Blockbuster Files for Bankruptcy; Wipes Out Shareholders But Keeps Stores, Rent-by-Mail Service Open

Phillip Dampier September 23, 2010 Consumer News, Online Video 4 Comments

Blockbuster, Inc. announced this morning it was filing for Chapter 11 bankruptcy protection under a plan that cuts nearly $1 billion in debt and delivers a financial rescue package to help reorganize its operations.

The company, based in Dallas, faced insurmountable challenges from online video, piracy, pay-per-view, Netflix, and most recently Redbox — video kiosks strategically placed in supermarkets and drug stores.

But despite the bankruptcy filing, which wipes out the company’s shareholders, Blockbuster said it would keep its 3,400 company-operated and franchise stores, its DVD by-mail business, and online operations open for business.  Those holding Blockbuster coupons and gift cards need not worry — the company will continue to honor both.  Some unprofitable store locations may be closed later.

Netflix and Redbox are among the biggest contributors to Blockbuster’s financial demise.  Netflix’s 15 million customers dwarf Blockbuster’s 2.6 million customer rent-by-mail operation.  Redbox has more than a 13,000 store kiosk advantage over Blockbuster.

Shareholders blamed Blockbuster CEO Jim Keyes for the company’s financial position.

“Jim Keyes is the main reason Blockbuster is in this position today due to his denial of being in a business model that did not work anymore,” said Niko Celentano. “If Jim Keyes would have seen the changes that were evolving in this industry in the past few years, Blockbuster would not have been in the courts today filing Chapter 11 bankruptcy.”

Sprint CEO Says Provider “Could” Discontinue Unlimited Pricing, But Not Now

Phillip Dampier September 22, 2010 Competition, Data Caps, Sprint, Wireless Broadband 2 Comments

Sprint CEO Dan Hesse told a crowd of Wall Street investors the wireless provider could drop unlimited wireless pricing if the costs to deliver it begin to upset shareholders.

“We are watching very closely,” Hesse said during a Goldman Sachs-sponsored conference.

“Clearly, I’m not ruling out metered [price packages],” he said. “But customers value simplicity.”

While Hesse stressed the company had no immediate plans to drop its “Simply Everything” plans, it does acknowledge a small percentage of its customers are using enough of Sprint’s network to cost the company more than it earns from its heavy users.

But Hesse argued the marketing benefits of unlimited service may have brought the number three wireless carrier more business (and revenue) than it loses.  Sprint has been trying to recapture a stronger position in the wireless market lost after years of notoriously poor customer service and reduced coverage areas.

Most customers who left Sprint switched to AT&T or Verizon Wireless.  Both of its larger competitors have been seeking to impose more usage limits on its customers, especially for data.  Sprint hopes to win some of them back, but Hesse admits the company still has a long way to go to improve customer numbers.

Time Warner Cable Pays $20k for Report That Says Fiber-to-the-Home Is Our Future

Phillip "Darn, they didn't pick my essay" Dampier

Time Warner Cable paid $20,000 for a report that concludes, “policymakers not only need to focus on the oft-stated long-term goal of encouraging Fiber-To-The-Home but also on the more immediate need to bring fiber significantly closer to the customer.”

That declaration was included in one of five essays released this week by Time Warner Cable’s Research Program.  When we first wrote about this program in February, we were convinced that the resulting essays would parrot the cable company’s public policy agenda.  We were largely right, especially in those that delved into public policy matters.  They stayed safely inside the company’s policy boundaries.  Even those who focused on technical matters avoided directly challenging the company writing the check.

The cable company earlier announced it would pay $20,000 stipends to essayists that wrote research reports on these questions:

  • How are broadband operators coping with the explosive growth in Internet traffic? Will proposed limits on network management practices impede innovation and threaten to undermine consumers’ enjoyment of the Internet?
  • How can policymakers harmonize the objectives of preventing anticompetitive tactics and preserving flexibility to engage in beneficial forms of network management?
  • Regarding these issues, describe a vision for the architecture of cable broadband networks that promotes and advances innovation for the future of digital communications.
  • How might Internet regulations have an impact on underserved or disadvantaged populations?

