Spotify Finally Realizes That Streaming Isn't Reproduction Or Distribution

from the copyright-conundrums dept

Hold on tight: we're going to get down into the weeds a bit on a copyright issue. In early 2016, we wrote about the "insanity of music licensing" as it related to streaming music, and Spotify in particular. This was in response to a series of class action lawsuits filed against Spotify by songwriters, claiming a failure to properly license so-called "mechanical rights." As I noted at the time, I talked the case over with a large number of copyright lawyers -- and many were left scratching their heads regarding what the lawsuit was actually about. Spotify, of course, is famous because it's a licensed music streaming service. That's it's whole thing. But, as we discussed, part of the problem is that there are a ridiculous number of different possible licenses out there -- many of which were designed for different types of technologies, and, when it comes to internet services, some people seem to assume that the services need to license roughly "all of them."

So, it was always known that a company like Spotify needed to secure negotiated license to use the sound recordings (that's from whoever holds the copyright on the actual recording -- not the composition). And they had to get public performance licenses from Performance Rights Organizations (PROs). But the question in these lawsuits was about an entirely different license -- the "mechanical" license. As you may have guessed from the name, a "mechanical" license comes from way back in the day, when the companies manufacturing records needed to get a license from the composer for the sake of reproducing and distributing the songs which those songwriters wrote.

And here's where we do some copyright 101. Section 106 of the Copyright Act includes a definitive list of six rights that copyright may grant the holder an exclusive right to (absent something such as fair use). These then are the specific exclusive rights under copyright law:

1. to reproduce the copyrighted work in copies or phonorecords;
2. to prepare derivative works based upon the copyrighted work;
3. to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
4. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
5. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
6. in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

So, when Spotify is licensing sound recordings from copyright holders, it's licensing #6. And when it's getting PRO licenses, it's covering #4. So, here's where things get trickier. The mechanical license -- usually granted by the composers to whoever is manufacturing, say, a record or a CD, and done via someone like the Harry Fox Agency (HFA), covers the rights for #1 and #3 -- to "reproduce" and to "distribute." That makes sense in an age of vinyl records, tapes or CDs.

As we noted back when these lawsuits first came out, some of the copyright lawyers we spoke to couldn't figure out why Spotify would even need a mechanical license in the first place. After all, it's just "streaming" music. It's not "reproducing" the work, nor is it "distributing" the work. Or is it? That question gets pretty murky, pretty fast. You can argue that the process of streaming involves bits being "reproduced" and "distributed" -- but a counter to that is that that's happening in such an ephemeral way, in which the "recipient" ends up with nothing, that it's not at all the same thing. Indeed, this issue came up in an important case a few years ago, concerning the "transitory copies" that were made by Cablevision with its remote DVR. In that case, it was determined by the appeals court that transitory copies are not "copies" under #1 above. That is, they are not "reproductions." Here's from the ruling:

"Copies," as defined in the Copyright Act, "are material objects ... in which a work is fixed by any method ... and from which the work can be ... reproduced." ...The Act also provides that a work is "`fixed' in a tangible medium of expression when its embodiment ... is sufficiently permanent or stable to permit it to be ... reproduced ... for a period of more than transitory duration."... We believe that this language plainly imposes two distinct but related requirements: the work must be embodied in a medium, i.e., placed in a medium such that it can be perceived, reproduced, etc., from that medium (the "embodiment requirement"), and it must remain thus embodied "for a period of more than transitory duration" (the "duration requirement").... Unless both requirements are met, the work is not "fixed" in the buffer, and, as a result, the buffer data is not a "copy" of the original work whose data is buffered.

That said, it did appear that Spotify had made (via HFA) at least a half-hearted effort to secure mechanical licenses anyway, often using the "Notice of Intent" process, which allows for compulsory mechanical licenses if certain rules are followed. Of course, the half-hearted nature of this appeared to have some significant gaps (gaps that HFA later started scrambling to fill).

Either way, earlier this year, we wrote about Spotify settling the big class action lawsuits it was facing, and agreeing to pay out a bunch of money. As we pointed out when that happened, it appeared that no one seemed to really want to fight out the issue in court of whether or not Spotify even needed to pay mechanicals, noting that such a fight would, undoubtedly, get messy.

Well, things are getting messy.

