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.

Time Warner Cable customers still waiting for access to HBO Go, the premium movie channel’s online streaming service, won’t have to wait for the cable company any longer if they happen to own a Roku set top box.  Roku owners who maintain subscriptions to the premium movie channel will be able to access HBO Go via Roku for no additional charge by the end of October.

Roku’s announcement follows Microsoft, who announced Oct. 5 HBO Go would be available to Xbox Live ($60/yr) game service customers.

HBO has been suffering declines in subscriber numbers from customers dropping premium movie channel subscriptions to save money.  HBO Go offers on-demand viewing of many HBO movie titles, and comes at no additional charge to subscribers.  But before HBO Go can be made available, agreements between your video provider and HBO must be signed to handle the authentication process, which verifies a valid subscription to HBO before allowing the service to work.

Time Warner Cable has been dragging its feet on signing an agreement, and that leaves a lot of potential customers without the service.  Time Warner Cable is the nation’s second largest cable operator, behind Comcast.

Roku believes its agreement allows HBO Go to reach more viewers, which in turn may discourage them from dropping the channel.  It also helps drive sales of Roku boxes, which are becoming increasingly affordable.  Roku announced this week it was cutting the price of its least expensive box to $50, a $10 savings.

Roku owners can stream their own video library with third party applications like PlayOn, or choose from a menu of more than 300 channels.  But most Roku owners buy the device to stream Netflix, Amazon, and Hulu content to their television sets over the home Internet connection.

For Sale?

A Wall Street analyst predicts Netflix’s recent announcement to separate itself from its DVD-by-mail rental service (now run independently as ‘Qwikster’) is the first step in selling its online streaming business to Amazon.com.

Michael Pachter, of Wedbush Securities raised his buy rating on Netflix stock, claiming the company could be on the verge of a lucrative sale of its increasingly-important streaming business to the online retailer:

Pachter said that Amazon has always wanted to be in the video-streaming business, but has been hampered by tax considerations due to state sales tax issues. Most states require companies that have physical operations in those states to collect sales taxes on transactions done within those states.

Amazon has so far been able to get around most of those sales-tax issues by virtue of its being an online retailer. Pachter said Amazon would likely have had to begin collecting state sales taxes had it purchased Netflix outright because that company has a wide network of distribution centers across many states.

However, Pachter said a separate video-streaming business from Netflix is more appealing to Amazon, as the company could still avoid enforcing the state sales taxes, and dramatically increase its own video offerings.

“If Amazon were to acquire only Netflix’s streaming business, it could triple the size of its content library, and gain traction as an industry leader,” Pachter said. “Netflix’s streaming has current content deals that provide it with access to movie content during the premium cable TV window, and Amazon has the financial resources to secure additional streaming rights.”

But not every analyst is convinced Pachter is on the right track.

Brett Harriss, an analyst with Gabelli & Co. in Rye, New York, told Bloomberg News that potential buyers are more likely to wait until Netflix gets cheaper before making a bid.

“At some point, this does get cheap,” Harriss said in an interview. “But I don’t think we’re down there yet.”

Other analysts think the concept of a sale is correct, but the buyer is all-wrong.

“The name that would pop in my mind first is Google,” Tim Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group LLC in Bedford Hills, New York, told Bloomberg. “Google loves to throw money at ideas and companies that they think have the potential to be game changers and become major players.”

[flv]http://www.phillipdampier.com/video/CNBC Netflix Feeding Frenzy 9-21-11.flv[/flv]

Netflix Feeding Frenzy: The vultures are circling as analysts on CNBC pound Netflix’s recent price and service plan changes as this compilation of reports illustrates.  (18 minutes)

The Florida Attorney General’s office is taking notice of an increasing number of consumer complaints regarding service providers auto-renewing contracts for subscription services without notifying customers in advance.

Among the worst offenders is satellite radio and Internet streaming provider SiriusXM, which some consumers say is notorious for shady billing and collection policies.

SiriusXM provides free trial service in any new and most used vehicles where receivers come pre-installed.  Most dealers activate the service trial for consumers, and pass along the name, address, and phone number of the individual buying the vehicle.  Within two weeks, SiriusXM will begin mailing customers invitations to convert their free trial into a paid subscription, usually with a discount offer.  Consumers who sign up for promotions like SiriusXM’s “5 months for $25” are invited to charge their subscription with a major credit card over the phone.

That’s where the trouble starts, several customers report.

Unbeknownst to them, SiriusXM will “automatically renew” active subscriptions with a credit card on file for “the convenience of the customer,” once the promotion expires.  Customers usually find out when they find a substantial charge on their credit card, often representing the next quarter of service, billed at the regular price of $12.95 per month, plus a “music royalty fee” and any additional state and local taxes.

Some subscribers find even bigger headaches when taking advantage of discounted annual rates that als0 auto-renew.  If the subscriber isn’t automatically billed for the renewal on a credit card, they will often find a bill in the mail, along with a fee for mailing the unexpected invoice.

Getting SiriusXM to cancel surprise bills can become a major headache, and has led to thousands of complaints with the Better Business Bureau.  SiriusXM’s overseas call centers can leave customers waiting on hold for more than half an hour, only to be connected with an English-challenged, uncooperative customer service agent that refuses to waive unexpected charges.

To be fair, SiriusXM’s subscriber agreement provides warnings that canceling service requires more than ignoring a billing statement.  Service will continue (along with billing) for up to three months before the service is suspended and the account is turned over to collections.  Consumers should not consider -any- SiriusXM plan or promotion a one-time, non-renewing offer.  Every promotion we’ve encountered will end with an account converted to regular price service.