The winners:

  • Dale N. Hatfield, executive director, Silicon Flatirons Center for Law, Technology and Entrepeneurship, University of Colorado, “The Challenge of Increasing Broadband Capacity.”
  • John G. Palfrey, Jr., Henry N., Ess III professor of Law, Harvard Law School, “The Challenge of Developing Effective Public Policy on the Use of Social Media by Youth.”
  • Nicole Turner-Lee, vice president and director, Media and Technology Institute, Joint Center for Political and Economic Studies, “The Challenge of Increasing Civic Engagement in the Digital Age.”
  • Scott J. Wallsten, vice president for Research and Senior Fellow, Technology Policy Institute, “The Future of Digital Communications Research and Policy.”
  • Christopher S. Yoo, professor of Law & Communciations, University of Pennsylvania Law School, “The Challenge of New Patterns in Internet Usage.”

Among the reports were a few that echoed the cable industry’s public policy agenda, particularly Scott Wallsten’s policy essay, “The Future of Digital Communications Research and Policy.” Wallsten is an industry favorite.  He works for the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten's essay parrots the cable industry's agenda

Wallsten argues worrying about residential broadband service is far less important than delivering broadband improvements to businesses to spur economic growth.  Part of the money to do that might come from raising residential broadband prices.  Wallsten points out consumers are willing to pay far more than they do today for their broadband accounts — up to $80 a month for today’s typical access speeds.  That’s music to an Internet Overcharger’s ears.

Wallsten’s essay hints that broadband expansion to the unserved, and Washington’s focus on broadband competition, might be misplaced if they are looking for the biggest economic bang for the buck.  His overall conclusion?  Worry about business broadband, not home residential use.

This is hardly new territory for Mr. Wallsten, who in 2007 wrote a piece warning of the perils of flat rate, unlimited use broadband pricing for the Progress & Freedom Foundation and the Heartland Institute, both great friends of large industry players. Only this time, he got a nice chuck of change from Time Warner Cable ratepayers.

More remarkable was Dale Hatfield’s essay, “The Challenge of Increasing Broadband Capacity.” Unlike Mr. Wallsten’s cable industry public policy echo chamber, Hatfield tries to keep things technical, but also safely made sure he didn’t stray too far off Time Warner’s broadband plantation.

Hatfield discusses the challenges of different broadband technologies ranging from twisted-pair copper wiring that delivers DSL to cable’s hybrid coaxial-fiber networks and the latest generation wireless and fiber optic technologies.  Hatfield largely calls them as he sees them, noting DSL’s inherent distance limitations and maximum supportable speeds, cable’s potential for last-mile/neighborhood congestion, wireless spectrum inadequacy, and the promises fiber optics can bring to the broadband revolution if costs can be reduced.

Hatfield avoids embarrassing his benefactor too much by spending the least amount of time and space on the benefits fiber brings to the broadband expansion question:

The fourth technology, fiber optic cable, is generally regarded as the “gold standard” in terms of increasing broadband digital access capacity because of its enormous analog bandwidth and its immunity to natural and man-made forms of electrical noise and interference. The actual digital transmission rate delivered to or from a customer depends upon the details of the architecture employed, but the ultimate capacity is limited more by economic factors rather than by the inherent technical constraints on the underlying technology imposed by Shannon’s Law. In this regard, fiber optic cable is often referred to as being “future-proof” because the maximum digital transmission rates are governed more by the electronic equipment attached to the cable rather than by the actual fiber itself. It is future-proof in the sense that the capacity can be increased by upgrading the associated electronic equipment rather than by taking the more expensive step of replacing the fiber itself.

Hatfield

While Time Warner Cable does market itself as having an “Advanced Fiber Network,” it is, in reality using the same technology the cable industry has used for a decade — fiber distribution into individual towns and large neighborhoods, coaxial cable the rest of the way.  Hatfield believes that simply isn’t good enough:

[…]Both DSL and cable modem technology benefit from the shorter distances that are associated with a more dense deployment of their access nodes. This suggests the growing need to extend fiber optic cable capacity closer to the customer—either fixed or mobile—to minimize the distance between the customer and the access nodes.

