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Netflix Announces Biggest Price Hike Ever: Most Will Pay $12.99 a Month

Phillip Dampier January 15, 2019 Competition, Consumer News, Online Video No Comments

Like cable companies, streaming services are not immune to raising rates, and the country’s biggest and most popular streaming service — Netflix — this morning announced its largest rate hike ever.

Most Netflix subscribers will see their monthly rate increase by $2 a month.

Netflix’s rate card effective January 15, 2019 (for new subscribers).

The rate hike will raise at least $100 million a month in revenue and will apply first to new subscribers, and will gradually apply to all 58 million current U.S. subscribers over the next three months, as well as those in Latin America where subscriptions are paid in U.S. dollars (except in Mexico and Brazil, where rates remain unchanged). Rates for the 78 million Netflix subscribers outside of the U.S. are not expected to change immediately, partly due to ongoing promotional spending and marketing efforts to boost subscriber numbers overseas.

Wall Street had been increasingly pessimistic about Netflix’s revenue and profit projections because of ongoing increases in spending to finance an avalanche of original Netflix productions. The company’s stock price dropped by 21 percent, from a peak of $423.21 last June to $332.94 just before the market opened this morning. Netflix’s chief content officer told the media last spring about 85% of the company’s estimated $8 billion in content spending for 2018 was for original TV shows, movies, and other productions. By summer, Netflix had $12 billion in debt before borrowing another $2 billion in October. But that debt never changed Netflix’s plans to premiere 1,000 new movies and TV series in 2018, with an even larger number of productions scheduled for 2019.

Netflix has been pushed towards producing its own content as movie studios and studio-owned television production companies raise contract renewal prices on Netflix or end those contracts altogether, bringing content back to those studios as they prepare to launch paid streaming services of their own. WarnerMedia, Disney, and NBCUniversal are all planning launches over the next 24 months, while other existing services like CBS All Access and Hulu continue to beef up their own viewing menus, often with shows that were formerly found on Netflix.

Netflix is also depending on a growing international audience for its offerings, and has expanded original productions in many languages to find that global audience. Netflix usually benefits from much lower production costs for shows filmed overseas, and English language subscribers have surprisingly embraced dubbed and/or subtitled content at levels beyond Netflix’s expectations. Back in North America, the massive increase in demand for original content by Netflix and its competitors has made it possible for production companies, directors, writers, and talent to command dramatically higher salaries, raising Netflix’s expenses.

Investors cheered today’s price increase, causing its stock price to rise at least 6% in early trading. Wall Street believes Netflix is now nearly immune to cancellations over its price, which is still below the monthly retail price of HBO. But this morning’s announcement does represent the largest rate increase ever for the 12-year old streaming service.

Netflix will also use some of the additional revenue from the rate hike to pay down its substantial debt. Few expect any backlash reminiscent of Netflix’s 2011 decision to raise prices and unbundle its DVD-rental-by-mail service from video streaming, which resulted in a 60 percent rate increase for customers seeking both streaming and mail rental options. Netflix lost 600,000 subscribers after that announcement, initially making the company more cautious about future rate increases.

Comcast-NBC Announces Direct to Consumer Streaming Service for 2020

Comcast-owned NBCUniversal today announced a 2020 launch of a new, advertiser-supported streaming service, relying on content libraries and distribution platforms from America’s NBCUniversal and Europe’s Sky.

In a press release about the new venture, NBCUniversal claims the service will reach over 90 million U.S. households and will include “some of the world’s most popular television and film franchises, including homegrown original programming as well as content from outside partners.”

The new service is a rare reminder that the cable industry’s “TV Everywhere” project — offering streamed and on-demand content to “authenticated pay television customers” is still alive and kicking. NBCUniversal plans to offer the service to consumers for free, as long as they can prove they have an active cable or satellite TV subscription. Comcast and Sky will be the first to debut the service to their combined 52 million subscribers, with other providers likely to offer the service sometime later. Cord cutters will be able to purchase a subscription to the service, and a paid, ad-free option will also be available.

TV Everywhere, the cable industry’s effort to make on-demand content available for little or no charge, as long as you are an “authenticated pay-TV customer.”

NBCUniversal also announced an executive shuffle to reposition itself for the streaming venture. With Comcast’s 2018 acquisition of Sky, Europe’s largest satellite television provider, the yet-to-be-named streaming venture will draw talent from both sides of the Atlantic. Programming is expected to rely heavily on both NBCUniversal-owned content and a growing library of original shows and movies produced by Sky. European audiences will see more American programming and Americans will have greater access to popular Sky content, particularly from the United Kingdom and Ireland.

