How Netflix Deceived Both Regulators and Consumers

Provided by The Street

A story line that has been playing out for years in the telecommunications industry came to a dramatic conclusion last week when Netflix said that it has been secretly slowing its video streaming to customers, even as some had blamed wireless carriers such as AT&T and Verizon for the poor quality of the programs.

Who can even count the number of times they called their Internet service providers to complain when a “House of Cards” episode was interrupted by “buffering?”

To make matters worse, the company actually invested resources into mobilizing its legions of customers to take their frustrations out on Verizon, going so far as to post error messages saying things like, “the Verizon network is crowded right now.”

Netflix said that it wanted to “protect consumers from exceeding mobile data caps” that add costs and turns off customers.

But that doesn’t explain the company’s secrecy or why it blamed Internet service providers (ISPs) like Verizon for the slower video streaming. The truth may actually involve a more cynical calculation centering on a complex but high-stakes regulatory process in Washington, where Netflix essentially needed to convince policymakers that it was the victim of abusive practices by ISPs.

The debate centered around an arcane but controversial policy known as net neutrality, the principle that all content flow across the Internet without being throttled, blocked or degraded.

Netflix has been a staunch backer of net neutrality and has spent the past few years lobbying the Federal Communications Commission to enact rules that would ensure that the principle of net neutrality is enshrined in existing government regulations that were designed for the Ma Bell telephone monopoly. Not surprisingly, Netflix was joined by other content providers such as Amazon, Apple and Google, whose executives have essentially warned that ISPs would, if allowed, create an Internet system of winners and losers in which premium access would go to those who could pay for it.

Net neutrality has become a rallying cry for the grassroots political activists who make up the so-called Netroots community, and in principle, it is hard to argue with the goals. The problem, however, is that companies such as Netflix seem less committed to a democratic principle than it is to protecting its bottom line, even if that means it has to push off its own costs on others.

In delivering content, Netflix uses much more data than other content providers, thereby accounting for huge traffic and congestion at critical times of the day when many people are online and watching videos.

One solution is that Netflix can cut side deals with ISPs to ensure that their movies are delivered without delays or interruption. In fact, Comcast, a cable and broadband provider, reached a deal with Netflix in 2014 that required Netflix to pay Comcast for faster and more reliable access to Comcast’s subscribers. Most other ISPs have also reached similar content delivery agreements. Of course, this is one manifestation of the creation of “winners” that Netflix and others say they fear.

Netflix, a company with a valuation of more than $40 billion, has made no secret of its displeasure with paying such costs.

Netflix went to the FCC and lobbied for the adoption of net neutrality rules that would impose restrictions on the ability of ISPs to charge for, say, paid, priority services, and would limit what providers could charge to deliver Netflix content — despite its incredible volume — to consumers.

Netflix’s net neutrality argument won the day at the FCC, which adopted net neutrality rules last year through its Open Internet Order.

But the debate over net neutrality is hardly over. The U.S. Court of Appeals’ District of Columbia Circuit is deliberating on a lawsuit filed by the U.S. Telecom Association challenging the FCC’s authority to enforce net neutrality regulations.

It is anyone’s guess how the court will ultimately rule. But for the sake of American consumers, the court would be wise to consider the troubling new evidence that has surfaced as a result of Netflix’s admission.

That evidence demonstrates not only that Netflix created a straw man with the intent of convincing the FCC to impose new regulations on its competitors but also that net neutrality regulations may have been based largely on flawed evidence.

Written by John Burnett of The Street

(Source: The Street)

Netflix and Amazon Offer Indie Filmmakers Hope (and Lots of Money)

The Egyptian on Main Street in Park City, Utah during the 2016 Sundance Film Festival.
Fred Hayes/Getty Images

The biggest players at the Sundance Film Festival are Hollywood outsiders. Amazon and Netflix, with their deep pockets and big ambitions, have picked up several films and have driven up the bidding for others. Backed by the might of their massive audiences, superior technology, and business models unfettered by the typical constraints of Hollywood, these tech giants provide a new hope for independent filmmakers.

