Apple’s Latest TV Tease

For the best part of a decade, the heads of Apple, including Steve Jobs and current CEO Tim Cook, have had a side-career teasing fanboys and analysts about a major move into TV and video.

Jobs famously told his biographer, Walter Isaacson, that he “finally cracked” the secret to re-engineering the TV viewing experience, and just weeks before his death called tech columnist Walt Mossberg to say he had figured out how to “remake” television.

Whatever it was Jobs had figured out, though, he took it with him to his grave because nothing like what Jobs described to Iasaacson was ever released.

That didn’t stop his successor, Cook, from continuing the tease, however. For several years after, Cook made a habit of dropping hints about some new TV project or another, and stories leaked out of Hollywood every six months or so that Apple content chief, Eddie Cue, was talking with the studios and TV networks about licensing content for some sort of new Apple video service.

Nothing ever came of those purported discussions, either.

More recently, thing had gone quiet on the TV front as Apple turned its attention to building up its music streaming service and squelching growing investor fears about the future profitability of iPhone sales.

On this week’s Q3 earnings call, however, the TV tease was back on.

“We hired two highly respected television executives last year, and they have been here now for several months and have been working on a project that we’re not really ready to share details about,” Cook said. But he assured analysts he “couldn’t be [more] excited about what’s going on there.”

OK, I’ll take the bait. What could it be?

It’s clearly not any kind of integrated Apple TV set, as Jobs seemed to be contemplating. Nor is it likely to be a new set-top box or dongle, as Cook had hinted at over the years.  The two executives he referred to hiring are Jamie Erlicht and Zack Van Amburg, from Sony Pictures Television, where they were responsible for “Breaking Bad,” “The Crown” and “Rescue Me,” among other series. They’re not what you would call hardware guys.

But are Erlicht and Van Amburg there to produce shows or to take another run at licensing and acquiring content from the studios?

As Cook noted on the earnings call, pay-TV cord-cutting is happening at an accelerating rate, but he believes it will accelerate even further, “at a much faster rate,” than generally acknowledged. That means there will be a lot of potential video subscribers up for grabs over the next few years.

I wouldn’t expect Apple to try to launch a virtual MVPD service, as it seemed to be angling for in the past, though. With studios and networks increasingly looking to launch their own direct-to-consumer streaming services, and the consolidation underway in Hollywood, there is likely to be a lot less premium content and established TV brands around license, and prices will be sky high.

I wouldn’t expect Apple to go the Netflix route either. With 140 million video subscribers world wide Netflix has an enormous head start. It’s true that Apple has proved it can come from behind, as it did in catching Spotify in music. But in that case, Apple was able to obtain essentially the same catalog of content as Spotify at comparable prices. Though Apple is sitting on a mountain of cash, taking on Netflix’s $8 billion original content budget and well-oiled production pipeline would be a very heavy lift with a high potential for failure.

Whatever Apple is planning its target is likely Amazon. Apple can’t have missed noticing the strategic value Amazon has derived from Prime Video and its ability to drive business for other parts of the company.

Amazon’s Echo smart speakers and Alexa voice assistant have also given it a firm and rapidly growing footprint in the home, posing a serious threat to Apple’s ambitions in the connected home market. Alexa is also helping drive subscriptions to Amazon Music, which is starting to look like less of an also-ran in a market Apple hopes to dominate.

Apple needs an answer to Amazon in the home. And that means creating a credible alternative to Amazon Prime Video.

Whatever Apple is planning, it won’t be a Netflix-link standalone video streaming service. It will instead be tightly integrated with its broader strategic goals, the way Prime Video is tied to Amazon’s.

And Apple can’t keep up the tease much longer.

AT&T’s Real Challenge to HBO

Media industry tongues are still wagging over AT&T executive John Stankey’s June 19 town hall meeting with HBO employees, in which he discussed the telco-giant’s plans for the network.

