November 2009

The Economics of Jay Leno

[Commentary] If Comcast takes over NBC Universal, will Jay Leno return to 11:35 pm? That unimportant question is emblematic of the pending sale by GE of a controlling stake in its media properties to the cable giant. Mr. Leno was moved to 10 p.m. as a cost-saving gesture: Since his show is so cheap, GE can make money even after chasing away much of its audience for the high-end scripted shows that used to appear at that hour. As Mr. Leno explained in a candid interview with trade bible Broadcasting & Cable: "If you are making buggy whips and no one is buying buggies anymore, do you keep making buggy whips? I don't know. This is an economic decision." In Jack Welch's day, an employee perhaps would not have expounded so freely. Otherwise, however, GE is behaving like what it's always been, an unsentimental owner of a business that it no longer likes and doesn't know how to fix. Yet, truth be told, Comcast's shareholders don't want the job of fixing NBC either. Only the controlling Roberts family does—and then because the alternative may be having no great future as a prominent American business family. Ergo, a deal merging "content" and "distribution" seems inevitable, even though the track record of such deals is unpropitious. Bottom line, since a deal seems nearly certain to happen: Would a savvy media investor wish the Roberts family luck in their gamble? Absolutely. Would such an investor care to come along for the ride? Maybe not so much.

Vivendi, GE Iron Out Terms For NBC Universal Stake

Apparently, Vivendi SA is still working out terms with its partner General Electric Co., asking for a higher price and deal protections as the French company seeks to exit its minority stake in NBC Universal. The Vivendi-GE talks are the last major hurdle in a deal GE has been negotiating with Comcast Corp., in which the U.S. cable operator would take control of NBC Universal, according to people familiar with those talks. GE currently owns 80% of the television and film company, while Vivendi holds 20%. One issue in the GE-Vivendi talks is how Vivendi would be paid. Vivendi has asked for GE to buy out at least part of its 20% stake before a Comcast deal would likely close. That stipulation would give Vivendi some measure of protection if the Comcast deal does not go through. A Comcast deal could take from six months to more than a year to pass muster in Washington. Vivendi has also pushed GE to boost what it would pay for Vivendi's 20% interest.

File-sharing software ban sought in House

Weeks after an embarrassing security breach revealed details of dozens of ethics investigations, a House committee chairman introduced legislation Tuesday that would forbid federal employees to use popular file-sharing technology that was involved in the leak. Rep Edolphus Towns (D-NY), who chairs the House Oversight and Government Reform Committee, aims to outlaw federal workers from using networks such as LimeWire, through which network members can share computer and music files.

Library in a Pocket

With Amazon's Kindle, readers can squeeze hundreds of books into a device that is smaller than most hardcovers. For some, that's not small enough. Many people who want to read electronic books are discovering that they can do so on the smartphones that are already in their pockets — bringing a whole new meaning to "phone book." And they like that they can save the $250 to $350 that they would otherwise spend on yet another gadget. "These e-readers that cost a lot of money only do one thing," said Keishon Tutt, a 37-year-old pharmacist in Texas who buys 10 to 12 books a month to read on her iPhone, from Apple. "I like to have a multifunctional device. I watch movies and listen to my songs."

Court hears AT&T, Verizon ad fight today

A federal court today will consider the fate of a Verizon ad campaign that features side-by-side wireless coverage maps showing it has five times more 3G coverage than AT&T. AT&T isn't contesting the accuracy of Verizon's claim, but says the ads are misleading. Verizon, in its legal response, says AT&T is suing because the "ads are true, and the truth hurts." AT&T wants the court, which will hear arguments today, to force Verizon to pull the five ads. Three are holiday themed. Regardless of the outcome, legal experts say the lawsuit has put a spotlight on an even bigger problem for wireless consumers: the reliability of ad claims in general. Trying to win customers, carriers are increasingly bending the truth or omitting facts in ad campaigns, says Joel Kelsey, a lawyer with Consumers Union. All carriers do it, he says.

