July 2013

Activision in $8.2 Billion Deal to Buy Back Stake From Vivendi

Activision Blizzard, the world’s biggest video game publisher, has a reached an $8.2 billion deal to separate from Vivendi and become an independent company.

Activision Blizzard and a group of investors led by the company’s management will buy back shares owned by Vivendi, the French conglomerate that controls the video game maker, leaving a majority of Activision Blizzard’s shares held by the investing public. Activision Blizzard will buy about 429 million of its shares and certain tax attributes from Vivendi for roughly $5.83 billion in cash, or $13.60 a share, the company said. In addition, Robert A. Kotick, 50, the chief executive, and Brian Kelly, the co-chairman, are leading a group in buying about 172 million shares of the company from Vivendi for about $2.34 billion. Vivendi will retain a stake of about 12 percent, or 83 million shares, in Activision Blizzard, the company said. Mr. Kotick will continue to lead the company and Mr. Kelly will become the sole chairman, according to the terms of the deal. Activision Blizzard plans to finance the deal with about $1.2 billion of cash on hand and roughly $4.6 billion of debt, raised through the markets and bank financing. The company expects to have $1.4 billion of net debt after the deal, which is expected to close by the end of September.

What Happens When Phone Lines are Destroyed in Storms? We Need a Good Answer.

Public Knowledge, along with 18 other public interest groups, asked the Federal Communications Commission to affirmatively create post-disaster communications policy.

PK believes that all Americans should have access to basic telephone services, regardless of location. Since the invention of the telephone, federal regulations have protected and promoted that access, as well as competition in the communications industry. Unless the FCC establishes appropriate responses for situations in which infrastructure is damaged and carriers do not wish to rebuild, policy makers will continue to improvise, carriers will continue to evade their regulatory obligations, and consumers will continue to be harmed.

Senate Commerce Committee to move on FCC pick

The Senate Commerce Committee plans to vote on the President’s pick to chair the Federal Communications Commission as part of a late-summer session that also could advance new cybersecurity legislation. The vote could come as early as July 30 and is likely to be the panel’s last order of business before Congress departs for its yearly August recess.

Both Tom Wheeler, the president’s nominee to lead the FCC, and the committee’s cybersecurity bill are expected to pass easily with bipartisan support. Of course, the committee’s vote wouldn’t install Wheeler as the new head of the FCC — that only comes after full Senate consideration. And it may be months before that occurs: Republicans aren’t willing to advance Wheeler unless President Barack Obama submits a candidate for the FCC’s open GOP slot, but the White House hasn’t yet put forward a Republican name. Senate GOP leaders are believed to have recommended Mike O’Rielly, a chamber telecom aide for Sen. John Cornyn (R-TX), for the FCC’s only open seat.

Senate Commerce Committee to vote on media violence bill

The Senate Commerce Committee is expected to vote next week on Chairman Jay Rockefeller's (D-WV) bill to study the impact of violent video games and other media on children.

Chairman Rockefeller first introduced the bill last year after the shooting at Sandy Hook Elementary School in Newtown (CT). The bill would require the National Academy of Sciences to examine whether violent video games and programming cause children to act aggressively or otherwise hurt their well-being. The academy would look at whether the interactive nature and vivid way violence is portrayed in video games has a unique impact on children. Chairman Rockefeller has said the bill could lay the groundwork for future regulation.

NIST: Cybersecurity Standards Require Industry Buy-In

Patrick Gallagher, heading up the National Institute of Standards and Technology's efforts to develop voluntary cybersecurity standards for critical infrastructure in concert with industry, told the Senate Commerce Committee that there are three reasons why the standards will have to have private industry buy-in:
1) the industry has the knowhow and capacity and the process will only be "agile" if industry embraces it; 2) industry participation provides the best chance that those standards are compatible with business (the goal is to put the voluntary standards, so sitting on the shelf is not an option); and 3) that is the only way to scale the standards internationally.

If the standards don’t get industry buy-in, Gallagher warned, Congress will have to decide what to do next given the national interest in protecting critical infrastructure.

Bipartisan Internet Tax Fairness Bill Introduced

Senate Finance Committee members John Thune (R-SD) and Ron Wyden (D-OR) have introduced a bill to prevent multiple taxation of digital goods and services on the Internet, including downloads of TV shows, movies and apps as online purchases become more mobile along with the tablet-toting, iPhone accessing folks who make them.

