A Look Back: NBC's Words Against AOL/Time Warner Merger May Come Back To Haunt

from the ooops dept

NBC Universal is probably wishing that people didn't remember stuff from a few years ago right now. The folks over at the National Journal dug up NBC Univeral's vehement opposition to the AOL/Time Warner merger, which used all sorts of arguments that I would imagine NBC Universal would prefer were not used against its pending merger with Comcast. The letter, sent to the FCC in July of 2000 included this point:

"Given the size and scope of the proposed merged company, AOL/Time Warner will have both the ability and the incentive to discriminate against unaffiliated content providers such as NBC."

Furthermore, NBC Universal was quite worried about how that deal would impact net neutrality and asked the FCC to make clear net neutrality principles if it allowed the merger to move forward, asking the FCC:

"to establish firm principles of non-discrimination in the treatment of unaffiliated content providers in the broadband services marketplace"

Of course, Comcast is now very much against that concept.

Not surprisingly, the letter was signed by NBC Universal's General Counsel, Rick Cotton, who has a long history of sticking his foot in his mouth in saying things he later regrets -- such as his still hilarious quote about how corn farmers were being harmed by movie piracy, and who was a major source for the bogus Hollywood propaganda piece on 60 Minutes. Still, you have to imagine that he now regrets that letter -- and the fact that reporters have now brought it back to light.

Filed Under: mergers, net neutrality, rick cotton
Companies: aol, comcast, nbc universal, time warner

AOL's New Strategy Is To Fill The Internet With Crap?

from the pollution-is-in-their-genes dept

Remember how AOL first became "famous"? It cluttered the world (and our garbage dumps) with millions upon millions of CD-ROMs offering "try AOL for free!" It seems that pollution is in AOL's genes, and it just can't get away from it. How else to explain AOL's new plan to rebuild its brand: to flood the internet with poorly written, but quickly written, content based on whatever search terms are hot. Danny Sullivan points out the amusing fact that AOL is looking to leverage search engines for more traffic this way, at the very same time as others, such as Rupert Murdoch, are claiming that Google is "stealing" from him in sending traffic, and he's considering opting-out.

But, of course, that doesn't make AOL's strategy very well conceived either. Farhad Manjoo makes the case for why this is a dumb plan, and there's plenty to agree with:

The trouble with AOL's plan, then, isn't that it's based on data-mining. Instead, it's what the company will likely do with search data--publish quick, vapid posts that do little to advance any hot story and instead feed readers a collection of factoids gathered from other places. How do we know this will happen? Because AOL's model is strikingly similar to that of Demand Media and Associated Content, two start-ups that also use search data and user contributions to build Web content. Indeed, AOL's Armstrong--who was an advertising executive at Google until earlier this year--is reportedly an investor in Associated Content, whose CEO is also a former Googler.

Associated Content stands as a cautionary tale for anyone looking to do news by the numbers. It is a wasteland of bad writing, uninformed commentary, and the sort of comically dull recitation of the news you'd get from a second grader.

Effectively, it's a plan based on adding crap into the system to trick search engines. It's pollution and web spam as a business model. But as folks like Umair Haque are fond of pointing out, business models based on tricking people and not adding any real value aren't business models that will last. They're short-term scams. Manjoo, in his writeup, helps explain why:

Will this plan do wonders for AOL's bottom line? It very well might, at least in the short run. If AOL can replicate the success of Associated Content across its network of sites, it will surely see huge gains in traffic and renewed interest from advertisers. But this plan hinges on something that can't be guaranteed for long--a weakness in search engines. By any measure, stories like those found on AC don't deserve top billing in search results. If you search for "Tiger Woods mistress pictures," you should get pictures of Tiger Woods' alleged mistress, not a story that repeats that phrase a dozen times. Google and other search engines constantly battle search engine spam, and over time they're sure to steer people away from sites that rely on such trickery to get visitors. Then what? Associated Content gets 90 percent of its traffic from search engines. Once Google and co. wise up to AC's schemes, its business model is toast.