As first reported by the New York Times, which got its hands on an audio recording of the event, Stankey came off  like a bull in a china shop, seemingly admonishing HBOers they were in for a “tough year” to meet AT&T’s goal of making the boutique network “bigger and broader,” in the Times’ characterization, by cranking out subtantially more content to better compete with over-the-top services like Netflix.

“We need hours a day,” the Times quoted Stankey saying. “It’s not hours a week, and it’s not hours a month. We need hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes.”

The goal, he said, was more engagement. Read More »

Shallow Harbors: EU Poised To Rewrite Rules For User-Generated Content

Almost from the day the Digital Millennium Copyright Act came into effect, copyright owners have sought to limit the so-called safe harbor protections against infringement liability the law grants to online service providers that host user-uploaded content.

But a series of lawsuits aimed at setting strict limits on the safe harbors, starting at least as early as Perfect 10’s 2002 litigation against CCBill and stretching through the Veoh cases and Viacom’s long-running battle with YouTube, largely failed in that regard and arguably made things worse for rights owners. The result was a series of court rulings reinforcing the strict and precise requirements of the notice-and-takedown system the law spells out for getting infringing content removed from online platforms.

Legislative efforts to limit or weaken the safe harbors fared no better, culminating in the spectacular crash-and-burn in 2012 of the Stop Online Piracy Act (SOPA) in the House and the PROTECT-IP Act (PIPA) in the Senate, which largely scared Congress off similar attempts ever since. Read More »

The Weight Of The World

Shares of Netflix touched $349.29 this week, raising its stock market value to $153 billion, eclipsing Disney’s $152 billion and making the streaming service, briefly, the most valuable entertainment company in the world.

Netflix’s stock has been the top performer in the S&P 500 so far this year, surging nearly 70 percent since January. But a bullish forecast put out last Friday by Bank of America analyst Nat Schindler suggested the peak is yet to come, fueling this week’s rally.

“We believe Netflix still has a considerable opportunity ahead if it can achieve reasonable penetration levels internationally,” Schindler said in a note to clients. “Netflix will face varying levels of competition, regulation and economic conditions in each individual market it participates in, but its content scale should allow it to become the dominant streaming player in virtually all markets.”

Schindler predicts that Netflix’s global subscriber base can continue to grow by 8 percent annually, reaching 360 million by 2030, as consumers in a growing number of markets get access to broadband. Netflix currently pegs its global subscriber rolls at 125 million. Read More »

How The Creative Industries Are Using Blockchain

This was Blockchain Week in New York, formally known as Consensus 2018, an orgy of  blockchain-focused conferences, hackathons, meetups, hookups, seances and parties organized by CoinDesk that actually ran to 10 days. Yours truly was asked to moderate a panel at one such conference, the Blockchain Brand Innovation Summit put on by the CDX Academy and Columbia University Business School, and to offer a few words on how folks in the creative industries are using, or thinking of using blockchain.

I am no kind of expert on blockchain or the various technologies or mathematical concepts associated with it (crypto, consensus mechanisms, smart contracts, etc.). But in my capacity as co-founder of the RightsTech Project I’ve observed how many different sectors of the creative industries are looking to blockchain as a solution — or part of a solution — to a common set of challenges. So, in preparing for the panel, I pulled together a few “thoughts” on the question and came up with five broad use cases, or categories of use cases, for which people in the creative industries seem to be looking to blockchain. Read More »

Comcast And Netflix: We’re Chill

A story appeared this week in the the music trade Digital Music News claiming that Comcast had coerced Netflix into their recently announced agreement to bundle the streaming service in with Comcast’s pay-TV offering by threatening to impose “paid prioritization” charges on Netflix for delivering its streams to Comcast broadband customers.

