July 2010

Cathy Hughes Strikes Back on Paying Artists for Radio Plays: "Dionne Warwick Is a Lobbyist"

[Commentary] The notion of AM/FM radio stations paying for music is a complete reversal of how the industry has always worked.

The old business model was this: The artist is commissioned to create music for the record label. The record label delivers the music to the radio stations, requesting airplay. The radio station plays the music, earning its revenue from a stream of advertisers that market to its niche listening audience; ratings determine how large that listening audience is, and how much money the stations can charge for advertising. As it stands now, Internet and satellite radio make payments to SoundExchange, a non-profit organization set up to collect performance royalties, and funnel that money to record labels and artists, if the music rights can be identified. With the introduction of H.R. 848, The Performance Rights Act, the pressure is on for AM/FM radio to pay to play songs as well.

Dionne Warwick says Cathy Hughes needs to stop ripping off black artists and pay up. Hughes, Founder and Chairperson of Radio One, says radio shouldn't pay up. And Dionne Warwick is raising hell because she's on the record labels' payroll.

Why Do-Not-Track Isn't The Same As Do-Not-Call

The concept of a do-not-track list seems likely to alarm many online ad companies, if for no other reason than because of telemarketers' experience with the do-not-call registry.

That list, which has proven hugely popular with consumers, now has 200 million phone numbers. But, while the phrase do-not-track might sound comparable to do-not-call, the concepts really aren't all that similar. People who sign up for the federal do-not-call registry are able to avoid most telemarketing -- including the much-disliked ringing telephone that interrupts dinner with an ad. Do-not-track, on the other hand, wouldn't allow consumers to avoid advertising in the slightest. On the contrary, people would still see as many ads online as ever, but the difference is that ads wouldn't be targeted based on sites visited. So even Web users who dislike online ads might not join a do-not-track list if they decide they would prefer receiving targeted ads to run-of-network ones. Additionally, many consumers already have the ability to place themselves on a do-not-track list of sorts by opting out of behavioral targeting, either through the Network Advertising Initiative's opt-out page, by using the group's browser plug-in, or on a site-by-site basis. While the NAI doesn't include all online ad companies, it counts at least 50 ad networks as members. And even aside from the NAI opt-out page, consumers today can control much behavioral targeting through cookie settings in their browsers. Despite these tools, very few consumers seem to opt out of behavioral targeting.

Is a la carte back on the menu?

[Commentary] At the Chicago field hearing on the proposed Comcast-NBC merger, James Speta, a professor with the Northwestern University School of Law, noted that it might be difficult to stop the merger from a legal standpoint because most of the fear was based on "what might happen." Much of what Internet service providers and other multichannel providers fear is based on Comcast-NBCU's potential to gouge competitors for content fees, hold back the most desirable content and provide preferential treatment for its own content. Among the multiple restrictions being proposed by opponents of the deal are strong safeguards against Comcast using its massive power over content to harm competitors or forced divestitures of some assets. While not proposed as part of the merger, Vittore predicts that one of the end results of this merger will be a renewed interest in requiring all pay TV providers to offer a la carte programming. Perhaps this comes from the FCC but more likely from the deep-thinking minds in Congress. A la carte programming has been discussed for more than a decade and has been successfully beaten back by programmers every time. But with one of the largest programmers about to be swallowed into a vertically integrated powerhouse, the concept is about to get another hearing.

[Vittore is with the Yankee Group]

The USF Reform Act vs. the National Broadband Plan

[Commentary] When it comes to Universal Service, there seems to be consensus that today's plan should transition to one focused on broadband Past-focused people have been watching broadband service grow while voice declines.

Forward-focused people see all the cool things that could be done if broadband were more widely available. And present-focused people have prioritized all the things on their to-do list, and getting broadband deployed is at the top. But different groups have different ideas about how to reach it.

While the National Broadband Plan seems to have been written by people with a heavy future focus, the Universal Service Reform Act, authored by Reps. Rick Boucher (D-VA) and Lee Terry (R-Nebraska), seems to have been written by people who are primarily past-focused. The strengths and weaknesses of each plan are a direct result of those divergent viewpoints. Future-focused people, like those involved with the NBP, believe in starting any project with the proverbial clean sheet of paper — an approach that often can help bring fresh thinking to a project.

The past-focused people who wrote the Universal Service Reform Act didn't need a brainstorming session to know what needs to be done there. With small carriers losing more and more access charge revenues, the act's recommendations include prohibiting any carrier from omitting information from call detail records that another carrier requires in order to bill for terminating the call. The bill recommends that if only one or two wireless carriers are eligible to receive Universal Service support for a particular service area, those carriers should receive support at no more than the level they receive today. Yet wireless carriers today often receive support at a level that does not represent their actual costs of delivering service because it is based largely on the incumbent landline carrier's costs.

