What Quibi Got Wrong

It’s hard to imagine what more could have gone wrong for the launch of Quibi. The short-form, mobile-only streaming app set sail amid the worst pandemic in a hundred years that has left people with hours of time on their hands and decidedly un-mobile.

It bet heavily on a technical twist — its Turnstyle portrait-to-landscape viewing feature — that is now the subject of a patent infringement lawsuit that could prove costly, and it suffered a major privacy breach less than a month after launch.

It also baffled and frustrated early users by having no connection to TVs or any other non-mobile platform, and its ad-supported tier still costs $5 a month.

As a result, despite billions in advertising and promotion, including an expensive Super Bowl ad, Quibi has so far managed to attract only 1.3 million active users, most of whom are still on a free trial, and the app quickly fell out of top 100 list of iPhone app downloads.

In an interview with the New York Times last week, Quibi co-founder Jeffrey Katzenberg blames the poor showing so far on Covid-19.

“I attribute everything that has gone wrong to coronavirus,” Katzenberg said. “Everything.”

But there was a lot wrong with Quibi even before the Covid lockdown.

The initial lack of a connection to the TV was both a monumental miscalculation (which the company is now scrambling to fix) and a tell. It was a strategic decision premised on the idea that a service provider can dictate to consumers long-habituated to all-platform access to content what the use-case must be and which device they must use for it.

It’s the same way of thinking that led the record industry to believe they could continue to force consumers to buy high-margin CD albums even after Napster had empowered consumers to disaggregate the bundle. It’s as if Quibi’s big-name Hollywood backers have learned nothing about consumers and digital services in the nearly three decades since.

Quibi also raised $1.75 billion before launch and used it to pay A-list talent to create original programming based on the untested premise that consumers want to watch professionally produced long-form content cut up into 10-minute chunks.

In short, there was nothing at all organic about Quibi. Its content is un-viral by design, there is no way to engage with it apart from passive consumption, and it’s not designed for binging.

Compare that with TikTok, which came out of nowhere less than three years ago and has amassed 2 billion viewers worldwide. The platform is mobile-friendly by design but its content is designed for engagement. Unlike Quibi, it’s seen a surge in users since everyone was forced to stay home and is now attracting the same sort of A-list talent to create content organically that Quibi has paid so handsomely for.

Quibi needs to go back to the drawing board.

Publish, or Perish?

When you think about the “copyright wars,” you typically think of the major record companies and Hollywood studios battling digital platform providers and developers over alleged “piracy” and the purported “value gap.” But some of the hottest engagement these days are happening in the world of publishing, including book, news media and scholarly journal publishing. And the roster of antagonists includes governments, courts, libraries and public advocates.

The U.S. Supreme Court this week handed down a ruling in a closely watched case concerning an annotated compendium of the Georgia state laws compiled by LexisNexis on behalf of the state legislature.

While the statutes themselves are a matter of public domain, under a long-standing legal principle known as the “government edicts doctrine,” the legislature maintained that the annotation it commissioned (at no direct cost to the state) represents original works of authorship covered by copyright. Since the work was performed by LexisNexis under a work-for-hire agreement, the legislature claimed the copyright in the annotated presentation for itself. In return, it granted LexisNexis and exclusive license to sell the annotated edition commercially — the only form in which a complete corpus of state laws is made available.

When the non-profit public access organization Public Resource scanned the annotated edition and posted it online for free the state legislature sued it for copyright infringement.

By a 5-4 majority that crossed ideological lines the Court held that, since the work of annotating the laws was done under a work-for-hire agreement, the legislators themselves were technically the authors of the annotations. And insofar as they were acting in their official capacity as legislators, any work of authorship they produced would fall under the government edicts doctrine and be ineligible for copyright.

Where there is no copyright, there could be no infringement my Public Resource.

But where there is no copyright, there also could be no valid assignment of the exclusive right to distribute the annotated volumes to LexisNexis.

In its brief to the Court, the legislature argued that without a licensable copyright, it could not induce private parties such as LexisNexis to help it produce affordable editions of its annotated code, ultimately harming the public. Writing for the majority, however, Chief Justice John Roberts said that was a matter of public policy better addressed to Congress than to the courts.

“That appeal to copyright policy, however, is addressed to the wrong forum,” Roberts wrote. “As Georgia acknowledges, ‘it is generally for Congress, not the courts, to decide how best to pursue the Copyright Clause’s objectives.'”

Twenty-two states, two U.S. territories and the District of Columbia rely on similar arrangements with commercial publishers to produce annotated statute books. All of those arrangements are now potentially invalid, as could be thousands of other copyrights and licensing arrangements maintained by the several states. Which means this week’s ruling won’t be the last shot fired in this skirmish.