Amazon’s bought five independent films so far, including the well-receivedManchester by the Sea for a reported $10 million. Netflix, meanwhile, has picked up streaming rights for three films, including Tallulah starring Ellen Page, and announced it will produce a slate of indie features. And the film festival isn’t over until the end of this week.

This isn’t the first year Netflix and Amazon have attended Sundance. But their presence looms larger than ever over the festival and the film industry. As major studios have been slower to pick up films, the two tech titans have aggressively offered top dollar, rattling the nerves of those at established studios.

And yet for filmmakers, their interest offers a new kind of opportunity. At the most basic level, the big budgets offer filmmakers a chance to repay investors. More importantly, Netflix and Amazon provide access to a much wider potential audience while promoting a diverse range of stories and ginning up excitement for independent films in general. But as Netflix and Amazon try to change the industry, they must reckon with what filmmakers ultimately want.

And what’s good for artists isn’t always what’s good for Amazon and Netflix.

A New Arthouse Circuit

Independent filmmakers have always struggled to find funding and an audience. But in the past 10 years, the number of indie filmmakers has grown substantially as the cost of making films has dwindled, making competition for distribution even more cutthroat. “It’s becoming more and more difficult to get independent films distributed whether that’s in traditional movie theaters or even on cable, ”says Tom Nunan, a founder and partner of Bull’s Eye Entertainment and a lecturer at UCLA’s school of theater, film, and television.

In recent years, however, Netflix and Amazon have come onto the scene with platforms that command tens of millions of viewers—and perhaps just as importantly, seemingly unlimited bandwidth. After all, streaming video isn’t limited by the number of available movie screens or TV time slots.

As both tech companies amassed their inventories of self-produced content, they also started acquiring independent films, ranging from the big Sundance acquisitions this year to smaller buys that end up on their services through distributors. “The idea that the streaming services can be our new arthouse circuit is just nothing short of lifesaving for these artistic storytellers,” Nunan says.

“The best thing is that because of Netflix and Amazon and all of these places, everyone can see these movies all over the world,” says Rob Burnett, the writer and director of The Fundamentals of Caring, to which Netflix acquired the streaming rights ahead of Sundance. “All of these movies that may not get theatrical releases, or may get minimal theatrical releases, they can now be seen.”

Netflix and Amazon not only offer built-in audiences, but those audiences can experiment more easily. While most moviegoers may not want to “risk” an entire evening stuck in a theater watching, say, an independent documentary about concrete changing color, Nunan says, tuning in at home on Netflix or Amazon demands virtually no investment. The film is already paid for, and can be turned off at any time.

Amazon says it has seen “good demand” for independent films. “If you don’t live right in a city, it may not be convenient to see some of these very interesting independent films,” says Roy Price, head of Amazon Studios. “But once you take that constraint out of the system, we’ve observed there are categories that tend to thrive when they have greater availability. It’s been a good few years for independent films and documentaries.”

Different Stories

The tech giants also have more leeway to experiment. Their subscription-based models mean they don’t need every film to be a blockbuster. A single movie or show on Netflix and Amazon needn’t appeal to everyone; the key for both platforms is making sure they offer enough of everything to attract anyone.

Renowned filmmaker Spike Lee, for example, was able to get his film Chi-Raqmade by Amazon after being turned down by the major studios. “It’s a great option for filmmakers because now you have another place to go to. I knew going in that it would be a very long shot for a major studio to do Chi-Raq. Thank god Amazon [did],” Lee says. “The more options there are, the more options there are for anybody, including young filmmakers.”