Florida state law requires providers like cable, satellite, and phone companies to warn subscribers at least 30 days in advance of any scheduled automatic renewal of a contract.  The law gives consumers time to opt out before they find themselves committed to a service they no longer want.  But many customers accuse SiriusXM of ignoring the law, and the first indication the radio service has been renewed arrives in the form of a bill.

Coping with the third party collection agency SiriusXM uses can be even more difficult than dealing with the company directly, according to several complaints.

Customers who have filed complaints with the BBB report the company usually bends to customer demands at that point.

We have had some long-standing experience dealing with SiriusXM customer service ourselves.  Here are some tips:

1. Don’t give them a credit card number over the phone.  Tell them to send you a bill in the mail and you will write them a check.  You can make a “one-time” credit card payment on their website that has never resulted in auto-payments for us.  Most of the automatically-renewing charges we’ve encountered came from overzealous telephone customer service representatives enrolling us in the “auto-payment” service without our authorization.
2. You almost never have to pay regular SiriusXM prices.  Their retention offers can be renewed over and over again just by telling them the regular price is too high.  But retention plans do not include “best of” channels from the sister provider (Sirius customers can get certain XM channels and vice-versa).  Routine promotions these days are 5 months for $25 or a year for $77 if you don’t want the hassle of calling every five months to renew your retention deal.  Either is much better than $12.95 a month.
3. Although getting “late fees” and “paper billing fees” waived is easy, getting the bill-padding “music royalty fee” forgiven is not.  But you can try.
4. The “lifetime” promotion only covers the life of the receiver (or your automobile).  It’s not a good deal.
5. When you sign up for a promotion, use a calendar application to start reminding you 30 days before it expires so you can call and extend it.  If your promotion expires, you will be billed regular prices and it is a major hassle to get them to waive or discount those charges in-between promotions.
6. If you want to listen to the music channels on offer from SiriusXM these days, you can sample them for free using their streaming service.

SiriusXM recently announced they intend to raise their monthly subscription price to $14.49 in January — just another reason not to pay the regular price.

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WFTS-TV in Tampa reports on increasing complaints about SiriusXM’s billing and auto-renewal practices.  (4 minutes)

Get ready for Qwikster

Netflix CEO Reed Hastings apologized this morning on the company’s blog for the perceived lack of “respect and humility in the way we announced the separation of DVD and streaming, and the price changes,” imposed on customers this month.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.

We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/YouTube An explanation and some reflections 9-19-11.flv[/flv]

Netflix CEO Reed Hastings apologizes and explains the company’s new mailed DVD service Qwikster.  (3 minutes)

Hastings promises little will change with Netflix’s DVD-rental business except the name.  But is that enough to erase the perceived price and policy changes customers are complaining about?  Some of our readers say no, and most of the 10,000+ comments on Netflix’s blog as of this afternoon were also very hostile.

“He’s re-arranging the deck chairs and calling them lounge seats, but they are really the same deck chairs,” shares reader Tom Defrancisco in Austin, who shared the story with us.  “The ship is still taking on water, and that will only get worse when the rest of Hollywood gets their piece.”

Defrancisco is referring to ongoing content contract renewals Netflix is pursuing to keep, and expand, its online video streaming.  With the potential forthcoming loss of content from Starz, which could take a significant amount of current movie titles offline, subscribers may not be willing to pay more for less content to stream.

“It’s inevitable Netflix will have to raise streaming prices in the next six months when some of their content deals are renewed, and I am asking myself if it is worth $10-12 a month to stream old documentaries, TV shows, and movies I barely care about when current movies are simply not available online,” Defrancisco adds.

[flv]http://www.phillipdampier.com/video/CNBC Netflix Quixster Equals Quitster 9-19-11.flv[/flv]

CNBC investors and analysts are calling Netflix’s announcement they are splitting up their streaming and DVD rental business a “the third strike” for the company and are telling investors to get out before it’s too late.  “Qwikster=QUITster,” says Michael Pachter, Wedbush Securities, who thinks customers are once again the big losers.  “In the last three months, customers have seen prices rise, the quality of streaming content decline, and they just made the service a lot more complicated.”  (4 minutes)

Several of our readers miss Netflix’s 1-out-DVD/streaming companion plan, which used to offer unlimited streaming and one DVD rental at a time for $9.99 a month.

“I don’t care if they call it Netflix or Qwikster or MasterWatch,” says our reader Kyle. “It’s the same thing at the same high price called something else.  Who are they trying to fool?  I think it’s very telling Mr. Hastings doesn’t even directly own shares in his own company, and has sold off tens of millions in indirect shares he controls.”

The company’s new YouTube channel is also being pelted with negative views of Netflix’s latest business moves.

VoiceOreezn:

You guys just don’t get it. You don’t care what your subscribers want, and now are trying to justify your actions. Your streaming service sucks, and the pickings are very slim. I cancelled my account. It’s not about price, it’s about greed. You started off with a good concept, (but not enough streaming movies). Now, you’re just another greedy corporation. Want people back? Give them MORE, not less. I’d be very afraid of Amazon if I were you.

Netflix stock has lost nearly 50 percent of its value since the company first announced its price increase and plan changes on July 12.  Last week, Netflix admitted it was adding fewer new subscribers than forecast since raising prices nearly 60 percent on combination streaming-DVD plans.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Cory Johnson Discusses Netflix Subscriptions 9-16-11.flv[/flv]

Bloomberg talks with Cory Johnson about the outlook for Netflix Inc., after the company cut its U.S. subscribers forecast following a price increase.  Netflix has some surprise expenses coming up.   (2 minutes)

Some analysts, including Gabelli & Co analyst Brett Harriss don’t think today’s developments will make much of a difference, telling Reuters Hastings has talked repeatedly about separating the businesses in the past.

But one thing Qwikster will bring that Netflix never had: video game rentals for Wii, Playstation 3 and XBox 360 owners.