After that settlement, not all composers were happy. Some of them, including Bob Gaudio, from the Four Seasons, sued Spotify over the same issue -- and argued that the settlement of the previous lawsuits was an "empty gesture" given just how massive the copyright infringement was on Spotify. In other words, these new cases seemed a lot less willing to settle. And that means, the issue we never thought was going to get tested in court... is looking like it's going to get tested in court. As first covered by Eriq Gardner at the Hollywood Reporter, Spotify has now directly argued that its service does not reproduce or distribute the songs it streams. From the filing:\

Plaintiffs allege that Spotify “reproduce[s]” and “distribute[s]” Plaintiffs’ works..., thereby facilely checking the boxes to plead an infringement of the reproduction and distribution rights. But Plaintiffs leave Spotify guessing as to what activity Plaintiffs actually believe entails “reproduction” or “distribution.” The only activity of Spotify’s that Plaintiffs identify as infringing is its “streaming” of sound recordings embodying Plaintiffs’ copyrighted musical compositions.... But “streaming” – by its very definition – cannot infringe upon either the reproduction right under 17 U.S.C. § 106(1) or the distribution right under 17 U.S.C. § 106(3). As a consequence, Plaintiffs’ allegations simply do not inform Spotify how Spotify is alleged to have violated the law.

As Spotify's lawyers admit (as we described above), it's clear that streaming implicates #4 and #6 of copyright's exclusive rights -- and it has licenses to cover both of those areas -- but not #1 and #3:

In short, the act of streaming does not reproduce copies of sound recordings or musical compositions, and equally does not distribute copies of either sound recordings or compositions. This is not to say that streaming has no copyright consequence. Streaming does result in a public performance of both sound recordings and musical compositions. See 17 U.S.C. § 106(4) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of musical works) and § 106(6) (granting copyright owner the exclusive right to “perform the copyrighted work publicly” in the case of sound recordings).... But Plaintiffs do not allege that Spotify has violated their public performance rights, and such an allegation would be futile. Spotify has paid hundreds of millions of dollars to license the public performances of the musical compositions it streams, including those allegedly owned by Plaintiffs, through negotiated licenses administered via ASCAP, BMI, SESAC, and GMR – a group of licensing agents known collectively as “performance rights organizations” or “PROs.” In sum, Plaintiffs’ Complaint, which rests upon Spotify’s “streaming,” leaves Spotify guessing about what it has done that, in Plaintiffs’ view, constitutes a violation of Plaintiffs’ reproduction and distribution rights.

If Plaintiffs are indeed alleging an instance of copying (as opposed to streaming) that allegedly violates Plaintiffs’ reproduction and/or distribution rights, they can amend their Complaint to say so. Depending on what that allegation is, Spotify will advance a number of defenses. If Plaintiffs’ real complaint is with, for example, a particular instance of alleged temporary copying, then, among other things, Spotify may assert a defense of fair use. Spotify may also assert defenses of compulsory license, implied license, negotiated license with copyright owner or co-owner, statute of limitations, and others, depending on the nature of the specific allegations. But Spotify should not be forced to guess and aim its defenses at an unknown claim. Spotify believes that every element of its service is either fully licensed or otherwise permitted by law, and Plaintiffs’ Complaint offers no notice as to what Spotify conduct it thinks violates its copyrights or what conduct would require additional licenses.

Spotify also argues that the point of this lawsuit is really to try to convince composers to opt-out of the settlement from earlier this year, and to join in this action, which may explain why Spotify is taking an aggressive stance here. But this case, should it move forward, could become quite important. Because if a court somehow goes against earlier precedents and argues that streaming actually impacts four out of the six different exclusive rights granted under copyright law, that would be quite amazing.

As we've noted many times in the past, one of the problems with copyright law is that each time a new technology comes along that threatens "the old way" of doing things, rather than rethinking copyright itself, Congress tends to just duct tape on a new right that requires licensing. And that works fine until the next innovation comes along. Now, in the internet age, where things look a little like their analog predecessors, but also with other features, it's no surprise that some copyright holders are trying to argue that ALL THE LICENSES must apply. But if you actually look closely at what Spotify does, what copyright law covers in terms of those six exclusive rights, and what previous cases have held, it does seem likely that streaming should really only implicate two of the exclusive rights.

Filed Under: bob gaudio, copyright, distribution, mechanical rights, music licensing, reproduction, streaming
Companies: spotify

After Previously Claiming the Economics Would Never Work, HBO Streaming Now A Major Windfall

from the evolution-doesn't-care-that-you're-afraid dept

For years, HBO and owner Time Warner fell into the trap of telling customers what they wanted instead of the other way around. You might recall that HBO and Time Warner spent years waging a rather scorched earth assault on piracy and other "unauthorized viewing," going so far as to poison show torrents and shut down "Game of Thrones" viewing parties. A major problem with this approach is that HBO wasn't fully providing pirates an alternative. While HBO was offering streaming to existing cable customers, it spent years ignoring consumer calls for a standalone streaming video platform that didn't require cable.