A short-term strategy based on polluting the internet with bad content may be a last-gasp effort to revive a dead brand, but it's difficult to see how that's any sort of long-term strategy to survive.

Filed Under: business model, content
Companies: aol

News Corp. Digital Boss Says Free Doesn't Work, Doesn't Bother To Explain How Pay Will Work

from the good-luck dept

A bunch of folks have been sending in various versions of the fact that News Corps. digital media boss Jon Miller apparently said that "free doesn't work," though that isn't quite what he actually said. He said that ad-supported content doesn't work. Now, it may be true that he's making the (false) assumption that the only way to make money off of free content is advertising, but that's not the same as saying "free" doesn't work. Either way, I'd argue he's wrong. Ad supported free content has been shown for ages to work in various different ways if you do it right. Perhaps the problem is that he's not doing it right. Either way, his suggestions for where News Corp. is heading don't sound very promising:

"It's pretty clear that there has to be some recognition of value," said Jon Miller.... Miller noted that Web companies will have to figure out a way to charge consumers for content they have grown accustomed to getting for free, noting that cable television service providers learned how to charge for television shows. Miller also said he expected to see the rise of Internet micro-payments.

If there's one nearly universal truth out there, it's that you can never go back to charging for content people were used to getting for free. You may be able to charge for new content or services, but never what they're already used to getting for free.

But the real root of the problem is Miller's opening statement. That there needs "to be some recognition of value." There is a recognition of value. Otherwise people wouldn't consume your content. But that doesn't mean they'll pay for it. Notice what he doesn't say. He never says that they need to give people a reason to buy. He's talking about putting up a paywall, not providing a reason to buy. That's destined to fail.

The reason that cable providers learned to charge for television shows was because there was a scarcity there... and even then there's a big push to break out of that and move to free television shows online as well. Trying to cram the internet into that dying model sounds like a terrible idea.

The most ironic thing about all of this is that, if anyone should understand all of this, it's Jon Miller. After all, he was the one who realized that AOL's walled gardens were killing the company, and put in place its strategy of opening up and going free. So now he wants to do the opposite for Fox Interactive? Good luck!

Filed Under: advertising, business models, economics, free, jon miller
Companies: aol, news corp.

AOL Sued For Putting Ads In Email

from the you've-got-lawsuits! dept

We Americans sure do love filing lawsuits for just about any reason. The latest is a guy who has sued AOL for putting text ads in his email messages, claiming that because he pays for his AOL account (that might be his first mistake), these ads are "fraud, unjust enrichment" and a violation of California business codes. He's trying to turn it into a class action lawsuit as well. Here's another suggestion: switch your email account. Hopefully this gets thrown out quickly.

Filed Under: advertisements, email, lawsuits
Companies: aol

AOL To Nuke Users' Content On Halloween

from the bye-bye dept

theodp writes "Blaming an unquantified decline in usage, AOL has notified users it's decided the best thing to do is delete all of their blogs and files on October 31st. Want to save that precious blog of yours? AOL not-so-helpfully suggests: 'The quickest and easiest way to do this is by copying and pasting your content into a word processing document such as Microsoft Word, Notepad or even into an email and mailing it back to yourself. If you have any images we suggest you save them separately by right clicking on the image, choosing "Save Picture As" and allocate the drive on your PC where you would like to save them to.' Gee, thanks. And don't get too smug, Google users - the search giant has put its users on notice that Google Page Creator will be a thing of the past by year-end, although details of the transition have yet to be provided."

These are just a few more in a long line of attempts by big companies to enable user generated content without much of a plan. With so much attention in the space, plenty of large companies (including Yahoo and Microsoft, in addition to Google and AOL mentioned here) rushed out various tools for users, but forgot to explain to them why they might want to use them. For the most part, they just launched them and figured users would show up willingly. It turns out that, even if you're a big company, it's not so easy to get user adoption if you don't offer anything particularly special compared to what's already out there.