Hatfield’s subtle conclusion is that broadband expansion is ultimately best served by delivering fiber-optic connections straight to the home, something Time Warner Cable has argued against and refused to provide for years, but has now paid $20,000 to put on their website:

[…]Policymakers not only need to focus on the oft-stated long-term goal of encouraging FTTH but also on the more immediate need to bring fiber significantly closer to the customer to support a vastly increased number of access nodes. This is particularly important in the wireless case, where the capacity added through frequency reuse is critical to facilitating wireless competition with the two major suppliers of fixed broadband capacity—the incumbent telephone and cable television companies.

HissyFitWatch: Epix Cuts Deal With Netflix, Time Warner Retaliates By Keeping Network Off Cable Lineups

Phillip Dampier September 22, 2010 HissyFitWatch, Online Video 4 Comments

Epix, the pay-TV channel from Viacom, Lions Gate and MGM, will -not- be coming to Time Warner Cable lineups anytime soon.

Why? Because the network ‘cheapened themselves’ when they agreed to get in bed with Netflix, which will offer online video streaming of the three studios’ movies just 90 days after appearing on the channel.

Time Warner Cable Chief Financial Officer Rob Marcus said the network did itself no favors with that deal.  He told attendees at the Bank of America/Merrill Lynch Media, Communications & Entertainment Conference that Epix’s online video deal “devalued the channel.”

Epix may have irritated the cable company for another reason — it streams much of its content online for its subscribers to watch anytime they like, outside of the industry’s TV Everywhere project.

Indeed, the majority of cable operators seem to share Time Warner’s sentiment, as the new HD pay channel faces a virtual embargo from the industry’s big players, including Comcast and DirecTV.  In fact, Epix’s four million subscribers come primarily from just three companies — Verizon FiOS, DISH Network, and Cox Cable.

[flv width=”480″ height=”292″]http://www.phillipdampier.com/video/Introduction to Epix.flv[/flv]

A short introduction to Epix.  (1 minute)

Broadband + Streaming = Online Video Piracy That Drives Hollywood Berserk

Phillip Dampier September 22, 2010 Online Video Comments Off on Broadband + Streaming = Online Video Piracy That Drives Hollywood Berserk

Forget about peer-to-peer torrents, file sharing networks, and download sites.  They are so yesterday.  Newsgroups?  That’s so last month.  No, today’s targets of Hollywood’s copyright cops are online video streaming sites that make watching pirated movies and television shows simple.  So simple, many viewers may not even realize they are watching illicitly.

At issue are video streaming sites that take uploaded video files and use them as part of one-click streaming entertainment portals.

Websites like Megavideo deliver thousands of shows and movies to viewers who want to watch online.  These sites bypass video “pay-walls” that limit viewing thanks to an army of volunteers who capture copies of programming and then upload them to file storage sites.  Previously, those who wanted to watch had to download multi-part files and use software to put the pieces back together.  With online streaming of that content, it’s as easy as watching Hulu.

The Los Angeles Times lifted the lid on the world of underground online viewing in a piece that sounds the alarm for the next generation of video piracy:

Streaming video is the most visible sign of how Internet piracy has evolved since the days of Napster and its imitators. The new digital black market combines “cyberlockers,” such as Megaupload and Hotfile, which piracy experts say hold stores of pilfered content, with linking sites such as TVDuck and TVShack.cc, which act like an underground version of TV Guide, helping people locate bootlegged TV shows and movies. Some of these linking sites even contain reviews and recommendations that lend a patina of legitimacy.

[…]File-sharing remains the primary source for pirated digital copies of songs, movies, TV episodes and video games. But use has stagnated as media companies have enjoyed greater success in crippling or shutting down popular sites such as Mininova and Isohunt, said Eric Garland, chief executive of BigChampagne, a media tracking firm. Streaming and downloading from so-called cyberlockers are on track to surpass peer-to-peer use by 2013, according to the Motion Picture Assn. of America, Hollywood’s lobbying arm.

[…]The fear is nonetheless palpable throughout the entertainment industry. Executives worry that improvements in Internet speeds and in the software that compresses movie files into easy-to-distribute packages are making matters worse.

“It’s made streaming a lot less clunky than it was even three years ago,” said Darcy Antonellis, president of Warner Bros. Technical Operations.

[…]To strengthen the government’s hand against online piracy, Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) and senior Republican member Orrin Hatch (R-Utah) on Monday introduced a bill that would give the Justice Department more tools to track and shut down websites devoted to providing access to unauthorized downloads, streaming and sale of copyrighted content.

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