Gizmodo Completely Misses The Point Of Cord Cutting

from the missing-the-forest-for-the-trees dept

Roughly every month or so I'll see a story proclaiming that cord cutting is a bad idea because you need to subscribe to multiple services to mirror the same overall volume of content you receive from pay TV. There are a few problems with that logic, first being that cord cutters aren't looking to precisely duplicate cable TV. They're looking to get away from paying a small fortune for hundreds of unwatched channels, including an ocean of religious programming, infomercials, whatever the Weather Channel is up to these days, and C-grade channels focused on inherently inane prattle.

Writers of these pieces always seem to forget that broadcasters dictate the pricing of content on both platforms, so any surprise that the pricing of television remains somewhat high (when you pile on multiple streaming services) is just kind of silly. All told, "cord cutting is really expensive when I subscribe to every streaming service in the known universe" is just a weird narrative that just keeps bubbling up across various media outlets despite not really making much sense.

The latest example is a recent piece over at Gizmodo by Matt Novak that proudly proclaims that "cord cutting isn't a bargain any more" when you sign up for a pile of different streaming services:

"So, let’s see, if you pay for Hulu Plus (which is now just Hulu, since they’re dropping their free tier) that sets you back about $8 per month. And if you go subscription free that’s $12 per month. And Netflix is another $10. And HBO Now is another $15. And obviously you’re going to get the new commercial free CBS, so that’s $10 per month. What are we up to? About $47 before tax? And then you toss on your high-speed internet bill, which you’re probably paying to the cable company anyway. Yeah, this whole cordcutter thing sounds like it liberated consumers alright, doesn’t it?

So............................................. ¯\_(ツ)_/¯"

And that's it. Pretty much Gizmodo's entire argument is that because the author had to pay $47 for four streaming services, cord cutting isn't a bargain and can't be taken seriously. But compared to traditional cable, that's not really a bad deal. Novak also appears to ignore that countless people save a significant amount of money when they decide to trim back their programming lineup or cut the cord entirely. As such, it was entertaining to watch users over at Reddit quickly and repeatedly point out how much money they've saved by moving on from traditional cable:And it's worth pointing out that these consumers are still saving money despite every effort by the broadcast and cable industry to make cord cutting as difficult as possible, whether that's via restrictive licensing agreements, lawsuits intended to deter innovation, or the use of usage caps to otherwise penalize users who try and leave the legacy TV pasture. The entire point of cord cutting is the flexibility to mix and match various services to craft the precise lineup of content you want, something the cable industry continues to pay empty lip service to via "skinny bundles" saddled with obnoxious fees and caveats.

The cable industry has a long, proud history of advertising one rate, then socking consumers with a significantly higher bill thanks to hardware rental costs and various other fees. That's something correctly pointed out by Jared Newman, who apparently found Gizmodo's narrative as tiring as I did:

"Cable TV might seem cheap when you first sign up, but that’s only because you’re getting a short-term promotional deal, and the advertised price rarely factors in hardware rental and other hidden costs, such as regional sports fees and broadcast retransmission fees. Keeping your payments down requires constant vigilance, and you’ll never actually pay the advertised rate anyway."

There's also a weird tendency among TV beat writers to act as if piracy doesn't exist just because it's not formally sanctioned by the United Nations or Homeland Security as a legal and accepted way to obtain content. But reality doesn't work that way. You don't get to magically eliminate discussing piracy as an avenue for consumer cost savings when discussing the pay TV landscape just because it's naughty. Many cord cutters pirate because the cable industry refuses to give them the flexibility and pricing they want. That doesn't somehow mean piracy isn't a legitimate competitor for consumer affections and shouldn't be discussed when analyzing cost savings.

If there's a problem with the streaming model, it's one that Gizmodo almost accidentally stumbles into. Namely that broadcaster licensing has increasingly fractured streaming content availability, forcing users to hunt and peck between multiple services to find the content they're looking for, something that's only going to increase as broadcasters exclusively offer their own content via their own services. That's incredibly confusing for the consumer, especially given the frequency with which content disappears as licensing periods expire. Ultimately this confusion will only make piracy more attractive.

And yes, consumers in the future will likely have to pay even more as more and more ISPs turn to usage caps to simultaneously cash in on a lack of competition while protecting legacy TV revenues. But that's not somehow the fault of cord cutting as a concept. Cord cutting may not be for everybody (especially sports viewers), but it's a very organic response to an aggressively inflexible pay TV sector that absolutely refuses to compete on price despite the obvious writing on the wall. So yes, ¯\_(ツ)_/¯ indeed.