There were any number of reasons for this myopia, the biggest being that like any good legacy company, HBO and Time Warner execs were afraid of wounding the traditional cable cash cow (even if said cow was already showing signs of notable mortality at the time). More specifically, HBO was afraid of hurting the cozy, heavily-subsidized relationship HBO enjoys with many cable providers, who all but give the channel away on occasional promotion. So while offering a standalone streaming platform was essential in evolutionary context, HBO consistently insisted it just couldn't make the economics work for such an option.

So while Time Warner and HBO execs were busy trying to downplay cord cutting as a fad, the piracy of HBO programs continued to smash BitTorrent swarm and other piracy records. That was until March of 2015 when HBO was forced to finally acknowledge the changing tides and launched HBO Now, its standalone streaming app. Fast-forward a little more than two years, and that decision is looking pretty good now in hindsight:

The “Game of Thrones” effect is in full force for HBO NOW, the premium network’s streaming service for cord cutters. According to new data from app market data provider App Annie, the iOS and Android versions of the HBO NOW mobile app have together generated $19 million in U.S. revenue for the two months containing the airing of “Game of Thrones” Season 7, as of Monday, August 21.

App Annie says it expects HBO NOW’s mobile apps to pull in well over $20 million by the end of the month.

The show’s outsized popularity has again sent the HBO NOW app flying up the Top Revenue charts on the iOS App Store, too. Roughly one month after the Season 7 premiere, HBO NOW became the number one app in terms of Overall iPhone revenue. It grabbed that spot on August 16th, 2017, and remained the top app by revenue for two more days.

That's pretty good for a service executives had to be dragged kicking and screaming toward, though you'd wonder how much more successful the platform could have been with an earlier start. And while "Game of Thrones" piracy is still booming, and HBO is still sending nastygrams to user ISPs in the hopes of thwarting it, at least HBO is now offering these users a legitimate alternative. An alternative that could provide more value over time if HBO experiments with price, or works on partnerships with smaller ISPs that have been contemplating getting out of traditional cable TV because they lack the leverage to compete with industry giants.

It's a similar predicament that's now facing ESPN, which, like HBO, spent years believing it could stand in the wings nursing its cash cow with a dumb look on its face while the entire pay TV ecosystem shifted under its feet. With cord cutting, phase one usually involves denying that the trend is happening, followed by acknowledging the trend but insisting it's some kind of fad. That's usually followed by the pretense that you saw and prepared for the trend all along despite all the data showing the opposite. It's usually good to throw in some make believe about how you're the one that gets to decide when to adapt for good measure

There's no doubt that adaptation will make these companies less money over the short term, but executives often struggle to realize a core truth: they don't have a choice. Cord cutting and the shift to IP video is happening whether these executives like it or not, and they can choose to stand mid-river in futile opposition to the flow, or adapt and take an early hit as the legacy cash cow dies, but be much better positioned for the future, whatever consumers determine they want it to look like.

Filed Under: game of throwns, hbo, hbo now, streaming
Companies: hbo, time warner

Mayweather V. McGregor: Showtime Got Injunctions On Pirate Stream Sites Which Didn't Work & Neither Did Their Own Stream

from the oops dept

As you will already know, a boxing match recently took place between Floyd Mayweather Jr. and Conor McGregor. The fight itself was far better than it should have been, but you may not know it if you couldn't manage to actually see it. Much as it did in the run up to the Mayweather v. Pacquiao fight of a couple of years ago, Showtime went out and got some rather questionable injunctions against 44 sites it believed would be offering up the fight via an illegitimate stream during the live pay-per-view broadcast. That effort resulted in, ahem, only three million viewers watching the fight via illegal live streams. Thousands more downloaded video of the fight illicitly after it occurred. So, Showtime got a court to agree to questionable pre-crime activities with the result being rather mixed.

But if the steady mantra from the content industries that "every infringement is a lost sale" were true, then perhaps Showtime should be thanking its lucky stars that illegal streams were available, because its own streaming service wasn't able to handle the viewership load it did have.

Showtime was hit with a federal class-action lawsuit amid reports that it delivered shoddy or non-existent $99 streams of the Floyd Mayweather-Conor McGregor fight Saturday. This is contrary to Showtime's promise of 1080p resolution at 60 frames per second.

"Instead of being a 'witness to history' as defendant had promised, the only thing plaintiff witnessed was grainy video, error screens, buffer events, and stalls," declared the lawsuit (PDF) filed in federal court on behalf of a Portland man named Zack Bartel. The suit seeks to represent "thousands of other consumers" unable to stream the Mayweather fight in HD as Showtime advertised.