The new streaming service represents an acknowledgment that traditional live, linear television is becoming less important as viewers increasingly shift towards on-demand viewing. NBCUniversal itself has recognized a trend away from live niche programming, and has closed down some of its lower-rated cable networks, including Cloo and Esquire. Original content on some lesser-known basic cable networks often amounts to little more than an hour or two a day, with the rest of the schedule populated with program length commercials or reruns of older network shows. Since NBCUniversal has a deep library of both original and older programming, it can offer viewers on-demand access to new shows and old favorites, attracting younger audiences.

“People are watching premium content more than ever, but they want more flexibility and value,” said NBCUniversal CEO Steve Burke. “NBCUniversal is perfectly positioned to offer a variety of choices, due to our deep relationships with advertisers and distribution partners, as well as our data-targeting capabilities. Advertising continues to be a major part of the entertainment ecosystem and we believe that a streaming service, with limited and personalized ads, will provide a great consumer experience.”

For now, Comcast/NBCUniversal will retain a 30% ownership in the Hulu venture.

FCC Panel Recommends Taxing Websites and Giving the Proceeds to Big Telecom Companies

The telecom industry wants a new tax on broadband services to pay for rural broadband expansion.

Nearly two years after FCC Chairman Ajit Pai announced the formation of a new federal advisory committee on broadband development, the telecom industry-stacked panel has recommended implementing a new tax on websites and online subscription services like Netflix, Hulu, and Amazon Prime Video and turning over the proceeds to many of the same companies dominating the Committee.

The proposal is part of a large set of recommendations from the Broadband Deployment Advisory Committee (BDAC) designed to promote and streamline broadband expansion, especially in rural areas. If adopted by the states, the new tax would create a large broadband deployment fund that could be accessed by telecommunications companies like AT&T and Comcast to expand service without having to pay back the funds or give up part ownership of the taxpayer-funded expansion.

What caught many by surprise was the sweeping impact the new tax could have on the internet economy, because online businesses, streaming services, and even many website owners could be subject to the tax, if enacted:

Entities that financially benefit from access to a broadband system located in the state, including advertising providers, shall contribute to the Broadband Deployment Fund.

A comprehensive piece by Jon Brodkin on Ars Technica points out defining the meaning of “entities” and “advertising providers” will be crucial to determine who will have to pay the tax and who won’t:

Article 11 of the BDAC’s model state code would create a Rural Broadband Deployment Assistance Fund, paid for by contributions from broadband providers and “Broadband Dependent Services.”

The definition of “Broadband Dependent Services” is where things get interesting. An earlier version of that definition—available in this document—reads as follows:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee which requires the capabilities of the Broadband Service which the consumer has purchased and shall also include entities that financially benefit from access to a broadband system located in the state, including advertising providers.

The BDAC met on December 7 and pared that definition back a bit to exclude “entities that financially benefit from access to a broadband system.” Video is available here; the discussion on the definition starts around 2:04:45.

BDAC Chair Elizabeth Bowles, who also runs an Arkansas-based wireless Internet service provider called Aristotle, expressed concern that the original version of the definition “was including every small business in America,” potentially forcing them all to pay the new tax.

Nurse

AT&T has been one of the strongest advocates for the new tax, and argued it should be as expansive as possible.

“It basically is everybody [that should be taxed] because this is a societal objective,” said Chris Nurse, assistant vice president for state legislative and regulatory affairs at AT&T. “Universal service is a societal objective. We want to spread that $20 or $30 billion burden more broadly so the tax is low on everybody.”

Google Fiber policy chief John Burchett objected, claiming under AT&T’s vision, everyone who has an internet connection would be taxed. In his view, AT&T’s proposal was “absurd.”

As the debate raged on, it became clear AT&T was once again looking for a way to be compensated by companies like Amazon and Facebook — using its ‘pipes’ without contributing towards the cost of the network.

“Who are we cutting out and who are we leaving in?” Nurse asked. “Today it’s basically the telephone companies [who pay] and not Google and not Amazon and not Facebook, right? And they’re gigantic beneficiaries from the broadband ecosystem. Should they contribute or not? Someone has to pay.”

Burchett

In the end, the BDAC settled on adopting a compromise over what broadband entities will be subject to the new tax:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee, and shall also include advertising-supported services which requires the capabilities of the Broadband Service which the consumer has purchased.

This compromise definition primarily targets the new tax on streaming video services — the ones AT&T itself competes with. But it will also cover any websites sponsored with online advertising — like Facebook and Google, ISPs, subscription services delivered over the internet, as well as AT&T’s broadband competitors.