Filed Under: content, failures
Companies: aol, google

Andrew Cuomo Gloats Over Getting AOL To Do What It Already Does

from the nice-work dept

We've already pointed out how ridiculous it is for NY Attorney General Andrew Cuomo to be pressuring ISPs to start blocking news groups and access to certain websites with "objectionable" content. Doing so actually makes the problems Cuomo is trying to fix worse. That's because he's not actually going after the source of the problem, meaning that it will continue to exist and just be harder for law enforcement officials to track down. This is pure political theater with Cuomo getting his name in the headlines for pretending to solve the problem, when all he's really done is get some ISPs to sweep the problem under the rug -- where it's only going to fester more.

Even more ridiculous, however, is the latest announcement from Cuomo, gloating over the fact that two more ISPs, AT&T and AOL will join with the ISPs from the original announcement and cut off access to newsgroups and objectionable websites. In the case of AOL, this is especially ridiculous since it's already done this for many years. Declan McCullagh even got AOL to admit: "We have not changed any policies or procedures as part of today's announcement."

Of course, "we're doing what we've always done" doesn't make good headlines for ambitious politicians.

Filed Under: andrew cuomo, isp blocking, porn
Companies: aol, at&t

Apple, eBay And AT&T All Give In On Visual Voicemail Patents

from the sad-to-hear dept

The reason patent hoarding firms are often successful in getting companies to pay up has little to do with the quality of their patents, but the fact that fighting these lawsuits out in court is so very expensive and time consuming. It's often much easier and cheaper to just settle. Klausner Technologies has been very successful in getting companies to pay up for daring to use the concept of "visual voicemail." Klausner for years has basically claimed ownership to any sort of "visual" phone info, such as the time it sued AOL for daring to display caller ID info on your screen -- something that clearly no one would have ever thought of if not for Klausner's patent. AOL just settled rather than deal with the mess of fighting it. Ditto for a similar lawsuit against Vonage. The latest trio to settle up are Apple, eBay and AT&T. With Apple and AT&T the lawsuit was over the visual voicemail feature found on the iPhone -- guess all those patents Steve Jobs hyped up didn't protect it from patent lawsuits.

So now Klausner has even more money to go after others (Comcast and Cablevision are listed as targets) -- and it will use the fact that all these big name companies settled as "evidence" that its patents are valid, even if the only thing it really means is that companies did the math and realized it's cheaper to settle. Even the press is falling for this false claim. News.com notes that Apple, AT&T and eBay probably would have lost because AOL and Vonage licensed the patent. That's not at all true. Both companies settled because it was cheaper and easier, rather than due to any acknowledgment that the patents are valid. The fact that some firms settle have no bearing on whether or not other companies could have won in court.

Filed Under: patents, visual voicemail
Companies: aol, apple, at&t, ebay, klausner, vonage

SEC Sues Former AOL Execs For Ad Scam

from the the-case-that-keeps-on-giving dept

It's somewhat amazing that this case is still going on, but AOL's sneaky ad deals to boost its own revenue are still the target of lawsuits. Back in 2006, we noted that federal prosecutors had decided that it wasn't worth prosecuting the executives involved. However, it appears that the SEC feels differently. It's now sued eight former AOL execs for taking part in the scam -- though, four of them have already settled. If you don't recall, AOL had this nice little trick where it would "swap" ads with other sites, where no money changed hands, but both sides would record revenue. That let them boost revenue (up to a billion dollars for AOL) without any actual revenue coming in. It's a nice little trick... and it's also illegal. Though, it all took place in the 2000/2001 timeframe, so it's not clear why it took the SEC seven years to do something about it.