The Real Cost of Netflix Streaming is the Movie, Not the Bandwidth

Everyone knows that Netflix's future is in streaming, and as a result, the company is investing heavily in titles for its Watch Instantly service. But a closer look at Netflix's financials underscore how the Internet has changed the movie distribution business, and how it is capitalizing on that trend.

Netflix is spending more money than ever on streaming video, in part because it costs less to deliver that content online than by mail. According to its 10-K filing, Netflix spent $66 million in the second quarter 2010 to license streaming titles for its Watch Instantly service, compared with just $9 million that was spent in the prior-year period. The acquisition of new and better content has helped drive its subscriber numbers up 42 percent over the past year, with 15 million subscribers at the end of the second quarter, compared with 10.6 million a year earlier. In addition, those subscribers are watching more streaming content than ever, with 61 percent using the service, compared to just 37 percent a year earlier. But despite a huge increase in the amount of video streams it's serving up through Watch Instantly, Netflix's streaming costs haven't increased proportionally. In the second quarter, the company said costs associated with delivery over third-party CDN networks only increased by $1 million versus the previous quarter.

Netflix is benefiting from bandwidth costs continuing to fall exponentially as it grows its streaming business.

Broadband Stimulus Funding Preserved

On July 27, the House approved -- on a 308-114 vote -- a fiscal year 2010 supplemental appropriations measure (HR 4899), which eliminated previous House amendments that would have rescinded $302 million in funding for the Broadband Technology Opportunities Program and $300 million in funding for the Broadband Initiatives Program. The measure already passed by the Senate and now awaits President Barack Obama's signature.

Cell phones save lives in Rwandan villages

The Rwandan government is giving out hundreds of cell phones in an attempt to save pregnant women and babies. Nearly 500 volunteer community health care workers in the rural district of Musanze have been given free phones so they can keep track of all the pregnant women in their villages. The cell phones are used to register and monitor expecting mothers. If there are any questions, complications or updates, health workers simply send a text to their local clinic and receive a response within minutes. The cell-phone program, or Rapid SMS scheme, was set up in conjunction with various U.N. organizations to bring the number of maternal deaths down.

Speaker Pelosi Connects Broadband to Restoring Manufacturing

Speaking to the Communications Workers of America, House Speaker Nancy Pelosi (D-CA) noted the America Recovery and Reinvestment Act's $7 billion investment in broadband infrastructure and mandate to create a National Broadband Plan. She promised that Democrats will continue working on universal broadband coverage and bridging the digital divide. "On our new path to prosperity, expanding broadband service goes hand-in-hand with our renewed commitment to a restored, growing, and thriving manufacturing sector," she said.

New FCC team aims for accessibility

A look at the Federal Communications Commission's new-media team. The team's goal is to comply with President Barack Obama's open government directive, the independent initiative of FCC Chairman Julius Genachowski, and turn a once notoriously opaque and uncommunicative FCC into a consumer-friendly agency.

In the 12 months since its inception, the new-media team of six specialists has been attempting to present all FCC projects in an accessible, easy-to-digest way. Tweets, podcasts, blogs and crowd-sourcing platforms have been integral to the team's communications efforts. The team has rolled out a series of websites, including Broadband.gov to chronicle the National Broadband Plan, OpenInternet.gov, and Reboot.FCC.gov -- a site for citizens to share ideas on the FCC's reform agenda and website redesign. The "reboot" website also serves as an interim platform until the long-awaited launch of the new FCC website, slated for the end of this year.

Rupert Murdoch to White House: No free news

The Murdoch-owned Wall Street Journal has jacked up the rate it charges the Administration's news clipping service by a jaw-dropping $600,000 per year — and is steering the White House towards a direct deal with News Corp's Factiva aggregation service.

It's unclear how News Corp. arrived at the $600,000 figure. But copyright laws would prevent the news-clipping service from widely disseminating Wall Street Journal articles without the parent company''s permission. For the past decade, Democratic and Republican administrations alike have paid a small Virginia-based media company $100,000 or more each year to prepare customized packages of excerpts from print, TV, radio and blog outlets. Bulletin News of Reston performs the labor-intensive searches (which would otherwise require the hiring of government staff) every night starting at 9 p.m., delivering a package of article extracts and Web links to the West Wing by 5 a.m. each morning. The Journal, which sits behind a licensed pay wall, has always been part of the package -- until now. Earlier this month, a Bulletin News executive informed the White House of the fee increase, which appears to have been motivated by Murdoch's business model, not his conservative politics.

Benton

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