By all accounts, it was bad. Really bad. The fight was delayed for paying streamers for over half an hour as Showtime's service was unable to handle all of those customers who paid for the fight. I don't want to spend any time on this class lawsuit, because these kinds of class lawsuits are generally pretty silly and the fact that Showtime failed to deliver on its own streaming product isn't in and of itself the point. The point is that if the company really wanted to go to war with streaming sites prior to the fight, it should have made sure that money and effort wouldn't have been better spent actually catering to its paying customers.

What if the content industries were right and the injunctions had worked? What if Showtime had to accommodate three million more customers with pirate streams unavailable? How bad would the streaming experience to all of those paying customers have been then? Likely it would have merely added 3 million more individuals to the class action lawsuit.

Meanwhile, of those that did pay for the fight and had their experience range from "delayed and sub-par" to "holy shit, I can't even watch this thing", how many might give this whole pirate stream thing a whirl the next time Showtime puts on a fight? All because Showtime would rather play whac-a-mole with streaming sites than make its own product function, never mind actually competitively good.

Filed Under: class action, conor mcgregor, copyright, floyd mayweather, piracy, streaming

As A Streaming Future Looms, ESPN Is Damned If It Does, Damned If It Doesn't

from the rock-and-a-hard-place dept

So for years we've examined how executives at ESPN completely whiffed at seeing the cord cutting revolution coming, and personified the industry's denial that a massive market (r)evolution was taking place. As viewers were beginning to drift away from traditional cable and erode revenues, ESPN executives were busy doubling down on bloated sports contracts and expensive Sportscenter set redesigns. Only once ESPN lost 10 million viewers in just a few years did executives finally acknowledge that cord cutting was a problem, though they subsequently have tried to downplay the threat at every opportunity.

The question now is how to fix that problem. ESPN's first step was to try and save costs by firing oodles of on-air talent, but not the executives that failed to navigate this sea change. That has since been followed by ESPN-owner Disney recently proclaiming it would be offering two direct to consumer streaming platforms -- one stocked with Disney and Pixar fare, and the other being a direct to consumer ESPN product. During a recent earnings call, Disney CEO Bob Iger verbalized the company's slow epiphany in the face of cord cutting:

"We’ve got this unbelievably passionate base of Disney consumers worldwide that we’ve never had the opportunity to connect with directly other than through the parks,” Iger said. “It’s high time we got into the business to accomplish that.”

Iger acknowledged that the decision to act was spurred by the disruption in the traditional TV eco-system that has been rocking ESPN for the past few years. But Disney’s blue-chip brands give them a leg up in taking a radical new approach to reaching consumers.

“It’s not just a defensive movie, it’s an offensive move,” Iger said.

Granted it's not really playing offense when you only react after worries about cord cutting and ratings slides causes a $22 billion valuation hit in just a few days, something Disney experienced last year. Still, it's good to see Disney pull its head out of the sand and embrace the idea of giving consumers what they want, even if the move is painfully belated and under-cooked. The problem for ESPN specifically, as many have been quick to point out, is that the company is still stuck between a rock and a hard place in terms of navigating the transition to streaming -- even if it does everything right (which it won't).

There's plenty of reasons for that, the biggest being that streaming simply can't be as profitable as the long-standing practice of forcing cable TV customers on to bloated bundles filled with channels (like ESPN) that they may not want. ESPN currently makes $7.21 for each cable TV subscriber, many of which pay for ESPN begrudgingly. One survey found that 56% of ESPN viewers would ditch the channel if it meant saving that money off of their monthly bill. Fear of losing those customers was one of the reason ESPN sued Verizon when the company tried to take ESPN out of its core TV bundle.

And while ESPN may now be technically doing the right thing in finally offering a direct-to-consumer streaming product, such an offering will only aid to expedite viewer defections, while ESPN's sports licensing costs remain the same:

"A streaming service, while it might attract sports fans who have cut the cord, won’t solve ESPN’s profit problems. Instead it will exacerbate them. Why? Because ESPN will continue to lose the millions upon millions of cable subscribers who pay for it but never watch it. Losing $7.21 from each non-watcher is going to be a revenue killer. There is no possible way the universe of sports fans who want ESPN can make up that revenue, even if they’re charged more for a streaming service."

Traditionally, many cable and broadcast companies have tried to give the impression of adaptation by launching a streaming service, then saddling it with all manner of caveats to prevent existing, traditional cable TV customers from downgrading to the cheaper, more flexible streaming option. This really never works, but it looks like the path Iger and Disney are going to follow when it comes to ESPN's latest streaming venture:

"To make matters worse, Disney appears to be planning a streaming service that even the most rabid sports fan will be reluctant to pay for. All the good stuff — big-time college football, professional basketball, the Monday night National Football League game — will remain exclusively on ESPN’s cable channels. The streaming service will get, well, other things. It’s pretty clear that Iger is still trying to protect Disney’s legacy cable business, and that his move to the internet is not exactly a wholehearted embrace."

