Variety announced the moves early Tuesday, saying the tabloid will drop its daily print edition as of March 1 and publish only a weekly version on paper. The paywall, which charged users $250 a year for access to Variety content, comes down at the same time — Penske called it “an interesting experiment that didn’t work” — and in a somewhat unusual decision, the paper’s editor has been replaced with three editors, each of whom will run different sections of the magazine.

Penske, the son of famed race-car driver and NASCAR operator Roger Penske, isn’t a newcomer to the power of digital: he was a co-founder of Mail.com, which he sold to a German internet company in 2010, and before that helped start a mobile company aimed at children called Firefly.

We're all going to miss Daily Variety in print but now we'll be faster and more nimble. It's a good move.

—
David S. Cohen (@Variety_DSCohen) February 26, 2013

The new owner bought Variety in October from owner Reed Elsevier for $25 million, after the European publishing conglomerate reportedly cut the price it was asking for the magazine — once reportedly valued at more than $200 million — by 25 percent. Penske added it to a stable of online properties that includes the Deadline site and MovieLine.com, as well as the well-regarded technology blog Boy Genius Report and HollywoodLife.com, a site run by former the former editor of Cosmopolitan, Bonnie Fuller.

If Penske was hoping that his moves would be applauded by his other sites, he doesn’t know veteran Hollywood gossip writer Nikke Finke, who runs Deadline Hollywood. In a scathing post about the dropping of the paywall and the decline of what she called “the beleaguered trade,” Finke said editorial morale at the entertainment trade magazine “is at its lowest ebb and anxiety is running sky high,” and described advertising as “non-existent” and readers as “few and far between.”

Sharon Waxman, who runs an online competitor called The Wrap, also warned that Variety could have a lot of work on its hands, since — like many other newspapers and magazines — print advertising in the daily edition likely made up a large proportion of its revenues.

Post and thumbnail images courtesy of Shutterstock / wavebreakmedia and Flickr user Pew Center

A day after rival video service Youku Tudou secured a deal to stream premium movies from an eighth and final Hollywood major studio, Tencent has got in touch to flag its own numbers.

Citing iResearch data, the outfit says its 275.5 million monthly Tencent Video users has grown to exceed even the recently merged Youku’s 266.3 million, while its average 54.8 minutes per user per day spent on-site beats Youku’s 34 minutes.

Although Youku Tudou now has an increasingly impressive professional content line-up, Tencent’s media briefing cites an Aegis executive who explains: “The reason why Tencent Video has achieved more unique visitors than Youku is the parent company’s ownership of social media properties that have pushed traffic towards its video site via social sharing.”

That would suggest scale can beat prestige and premium content when it comes to drawing eyeballs — or, at least, that domestic content trumps Hollywood imports. Tencent has an arsenal of services including its QQ IM network with over 700 million users, Qzone and Pengyou social networks, games, the Weixin mobile community client, and a Twitter rival with around 400 million registered users. Tencent placed at #9 in this year’s paidContent 50 list of the world’s biggest digital content earners.

If broadband speeds can continue increasing sufficiently, China’s online video viewing market could be set to explode.

Recently, I reported how one video service was even manufacturing its own internet-connected TV to take its content direct to living rooms.

Yet another new platform hopeful aims to replicate the pattern in which China is also seeing a creative explosion of smartphone systems thanks to operators and services rebadging Google’s Android.

Xiaomi, which has found success by releasing the low-cost M-1 Android handset running a slick firmware variant dubbed “MIUI”, is now planning to unveil an Android-powered internet TV set-top box.

iResearch concludes: “A Xiaomi set-top box would attract even closer comparisons between the company’s product line and Apple’s. Xiaomi founder Lei Jun is sometimes referred to as the ‘Chinese Steve Jobs’.”

1. it has signed a million UK and Ireland subscribers in just six months (see our July story).
2. it is bullish about out-bidding BSkyB for UK movie rights it needs to become more successful (CEO Reed Hastings told paidContent in January).

What is going on? Netflix is press-releasing this week to trumpet genuine early success in customer acquisition, likely hoping the headlines will impress movie studios it needs to court for better rights.

Sky Movies, which has nearly five million subscribers, has exclusive UK deals with the big six Hollywood studios to show movies after the post-cinematic DVD window. Netflix’s selection is thinner, poorer and later.

Netflix will need to spend heavily to unpick that lock. But its domestic U.S. track record shows it can do exactly that. So how much will it require?

Details of BSkyB’s Hollywood deals are sketchy; the company declined to give information to paidContent, citing “commercial confidentiality”. But Sky has previously disclosed that it paid £278 million in annual movie rights fees in 2008/09.

