Watch these shows online, if you want to risk some uninvited guests.

There is nothing new about news outlets promoting tips and tricks to lower your monthly cable bill.  We publish similar stories ourselves here on Stop the Cap!  But some newspapers take things further, openly advocating you disconnect your cable service for good and watch everything online.  This week, we found one even willing to publish website addresses that skirt copyright laws and take online video underground.

The State Press encourages Arizona State students to thumb their noses at Cox Communications’ latest offer — cable television for $29.99 a month, good for six months (regular price $70).  Instead, they encourage, take your viewing online to Netflix and Hulu — the former for movies, the latter for television series.  But with cable companies and Hollywood studios conspiring to tackle the growing problem of cord-cutting, new restrictions are finding their way to fans of both websites, including waiting periods, limited series runs, and higher subscription fees.  This means war to the State Press:

There is a dark side to these two corporate entities, however. In their attempt to slowly weasel their way into your pockets a bit more, Hulu has gone Plus and Netflix has divided their packages, limiting your viewing. Hulu has seemingly said, “You can pay a little more to watch it the day after, right? No? Well, then I guess you’re waiting five more days for that recent episode,” while Netflix has exclaimed, “Unlimited to our choosing! You’re going to have to pay up if you want every movie out there.” So we must retaliate and go a little dark ourselves.

The author advises readers there is a way around the roadblocks — visiting a website already shut down once by copyright enforcement action (but has since resurfaced with a Chinese web address), providing a list of links to other websites that host copyright-infringing videos you can’t watch on Hulu or Netflix.

While the author of the State Press story may not realize it, a brief test visit to the “pirate-streamed site” opened the door to some nefarious extras.  With the help of Malwarebytes’ Anti-Malware, we stopped unwanted browser toolbars, various intrusion attempts, and even a few pieces of actual malware that wanted in on the party.  Without the most robust security software, visits to websites with underground video content can wreak havoc, and there are not that many TV shows worth watching to make that headache worthwhile.

The website owner disclaims responsibility from just about everything:

“[This website] does not host, provide, archive, store, or distribute media of any kind, and acts merely as an index (or directory) of media posted by other webmasters on the internet, which is completely outside of our control. Whereas we do not filter such references, we cannot and do not attempt to control, censor, or block any indexed material that may be considered offensive, abusive, libellous, obnoxious, inaccurate, deceptive, unlawful or otherwise distressing neither do we accept responsibility for this content or the consequences of such content being made available.”

We encourage you to exercise caution visiting websites that are willing to skirt copyright laws.  Up-to-date antivirus and spyware detection software when visiting is a must at all times.  Many of these sites stay in business selling ad space to anyone, and those ads can come with unwanted malware that can find its way onto your computer long after the viewing is over.  Be careful.

Internet Overcharging schemes bring even more profits to a cable industry that already enjoys a 95% gross margin on broadband service.

At least one major national cable company plans to implement a usage-based billing system in the coming year, predicts Sanford Bernstein analyst Craig Moffett.  Bloomberg News quotes Moffett in a piece that thinly references Time Warner Cable as that operator, whose CEO strongly believes in further monetizing broadband usage.

Moffett is among the chief cheerleaders hoping to see operators charge customers additional fees for their use of the Internet.

“In the end, it will be the best thing that ever happened to the cable industry,” Moffett said.

For customers, DISH Satellite chairman Charlie Ergen predicts it will lead to at least a $20 monthly surcharge for broadband users who watch online video, which could bring already sky-high broadband pricing to an unprecedented $70-80 a month, the same amount most cable operators now charge for standard digital cable-TV service.

The cable industry’s interest in being in the cable television business has waned recently as subscribers increasingly turn away from expensive cable packages.  Now companies that used to consider broadband a mildly-profitable add-0n increasingly see Internet access as the new mainstay (and profit center) of their business.

Time Warner Cable, for example, wasn’t even sure its entry in the broadband business in the late 90s would ever amount to much.  Fast forward a dozen years, and it is an entirely different story:

“We’re basically a broadband provider,” Peter Stern, chief strategy officer for New York-based Time Warner Cable, said Nov. 17 at the Future of Television conference in New York. “As a convenience for our customers, we package and distribute television and provide service around that.”

Bloomberg reports the cable industry profit margin on broadband is nearly 95 percent, a testament to the lack of competitive pressure on Internet pricing.  The industry is going where the money is to make up for increasing challenges to their video business, which currently “only” brings them a 60 percent profit margin.

Suddenlink, already enjoying a 12 percent increase in broadband revenue in the last quarter alone, is implementing its own Internet Overcharging scheme, charging $10 for every 50GB a customer exceeds their arbitrary usage allowance.  That, despite the fact CEO Jerry Kent admits Suddenlink’s broadband margins are double those earned from the cable company’s video business.