In other words, ESPN's epiphany and transition isn't quite as profound as many are suggesting, and ESPN still somehow believes it can control the rate of evolution; a fool's errand. Many industry insiders also have told me over the years that ESPN's contracts with many cable providers state that should ESPN offer its own streaming services, cable providers will no longer be bound by restrictions forcing them to include ESPN in their core lineups, which will only accelerate the number of skinny bundle options without ESPN.

It's a damned if you do and damned if you don't scenario for ESPN, and even if ESPN does all the right things here and offers a truly compelling streaming platform customers really enjoy -- there's simply no getting around the fact that this transition is still going to really hurt.

Filed Under: cord cutting, streaming, television
Companies: disney, espn

Disney Pulls Content From Netflix As Users Face An Annoying, Confusing Rise In Streaming Exclusivity Silos

from the drowning-in-monthly-fees dept

On one hand, the increasing number of independent streaming services is certainly a good thing. This increase in competition is finally starting to apply pressure on incumbent cable TV providers to offer greater programming flexibility and to compete on price, even though many cable and broadcast execs falsely believe they can ignore the threat and do the exact opposite. But as everybody and their mother jumps into the streaming game, we're facing a new threat: the rise of fractured exclusivity silos that make consumers hunt and peck to obtain their favorite programs.

Case in point: if you're a fan of a particular program in the modern streaming video age, you first need to check to see if that program or film is available on any of the half-dozen services you may subscribe to, be it Hulu, Netflix, Amazon, CBS All Access, YouTube TV, or any of a myriad of other options. That in and of itself can prove fatiguing on your patience -- and wallet if you're trying to save money over traditional cable. You've then got to see if that content is still actually available, since content licensing results in titles being added and removed in what are often illogical availability windows, adding another layer of confusion.

Now, things are poised to become even more complicated in that regard. Wanting to cut out the middleman, many broadcasters (like CBS, FX or AMC) are busy pursuing their own streaming services, pulling their content from existing available services and forcing users to sign up for yet another monthly subscription. For example, if you want to watch CBS's upcoming new Star Trek: Discovery TV show, your only option will be to sign up for CBS's $7 per month All Access service. Don't want or can't afford another service? Your option is to either go without -- or to pirate the program. Guess which option many choose?

A more recent case in point: Disney announced this week that the company would be pulling its content from Netflix in order to launch its own streaming video service:

CEO Bob Iger told CNBC's Julia Boorstin Disney had a "good relationship" with Netflix, but decided to exercise an option to move its content off the platform. Movies to be removed include Disney as well as Pixar's titles, according to Iger. Netflix said Disney movies will be available through the end of 2018 on its platform. Marvel TV shows will remain. The new platform will be the home for all Disney movies going forward, starting with the 2019 theatrical slate which includes "Toy Story 4," "Frozen 2," and the upcoming live-action "The Lion King." It will also be making a "significant investment" in exclusive movies and television series for the new platform.

On one hand, if you really like Disney content, this may not be a horrible thing for you. On the other hand, if you're only interested in a few Disney titles but already feel you pay for too many streaming services, you could find yourself annoyed. Users are, it goes without saying, cutting the TV cord because they're tired of the poor value proposition traditional cable TV represents. It's not entirely clear you can call it real pricing evolution if you replace one bloated, giant cable bill with an ocean of smaller charges that ultimately cost you the same if not more than your old cable TV subscription.

And while it's not entirely clear how many monthly fees and subscriptions users are willing to tolerate, it is abundantly clear that broadcasters and cable companies intend to push their luck and figure out the answer. Not many seem to realize that should they push too hard and cordon off content into an ocean of annoying exclusivity silos, the end result will drive users back to the simplicity of piracy. And that's a particular shame given all the work it took to wean consumers off of file trading services like BitTorrent and on to "legitimate" monthly streaming subscriptions in the first place.

There's a fine line here as we shift from traditional cable to over the top streaming, and it's precisely the kind of line the traditional cable and broadcast industry loves to trip face-first over.

Filed Under: content, movies, silos, streaming, tv, video
Companies: disney, netflix

Charter Spectrum 'Competes' With New $20 Streaming TV Service Featuring $6 In Entirely Bogus Fees

from the the-illusion-of-competition dept

You may have noticed that things aren't going particularly well for the traditional cable TV industry. Ratings for many channels are in free fall, the rate at which customers are cutting the traditional TV cord is accelerating, and the number and quality of competing streaming services is only growing. Cumulatively, this has forced many previously myopic cable and broadcast executives to stop denying the obvious and to candidly admit there's an actual market (r)evolution afoot, even if most of them still aren't quite exactly sure how to adapt to it.