The amount it pays is based partly on the number of subscribers it has. So, for example, if BSkyB can make a success of its new Now TV brand, which will take Sky Movies to internet devices, it will have to pay more.

Netflix may have the wherewithal; it has spent heavily in the past. In 2011, it splashed out $674.4 million more on deals to snap up more streaming rights for Canada, Latin America and the Caribbean, bringing its total annual content outlay up to $1.78 billion.

“We will be really aggressive in our bidding,” Hastings tells The Telegraph. “It may be that we win in the first round. It may be that it takes two or three years, but we’re incredibly confident that we will win the bidding for some of Pay 1.”

But, in Sky, it has a powerful incumbent competitor that also has proven it can dig deep to acquire content. The recent auction for live rights to three seasons of soccer’s Premier League, won mostly by Sky ‘s renewal bids, saw winning bids’ total value double from the previous package, from £1.254 billion to a record £3.018 billion.

BSkyB CEO Jeremy Darroch has shown that Sky can splash much more cash to secure top content like Premier League soccer.

Against that sporting backdrop, Netflix could be to Sky’s movie renewal what BT Vision and Al Jazeera were to its Premier League bids – rival bidders which didn’t steal any rights from Sky but which succeeded in driving up the price it had to pay; a stalking horse.

One factor that may mitigate Sky’s spending power is the £30 million it is already spending this year to launch Sky Movies on IPTV devices as Now TV. But that is not as important as renewing rights themselves.

Netflix expects to lose up to $105 million this Q3 on its international operations, after spending heavily to market what is otherwise a low-staff European operation. It was recently buoyed by slightly lower UK and Ireland roll-out costs than expected, but remains under pressure at home to steady the ship and return to the black.

If that cost proves too much for Netflix, the upstart has got its defense in first. In June, it grumbled to regulators that ”Sky continues to hold a near monopsony on the acquisition of these rights”:

“If, in the upcoming year, it becomes apparent that Netflix and other Sky competitors are not able to obtain significant FSPTW rights from the major studios, this may demonstrate that continuing market dominance by Sky has resulted in Netflix having to find other routes to the acquisition of FSPTW content—other routes which avoid head to head competition with Sky for the acquisition of rights which Sky wishes to obtain in order to maintain the market position of Sky Movies.”

So, if Netflix can’t steal films from BSkyB in the next year, expect it to have to think out of the box.

“Six months ago, we launched Netflix in the UK and Ireland, and today we are one million members strong.”

In just two quarters and two countries, Netflix has gathered an online customer base equal to half of that which Lovefilm, which also rents out DVDs and games, has amassed in five countries and over a decade.

The company doesn’t even have a UK office.

Netflix has invested very heavily in a UK and Ireland marketing campaign that includes multiple high-rotation TV ads and direct mail, and which has driven mainstream awareness for over-the-top movie subscriptions as a segment.

That investment hurts Netflix’s bottom line, but one million subscribers paying £5.99 per month gives Netflix monthly UK and Ireland revenue of £5,990,000 or £71,880,000 per year, and it’s only growing.

In Tuesday’s earning disclosure, Netflix repeated its launch-time stated theory that Lovefilm is not its main competition:

“We believe we have pulled ahead of Lovefilm in every important streaming-related metric.

“Going forward, competing effectively with Sky is our core and substantial challenge.”

Lovefilm claims two million subscribers and won’t disclose subscriber count for its Lovefilm Instant streaming tier, which it launched alongside Netflix in January. Netflix likely already has more streaming-only customers than Lovefilm does.

The UK over-the-top movie subscription segment is now hotting up. Aside from these two challengers, BSkyB, which owns exclusive licenses for offering movies from six Hollywood majors via subscription, is making them available to its own satellite subscribers on internet devices and last week launched Now TV, a spin-off over-the-top service offering Sky Movies without satellite subscription for £15 per month. That is three times more expensive than either Netflix or Lovefilm, but avid blockbuster fans may consider the newer, bigger catalogue three times better.

Amazon must decide how much it wants to capitalise Lovefilm so it can front up on content acquisition and marketing.

Impressively, Netflix’s one million new UK and Ireland members is also about half the size of the customer base it had signed in Canada and over 40 Latin American countries in a whole two years.

Netflix now intends to replicate its UK and Ireland roll-out elsewhere in Europe. But, as it invests in doing so, it will also need to spend heavily to out-bid BSkyB for UK and Ireland studio deals. As recent fee hikes for Premier League soccer show, BSkyB has the wherewithal to invest heavily in content.

The threat to Netflix, however, is its catalogue, full of old fare.

“As long as there are good markets to enter around the world, we will take U.S. profits and put them in to international expansion,” CEO Reed Hastings told investment analysts.