Written by Julia Greenberg of Wired

(Source: Wired)

Netflix Owes $11 Billion in Content Costs, and Someone has to Pay

netflix-2015-earnings
Provided by Netflix
Netflix has released its annual report for 2015, revealing just how much money the streaming video giant now owes to the media companies from which it licenses movies and TV shows. The report, released Thursday, shows Netflix is on the hook for $10.9 billion in content costs. That’s billion with a “b.” About 91 percent of that figure is due within the next three years, and $4.7 billion of it due in the next 12 months.

To properly conceive of the amount of money the company has agreed to pay studios during the next three years, it helps to think of the hoard of Smaug, the dragon from J.R.R. Tolkien’s “The Hobbit.” According to Forbes, the winged serpent is worth $62 billion. So, picture about one-sixth of that, and that’s how much Netflix CEO Reed Hastings and chief content officer Ted Sarandos will be forking over.

For a more apples-to-apples comparison, the annual programming budget for a basic cable network like FX is a little less than $1 billion, according to FX Networks President and CEO John Landgraf. HBO, meanwhile, spends about $2 billion a year. Speaking to a group of reporters in Pasadena, California, in January, Landgraf described losing bidding wars on two shows (Aziz Ansari comedy “Master of None” and Queen Elizabeth II drama “The Crown”) to Netflix: “They just overwhelmed us with ‘shock-and-awe’ levels of money and commitment.”

Sarandos doesn’t anticipate a damming of the current raging river of cash. He told that same gathering of reporters the next day that his company will be spending $6 billion on content in 2016. But, he emphasized, “every dollar we spend is a global dollar.” Netflix, now available in more than 190 countries, is no longer content to buy the international rights to shows and movies in a piecemeal, regional fashion.

That’s an expensive (if smart) strategy that can get quite expensive, as sellers will charge a premium for not being able to sell their wares to distributors in other countries.

Netflix also doesn’t get to profit from licensing its content out, unlike other networks. While Netflix originals are exclusive to the service, Netflix doesn’t produce those series, so even if it wanted to distribute them some other way, it can’t. That’s how HBO can rake in profits, by selling its shows (most of which are HBO productions) abroad. FX, meanwhile, makes its bones from ad sales, cable subscription fees (66 cents per month per subscriber, according to research firm SNL Kagan), and licensing shows it owns.

So where, exactly, will that $4.7-plus billion come from, given that the company only took in $6.8 billion in revenue in 2015, and ended the year with a negative free cash flow of $920 million?

One way is through debt financing, which the company did in February 2015, raising $1.5 billion by promising a return of 5.5 and 5.875 percent on bonds that’ll be paid out in 2022 and 2025, respectively.

The other way is to raise prices again. Netflix just did this last October, though (which may have helped slow domestic subscriber growth); and the addition of more than 130 countries’ worth of potential customers might just be enough to stave off another increase. Or perhaps not. The company was still hemorrhaging money on its international business at the end of 2015, which, admittedly, didn’t include any of those 130 new territories. But launching in new countries takes mountains of cash, particularly for marketing efforts, and Netflix received an average of $1.02 less per subscriber from international customers than their American counterparts in 2015.

Wall Street doesn’t seem to care, as long as those subscriber numbers keep growing: When Netflix announced that it had gained 17.4 million customers in 2015 after the market had closed on Jan. 19, investors celebrated by sending shares soaring from $107.89 to $117 in after-hours trading. There’s just no accounting for investors.

Written by Oriana Schwindt of International Business Times

(Source: International Business Times)

Comcast Draws Customer Ire by Putting Netflix Addicts on a Meter

  
Andrew Harrer/Bloomberg/Getty Images

Comcast Corp. customers used to be able to binge on all the Netflix and YouTube videos they wanted without repercussions. Now many are being put on a diet.

In a growing number of cities, the nation’s largest cable company has begun imposing extra fees on Internet customers who use what it considers excessive amounts of data. The move could bring in new revenue to offset losses from cord-cutters dropping pay-TV service to stream videos online.