And while the headlines are often filled with dire warnings about traditional cable TV being "doomed," that's not really true. Cable operators still lay claim to somewhere around 98 million paying customers. And keeping these users from fleeing to competing streaming services really isn't that complicated. These companies just don't want to do what's necessary. Namely, listen to their customers, offer more flexible and convenient services, shore up their atrocious customer service, and finally begin seriously competing on price.

Many traditional cable providers have responded by offering a new suite of so-called "skinny bundles" that profess to offer lower costs and to offer greater channel flexibility. But more often than not old habits die hard, and the industry often saddles these offerings with numerous murky restrictions, or layers of misleading fees. The end result is that these offers either aren't really competitive, or wind up costing nearly as much as traditional cable.

Case in point: Charter (Spectrum) is currently hyping a new $20 bundle of a few dozen channels they're testing in a handful of markets. Usually these trials exist to give the impression the cable company is being innovative, but are never launched nationwide for fear of mass-cannibalization of traditional customers downgrading from more expensive plans. But most news outlets were quick to lavish praise on Charter's new offering, many posting the ad for the $20 price point alongside their reports on the new service:

Except that "$20" isn't really $20, since the cable industry just can't let go of some bad habits.

Trial participants who actually have tried the service say it not only doesn't work all that well, but Charter has chosen to hide a number of obnoxious fees that dramatically jack up the price of the service. Of particular note is the fact that Charter saddles the offering with a $6 per month "broadcast TV fee." As we've noted previously, this increasingly-utilized fee simply takes some of the cost of programming and buries it below the line. Why? It lets the cable provider falsely advertise a lower price. And despite being false advertising, regulators from both parties traditionally haven't given much of a damn.

Some companies, like Comcast, have gone so far as to try and claim the broadcast TV fee is just their way of being transparent with consumers, since nothing quite says transparency like customers having no idea what a service they're buying will actually cost. But as the market floods with alternatives from the likes of Hulu, YouTube, Sling TV and more increases, cable and broadcast executives are eventually going to have to realize that the threshold for tolerating this kind of bullshit -- in the face of real competition -- isn't going to be quite at high as they're accustomed to.

Filed Under: cable tv, competition, cord cutting, fees, hidden fees, over the top, streaming, tv
Companies: charter, charter spectrum

Disney Feels The Heat As Children Lead The Cord Cutting Revolution

from the adapt-or-perish dept

For a while now we've noted that it's actually the youngest among us that are leading the cord cutting revolution. Viacom has watched channels like Nickelodeon experience a ratings free fall for several years now as streaming alternatives have emerged as a useful alternative to strictly-scheduled, commercial-bloated Saturday morning cartoons. Toddlers don't really care if they're watching the latest and greatest "True Detective" episode or not, and parents, like everybody else, are tired of paying for bloated cable bundles filled with channels they never watch.

Like Viacom, Disney has been feeling the brunt of this evolution, especially since cable TV accounted for 30% of its revenue and 43% of profits last fiscal year. But, as evident by the ongoing subscriber exodus at Disney-owned ESPN, the company really hasn't really done a very good job adapting to the changing market. The same thing is occurring at Disney's kid-oriented networks like the Disney Channel, Disney Jr., and Disney XD, all of which are, well, not faring particularly well under this new streaming paradigm:

"For the first six months of this year, the commercial-free Disney Channel's ratings among in its core 2-11 and 6-14 demographics fell 23% in prime time and 13% and 18%, respectively, during the full day, compared with the same period a year ago. Ratings are also down at the smaller Disney Jr. and Disney XD networks, which fall under Mr. Marsh's Disney Channel umbrella.

Cable revenue at Disney is relatively flat, and operating income is down 6% in the first half of the current fiscal year. That has contributed to a freak out or two among Wall Street analysts, which have in recent months finally, truly woken up to a trend they spent years both ridiculing and denying. That's in large part thanks to the fact that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. The second quarter is expected to be notably worse, with most analysts predicting a 1 million subscriber decline (or greater).

And that fear on Wall Street has, in turn, forced traditionally myopic cable executives to finally realize that they need to stop trying to defend the traditional bloated cable TV cash cow -- and begin offering cheaper, more flexible streaming alternatives:

"Disney Chief Executive Robert Iger has said that strengthening online accessibility for television programs is a priority and that the company is preparing to offer its channels, in part or whole, directly to consumers online rather than just through costly cable packages. Profits for Disney Channel and Freeform are driven in part by long-term contracts with cable companies, but the erosion in ratings is likely to ultimately hit the bottom line unless the networks can generate substantial new digital revenue."

