January, 2011

Asymmetric warfare

Streaming Video In their letter to shareholders included with their Q4 earnings announcement, Netflix CEO Reed Hastings and (new) CFO David Wells confirm something I noted back in December: The FCC’s recent net neutrality ruling did not offer as much protection to Netflix and other online video distributors as it may have appeared.

While the new rules will bar last-mile ISPs from blocking or degrading OVD-generated traffic, that’s not really an issue for a company like Netflix, with its more than 20 million subscribers. As Hastings noted in his unusual public debate with hedge-fund manager and Netflix short, Whitney Tilson, last month, it’s as likely that Netflix would be able to charge ISPs for the right to deliver its highly prized video service as the other way around. Read More »

Netflix bears take it in the shorts

Earnings That squealing sound you hear is the sound of Netflix bears caught in a short squeeze by the company’s stellar Q4 results, posted after market close Wednesday. With earnings up 52 percent over last fourth quarter and total subscribers cresting 20 million for the first time, shares of Netflix rose by more than $17 in the after-hours market, or nearly 9.5 percent from the day’s official close.

Shares of Netflix had sagged in recent weeks as a number of prominent analysts  turned bearish on the stock, arguing that Netflix’s sky-high P/E ratio could not be sustained much longer.  One prominent hedge-fund manager, Whitney Tilson, went very public with his case for shorting Netflix shares, arguing that rising programming costs, increased competition from Apple, Google and others, and mounting pressure on margins were setting Netflix shares up for a fall, perhaps a steep one, after they grew more than 200 percent in the past year. Tilson’s analysis drew an unusual public riposte from Netflix CEO Reed Hastings, who spelled out his case for Netflix’s long-term upside, urging his “friend” and fellow-philanthropist Tilson to reconsider his position. Read More »

Hulu, the FCC and the Law of Unintended Consequences

Online Video The FCC added a bit of an unexpected twist to its conditioned approval of Comcast’s bid to take control of NBC Universal announced Tuesday. According to the FCC press release, the order approving the deal will stipulate that NBC must give up all  involvement in the management of Hulu, the joint venture among NBC, ABC and News Corp. (Comcast will be able to retain its 30 percent equity stake). Hadn’t seen a lot of speculation around that prior to today’s announcement.

We might already have seen one of the effects of that stipulation, however, without realizing it at the time. The Wall Street Journal reported last month that Hulu has shelved plans for an IPO, at least for the foreseeable future. The main stumbling block, according to the Journal, was the networks’ refusal to sign the sort of long-term licensing deals for their content that Hulu would need to secure a decent valuation in an IPO. Read More »

Ouch

Consumer Spending From the New York Times:

Probably the best thing about last week’s dreary annual summary of home entertainment revenue from the Digital Entertainment Group, an industrywide consortium of technology and entertainment companies, is that the numbers weren’t adjusted for inflation. That made the six-year tumble in cumulative spending on DVDs and other forms of home entertainment look only about half as bad as it really was.

In the peak year of 2004, according to the group, consumers spent about $21.8 billion to rent and buy DVDs, Blu-ray discs, digital downloads and other forms of home entertainment.

Under pressure from piracy, competing entertainment and economic weakness, the number has fallen every year since, for a total drop of about 13.8 percent, to $18.8 billion in 2010.

Read the full story here.

The MPAA gets dialed in

Lobbying You never know how much to read into a hire after a job has been hanging out there for a while, but it strikes me as potentially significant that the MPAA has hired a telecom guy as its new chief technology policy officer. After several months of being shopped around, the job went to Paul Brigner, who spent the previous eight and a half years at Verizon, first as a software engineer and more recently as a lobbyist representing Verizon before the FCC. His LinkedIn profile is here.

The title, chief technology policy officer, is a new one for the MPAA and represents an evolution in the position since the association began trying to fill it last year. Originally, it didn’t have a policy role, and most of the folks who were approached about the job had backgrounds in engineering, not policy. Brigner has both. Read More »

The Pay TV Empire strikes back

Connected TVs What’s the opposite of “over-the-top”? Whatever the correct term, it was on display at the Consumer Electronics Show last week, where pay-TV operators and their allied solutions providers unveiled a host of initiatives and technologies designed to help cable and satellite companies wrest control over IP-delivered video from interlopers like Google TV, Yahoo, Boxee and Apple TV.

The most striking announcements came from cable providers themselves. In separate presentations, Sony and Samsung each announced deals with Time Warner Cable in which Time Warner subscribers will be able to receive cable service directly through certain Sony and Samsung Internet-enabled HDTV sets without need of a set-top box. Samsung unveiled a similar deal with Comcast. Read More »

Connected TVs approaching their Michael Dell moment?

Connected TVs As the curtain goes up on the Consumer Electronics Show in Las Vegas this week, TV set makers could be tempted to throw up their hands. The proliferating number of embedded software platforms, app stores and chip-sets for connected TVs and set-top boxes, to say nothing of web-based content services like Netflix, Hulu and CinemaNow looking for real estate on connected devices, figuring out what sets to build has become a lot more complicated than deciding on LCD or plasma screens.

More fraught, too, as those set makers who had thrown their lot in with Google TV discovered just last month, when Google asked them not to display their Google TV-enabled sets at CES and to delay their commercial rollout until Google could fix some “software problems” with the format. Read More »