Filed Under: broadband, bundles, cable tv, cord cutting, options, streaming, tv
Companies: amazon, comcast, hulu, netflix

Patent Troll's Frivolous Attack On Startup Forces Startup To Sell Out To Another Patent Troll

from the fix-patents dept

The folks over at the App Developer's Alliance (a trade group for app developers) recently posted the following video of Peter Braxton discussing his run in with a patent troll: In short: Braxton started a company called Jump Rope Inc., which made an app that would let you pay a fee to skip a line (first use case: pay your way to get into a popular bar ahead of the line). No matter what you might think of that kind of app, Braxton was quickly threatened and then sued by a patent trolling operation called Smart Options which has a patent (US Patent 7,313,539) on a "method and system for reserving future purchases of goods or services." In short, it's a patent on electronic options buying -- which should never be patentable in the first place. It's "take something that happens in the offline world (options buying) and put it on a computer" which isn't supposed to be patentable. Either way, the idea that line jumping violates a patent for options buying seems doubly ridiculous.

And, Braxton actually went to court to fight it, spending his own money to do so after returning his investors' money. As he noted, his investors had bought into a startup, not a lawsuit. Eventually, he not only won the case, but Smart Options was ordered to pay attorneys' fees under Rule 11 for filing a frivolous lawsuit (including never actually using the Jump Rope app and falsely describing its functionality in the lawsuit):

Despite Jump Rope’s warnings that its application did not meet the limitations of claim 1, however, Smart Options did not purchase a Jump or ensure that the basis for its claims was not “factually inaccurate” before continuing to pursue its infringement claims.... Smart Options’ failure to avail itself of the easy, inexpensive opportunity to actually test and analyze Jump Rope’s product, particularly after it received Jump Rope’s initial Rule 11 motion, is unreasonable....

Moreover, even if Baker had purchased a Jump or had sufficient information about Jump Rope’s application to compare its functionality to the ‘539 patent, Smart Options failed to reasonably construe the claim terms in order to allow for such a comparison....

[....]

Smart Options also could not have sufficiently compared its patent with Jump Rope’s product, not only because it did not have familiarity with its functionality, but because it did not construe the claim terms. Smart Options, therefore, did not conduct a reasonable pre-filing investigation and had no reasonable factual basis to file its complaint, or to refuse to withdraw the complaint during the safe harbor period after Jump Rope served its original Rule 11 motion and letter.....

For the foregoing reasons, the Court grants Jump Rope’s motion for sanctions. Specifically, the Court awards Jump Rope all of the reasonable attorney’s fees directly resulting from Smart Options’ frivolous complaint, including attorney’s fees incurred during the filing of the present Rule 11 motion.

Braxton discusses some of this in the video, but adds in another tidbit that is absolutely crazy. After that ruling above, Smart Options appealed and both sides went to mediation to try to resolve it (Braxton noted he had no money to continue the lawsuit). Here's how Braxton describes how that went in the video:

This is the first time that I met the plaintiff, after a year and a half of litigation. He waived confidentiality and he said: "Look, I'm going to make this real easy for you. This isn't a mediation. This isn't arbitration. This is what you're going to do. You're going to settle the lawsuit. We're not going to pay you any Rule 11 capital. We may or may not win this case," they said, "but what we are going to do when this case is over. We're going to sue you with another patent in our portfolio of patents and you're going to start this process all over again.

This kind of story is not that unusual. For years, we've pointed to the similar story of how IBM tried to shake down Sun Microsystems in its early years, threatening over seven patents. Sun's engineers and lawyers went through all seven showing how they didn't infringe and were then told:

"OK, maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"

Originally, after seeing that video, I was going to just focus on that threat to sue again with this post, but as I continued investigating the story, it turns out that it gets even weirder and more ridiculous. For what it's worth, Smart Options' lawyers claims he never made such a threat... but also in the next breath does claim that the company has other patents that Jump Rope violates.

But, the crazier part is in a NY Times article that tried to follow up on this story. The reporter, Daivd Segal, heard Braxton's story, and called up Erich Spangenberg, one of the world's most notorious patent trolls, who definitely has experience with situations like the one above. In fact, Spangenberg once got hit with a ruling saying he had to pay $4 million for suing the same company with the same patent twice, despite an earlier settlement promising not to do so.

Spangenberg's response to the questions about Braxton's situation? He smelled blood in the water and agreed to invest in Braxton's company -- basically buying low, with a promise that he could then strong arm Smart Options into going away. Really:

A free consultation quickly became the beginnings of a negotiation. Mr. Spangenberg offered to take an equity position worth $500,000, in exchange for solving all of Jump Rope’s legal problems.

“I’m going to invest as well,” Mr. Spangenberg said. “Peter, what do you need to get this back up while we raise money from people with lots of money?”

“About half a million bucks,” he said.

“That’s what I figured,” Mr. Spangenberg replied. “So we’d fund that.”

And Spangenberg knows that he's buying distressed assets here:

“Look, I’ll get $500,000 in equity for taking the legal piece off his plate,” he said. “It’ll cost me $100,000 to make the lawsuit go away.” He promised to locate “pressure points” on either Smart Options or Hugh McNally, its C.E.O.

“I get to make a great investment on great terms,” he said. “Then I let Citadel” — a large hedge fund that had expressed interest in funding Jump Rope — “put a big chunk of money into it and I go off and do something else.”