Filed Under: ads, dot com bubble, revenue, sec
Companies: aol

Do Songwriters Deserve A Cut Of Yahoo Search Revenue?

from the highway-robbery dept

You may recall a couple weeks ago that a judge set new rates to be paid to ASCAP by AOL, Yahoo and RealNetworks. ASCAP represents the songwriters, and those three companies and ASCAP could not agree on licensing terms for music streamed online. While ASCAP ran around touting the (somewhat made up) $100 million owed, there was plenty more in the decision that deserved discussion. At last week's San Francisco Music Tech Summit, I got into an interesting discussion with a few folks who had read through the 153 page decision thoroughly, and noticed a variety of problems. You can read the whole decision (pdf) yourself, if you want, but there are a few key points that are extremely disturbing, and could spell a lot of trouble. Basically, there's a meaningless "formula" that's applied to a very large segment of these companies' revenue, taking a huge chunk of money that seems beyond reasonable.

The judge seems to consider what AOL and Yahoo do somewhat equivalent to the way TV stations use music, and refers back to the rate agreements set up with various TV networks, despite vast differences in the way these websites operate. It suggests a misunderstanding between the difference between broadcast and interactive content. But what's really troublesome, is when you look at the overall formula for how the royalties are set. It clearly overvalues the music, and undervalues just about every other part of these three companies' businesses. The formula is, basically, the total revenue made by any business unit (minus a few specific costs) multiplied by a bizarre fraction (called the music-adjustment fraction): total number of hours that music is streamed, divided by total number of hours used on the website. Then, you take the result of that and multiply it by the "rate fee" of 2.5%.

This formula is applied to revenue coming in from any business unit that is considered to have used music. This includes things like Yahoo's search engine. That's because Yahoo (smartly, from a consumer perspective) allowed users who searched on a musician or song to stream that song directly from the search results. But, in making that so user friendly, the company has now opened up its cash cow search revenue to this formula, despite the fact that it's incredibly difficult to think that music has anything to do with nearly all of the revenue Yahoo makes from this site. Similarly, RealNetworks has almost its entire consumer division revenue included in this formula, despite the fact that it makes a ton of revenue from its gaming business. Wondering why RealNetworks decided to spin off the gaming business a week after this decision was announced? Maybe because a rate court judge just chopped off a huge chunk of revenue from it and handed it over to songwriters who have nothing to do with these games.

As for the formula itself, it makes little sense. The "music-adjustment fraction" is a totally meaningless number. The number of hours music is streamed is hardly an indicator of how much of a site's revenue is actually music based. If I have music streaming in the background all day, but am still using the site for other purposes, it seems ridiculous to include all of that as music-based revenue. The denominator of the fraction is "total number of hours on the website" which is also a totally meaningless and unrelated number. Even worse, since the court notes that none of these sites actually track that information, the judge ruled that everyone should just use Comscore's numbers instead -- the same Comscore that most people admit is not particularly accurate. So, basically, you're dividing a meaningless number by an even more meaningless number and multiplying it by the total revenue of units who often have very little to do with music, and then taking 2.5% of that. If anything, this ruling should make any site think twice before including any streaming audio from any ASCAP-affiliated songwriters.

Filed Under: ascap, copyright, rate court, royalties, songwriters
Companies: aol, ascap, realnetworks, yahoo

District Court Tells Yahoo, AOL To Pay Millions To Songwriters

from the watch-for-the-appeal dept

In the latest of many arguments about the various rights and payments companies need to pay for streaming music online, a district court has ruled that AOL, Yahoo and RealNetworks most likely owe millions to ASCAP for songs that they streamed to users between 2002 and today (and continuing on to 2009). This has nothing to do with the record labels -- ASCAP represents the songwriters -- but is yet another extraneous "license" where the terms are hardly clear, but basically serve to make it more difficult for anyone to play music. It was never in question that these sites would need to pay some kind of royalty -- the question was how much. The odd part of this ruling, though, is that the rate set by the judge is likely to be higher than the rate that traditional terrestrial radio pays. If there ever were a formula for making companies less interested in streaming music online -- this might be it. Of course, it's quite likely that this ruling will be appealed, so it's far from over.

Filed Under: ascap, compulsory licensing, royalties, songwriters
Companies: aol, realnetworks, yahoo