The strategy poses risks. In 2008, Time Warner Cable Inc. tried to limit customers’ Internet use then dropped the plan the next year after a public backlash. Comcast has also faced questions from regulators about why its own streaming service doesn’t count toward subscriber data limits, as well as complaints from customers and online video providers.

“It leaves a bad taste in your mouth,” said Jonathan Strong, 33, a finance manager in Charleston, South Carolina. His family — including three children who watch Netflix every night — goes over the data limit every month, resulting in as much as $20 in extra charges, he said. “It feels like we’re getting punished for our normal use.”

In almost all of Comcast’s test markets, which include Atlanta, Nashville and Miami, customers who exceed 300 gigabytes a month — the equivalent of streaming high-definition video five hours a day, by one estimate — pay $10 more for additional increments of 50 gigabytes.

In some cities, Comcast subscribers can pay $30 to $35 more for unlimited data. Those who stay under 5 gigabytes a month — about 3 hours of streaming high-definition video, according to the U.S. Government Accountability Office — get $5 off their bill. Customers get a three-month grace period before being charged fees.

Small Fraction

Comcast says only a small fraction of customers — about 8 percent — exceed the limit, in some cases because their computers are running malicious software without their knowledge. The company says usage-based billing, which is common in the wireless industry, is about fairness. Customers who only use the Internet to check e-mail shouldn’t pay the same as subscribers with bandwidth-heavy Web habits like online video games, file-sharing or binge-watching Web videos, the company says.

Chief Executive Officer Brian Roberts likens it to buying more gasoline after driving long distances or paying higher electricity bills for running the air conditioner.

Balanced Relationship

“We’re just trialing ways to have a balanced relationship,” Roberts said at the Business Insider Ignition conference last month. “I don’t think it’s illogical or something people should be paranoid about.”

Customers of Philadelphia-based Comcast aren’t alone. About one-fourth of U.S. Internet subscribers have data plans that charge extra for heavy usage, according to Craig Moffett, an analyst at MoffettNathanson. AT&T Inc.’s subscribers have different usage limits based on their Internet speed. Cox Communications Inc., the fourth-largest cable operator, is testing a strategy similar to both Comcast and AT&T’s on customers in the Cleveland area who go over their monthly data allotment. Time Warner Cable offers discounts to light Internet users, according to Moffett.

Hoping to appease consumer advocates, Charter Communications Inc. has pledged not to place any limits on customers’ broadband data for three years if regulators approve its merger with Time Warner Cable and Bright House Networks LLC.

Insurance Policy

For pay-TV companies, usage-based pricing is “an insurance policy against cord-cutting,” Moffett wrote in an October report. It ensures they still get paid for delivering video in the future even if more customers drop pay-TV service for Netflix Inc., Hulu or Amazon.com Inc., he said.

“What’s at stake is nothing less than the basic business model of the cable operators,” Moffett said in an interview.

The average U.S. household watches about five hours of TV a day, according to Nielsen. That same amount streamed over the Internet would probably exceed Comcast’s limit, according to Roger Lynch, chief executive officer of Dish Network Corp.’s Sling TV, which offers an online “skinny bundle” of more than 20 channels for $20 a month. Comcast says it would take more than seven hours of video streaming a day to exceed its limit.

“It’s something we’re quite concerned about,” Lynch said in an interview. Comcast’s 300 gigabyte limit is “very restrictive” and “clearly designed to discourage customers from using over- the-top services,” he said, using the term for online video.

Last month, Netflix said its engineers are adapting movies and TV shows available on its service so customers use less bandwidth. Anne Marie Squeo, a spokeswoman for Netflix, declined to comment on Comcast’s strategy.

The U.S. Federal Communications Commission, which regulates pay-TV providers, hasn’t taken a position on usage-based pricing. Last year, the agency said such pricing may benefit consumers by offering them more options, calling it “an unresolved debate” that it will address on a case-by-case basis.

The FCC said in a December letter it wants “to ensure that we have all the facts” about Comcast’s new Stream TV service, which lets customers watch some programming on laptops, tablets and phones and doesn’t count toward their data allotments.