Complicit in the parade to Internet Overcharging is Federal Communications Commission chairman Julius Genachowski, who publicly supported usage-based pricing in public statements made last December.  Cable operators were fearful Genachowski might lump the pricing scheme in with the Net Neutrality debate.  Providers have since used Genachowski’s loophole in an end run around Net Neutrality.  If providers cannot keep high volume video traffic from competitors like Netflix off their networks, they can simply make using those services untenable on the consumer side by increasing broadband pricing, already far more expensive than in other parts of the world.

That is a lesson already learned in Canada, where phone and cable companies routinely limit usage and slap overlimit fees on consumers who cross the usage allowance line.  Canada’s broadband ranking has been deteriorating ever since.

Moffett - The chief cheerleader for Internet Overcharging

Bloomberg says such a pricing regime would discourage investment in online video products that currently are held responsible for some cable cord-cutting:

“It’s the reason why Apple or Google would inevitably be reticent about committing a significant amount of capital to an online video model,” Moffett told Bloomberg. “You can’t simply assume just because you can buy the content more cheaply, you can offer a product that’s cheaper to the end user.”

The only way around this might be video providers like Google getting into the broadband business themselves, something Google is experimenting with in Kansas City.  Google’s “Think Big With a Gig” project is partly designed to prove gigabit broadband delivered over a fiber network is practical and doesn’t have to be unaffordable for consumers.  It will also finally bring competitive pressure on a comfortable broadband duopoly, at least for residents in one city.

So far, video providers who depend on an Internet distribution model are not putting much money in the fight against usage-billing.  Instead, companies like Netflix are releasing occasional press releases that decry the practice.

“[Usage billing] is not in the consumer’s best interest as consumers deserve unfettered access to a robust Internet at reasonable rates,” Steve Swasey, a Netflix spokesman, said previously.

It is clear consumers despise usage pricing.  In every survey conducted, a majority of respondents oppose limits on their broadband usage, especially at today’s prices.  But that may not be enough to get companies like Time Warner Cable to back off.  The company has reportedly been quietly testing usage meters since last summer.  CEO Glenn Britt, with a considerable drumbeat of support from Wall Street analysts like Mr. Bernstein, has never shelved the concept of usage pricing, seeing it more lucrative than hard usage caps.  The company retreated from a 2009 plan to charge up to $150 a month for flat rate access after consumers rebelled over planned trials in Texas, North Carolina, and New York.

But without a solid message of opposition from consumers, and an about-face from an FCC chairman that should know better, they’ll be back looking for more money soon enough.

[Thanks to regular Stop the Cap! reader Ron for sharing the news.]

Netflix is selling $400 million in stock and convertible notes to bolster its cash-on-hand as the company faces the imminent loss of important video content for its streaming movie service.  Netflix stock has paid the price in what some investors are calling the worst deal ever. Michael Pachter, an analyst with Wedbush Securities, suspects banks might be turning Netflix down for traditional, less expensive bank loans, leaving the expensive stock sale its only alternative.

Netflix continues to lose subscribers upset over recent price increases and impending content reductions on the company’s streaming service.  Much of Netflix’s more-recent streaming movie library comes from its expiring deal with Starz, and that content will disappear in February.

Banks may be worried the forthcoming downsizing of Netflix’s online selection combined with increasingly expensive streaming renewal deals for the programming that remains may make the company too risky, even if they use the money to acquire additional content. The company might be one rate increase away from a subscriber exodus.

Netflix CEO Reed Hastings isn’t inspiring confidence among investors either.  He’s been selling nearly 5,000 shares of Netflix stock every week since the beginning of the year, according to filings with the Securities and Exchange Commission.  If Hastings ultimately dumps 260,000 shares in the company he founded, investors wonder, why should they buy?

The Wall Street Journal financial MarketBeat blog wonders just how many more blunders are in store for the former high-flying company:

So Netflix is raising a bunch of cash by selling stock when it’s super cheap, after spending a lot of money earlier this year buying back stock when it was super expensive.

This comes after it raised its prices high enough to irritate half its customers, then tried to chase off the other half by shunting them off to a splinter company named after a pot-smoking Elmo. Then it said, never mind, just kidding, please don’t leave us. We can’t wait to not read the business-school papers written about this one!

For some mysterious reason, investors are once again fleeing in disgust from Netflix’s stock, which is down more than 4% this morning at $71. And analysts are not too pleased, either — although, these being analysts, there are of course some who say everything’s just fine, the stock’s a great bargain.

Pachter believes either the company’s chief financial officer is “a moron,” or the company is in growing trouble, unable to convince traditional lending sources with cheap money to share some with Netflix.  The company still expects a financial loss in the coming quarter, although it says subscriber flight is now diminishing.  Netflix is also trying to find new content to keep subscribers satisfied, although much of it consists of repeats of low budget cable documentary and reality shows. Considering these challenges, affordable liquidations could provide financial relief and a strategic approach to managing their resources effectively.