The story cited an anonymous source, who pointed to a paragraph in the press release announcing the deal, which reported that “Netflix-related billing will be handled directly by Comcast, giving customers one, simple monthly statement,” as evidence of Comcast’s arm-twisting. Read More »

Set-Top Rapprochement

Back in 2012, writing for the now-defunct GigaOm, I predicted that peace would eventually breakout between pay-TV operators and over-the-top services, a process I dubbed the set-top rapprochement (I was able to find one archived example of my musings still available online).

As OTT services evolved into ever-more viable substitutes for traditional TV, pay-TV providers, I assumed, would eventually realize they were better off embracing the enemy that fighting him, lest they be displaced altogether. OTT services, I imagined, would eventually see the benefit to getting their service onto TV-input 1 in households that held onto their pay-TV service, which is to say most of them. Read More »

The Justice Department’s Fanciful Case Against AT&T-Time Warner

There is rarely anything to celebrate when two companies in the same industry decide to merge. Mergers–whether horizontal or vertical–tend to entrench incumbents and raise barriers to entry for disruptive newcomers, which robs consumers of choices.

Within the industry itself, mergers channel capital toward scale, at the expense of innovation, which can lead to stagnation and ennui.

And, while the shareholders of the companies involved may see a short-term windfall, in the long run the buyer generally just ends up inheriting whatever problems drove the seller to sell in the first place, without actually solving them.

So, there is more than ample cause to be skeptical of AT&T’s proposed $109 billion acquisition of Time Warner.

That said, however, the theory of the government’s case for blocking the merger, which went to trial this week, seems cockeyed. Read More »

Mirror Mirror

Netflix’s content chief Ted Sarandos once famously quipped that his goal was for Netflix to become HBO “faster than HBO can become us.” By that he meant, for Netflix to establish itself as a high-end global TV content brand before the reigning high-end global TV content brand, HBO, could un-tether itself from the legacy pay-TV ecosystem.

So far, Netflix is winning that race. The streaming service now reaches over 100 million subscribers worldwide, more than the entire U.S. pay-TV universe, and will spend upwards of $8 billion in 2018 producing 700 original series.

What’s more, Netflix has successfully colonized HBO’s home turf in the living room. Although today you can watch Netflix on virtually any connected device nearly anywhere in the world, the company reported this week that 70 percent of its streams are delivered to a stationary TV set, either directly via smart TV app, via streaming box, or via its growing number of integrations with traditional pay-TV platforms. Read More »

YouTube Under Fire

YouTube. What is it good for?

Not for making a living, apparently. According to new research by Matthias Bärtl of Offenburg University of Applied Sciences in Offenburg, Germany, 96.5 percent of YouTubers trying to make money from their videos won’t earn enough from advertising to exceed the official U.S. poverty line of $12,140 a year.

That’s in part due to YouTube’s low advertising rates, but mostly due to the fact that a tiny slice of videos grab nearly all of the views. According to Bärtl, 3 percent of most-viewed channels in 2016 attracted almost 90 percent of all views.

There’s a broken heart for every “like” on YouTube.

While Bärtl’s research may say more about the unwarranted expectations of most YouTubers than about anything YouTube itself is doing, another new study this week cast the Google-owned site in a more sinister light. Read More »

Disney Sees Red Over Ruling on Download Codes

Ever since sales of DVDs and Blu-ray Discs began their long eclipse behind the rise of more convenient digital alternatives the Hollywood studios have sought ways to extend the life of the high-margin disc business by finding ways to integrate disc sales with the broader digital economy.

The most systematic effort was the UltraViolet initiative. By creating an UltraViolet account, consumers could register their purchase of a DVD or Blu-ray Disc and obtain access to a digital version of the same movie, which they could then stream to connected devices without a DVD or Blu-ray drive, via participating streaming services.

Disney, which never joined the UltraViolet consortium, had its own version it called Disney Movies Anywhere (now re-christened simply Movies Anywhere and incorporating most of the former UltraViolet studios). Disney packaged its discs with an insert containing a code, which, when entered by the consumer in her online Movies Anywhere account allowed her to stream the movie through participating online services, or to download the movie onto up to eight registered devices.

