January 2013

Where the Tribune LBO Went Wrong

[Commentary] The right lessons are not being drawn from the Tribune Co.'s disastrous 2007 leveraged buyout and subsequent bankruptcy.

The Tribune deal was not the drunk-on-debt product of a bidding war by hubristic private equity. Just the opposite: Prospective buyers, including Sam Zell, walked away judging the price demanded by the company's controlling shareholders too rich for a troubled collection of media assets. The possibility of a deal was resurrected only when Zell, a Chicago real-estate investor, and Trib management joined forces and, rather than finding a buyer, concocted one in the form of an Employee Stock Ownership Plan. Hired "valuation opinions" were used to justify the ESOP paying a higher price than anyone else was willing to pay, thanks to certain ESOP-related tax benefits the company hoped it would survive long enough to exploit. The disgrace of the Tribune LBO may have been out of character for all concerned, but it was a disgrace nonetheless, even if a big part of the fault lies with federal ESOP law. And the Tribune newspaper's own reliance on business-press bloviation about "an era of superheated Wall Street deal-making" leaves us with a feeling the air has yet to be cleared.

Women in Texas Suing a Porn Site

Seventeen women filed a civil lawsuit in Texas state court against Texxxan.com alleging that their intimate photos were posted illegally and included information that made them easy to identify.

They are seeking damages and to have the site closed down. Legal experts say they are seeing an increasing number of such lawsuits targeting so-called revenge porn, in which intimate images are posted online, often by jilted former lovers but also by computer repairmen or hackers who gain access to private photos. Some sites feature pornographic images alongside links to a subject's social-media accounts and other identifying information.

Press Freedom

[Commentary] There are sound reasons for the European Union to review safeguards for press freedom and media plurality. Some newer member states, Hungary in particular, have in recent times taken steps that gravely threaten press independence. But there is a contradiction in wanting to defend this fundamental principle while at the same time giving Brussels greater powers over Europe’s media.

Proposals published this week by an independent panel charged with examining press freedom ring alarm bells. Though the report carries no legal weight, it has been endorsed by the European Commission as the starting point for discussions that could eventually lead to new regulations. The point of contention is not the report’s suggestion that members should have independent media councils with powers to investigate complaints and perhaps even impose fines. Most already have such bodies. It is that these councils should be subject to monitoring by the European Commission to ensure they “comply with European values.”

One-Third of Cyber Attack Traffic Originates in China, Akamai Says

About one-third of the world’s cyber attack traffic was traced back to China, according to a report by Akamai Technologies. Between July and September of last year, about 33 percent of the attacks originated in China, double the percentage in the previous quarter, the report said. The U.S. was the second-largest source with 13 percent. Next came Russia, Taiwan and Turkey, which each accounted for less than 5 percent of the attacks.

Google spent a billion on infrastructure last quarter

Google’s infrastructure spending continued its upward trend during the fourth quarter, hitting a two-year high of $1.02 billion, the biggest infrastructure investment in its history.

It’s difficult to say where, exactly, all that investment went, but the record spending probably shouldn’t come as a surprise given the current state of the web economy. Much more than just a search engine, Google now finds itself competing against (or has put itself in a position to compete against) formidable foes in a variety of different areas. Doing battle against companies such as Apple, Facebook, Yelp, Amazon Web Services and (with the advent of Google Fiber) internet service providers — and doing it well — costs a lot.

Tourists' cellphones now OK in North Korea -- but not local calls

The fanatically strict North Korean policy against cellphone use by outsiders has begun to crack. Tourists will be allowed to bring their smartphones, though calls will be highly restricted. The only service they could use is the state-run Koryolink, and the only calls allowed -- with rare exception -- are to phones outside the nation. Before the new cellphone thaw, if a tourist was carrying a phone when entering the country, it would be taken at the airport and then returned when the person was leaving.

New chairman of House Trade panel open to online privacy regulation

Rep. Lee Terry (R-NE) -- the new chairman of the House subcommittee on Commerce, Manufacturing and Trade -- he plans to examine whether the government should do more to protect the privacy of Internet users. He is considering whether to form a bipartisan group of lawmakers that would study the issue more closely and make recommendations to the subcommittee.

Whether that comes to legislation or not, we don't know," he said. Chairman Terry said he will not start the year by pushing any particular privacy-protection measures. "We're coming in with open minds," he explained. Terry's subcommittee, which is part of the Energy and Commerce Committee, held numerous hearings last Congress on online privacy issues under Chairwoman Mary Bono Mack (R-CA). Rep Terry took over the panel after rep Bono Mack lost her bid for reelection. He said the subcommittee will use the previous hearings as a starting point, but noted that there are new members who did not participate in the previous hearings.

House Judiciary Committee to look at hacking law in wake of Swartz's death

House Judiciary Chairman Bob Goodlatte (R-VA) said his committee will look at a computer hacking law that has come under fire since the death of Internet activist Aaron Swartz.

"We certainly are going to look at that very carefully and see what we can do in that area, but at this point in time we're looking at what occurred in specific instances and what needs to done to make sure that the law isn't abused," Chairman Goodlatte told reporters at the State of the Net Conference. "There's a lot of legal input, judicial input into this and we're going to look at that and pair it up against what the language of the law is today and how we're going to pursue it—but we're just starting on that." He also added that the committee "may" hold hearings on the Computer Fraud and Abuse Act (CFAA) and Rep Zoe Lofgren's draft measure to narrow CFAA, but emphasized that "no decisions have been made yet."

Twitter flaw gave third-party apps unauthorized access to private messages, researcher says

Users who signed into third-party Web or mobile applications using their Twitter accounts might have given those applications access to their Twitter private "direct" messages without knowing it, according to Cesar Cerrudo, the chief technology officer of security consultancy firm IOActive. The issue is the result of a flaw in Twitter's API (application programming interface) that led to users not being properly informed about what permissions an application will have on their accounts once granted access. Cerrudo described the problem and explained how he discovered it.

Study: Prime-time Spending Wildly Inefficient

A new study from advertising consultancy Simulmedia suggests that there's a large disparity between prime-time ad spending and the actual return on the investment. In the two-week period measured, more than half of TV ad dollars (54 percent, or about $91 million) were spent on the four-hour block between 8 p.m. and midnight, and yet only 34 percent of all measurable impressions were logged during that time. Mind you, that's still a lot of impressions—certainly disproportionate to its share of the programming day—but conventional wisdom has had it for years that the most bang for your buck to be had was in prime time. Now, that's appearing to be less and less the case.

Benton

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