Completely overshadowed by the stock sale are two just-announced Netflix acquisitions: a recommissioned Arrested Development, a quirky comedy which ran on Fox from 2003-2006, and the BBC’s ruthless 1990 political intrigue mini-series House of Cards.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Pachter Says Netflix Plan to Raise Cash Terrible Deal 11-21-11.mp4[/flv]

Michael Pachter, an analyst with Wedbush Securities, talks about Netflix’s agreement to sell $400 million in stock and convertible notes to bolster cash as it increases spending for online rights to films and TV shows. (Bloomberg News)  (8 minutes)

The CW Television Network

First it was the United Paramount Network (UPN) and The WB Television Network (WB), two mini-networks run by their respective studios that simply refused to become profit centers and established challengers to more traditional broadcast networks.  In 1996, both networks combined to create The CW Television Network, and the result has been less than the two original networks had hoped.  Youth-oriented programming targeted to an audience that increasingly doesn’t watch traditional television and a challenging advertising market that has considerably declined since 2009 haven’t helped.

Now the folks in charge of the CW are resting a lot easier, all thanks to Netflix.  The movie streaming and rental service is reported to be signing an agreement worth upwards of $1 billion to access CW programming for its streaming service.

Les Moonves, chief executive of CBS Corp., which now co-owns the network with Warner Bros., couldn’t be happier.

“It essentially makes the CW a profitable enterprise,” Moonves said.

The Los Angeles Times reports:

Netflix is buying rights to repeats of current and future series on the network, and the longer the shows stay on the air and performs well, the more the subscription video company will pay for streaming rights.

For example, Netflix is paying in the neighborhood of $600,000 an episode for “Gossip Girl,” an established show, but will initially pay much less for newer or lower-rated CW programs, people familiar with the pact said. The window between when a new episode of a CW show appears on the network and then ends up on Netflix could be as long as a year.

Netflix has exclusive online subscription rerun rights to all episodes of all CW shows. However, CBS and Warner Bros. can still sell reruns to other outlets, including local television stations and cable networks.

Netflix is hurrying to sign new programming deals as it prepares to lose access to an important component of its streaming library — current movie titles that come courtesy of an expiring agreement with Starz.  Netflix said without renewing that agreement, it would spend heavily to try and find new programming to make up the difference.  The deal with the CW may be an example.

After nearly a half-million Canadians expressed outrage about Bell’s Internet Overcharging practices, the company is responding.  This week, Bell sent a letter to their wholesale customers announcing it plans to end the practice of speed throttling peer-to-peer file traffic (at least for them):

Effective November 2011, new links implemented by Bell to augment our DSL network may not be subject to Technical Internet Traffic Management Practices (ITMP).  ITMPs were introduced in March, 2008 to address congestion on the network due to the increased use of Peer-to-Peer file sharing applications during peak periods. While congestion still exists, the impact of Peer-to-Peer file sharing applications on congestion has reduced. Furthermore, as we continue to groom and build out our network, customers may be migrated to network facilities where Technical Internet Traffic Management Practices (ITMPs) will not be applied.

Peer-to-peer traffic, once all the rage for swapping music, movies, and software (legally or otherwise), has been declining as a percentage of Internet traffic and legal online entertainment services (Netflix, et al.) have become available.  Copyright crackdowns and usage caps manage to further restrict customers from leaving P2P software running continuously as it can rapidly eat into usage allowances.

With increased capacity of Bell’s networks and decreased interest in file swapping software among customers, the practice of throttling such traffic (along with the unintended collateral damage to online gaming), means such network management practices have outlived their usefulness.

Providers these days are far more likely to blame online video for congested networks.  But once providers attach a speed throttle to an application, it can be difficult to remove.  Even as Bell announced it would no longer throttle their wholesale clients, retail customers will still suffer with reduced speeds during “peak usage times” — 4:30pm-2am local time.

Michael Geist, who covers Canadian broadband issues, wonders if Bell’s throttles are actually in violation of the Canadian Radio-television and Telecommunications Commission’s traffic management guidelines:

While Bell says its congestion has been reduced, its retail throttling practices have remained unchanged, throttling P2P applications from 4:30 pm to 2:00 am.  Given the decline in congestion, a CRTC complaint might ask whether the current throttling policy “results in discrimination or preference as little as reasonably possible” and ask for explanation why its data cap policies “would not reasonably address the need and effectively achieve the same purpose as the ITMP.”  In fact, the same can now be said for many other ISPs who deploy broad based throttling practices (Rogers, Cogeco), which may not be reasonable under the CRTC policy.