DVD rental kiosk operator Redbox has likewise struggled with consumers’ declining appetite for DVDs and Blu-rays. It’s main strategy has been to keep its rental prices extremely low, which has often put it at odds with the studios, who by and large would prefer to see the low-end rental market wither away. But Redbox, too, has sought ways to make itself digitally relevant. Read More »

Explaining Blockchain With Cats

When Satoshi Nakamoto introduced Bitcoin into the world, whoever he, she, or they were set the total number of coins that can ever be released (“mined” in Bitcoin parlance) at 21 million. While individual bitcoins can be sub-divided into an infinite number of smaller units (fractions of bitcoins), the total whole number of units is finite.

CryptoKitties fat cat Mack Flavelle

That inherent scarcity is one of the reasons for the dizzying run-up in the price of bitcoins: At any given time there is a fixed number of bitcoins in the world.

The key to establishing that scarcity is the blockchain, which leverages cryptography to ensure that individual bitcoins (and their subdivisions) are unique, identifiable, unalterable, and un-reproducible. Unlike the internet, where sending a digital file from one computer to another inescapably involves creating a new copy, bitcoins themselves are not really “sent” or transferred over a network so there is no need to create a copy. Instead, the shared ledger that records ownership of bitcoins is updated to reflect the new network address (i.e. owner) of a cryptographically unique asset on the network.

Those properties, of uniqueness and scarcity, are part of what has attracted many artists to blockchain technology. What is unique and scarce can have and hold value, and what has value can be bought and sold, traded and collected, or held as an asset in the expectation of appreciation.

Getting people who are not steeped in cryptography and are accustomed to the infinite reproducibility of digital files on the internet to become familiar and comfortable with the concepts of digital scarcity and uniqueness, however, is a challenge. Without that buy-in from consumers, the blockchain hopes of many in the media and creative industries could be broken.

It was that challenge that Mack Flavelle and his team of developers at AxiomZen set out to tackle. Their solution? Cats.

The team came up with a collection of digital illustrations depicting goggle-eyed, cartoon cats they called CryptoKitties and created an online game allowing people to buy, sell and collect CryptoKitties using Ether. The game also leverages smart contracts to make the kitties “breedable,” based on their unique “DNA,” creating new, unique CryptoKitties.

Why cats? While there are other blockchain-based digital collectibles on the market, most are targeted at limited audiences, such as RarePepes, based on the adopted alt-right mascot Pepe the Frog. Flavelle’s goal was to appeal to a broader market and introduce ordinary consumers to digital collectibels. “Cats are part of the internet,” Flavelle tells RightsTech.  “People are already familiar with the idea of trading cat videos.”

Trading in CryptoKitties has been robust. At one point, it became the dominant application on the Ethereum network, to the annoyance of others trying to use the network.

According to a third-party site that tracks sales of CryptoKitties, some virtual kittens have sold for the equivalent of more than $100,000, based on the then-current value of Ether.

Flavelle, who’s title is Fat Cat, will sit down for one-on-one fireside chat with me on February 6th, as part of the RightsTech track at the Digital Entertainment World conference in Los Angeles.

We’ll discuss the origins of CryptoKitties, what their creators have learned about the market for digital collectibles, what their popularity portends for consumer adoption of blockchain-based applications, and whether CryptoKitties are a fad or will prove to have nine lives.

Click here for information on registering for Digital Entertainment World.

 

Nothing Neutral About Disney’s Bid For Fox

It was fitting, albeit likely coincidental, that the Walt Disney Co. announced its $52 billion acquisition of most of the movie and TV assets of 21st Century Fox on the day the Federal Communications Commission voted to repeal its own net neutrality rules, because the deal is very much about the future of content delivery over the internet.