The proposal also seeks to guarantee that rural residents be granted access to affordable broadband, but the industry-dominated Committee chose to define “affordable” as the cost of internet access in urban areas, which some would argue isn’t affordable at all.

The draft proposal has been criticized by many stakeholders, including the National Rural Electric Cooperative Association, representing electric cooperatives. The group implied the new proposal was just the latest attempt to get the telecom industry’s wish list enacted.

“Instead of focusing on solutions for unserved and underserved rural communities, many of the recommendations focus on issues specific to urban areas where broadband is already available,” said NRECA CEO Jim Matheson. “Ignoring the precedent of federal law and laws in 20 states, the state model code would treat co-op poles like those belonging to large investor-owned utilities. The state model code would also cap pole attachment rates in state statute, effectively making those rates permanent. This code, in effect, increases regulatory burdens while giving co-ops less time and less money to comply with those regulations.”

The National Multifamily Housing Council also objected to another proposal approved in the draft.

“Article 8 of the MSC grants broadband providers the unilateral right to install facilities in all multifamily residential and other commercial buildings and mandate construction of broadband facilities at the property owner’s expense without regard to the rights and concerns of the owner,” the organization claimed. “NMHC/NAA and its real estate industry partners argued that Article 8 of the MSC is riddled with many practical and legal problems. Among the most serious issues with the MSC is that it interferes with private property rights, disrupts negotiations and existing contracts between property owners and communications service providers and will lead to costly regulation and litigation at the state level without any assurance of actually spurring broadband deployment.”

AT&T would be among the biggest beneficiaries of the tax fund, already receiving $428 million annually from another rural broadband fund to expand wireless internet access in rural areas. If Nurse’s predictions are correct, the tax could collect $20-30 billion, far more than has ever been spent on rural broadband before.

Liccardo

Critics also contend the BDAC’s industry-friendly proposals are predictable for a Committee created by FCC Chairman Ajit Pai and well-stacked with telecom industry executives and lobbyists. The former head of the BDAC was arrested by the FBI on fraud charges, and San Jose Mayor Sam Liccardo quit the Committee in January, writing, “the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public” in his letter of resignation.

Whatever the BDAC ultimately decides, the final proposal has a long road to travel before becoming law. Each state can choose to adopt the proposal, part of it, or none of it. In the end, it is just a “model code” for states to consider. But it will be part of the argument made by the telecom industry that laws must be streamlined to prevent delays in deploying service, and that those benefiting from broadband should cover more of the costs to provide it.

Ironically, the person most likely to be embarrassed by the model code could be FCC Chairman Ajit Pai, who has almost universally rejected new taxes and fees on broadband services. But his approval is not required to advance the argument and the model code to the states, where the telecom industry’s lobbyists are waiting to begin advocating the passage of new state laws enacting its recommendations.

The Return of Court TV: Law and Order Networks Struggle to Gain Carriage

Phillip Dampier December 11, 2018 Competition, Consumer News, Online Video, Video No Comments

In the era of cord-cutting, getting a new, independently owned cable network on cable lineups can be an exercise in futility.

With most new channel additions coming as part of renewal agreements with major cable network owners or sports teams, launching a new 24-hour cable network and getting it on the lineup has never been so difficult. That isn’t stopping a relaunch of Court TV — a well-known former cable network that literally burned its logo into some television sets that were reliably tuned to coverage of the murder trial of O.J. Simpson, which ran from January-October, 1995.

“Court TV was a top-20 cable network and at the height of its popularity when the network was taken off the air in 2008,” said Jonathan Katz, CEO of Katz Networks. “Today, while consumer interest in the real-life drama of true-crime programming is at an all-time high, there is no dedicated daily court coverage on television. We expect the new Court TV to fill that void on cable, satellite, over-the-air and over-the-top.”

A promotional video for Court TV, returning in May, 2019 (0:44)

Katz Networks, a division of E.W. Scripps Co., has acquired the rights to the Court TV name and other intellectual property from its old owner, Time Warner (Entertainment). That includes over 100,000 hours of pre-recorded programming and trial coverage in the Court TV archives. The new venture has hired Vinnie Politan, a former Court TV presenter, as its lead anchor. The new Court TV has also hired back some of its old employees who either left the network or transitioned to its replacement – Tru TV.

The new Court TV will run 24 hours a day, everyday, and is expected to concentrate on live coverage of high-profile trials.

The thought of bringing back Court TV has not been enough to attract much attention from the cable industry. When the network launches in May 2019, it is expected to achieve coverage in 25% of cable homes at best. Most viewers will be able to watch Court TV as a digital subchannel offered by a local over-the-air station. Katz already specializes in running digital sub-networks, including Bounce (African-American targeted channel) and Laff (comedy).