Open Sesame

We also haven’t heard the last shot in the long-simmering battle over applying open-access publishing policies to publicly funded research.

In 2018, a coalition of scientific research funding organizations announced an ambitious plan, known as Plan S, to require recipients of their grants to make any resulting papers on their findings freely available for anyone to read, download, translate or otherwise re-use the work rather than publishing their papers in subscription- or fee-based journals.

After much hue and cry from commercial academic publishers, the original 2020 target date for Plan S to take effect was pushed back by a year to give publishers more time to adjust their businesses.

But the issue hasn’t gone away. And in February of this year, the White House Office of Science and Technology Policy (OSTP) issued a request for comments on a proposal to implement a similar policy in the U.S. for federally financed research.

Those public comments are not yet available, but in December, when word of a possible executive order imposing the policy began to circulate, a group of publishers led by the Association of American Publishers (AAP) wrote a letter to the White House strongly objecting to any such policy.

“We have learned that the Administration may be preparing to step into the private marketplace and force the immediate free distribution of journal articles financed and published by organizations in the private sector, including many non-profits,” the group wrote. Such a policy, they said, would effectively nationalize American intellectual property and “force us to give it away to the rest of the world for free.”

The issue is an odd one for the Trump White House to be pushing, given its general disdain for the fruits of scientific research. And in fact, the initiative within OSTP dates to the Obama Administration. The fact that it has been able to continue, however, demonstrates the momentum gathered behind the open-access movement.

Much of the raw data that results from publicly financed research is already made freely available, in fact, either voluntarily by the researchers themselves or the institutions they work for, or as a matter of policy by the funding organizations.

It is the scholarly papers analyzing those data that historically have been published in commercial, peer-reviewed, journals that are at issue.

Subscriptions to those journals are often very expensive, especially institutional subscriptions that allow access to all qualified users. Tension between publishers and budget-strapped public and academic libraries is a matter of long standing. But as digital technology has democratized access to information generally, the question of access to publicly funded scientific information has become a question of public policy.

There is a certain intuitive fairness to the idea that publicly funded research ought to be publicly available. We paid for it, after all.

On the other hand, organizing and managing the peer-review process, and identifying, curating and archiving the most credible and highest quality information — in a word, editing — costs money. And if commercial publishers are not able to profit from performing those functions they are unlikely to perform them.

Someone else — perhaps even the public that funded the research in the first place — would need to bear the cost of performing those fuctions.

Training Camps

Commercial publishers these days also find themselves on the front lines of a growing conflict over the use of copyrighted works to train artificial intelligence algorithms.

As discussed here before, both the U.S. Patent & Trademark Office (USPTO) and the World Intellectual Property Organization (WIPO) have launched inquiries into the intellectual property implications of A.I. technology.

Much of the public discussion of the issue has focused on whether works of authorship or invention produced by A.I. systems should be eligible for intellectual property protection, and if so, in whom or what should any such copyright or patent vest.

But the most contentious debates emerging from the USPTO and WIPO inquiries have been around the datasets used to train A.I. systems.

Artificial intelligence applications such as machine learning must be fed huge amounts of data from which the algorithm can decipher patterns, relationships among data points, and statistical correlations. In many such applications, the data being fed in is contained in works that are under copyright.

As with most computer operations, a certain amount of reproduction is involved. The works most be reproduced in a machine-readable form before they can be input, and then get reproduced again in the computer’s random access memory as it processes those machine-readable inputs.

According to the AAP, such “wholesale, un-permissioned reproduction of copyrighted works in which data subsists, even for the purpose of machine learning, is likely to be infringing.” As for any data contained within those works, “the scope and terms of such use can best be set out in a licensing agreement between the parties.”

Other rights groups argue that any output of an A.I. system represents a derivative work created from the copyrighted inputs and that the act of creating it should be licensed.

A.I. developers, however, maintain that their algorithms are merely extracting data about the works, not any part of the works themselves, and that data, like facts, cannot be copyrighted. As for any reproduction involved, it is merely functional and of no commercial significance, and should therefore be allowed under the fair use or fair dealing doctrines.

In one sense, the dispute over A.I. training datasets is simply another flare up in the age-old conflict between rights owners and technology developers over fair use/fair dealing.

What the broader debate over the copyright implications of A.I. would seem to share with the Georgia case and the drive for open access, however, is an evolving sense that the public domain — the commons on which future authors and investigators must draw — is in danger of becoming impoverished, and that its legal scope and contours need to be revised.