Ericsson signs first TV broadcasting deal

Ericsson, the world's largest provider of telecommunications infrastructure, announced its first deal with a television broadcaster in a move that highlights the accelerating pace of convergence between the media and telecommunications industries. The 10-year contract to provide television transmission services to TV4, one of the biggest broadcasters in the Nordic region, opens up a new potential market for Ericsson as the Swedish company faces increasing competition in its core wireless network business. Under the TV4 contract, Ericsson will take day-to-day responsibility for transmitting all the broadcaster's free-to-air and pay-TV channels in Sweden and Finland.

Smith on Indecency

Likening it to the fee paid for grazing cattle on public lands, National Association of Broadcasters President Gordon Smith said Tuesday that hewing to community standards on content was one of the prices broadcasters pay for their spectrum. Asked if that meant he thought broadcasters have to be subject to FCC indecency rules as part of that price, he said broadcasters "needed to be sensitive to it. I think with some exceptions we are trying to be." But he also said the emphasis should be on technology, "so we can balance the First Amendment with the need to be competitive and the need to empower parents and shield children from things that they ought not to see." Smith said he valued and believed in the First Amendment, but said he understood the challenge of competing with subscription services that can "push the envelope all [they] want." But he also said he represented a lot of cattlemen, who know that they are going to pay a fee if they are going to graze their cattle on public land. "The fee that we pay is localism, engaging the community and observing community standards."

Law Firm Asks FCC To Delay Ownership Filing Date

On behalf of itself as well as station and broadcast group clients, law firm Fletcher, Heald & Hildreth has asked the Federal Communications Commission to stay the Dec. 15, 2009, deadline for station owners, which in most cases means their lawyers, to file biennial ownership reports (form 323). The FCC has changed the form -- the firm calls it an "unexpected revision...inappropriately adopted" -- to require information from anyone with an attributable interest in a station rather than just the principal entity. That, says the law firm, means vastly increasing the number of parties, including individuals, who have to supply personally identifiable information, including social security numbers, to the commission, raising "serious privacy concerns." The request for a stay or delay of the deadline also takes issue with the way the FCC chose to change the form, which was not through a notice and comment proceeding, but through an "unexpected" revision in the form without notice, says the firm.

Senate Bill Would Mandate DirecTV Local Carriage

Sen. Claire McCaskill (D-MO) is preparing an amendment to the Senate Commerce Committee version of the satellite reauthorization bill that would mandate local TV station service to all 210 markets by satellite carriers EchoStar and DirecTV. That makes it different from the House version of local-into-local carriage in all 210 markets, which says that if EchoStar wants to get back into the distant-signal business, it will have to deliver local TV station signals to the remaining 30 or so smallest markets that lack them. That voluntary provision was part of a compromise reached between EchoStar and broadcasters and urged by House Communications Subcommittee Chairman Rick Boucher (D-VA), though the deal is threatened by an amendment advancing the timetable for satellite carriage of noncommercial HD signals. The amendment was adopted by the House Commerce Committee, but opposed by Chairman Boucher for its potential to unravel the deal. The draft of the Senate Commerce bill [STELA, the Satellite Television Extension and Localism Act] that was circulated last week did not include a local-into-local mandate, but McCaskill is aiming to fix that.

Senators Bash Online Marketing Tactics

Senate Commerce Committee Chairman John D. (Jay) Rockefeller (D-WV) said Tuesday that he may pursue legislation to crack down on some controversial online marketing tactics that result in consumers paying for products and services they did not realize they signed up for or used. During a hearing on these aggressive online marketing methods, Rockefeller detailed the results of a committee investigation into the marketing tactics of three firms: Affinion, Vertrue and Webloyalty. "Tricking consumers into buying goods and services they do not want ... It's not ethical. It's not right and it's not the way business should be done," Rockefeller said. The problematic transactions, detailed in a committee report, take place when a consumer is ready to finish buying a good or service online from a trusted retailer. Consumers are asked if they want a discount or reward and if they agree, they are often automatically signed up for the services offered by the three firms and charged a monthly fee.

Benton

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