Netflix may change its model and urge UK’s media and anti-trust regulators to launch a second movie monopoly probe against BSkyB if it cannot wrestle top film rights from the News Corp outfit there by summer 2013.

The Competition Commission in May provisionally ruled that Sky Movies’ exclusive deals for six Hollywood studios’ films do not overly dominate the UK market for first pay-TV subscription window (FPTSW) movie rights.

That conclusion was a reversal of the commission’s earlier decision and was based on the recent and future arrival, since the investigation began, of IPTV movie services from Netflix itself, Lovefilm and Sky’s own upcoming Now TV service.

In its response to the conclusion, published on Wednesday, Netflix, which launched in the UK and Ireland in January, says that conclusion is “dangerous”, arguing:

“Despite the entry of Netflix and Lovefilm’s presence in the UK, Sky continues to hold a near monopsony on the acquisition of these rights.

“While Netflix intends to continue to compete vigorously against Sky for content, including FSPTW content, it remains the case that none of Sky’s competitors currently have meaningful FSPTW content from the major studios.

“If, in the upcoming year, it becomes apparent that Netflix and other Sky competitors are not able to obtain significant FSPTW rights from the major studios, this may demonstrate that continuing market dominance by Sky has resulted in Netflix having to find other routes to the acquisition of FSPTW content—other routes which avoid head to head competition with Sky for the acquisition of rights which Sky wishes to obtain in order to maintain the market position of Sky Movies.

“Netflix believes it would be irresponsible and dangerous for the CC (Competition Commission to simply conclude at this point that any AEC (adverse effect on competition) arising from the dominance of Sky in the acquisition of FSPTW rights will be offset by new competition emerging for these rights from Netflix and Lovefilm.

“For this reason, Netflix is strongly of the view that the CC should now expressly anticipate a further review in one year’s time. This would allow Ofcom and if necessary, the CC to review whether the emergence of OTT SVOD services in the UK has in fact created strong competition for Sky Movies by recruiting subscribers at the retail level, and, in particular whether this has actually resulted in erosion of Sky’s market power as an acquirer of FSPTW rights.”

The submission, Netflix’s first to the investigation which began in August 2010, is an interesting insight in to how it regards its chances of success in the UK. Effectively, Netflix is giving itself a one-year run at outbidding Sky Movies for first-run rights – if it fails, it will call for regulators’ help.

The “other routes” referred to by Netflix are not clear but could include jointly bidding for shared rights against Sky, or sub-licensing from Sky .

This is also a more cautious tone than the company previously struck on its entry to the UK, when CEO Reed Hastings told paidContent in January: “We could just bid against them (Sky). We are not dependent on whatever the Competition Commission does.” Netflix has spent heavily on other UK rights and a large marketing campaign but has not disclosed sign-ups so far.

In other responses to the Competition Commission’s revised provisional conclusion, BSkyB, NBC Universal and Paramount are supportive, but the British Film Institute and Consumer Focus expressed concern and NBCU suggested competition could become even greater than the commission has finally concluded…

British Film Institute:

• “The CC appears to have overturned almost five years worth of analysis with undue haste on the basis of highly speculative market forecasts.”
• “The reversal of position appears to be based on assumptions about the future growth of very new entrants to the video-on-demand market. Such growth is far from guaranteed.”
• “VoD services cannot be accessed by people who do not use the internet” … ”As it stands, the impact of these new services (Lovefilm, Netflix and Now TV) is very small.”
• “We urge the Commission to reconsider its position.”

Consumer Focus:

• “Not convinced that material changes have occurred in the  market which would remedy the lack of competition”
• “Does not believe that competition between providers of movie services in relation to FSPTW rights has materially changed with the entry of Netflix to the UK market”
• “Not convinced that the launch of Now TV would remedy the consumer detriment.”

NBC Universal:

• “The Commission may be too conservative in its assessment that SVOD OTT services of LOVEFiLM and Netflix are unlikely to become close substitutes for bundled packages of traditional pay TV in the foreseeable future.”
• “The evolving pace of competition between OTT services and traditional pay TV should not be underestimated, particularly given continuing growth in the smart TV sector.”

Berlin’s Moviepilot.com, which is making its big push into the U.S., hopes to kill both birds with one stone. And, judging from the $7 million Series B round it revealed on Thursday, it’s armed with a boulder.

The round was led by new investor DFJ Esprit, along with Deutsche Telekom’s T-Venture, Grazia Equity and Creative Industries Berlin — all of which have already been backing the site’s German incarnation, moviepilot.de.

That German version is quite a different beast, however. It’s a Google-driven rumor and recommendation site that in turn powers Telekom’s T-Entertain IPTV package, and it’s very successful, with two million monthly uniques and 1.4 million Facebook fans. In fact, that makes it Germany’s most popular Facebook page, bar that for soccer team Bayern Munich.