Copyright owners have been generally successful over the past three decades, legally and politically, at putting limits on the public domain. Decades have been added to the term to copyright, preventing works from entering the public domain for more than a century in some cases, and the publication of public information is increasingly channeled through private hands in the name of budgetary efficiency.

Last week’s Supreme Court ruling and the imposition of an open-access policy for publicly funded research cut against those gains, and could herald a broader shift in the wind.

WarnerMedia Gets Hulu’d

This week saw a rare smart move by AT&T with the hiring of Jason Kilar to head up WarnerMedia.

It was smart not only because Kilar is a capable executive but because he seems to thrive in thankless jobs.

I first met Kilar when he was with Amazon, running its VHS and DVD business. When he was later picked to be head up the nascent Hulu I went on record to declare the job un-doable. But Kilar proved me wrong.

Not only did Hulu turn out to be a well-designed and well-constructed service, but Kilar managed to successfully navigate around an ungainly board of directors that included representatives from the three competing major studios that owned the joint venture at the time: Universal, Disney and Fox.

There were constant frictions over the strategic direction for the company, with Kilar wanting to chase the streaming future while its studio owners were really trying to hold back the streaming tide to protect their then still-lucrative DVD business.

The creation of Hulu, in fact, was driven in no small measure by the studios’ frustration with YouTube over the explosion of TV and movie content being uploaded to the platform. Before being christened Hulu, it was known jokingly in the industry as “Screw Tube,” “Me-too Tube” and “Fuck you Tube,” among other sobriquets.

Kilar also had to manage a persistent channel conflict between Hulu’s internal advertising sales team and those of the networks’ whose programming it was streaming, who shared sales duties (and sometimes clients).

He’s likely to find much that is familiar at WarnerMedia.

Though his hiring is a signal that AT&T is serious about WarnerMedia’s digital future, where Kilar had tried to steer Hulu, he will again be riding herd over multiple and not-always harmonious power centers, including Warner Bros. studio, under Ann Sarnoff, WarnerMedia Entertainment, under Robert Greenblatt, and WarnerMedia News and Sports under Jeff Zucker, all of whom have far more experience than Kilar in movie and TV production and distribution.

As I’ve written here before, AT&T/WarnerMedia is also an awkward amalgam of content and pipes, an arrangement that, for all the hype about “synergy” and scale, has historically destroyed more value than it has created.

Kilar has also been charged with launching AT&T’s big digital play HBO Max, on which it’s betting much of the company’s future, into the teeth of a catastrophic public health emergency and perhaps the steepest economic downturn since the Great Depression.

Meanwhile, his new parent company’s shares are getting downgraded, its balance sheet is heavily leveraged, and its pay-TV business is bleeding out.

Welcome to Hollywood, Mr. Kilar.

Distance Learning

In 1604 and into 1605, London was ravaged by Plague, forcing much of the city into what today we would call lockdown: Many types of public gatherings were banned, theaters were shuttered, and houses that had been touched by the disease were marked with red crosses and the occupants told to stay indoors.

William Shakespeare used his forced downtime to write “King Lear” and “Macbeth.”

Some 60-odd years later, during another outbreak of Plague, Isaac Newton worked out the laws of motion and invented the calculus while self-isolating away from London.

Read More »

Box Office Blues

Total movie admissions in the U.S. fell 4.6% in 2019, to 1.24 billion, making last year the second worst through the turnstiles since 1995, according to the National Association of Theatre Owners.

The worst year was 2017, when only 1.23 billion tickets were sold.

The decline comes as theaters face growing competition from streaming services, not only for consumers’ time and entertainment dollars, but for their first-in-line position in the movie distribution system.

Two of 2019’s most high-profile releases, for instance, Netflix’s “The Irishman” and “Marriage Story,” which together helped the streaming service rack up an industry-leading 24 Oscar nominations, received very limited exclusive theatrical runs.

One reason for those limited runs, of course, was the reluctance by many theater owners themselves to book the films at all because they did not like Netflix’s proposed terms — a policy that increasingly looks self-defeating.

A recent survey by The Hollywood Reporter and Morning Consult found that a plurality of U.S. adults — 48% — prefer to watch new release movies via streaming service, compared to only 37% who would prefer to see them on the big screen.

Preventing movies from being more widely available on the big screen seems likely only to fuel consumers’ preference for in-home viewing.

It is a policy that also seems likely to grow increasingly untenable. As the major studios aggressively pursue their own direct-to-consumer initiatives, launching streaming services of their own and adopting increasingly proprietary distribution strategies for their content, pressure on the exclusive theatrical window will only increase.

If theater operators cannot find a way to accommodate themselves to the new strategic landscape, missing out on a few Oscar nominees will be the least of their problems.