, the top category among YuMe’s 1,500 publisher sites, remained the top spender in Q3 with a 23 percent share of the market, up from 17 percent in Q2. More on the company’s funding in the release.

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