Disney CEO Robert Iger

Under the deal, Disney would absorb the 20th Century-Fox film and TV studio and its library, including the first three “Star Wars” films; most of Fox’s cable networks group, including National Geographic, FX, and 300-plus international channels but excluding Fox News or Fox Sports; and 22 regional sports networks (RSNs). The deal also includes Fox’s one-third interest in Hulu, giving Disney majority control over the streaming service.

Assuming the deal passes antitrust muster — highly likely given Rupert Murdoch’s closeness to Donald Trump — it will give Disney control over vast new libraries of content as it prepares to significantly expand its direct-to-consumer streaming business. Strategic control over Hulu will also give Disney a solid foundation from which to challenge Netflix and Amazon directly as an over-the-top content aggregator.

Yet, while the coming showdown with Netflix has grabbed most of the headlines about the deal, there is another important streaming dynamic likely to play out that has gotten less attention but which could be directly impacted by the repeal of the net neutrality rules.

Whether, or not, the bulked up Disney succeeds in challenging Netflix and Amazon, its growing direct-to-consumer ambitions give the Mouse a major stake in the coming contest between programming services and broadband providers over the terms and conditions of engagement on last-mile networks.

The over-the-top streaming business has so far developed very differently from traditional movie and television delivery businesses. In the traditional TV business, the owners of the last-mile pipes — cable and satellite operators, local broadcast affiliates — pay program providers for access to their content.

Disney, in particular, has been successful in leveraging that dynamic, earning ESPN the highest per-subscriber carriage fees of any cable network.

Unlike a cable TV system, however, internet access networks have utility and value independent of any particular content, allowing access service providers to build their networks — and subscriber bases — without having to pay for the content moving across those networks.

If anything, the monopoly or duopoly status most internet access providers enjoy within their footprints has raised concerns that ISPs could use the leverage of their control over their networks to compel content providers to pay for access to their subscribers.

The FCC’s original Open Internet Order was designed in part specifically to deny ISPs that leverage, by prohibiting the blocking or throttling of data based on its source, or accepting compensation for favorable treatment of data from a particular source. Those rules left the status quo in place, at least for the time being. But they left open the possibility that the streaming business could eventually develop more like the traditional TV business, in which access providers are compelled to

The FCC has now voted to lift those rules — their ultimate fate awaits the outcome of inevitable litigation — potentially upsetting the current balance of power.

Determining who will ultimately holds the leverage in that balance remains a work in progress, however. One way to read Disney’s bid for Fox is as an attempt to position itself not only against Netflix but against last-mile network operators for the inevitable battles ahead.

From that perspective, the real trigger event for Disney was AT&T’s (still pending) acquisition of Time Warner. Assuming that deal goes through, it will mean that two of Disney’s (and Fox’s) major competitors — NBCUniversal, now owned by Comcast, and Time Warner — will be owned by major broadband providers. That could leave Disney at a disadvantage in the struggle for leverage over the terms of OTT distribution.

One option would have been for Disney to sell itself to a network operator. But the only one out there with the scale to do it and not already betrothed is Verizon, and Verizon execs have made it clear they’re not in the market for a major studio.

By buying Fox, Disney is hoping to gain enough scale as a content provider to treat with network operators on equal or better terms.

 

Amazon, Google And The Great Game

For the better part of the 19th Century, the British Empire and Czarist Russia (and for a while Napoleonic France) struggled for influence and control over Afghanistan and the broader Islamic Central-Asian region. Russia feared England’s growing commercial ambitions on the doorstep of the Russian Empire, while England feared that Russian control of Afghanistan would allow it to threaten India, the “jewel in the crown” of the British Empire.

Although the European powers never went to war against each other directly over the region, they engaged in a decades-long series of political and diplomatic moves and counter-moves (and occasional indirect military moves) that historian came to call The Great Game.

Something like a 21st Century version of the Great Game is now playing out among today’s digital empires for control over virtual territory on the connected devices and streaming services in Americans’ homes. Read More »