Of course, like the Millennials ahead of them, most of these kids will grow up (correctly) believing its bizarre and punitive to force people to buy oodles of often-horrible cable TV channels at outrageous prices. And contrary to some cable and broadcast executives who still think this is all just a temporary blip on a radar screen, this rise in competition and the resulting massive shift toward cheaper, more flexible viewing options isn't going anywhere.

Filed Under: cord cutting, streaming
Companies: disney

Texas Court Orders Sports Streaming Sites To Be Blocked In Anticipation Of Piracy

from the pre-crime dept

A few years ago, we wrote about HBO and Showtime's somewhat novel decision to file a lawsuit against two sports streaming sites for copyright infringement that both claimed would happen... in the future. The lawsuit was filled with understandably novel language, but the fact remained that this was something akin to pre-crime enforcement, best demonstrated in the film Minority Report. One of the chief axioms of American law is that a crime must have occurred for punishment to be doled out. Injunctions are a departure from that, but actually suing for infringement when that infringement hadn't happened yet and, indeed, when the content to be infringed didn't even yet exist, seemed like a departure from the way the law works.

But perhaps this is a practice we'll see expanded, as it seems to be happening again. This time, a federal court in Texas has issued an injunction ordering ISPs to proactively block a group of streaming sites ahead of the Premier League cricket tournament.

This is also the path Indian media outfit Times Content Limited (TCL) decided to go down. The company operates the cricket channel Willow TV and owns the US broadcasting rights to the Indian Premier League cricket tournament, which is currently ongoing. Two weeks ago the company sued several sports streaming sites including smartcric.com and crickethdlive.com. These sites allow users to watch cricket games for free over the Internet, without permission. To stop this from taking place, the Indian company requested a broad injunction, which the court granted last week.

The preliminary injunction (pdf) orders various third party providers to stop working with these sites effective immediately to prevent future copyright infringements. This also applies to any new domain names or websites the operators may launch.

Now, there are a couple of things to stipulate here. The websites in question appear to be common sports streaming sites that regularly infringe on the copyright of others. The injunction also suggests that Willow TV has attempted to communicate with the sites many times and has not received much in the way of a response. Whatever you think about copyright and sports streaming sites, it's not like Willow TV has no reason to complain here.

Still, when one paints a picture of justice on a legal system canvas, it's not simply about what picture you paint but how you paint it that's important. After all, precedence is a thing, as are the norms of how the law is carried out. The injunction's inclusion of language like the following seems to set us all on a dark path to prior restraint of speech.

...all service providers whose services will enable or facilitate Defendants' anticipated infringement are ordered to suspend all services with respect to [ the offending websites]...

Again, whatever you might think of sports streaming sites such as the defendant sites, opening the door to broad injunctions on the basis of future infringement seems like a mistake. It's a door that will almost certainly be barged through by copyright holders all over the place and is fertile soil for wanton abuse. The injunction goes to great lengths to acknowledge its order is based on all kinds of past infringing activities by the websites in question, but there is no clear standard for how much infringement must take place prior to a court being able to take down what is ultimately speech pre-emptively in anticipation of infringement in this way.

We must hope this practice is not expanded, or you can expect to see the collateral damage stories begin to appear.

Filed Under: anticipation of infringement, copyright, infringement, pre-crime, sports, streaming, streaming sites
Companies: tcl, willow tv

French Theater Owners Freak Out; Get Netflix Booted From Cannes Film Festival

from the competing-isn't-really-the-French-way dept

Even as Netflix continues to draw top talent to produce original series and movies (while failing to destroy the motion picture industry), it is still being locked out of being considered a "real" filmmaker.

The tentative embrace of streaming services' offerings comes with caveats: films must be released to theaters as well to be considered for major awards. This makes things considerably tougher for Netflix since it's faced heavy resistance from theater owners and others who see a lack of release windows as a threat to their existence.

The latest rejection of Netflix's advances is happening at France's Cannes Film Festival. Netflix has two films up for consideration for this year's awards, but according to festival organizers, it will be its last unless something changes. Here's the festival's official flip-flop, via David Canfield at Slate:

A rumor has recently spread about a possible exclusion of the Official Selection of Noah Baumbach and Bong Joon-Ho whose films have been largely financed by Netflix. The Festival de Cannes does reiterate that, as announced on April 13th, these two films will be presented in Official Selection and in Competition.