Multichannel News reports several station owner groups will carry Court TV, giving it coverage of about half the country at launch:

Dan Abrams hosting a show on the Law & Crime Trial Network

Tribune Broadcasting will carry Court TV in 22 markets, including New York; Los Angeles; Chicago; Philadelphia; Dallas-Fort Worth; Houston; Miami-Fort Lauderdale; Denver; St. Louis; Seattle-Tacoma, Washington; and Sacramento, Calif.

Eight Scripps markets will carry Court TV, including Tampa, Fla.; Detroit; Cleveland; Cincinnati; Las Vegas; Tulsa, Okla.; Green Bay, Wis. and Tucson, Ariz.

Entravision Communications’ 10 Court TV markets include Boston; Orlando, Fla. and Wichita, Kan.

Univision Communications will carry the network in San Antonio; Albuquerque, N.M. and Bakersfield, Calif.

Citadel Communications will air Court TV in Providence, R.I.

Court TV already has at least one minor competitor. Dan Abrams, a former well-known Court TV personality who now hosts the popular A&E show Live PD, also runs the Law & Crime Trial Network, which relies primarily on live video streaming online to attract viewers. While the network has garnered little attention since it began streaming multiple feeds of live trial coverage over its website, YouTube, and Facebook Live, it did attract A+E Networks, which announced its involvement in the project in March, 2018.

Like Court TV, Abrams’ Law & Crime depends on live trial coverage during the day and analysis and documentary-style programming at night. So far, it is free to watch. Its future may be overshadowed by the higher profile return of Court TV, however, unless A+E bundles it into its suite of networks offered to cable and satellite providers.

Dan Abrams pitches his Law & Crime Trial Network to potential partners. (1:29)

Spectrum Strikers Launch Website to Teach Consumers How to Cut Cable’s Cord

Phillip Dampier December 10, 2018 Charter Spectrum, Competition, Consumer News, Online Video, Video 2 Comments

A new union-sponsored website promises consumers they can find a better deal with a different video provider.

(Courtesy: Cut the Cord on Spectrum)

Many of the more than 1,800 Charter/Spectrum workers in the New York City area, on strike since early 2017, have teamed up in a new campaign to encourage customers to cut cable’s cord and disconnect service.

“We all know a typical cable/internet bill with Spectrum runs about $164 – 194 (can’t forget those equipment rental fees, DVR fees & random bill increases!),” the Cut the Cord on Spectrum website says. “By cutting the cord on Spectrum and signing up for streaming services – many of which offer Live TV options including all your favorite cable network and sports channels – you can cut your bill down to as low as $57.99/month!”

The website offers basic advice on alternative providers that stream video programming over the internet, including general pricing and included features. The website implies choosing any other provider is probably better than sticking with Spectrum.

“Spectrum customers – along with the N.Y. Attorney General’s office – have a long list of gripes with Spectrum Cable,” the site claims. “With an income over $490 million and CEO Tom Rutledge earning a salary of $98.5 million, it’s clear that Spectrum Cable is fleecing its customers, overcharging for horrible service while raking in huge profits.”

The International Brotherhood of Electrical Workers Local 3 is behind the latest digital effort to make life difficult for Charter Communications. The union plans to spend “tens of thousands of dollars” on online ads targeting zip codes where Spectrum provides cable service, according to union officials.

The union is getting significant support from politicians downstate, including New York Gov. Andrew Cuomo, who blasted Charter at a well-attended union rally in front of Charter’s headquarters on Wednesday in Manhattan.

“[Spectrum’s] CEO in 2016 made $100 million. The COO of Charter Spectrum, $50 million. The company made $15 billion,” Cuomo told the audience. “How dare you abuse the hardworking men and women that built that company and put the money in your pocket?”

The governor also continued his ongoing attack on NY1 – Spectrum News, a company-owned 24-hour news channel. Many union-supporting politicians have refused to appear on NY1, accusing the channel of bias.

“You want to know what’s interesting about their news organization? It has a very selective memory, their news organization,” Cuomo said. “You know what their news organization never covered? The fact that the state of New York is trying to take away their franchise and kick them out of New York. You know what their news organization failed to cover? The fact that 2,000 Local 3 members were kicked to the street and they’re rallying for two years for fairness and decency.”

Gov. Andrew Cuomo blasted Charter Spectrum at a rally held Wednesday in front of Spectrum’s corporate headquarters in New York City. (15:19)

 

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