The article notes that Spangenberg has now invested in about 25 similarly "distressed" companies -- distressed by other patent trolls playing the same game that Spangenberg perfected. And, even the terms mentioned above weren't good enough. In the end, the article reports, Spangenberg's IP Nav bought 40% of Braxton's company for merely $200,000.

The story tries to play this out like a "patent troll done good," but it's horrifying. It's one patent troll beating up on a startup, and then allowing a second one to come in and vulture up the leftovers. It's certainly not good for innovation in any way.

People fighting against the patent reform bill that's currently making its way through Congress keep insisting that the bill is designed by big tech companies to harm startups. But that's ridiculous. The bill would have significantly helped Braxton, allowing him to get out of the lawsuit faster and for less money, and likely awarding attorneys' fees in a simpler and faster process. In fact, it's more likely that Smart Options never would have sued in the first place if the PATENT Act were law at the time.

Filed Under: erich spangenberg, line jumping, options, patent act, patent trolling, patents, peter braxton, shakedown
Companies: ip nav, jump rope, smart options

Would Sony Have To License A Screenplay About The Sony Hack?

from the owning-facts dept

There have been a lot of interesting questions to come out of the Sony Hack. And the story of the hack itself is certainly quite fascinating (in fact, as some have pointed out, the story of the hack still seems a lot more compelling than the plot of The Interview -- the movie some still want to associate with the hack, even as the evidence appears thin). So if the "true life" story of the hack is a movie waiting to be made, that raises some other intriguing questions. Parker Higgins wondered if Sony would option the screenplay itself, or if it would let a competing studio get it. Of course, that (correctly) assumes that the screenplay itself would be controlled by whoever wrote it, and that Sony wouldn't have any direct ownership interest in it otherwise.

But you could see where some would argue that this is somehow unfair. As we've pointed out for years, however, you can't own a copyright on facts. The basic news of something is factual and not covered by copyright -- though some of the reporting on it could be covered by copyright. In fact, we've noted how interesting it is that movie studios often license news stories from newspapers or reporters, even though they don't need to. In many cases, they could make a movie based on the news without making a deal with the journalists, but they still choose to do so, because there are certain advantages in doing it that way -- including having the reporters who know the story well give input into the film. It's a pretty good example of how contractual deals can often work even when there's no underlying copyright to be had.

But this gets pretty interesting when it comes down to the Sony Hack. First, among the odd legal theories tossed out by Sony's high-priced lawyers, is that the hacked information is Sony's "stolen information," and thus it might claim some sort of ownership right to the information, should any movie portrayal show/discuss the content of the hacked documents. That argument would raise an interesting First Amendment problem. Second, Sony could try a variety of other (mostly questionable) means of trying to block someone else from making the movie, using anything from trademark to publicity rights of some of the people involved. If challenged in court, it seems unlikely that these reasons would hold up, but it could make it difficult for a non-Sony studio to make such a film.

And, of course, it seems doubtful that Sony itself would want to make the film -- especially not one that accurately portrays a company that has been hacked 56 times in 12 years and kept its passwords in a folder named "Passwords" at the time of the hack. So, instead, it's entirely possible that someone else might try to make the movie -- and Sony might use legal bluster to try to stop it. Which is too bad, because such a movie seems like it might be a lot more interesting than some of what's been coming out of Hollywood lately...

Filed Under: copyright, licensing, options, screenplay, sony hack
Companies: sony

The Real 'Scandal' Over Zynga Stock Options Is Over Misleading Reporting

from the let's-work-this-out dept

There were a bunch of reports last week about a so-called "scandal" at social gaming company Zynga, concerning reports that it demanded stock options back from employees or they would be fired. Zynga certainly has done some questionable things over the years, and hasn't always had the greatest reputation... so a lot of people jumped on this story, and plenty of people submitted it. But, the details suggest that the only real "scandal" here is in the attempts by reporters to make this into a scandal (kudos to Dan Primack for not getting fooled). The reporters doing so either don't understand what really happened or are just attacking Zynga for the hell of it. I've got no problem calling out Zynga when I think the company has done something bad, but the details here suggest that what Zynga did is actually pretty reasonable.

The part that gets lost in most of the discussions is the fact that Zynga was only asking about unvested stock options, rather than vested ones. Unvested stock options are just like future salary. You can lose it if you get fired. What Zynga did here was take a few employees that it felt weren't achieving up to expectations and, rather just fire them -- in which case they would have received none of their unvested options -- try to find another role for them in the company. That other role, however, would be somewhat lower on the totem pole, and thus, would be entitled to fewer stock options. Yes, it's basically a demotion, but for some people perhaps that's preferable to an outright firing.

But here's the key point. Most of the "Zynga bad!" reporting on this made it sound as though Zynga was taking back options that had already vested. That's false and misleading. Nothing was taken back from the employees. The already vested options remained untouched. Basically Zynga was offering a way for people, who otherwise would have been fired, to keep accumulating some options, just at a lower rate. That may be insulting, but it seems like a more reasonable and humane solution than just firing them outright.

Filed Under: journalism, options, vesting
Companies: zynga