The Festival de Cannes is aware of the anxiety aroused by the absence of the release in theaters of those films in France. The Festival de Cannes asked Netflix in vain to accept that these two films could reach the audience of French movie theaters and not only its subscribers. Hence the Festival regrets that no agreement has been reached.

The issue here appears to be French theater owners, although the statement doesn't say that in as many words. Instead, the festival delivers a whole lot of words on a platter of subtext.

The Festival is pleased to welcome a new operator which has decided to invest in cinema but wants to reiterate its support to the traditional mode of exhibition of cinema in France and in the world. Consequently, and after consulting its Members of the Board, the Festival de Cannes has decided to adapt its rules to this unseen situation until now: Any film that wishes to compete in Competition at Cannes will have to commit itself to being distributed in French movie theaters. This new measure will apply from the 2018 edition of the Festival International du Film de Cannes onwards.

To translate this, one needs to look at the events leading up to the festival's sudden reversal. The festival doesn't want to lose local support, so it has allowed itself to be bullied into a hasty invitation retraction. This report from CBC News is the explicit version of the statement's implicit wording.

The [Netflix] selections prompted immediate criticism from French exhibitors. In France, the theatrical experience is passionately defended. Films are prohibited from streaming or appearing on subscription video on demand for three years after playing in theatres.

On Tuesday, France's National Federation of Films Distributors said the Netflix films at Cannes were "endangering a whole ecosystem."

Must be a pretty fragile ecosystem if a streaming service being considered for an award threatens its stability. And -- considering the three-year no-streaming window French citizens are punished with -- it's easy to see why Netflix hasn't reached an agreement with the locals. It's also easy to see Netflix will never be able to reach an agreement with French exhibitors. One side has a whole lot of room for compromise, but if it hasn't done so already during the rise of streaming services, it's unlikely to start making concessions now.

So, there will be no Palme d'Ors in the Netflix trophy case. And this nation's creative industries will continue to prop themselves up on insular, isolationist laws, rather than face the rest of the world head-on.

Filed Under: cannes, films, france, streaming
Companies: netflix

Atlus Loosens Streaming Restrictions For Persona 5, Still Has In-Game Checkpoints For Streaming Rules

from the not-good-enough dept

Recently, we discussed an odd post by the American division of Atlus, the company behind the recently released game Persona 5. The post basically outlined restrictions on streaming the game in the popular "let's play" format. Those restrictions were pretty clearly geared towards keeping spoilers for the game's stories off of the internet, with indications that discussing or streaming game content that occur after an in-game date was verbotten. The post was also couched in threats for DMCA notices, which is odd because spoilers aren't what copyright law was designed to combat. The public backlash was fairly uniform, with Atlus coming out not looking particularly good as a result.

It took a while, but Atlus has finally responded. While it positions this response as a loosening of the restrictions on streaming, it still keeps all of the worst aspects of the original restrictions in place.

On Tuesday Atlus announced that they will allow players to stream or post videos from up until the in-game date of November 19, just before the story's final act. The post wrote it was in response to "numerous reactive news articles," opinion videos and "many emails" asking them to loosen the restrictions.

"We also want to apologize to those of you who saw the previous guidelines as threatening," Atlus wrote. "It was never our intention to threaten people with copyright strikes, but we clearly chose the wrong tone for how to communicate this."

That last bit is more than laughable. Here is the original text that from the first set of restrictions that caused concern among streamers that they would be hit with copyright strikes.

This being a Japanese title with a single-playthrough story means our masters in Japan are very wary about it. Sharing is currently blocked through the native PS4 UI. However, if you do plan on streaming, video guidelines above apply except length. If you decide to stream past 7/7 (I HIGHLY RECOMMEND NOT DOING THIS, YOU HAVE BEEN WARNED), you do so at the risk of being issued a content ID claim or worse, a channel strike/account suspension.

That seems pretty clearly to be a threat of copyright or DMCA notices if the rules aren't followed. As for the loosening of the restrictions on streaming, Atlus essentially just pushed back the in-game checkpoint in the rules. Instead of prohibitions on streaming content beginning at the in-game date of 7/7, it now begins at 11/19. And if that following sentence doesn't read as purely absurd to you, then you need some help getting your mind calibrated.

There is value in having fans stream games in let's play videos. This has been demonstrated repeatedly. Either Atlus buys into that or it doesn't. Straddling the line in the name of saving fans from spoilers, even after it has moved that line, isn't good enough. Restrict streaming. Or don't. Pick a lane, in other words, rather than trying to build guidelines based on in-game dates. That simply makes no sense.

Filed Under: copyright, persona 5, spoilers, streaming
Companies: atlus