Netflix shares shot up 24 percent Tuesday to close at $216.99, following its positive Q1 earnings report released after regular U.S. markets closed Monday. In a letter to shareholders released Monday, CEO Reed Hastings said Netflix added more than 3 million members to its streaming service, bringing the total to more than 36 million worldwide (CD April 23 p13). The number of DVD members fell from 8.22 million in Q4 to 7.98 million in Q1. Lower-than-expected content costs and higher revenue led to a higher-than-forecast $113 million in contribution profit for DVD in Q1, Hastings said. While the number of DVD subscribers declined at a slower rate than expected in Netflix’s Q1, the company remains focused on moving toward more and more exclusive streaming content “to reinforce a reason to join Netflix” and remain a subscriber, said Hastings on the company’s earnings call Monday. Netflix has visions of broadening its portfolio of exclusive content over the next few years, with the timeframe dependent on how new releases perform. In the next two years, exclusive offerings will increase “modestly,” Hastings said. If coming shows the company produces “were as wildly successful for us as the first three shows have been, we could continue to expand to 20 or north, but that would be dependent on what happens the rest of this year,” he said. “What we don’t want to do is -- on the back of three shows, one of which has only been out three days -- suddenly take our commitments up to that 20-plus level.” On Netflix’s ability to curate and influence original content relative to other pay-TV networks, Hastings said Netflix is getting “more sophisticated” in working with producers and the creative community, while continuing to learn. “As we bring great success to the creators, then certainly that increases our reputation in the creative community,” he said. Netflix is putting into place an $11.99 monthly family plan to allow up to four simultaneous streams of programming versus the two allowed under the standard plan. Hastings said he expects less than 1 percent of subscribers to move to the family plan. Netflix has no plans “for the near term” to boost standard subscriber fees from their current $7.99 rate, Hastings said. On the company’s brand image following the public relations beating and customer defections Netflix took in 2011 after the split between the DVD and streaming services, the recovery has been “as expected,” Hastings said. “We're making steady progress and we'll continue to work hard to make steady progress going forward.” Netflix has released the next generation of its video player technology to its consumer electronics partners for integration with smart TVs and set-top boxes, Hastings said. The new platform emphasizes “size and performance improvements,” and delivers faster playback start-up time that aims to approach the speed of a linear TV channel change, Hastings wrote in the shareholder letter. The new platform will appear “in a few new devices in time for the holiday season,” and will roll out more widely in spring 2014 CE products, he said.
Class A stations WNCE Glen Falls, N.Y., and KCVB Logan, Utah, say they have now addressed violations of the FCC’s public-file requirements cited by the Media Bureau in letters sent to the stations in March. The station’s responses in letters to the agency Monday said their violations concerned incorrectly filed online documents listing their children’s programming and station addresses. “We have a staff of five people and found the online file upload process challenging,” said KCVB’s Earl Rouse. Both stations said they're in compliance with FCC rules and told the commission they had “no interest in relinquishing the Class A status of the station.” Some other Class A owners said they're worried about such bureau inquiries. (See separate report above in this issue.)
Virgin Media added 21 live channels to its TiVo-based TV Anywhere service, the company said. The addition of Animal Planet, Channel 4, Discovery Networks, Nickelodeon and others boosts to 66 the number of channels available for mobile devices, Virgin said. Virgin TV Anywhere is offered to all TiVo customers, enabling them to access content on smartphones, tablets and laptops. Virgin also will add Discovery’s TLC channel April 30, it said. TV Anywhere is seen as Virgin’s response to BSkyB’s Go app that has 17 channels. BSkyB’s Go allows offline viewing and, for a monthly fee, users can download and watch programs when they're not online. Virgin’s TV Anywhere is available only for iOS-based devices, but an Android version is due later this year, the company said. Virgin last week started imposing data caps on customers with 30 Mbps or higher broadband speeds if they are found to exceed expected data traffic levels. The speed caps are in force Monday through Friday between 4 p.m. and 11 p.m. and on weekends from 11 a.m. to 11 p.m.
The Competitive Carriers Association said no parties have filed comments to date that adequately counter its petition seeking conditions if the FCC approves a series of spectrum deals unveiled by AT&T, Verizon Wireless and Grain Spectrum in January (CD Jan 28 p9), in reply comments at the FCC. “The Applicants predictably attempt to deflect the serious concerns raised by CCA and others that the proposed transactions would harm the public interest,” CCA said. “The essence of the Applicants’ opposition is that the competitive harms asserted by the petitioners ‘are or were the subject of industry-wide proceedings,’ and they claim that the petitioners have ‘provided no evidence of any harms that would result from these transactions that their proposed conditions would purportedly address.'” CCA said it disagrees. “This transaction, if approved without condition, will further entrench the dominant positions of Verizon and AT&T and constrain competitors’ access to interoperable devices, all to consumers’ detriment,” CCA said (http://bit.ly/17VdXmU). “The Applicants fail to adequately address the stark fact that by allowing the use of an antiquated spectrum screen (a screen which results in no heightened scrutiny for spectrum holdings below one-third of all suitable and available spectrum), the FCC’s current regulatory environment allows carriers such as AT&T and Verizon Wireless to slowly and methodically control collectively two-thirds of all suitable and available spectrum in any given market,” the Rural Telecommunications Group said in its reply comments (http://bit.ly/17OOQPA). “Under the existing regulatory environment, the Twin Bells are also able to maintain collective control of at least two-thirds all suitable and available spectrum below 1 Gigahertz in any given market."
Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., said during an interview at the Capitol Tuesday the House’s passage of four cybersecurity bills last week won’t have any impact on the Senate’s work to craft comprehensive cybersecurity legislation. The Cyber Intelligence Sharing and Protection Act (CISPA) (HR-624) “is a very watered-down, weak, sort of useless bill. So it can’t guide us at all,” he told us. Rockefeller said “it would be much better to send [House lawmakers] our bills.” Rockefeller said the upper chamber’s work on a cybersecurity bill has been “going very well. I know I've been saying that for years but it actually is now,” he told us. Former Maine Republican Sen. “Olympia Snowe and I wrote a cybersecurity bill four years ago and it is still basically the underlying bill,” he said. “It is such a disgrace that the Congress has not been able to act on it.” Senate Homeland Security Committee Chairman Tom Carper, D-Del., said during a separate interview at the Capitol he has held “several constructive engagements with the principals” involved in crafting the forthcoming Senate cybersecurity legislation. Carper would not give his opinion of CISPA but said he has asked his staff to “get up to speed” on what the House has done in legislating the most recent version of the bill. “The administration has released a message to say that if it comes in this form they will not sign it. So that is not helpful if we want to get things done. We are looking at what are the concerns that the administration has and what does the bill do,” Carper said. “I'm in favor of going through regular order here, for the committees to do their work.” Carper would not say when specifically his committee would hold its next cybersecurity hearing. “The conversations are going on and I think that is very encouraging,” he said.
Demand for content and bandwidth in the entertainment, media and communications industries will spur increased mergers and acquisitions and divestitures in 2013, said PricewaterhouseCoopers in a report released Tuesday (http://pwc.to/15Eev18). “In an increasingly saturated U.S. market with limited spectrum options, operators are taking the M&A route to garner additional spectrum, geographical coverage, subscribers and more robust product and service portfolios.” PwC also said the demand for content will spur companies to look overseas, creating more international investment in the industry. To participate in all the deal making, PwC said companies will also be looking to free up cash through divestitures, a scenario it said will be “especially prevalent” among publishing companies that have been impacted by the increasing shift to digital content. The report forecast technology companies will continue to invest in media and communications, “blurring the lines” between the two industries. PricewaterhouseCoopers said entertainment, media and communications M&A in Q4 “reached the highest level since the first quarter of 2011” and are expected to remain “robust.” The report said broadcasting deals increased from $2.7 billion in 2011 to $5.8 billion in 2012, and cable deal value went from $3.4 million in 2011 to $9.1 million in 2012. PwC said cable companies will continue to “monetize the shift toward increased digital consumption, grow their subscriber base and improve operational efficiencies in 2013.” According to the report, communications industry deals increased from $26.9 billion in 2011 to $43.5 billion in 2012, and PwC “expects this sub-sector to remain active as communications companies seek to increase bandwidth and expand service offerings."
The FCC Media Bureau said Beech Street Communications, Texarkana, Ark., is apparently liable for a $3,000 fine for failing to file with the commission the children’s TV programming reports for its Class A TV station KLFI-LP, in Texarkana. The licensee acknowledged it failed to file with the FCC Form 398 for all four quarters of 2010, the bureau said in a notice of apparent liability (http://bit.ly/11ibVIh).
Millicorp said it’s “very excited” to have an opportunity to take part in the VoIP numbering trials approved last week by the FCC (CD April 19 p1) . Millicorp, which provides VoIP services, is one of the 15 companies that have filed waivers with the commission seeking direct access. The company said it’s “confident that the trials will enable everyone to better understand and overcome any challenges that will arise as VoIP companies are provided with direct access to numbering.” Vonage also said it was pleased with the order (CD April 22 p11).
The FCC International Bureau denied Spectrum Five’s request for a stay of special temporary authority granted to EchoStar. The STA was granted this month to operate tracking, telemetry and command frequencies to move EchoStar 6 from 76.8 degrees west to 96.2 degrees west (CD April 3 p12). Spectrum Five hasn’t established that “it is likely to prevail on the merits, that it will be irreparably harmed absent a stay, or that public interest considerations warrant a stay,” the bureau said in a memorandum opinion and order (http://bit.ly/15EIV3a). Spectrum Five argued that the grant will result in harm to the public interest by suppressing competition, the order said. EchoStar argued that the STA is consistent with other cases that involved moving satellites, “including cases in which the move resulted in bringing into use the ITU filings of other countries,” it said. The bureau considers Spectrum Five’s contentions on harm to competition in the U.S. “to be speculative, and based on numerous unsupported assumptions,” it said.
Online advertising companies are intentionally trying to slow the development of voluntary industry do-not-track standards, Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., said in an interview at the Capitol Tuesday. “Yes, absolutely,” he told us. “They say they are for voluntary this, and voluntary that. You know with big business nothing voluntary ever works. It’s like asking coal mines in West Virginia to become entirely safe -- they like the thought but not the spending. So we are going to have it out, going to duke it out.” The committee plans a hearing Wednesday to examine the development and adoption of voluntary industry do-not-track standards at 2:30 p.m. in 253 Russell. “We have a whole system of Internet abusers who are just finding out all kinds of information about people for advertising purposes and then selling them,” Rockefeller told us. “People have no way of cutting that off. Do-not-track means don’t collect on me and that is what the answer ought to be,” he said. Rockefeller is the author of the Do-Not-Track Online Act (S-418) (CD March 1 p11). The bill would require all online companies to minimize data collection about users’ browsing habits once requested by the consumer, require online companies to destroy or anonymize individual browsing data once they are no longer needed and enable the FTC to pursue enforcement actions against any violators.