But, as CEO and co-founder Tobi Bauckhage told me, it was only a first step:

“Based on the recommendations and based on this Facebook understanding, we said we had a chance from Berlin to create a new generation movie site that is concentrating on early fans, using the Social Graph and the Open Graph to learn about the fans, and kickstart recommendations based on that.”

So in October last year the startup opened Moviepilot.com, an English-language second iteration that’s plugged into a separate Facebook page that’s already amassed four million fans. Combined, the two services constitute the social network’s largest movie fan community.

Fans can use the service to discover new projects and follow them — one of Moviepilot’s many facets is that of a curated, personalised news site. And for the studios, the community can provide some sorely-needed marketing insight.

“We’ve always thought the real power of tech is not the distribution but discovery, not even of films, but discovery of audiences,” Bauckhage, a film-maker himself, said. “Discovery and recommendation is still supply-driven, but we’re moving to a model where you have to learn about your audience and build audiences.”

Audience insights

The problem, Bauckhage explained, is that the whole industry revolves around the opening weekend.

“It’s a supply-driven industry with a very limited shelfspace, with only a limited number of cinemas and screening rooms,” he said. “The anomaly of this industry is that you have a market entry phase of only 48 hours – this predetermines the money you’ll make in the whole lifecycle of the movie.”

So what do studios do? Generally, they launch a barrage of poorly-targeted advertising just before the all-important weekend. Moviepilot.com is in a position to tell them who’s following their projects, right from the first rumour to the release.

“For example, we had 15,000 fans for the Avengers before the film came out,” Bauckhage explained. “They use Facebook Connect to follow a project, and we get information back from the fans and understand what the fanbase is made of. We can see that, hypothetically speaking, they are 15 times more likely to be Buffy fans – we believe that the real dimension of how you understand audiences is not demographics, but taste.”

And the industry already seems to be lapping it up. Twentieth Century Fox is currently paying Moviepilot to promote the upcoming Abraham Lincoln: Vampire Hunter to early fans, and the studio knows it will get very granular data in return. Universal, Disney and Paramount are also clients.

So there you have it: Moviepilot is a pretty unique combination of fansite, rumour and news aggregator, and social marketing agency. Its new funding will allow it to open an office in Los Angeles this year, with a dedicated sales team in tow.

The likes of IMDB and Flixster should be watching this development with a concerned eye.

The decision by Mr. Justice Arnold was handed down in London this morning and provides long-awaited details about an important July ruling in which the English court effectively said that ISP’s were to play a major new role in enforcing copyright. These details included the 14 day schedule and instructions that the ISP would have to pay for costs in enforcing the action. The most significant part of today’s ruling appears to be a portion that instructs the ISP to take down any other website that acts as a gateway to the Newzbin 2 content. This is important for content owners because file-sharing sites will typically migrate to another website, often in another country, if a court orders their primary site to be taken down.

“I do not consider that the studios should be obliged to return to court for an order in respect of every single IP address or URL that the operators of Newzbin2 may use,” said Justice Arnold in explaining his ruling. The plaintiffs in the case were six major studios, including Fox (NSDQ: NWS), Disney (NYSE: DIS) and Warner Bros.

The ruling coincides with a strategic shift in recent years in which content owners have largely stopped targeting individual file-sharers and instead gone after the internet infrastructure that supports them. This means that website names and internet service provides are increasingly at the center of Hollywood’s longtime anti-piracy campaign.

The English decision is ground-breaking because it deputizes an ISP to become a copyright enforcer. Until now, the law has treated the providers (such as BT or Virgin in England or Comcast (NSDQ: CMCSA) and Verizon in America) as neutrals in the piracy debate on the grounds that they do not have a hand in creating content but, instead, simply move it around. Justice Arnold’s decision to force BT to block Newzbin 2 was founded in part on the fact that the ISP has the technical means to do so — the company already employs a screening technology that prevents customers from gaining access to child pornography sites.

There is unlikely to be a decision like Newzbin 2 in the United States anytime soon, however, because ISP’s are protected from liability by the strong safe harbors of the Digital Millennium Copyright Act. In the US, content owners have instead been turning to law enforcement tactics such as asking federal agencies to seize the names of websites. In practice, this means that visitors to a file-sharing or counterfeiting site are greeted with a new home page that features a giant Homeland Security badge. The content industry has been pushing for new legislation to create even greater law enforcement powers against websites.

For content owners, the UK tactic (forcing ISP’s to block customer access to websites) has an advantages over the American one (seizing the website name) because the website in question will typically appear under a new name a short time later.

Critics of the content industry argue that the recent anti-piracy efforts are heavy handed and impinge on free speech rights.