The bill's sponsors say it would prevent duplicative and discriminatory taxation that could stifle innovation and the online economy. The Digital Goods and Services Tax Fairness Act of 2013 prohibits state and local governments from applying taxes to online products sold over communications networks that don't apply to similar tangible goods. The bill also prevents the imposition of multiple taxes as digital goods and services move from one jurisdiction to another by making only making the final customer or end user pay the tax. For example, a summary of the bill says, "if a consumer is on vacation in another state and downloads a song, the state the consumer is visiting, the state that houses the server providing the song, and the consumer's home state could, under the right circumstances, all claim the authority to tax the purchase."

NCTA: Gannett/Belo Deal Highlights Need to Disallow Joint Retransmission Negotiations

In an ex parte response to broadcaster comments on the issue, the National Cable & Telecommunications Association pointed out it has urged the Federal Communications Commission to prevent broadcasters form using local marketing agreements or other joint arrangements to negotiate retransmission deals.

"Antitrust law recognizes that such coordination, collusive negotiation, and fixing of prices is so devoid of any countervailing benefits to consumers that it is generally per se unlawful," NCTA said in response to National Association of Broadcasters filings on the FCC's media ownership rule review and its open retransmission consent docket. The cable trade group said that none of broadcasters' arguments -- that the agreements don't make fees "dramatically higher," that those fees are only a small portion of cable costs; and that non-overlapping cable operator joint retrans negotiations is comparable to same-market coordinated negotiations -- hold up under scrutiny.

Fox Sports, Latest Underdog, Takes on ESPN

21st Century Fox has enlisted Canadian sportscasters Jay Onrait and Dan O'Toole in its bid to take on ESPN, the U.S. sports-TV powerhouse. On Aug. 17, when the media company launches its new 24-hour cable channel, Fox Sports 1, Messrs. Onrait and O'Toole will have the difficult but crucial assignment of anchoring an 11 p.m. news and highlights show that goes head-to-head against ESPN's flagship program "SportsCenter."

Building large and loyal audiences for that show and other studio programs will be one of Fox's major challenges as it tries to do what other media companies, including Comcast Corp.'s NBC and CBS Corp., have failed to thus far: mount a serious offensive on ESPN's moneymaking machine. ESPN, which had a three-decade head-start over its competition, generates over $10 billion in annual revenue for majority-owner Walt Disney Co., according to Needham Insights. The biggest assets for any sports network are the live events that in some cases cost billions of dollars to carry. Fox Sports 1 brings to the table programming rights for Nascar races, college football and basketball, and Major League Baseball games starting next year. It will also showcase Ultimate Fighting Championship mixed-martial arts events. But establishing successful news and talk shows is also a critical part of the business. At ESPN, such programming accounted for 43% of the $2.8 billion in ad spending it attracted, including to its sister channels ESPN 2, ESPN News and ESPN Deportes in 2012, according to Kantar Media.

Google Spent $1.3B on Acquisitions So Far This Year, Mostly on Waze

In the first half of 2013, Google spent $1.31 billion on 16 acquisitions. The largest of those was the mapping startup Waze, which cost $966 million.

Other disclosed acquisitions in the first half of this year included Makani Power and Wavii. But there were a lot more deals, too: 15 non-Waze acquisitions of companies and intangible assets cost Google $344 million. Also in the quarter, Google sold a company of its own: Motorola Home. Arris paid $2.238 billion in cash, plus $150 million in closing adjustment and $175 million in stock, resulting in a net gain of $747 million that was included in second-quarter earnings.

China is stealing intellectual property to boost its economic development

[Commentary] The world has recently been rattled by two unexpected exposures. First, Mandiant, the cyber security specialist, managed to identify – down to the physical address – a Chinese army unit responsible for the theft of foreign intellectual property. Second, via Edward Snowden, the Booz Allen Hamilton contractor turned leaker, a lens has been turned on to the extent of the National Security Agency’s practices of spying and privacy invasion.

China is doing its best to conflate IP theft with the NSA’s listening. But aside from the use of internet tools to further their ends, these programs and issues are otherwise unrelated. One represents the international theft of inventions as part of a national business model; the other is intended to promote national security. There is no evidence yet of any kind that the nations implicated by Mr Snowden in snooping have used their systems to undermine the economies of other nations or to gain a competitive commercial advantage. The US and its allies have generally employed spies because they are charged with protecting and defending their countries against aggressors. Their success, in broad terms, is measured by a reduction in successful attacks. Certainly, they can and do escape accountability and become overzealous. But countries steal IP for baser, less defensible reasons: to make money and to gain an international economic advantage against their competitors.

[Anderson is chief executive of Strategic News Service]

Benton

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