Lynch said that omission may violate an agreement Comcast made to not favor its own services over others and treat all Web traffic equally. Comcast spokeswoman Sena Fitzmaurice said Stream TV runs over the same network as cable service, which isn’t subject to the same rules as Internet traffic.

“Users hate wireline data caps because they create artificial scarcity that increases the cost of getting online,” said Noah Theran, a spokesman for the Internet Association, a Washington trade group that represents companies including Netflix and Google Inc.’s YouTube. “To make matters worse, limited competition in the high-speed broadband market means users often have nowhere else to turn for a better deal.”

Written by Gerry Smith of Bloomberg

(Source: Bloomberg)

Netflix Is About to Get More Expensive

Bloomberg—Bloomberg via Getty Images
Bloomberg—Bloomberg via Getty Images

Netflix is raising the monthly subscription price for its most popular streaming package by $1, it announced Thursday. The plan will now cost $9.99, making the second time in two years Netflix increased the price of the offering.

The standard plan, which lets users stream movies and television shows in HD on up to two screens simultaneously, is Netflix’s most popular offering. The recently-created “basic” plan, which lacks those features, will remain $7.99 a month.

The change should help Netflix increase its revenue as it pays increasing sums for original and third-party content. “To continue adding more TV shows and movies including many Netflix original titles, we are modestly raising the price for some new members in the U.S., Canada and Latin America,” a Netflix spokesperson told Variety.

Many current Netflix subscribers will be offered a grace period of up to a year during which they’ll still pay the $8.99/month price.

Written by Susie Poppick of Money

(Source: Time)

American Retail as We Know it is Dying a Slow and Painful Death

© Provided by Business Insider
© Provided by Business Insider

Gap once ruled the retail world.

But today, America’s largest apparel retailer is closing a quarter of its stores and laying off hundreds of workers amid disappointing sales.

Gap’s closures are indicative of a larger trend in American retail.

Big apparel brands are grappling with shoppers who increasingly want deeply discounted clothes over classic logos and status.

As Americans shell out for items like iPhones and Netflix, they are increasingly unwilling to pay full price for sweaters and jeans.

J. Crew just fired 10% of the workers at corporate headquarters as sales and profits continue to plunge.

The teen-apparel market is also struggling as a whole, with big-name players like Abercrombie & Fitch and Aeropostale closing stores.

Wet Seal, a shopping mall staple, abruptly shut down nearly all of its stores. Sears, Macy’s, and JCPenney have also shuttered hundreds of store locations in recent years.

The closures create a domino effect for malls.

Once mall anchors such as a department store close, it can be difficult for owners to find a tenant to replace them, said Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a national retail-consulting and investment-banking firm.

More than two dozen malls have shut down in the last four years and another 60 malls are on the brink of death, The New York Times reported, citing Green Street Advisors, a real-estate and real estate investments trust analytics firm.

“Teen retailers … are all a disaster and these middle-level malls are killing them,” Davidowitz said.

Certain businesses are Benefitting from current mall closure trends.

Discount retailers like T.J. Maxx and Ross are enjoying soaring sales.

Urgent care clinics like City Practice Group of New York and Concentra are growing at a rate of about 20% a year, reports Doni Bloomfield at Bloomberg Business.

Many are taking over spacious, empty leases in malls to satisfy growing demand from consumers, according to Bloomberg.

Technology-focused tenants like Tesla, Microsoft, and Apple are majorly driving sales, according to WSJ.

Because technology is more expensive than clothing, it’s easier for these stores to turn a profit.

Consumers are also increasingly spending on this category instead of traditional goods like home decor or clothing.

Technology stores also require fewer staff and smaller spaces than department stores, resulting in fewer overhead expenses.

Written by Ashley Lutz of Business Insider

(Source: Business Insider)

12 Great Things About Retirement

© Monika Lewandowska/Getty Images
© Monika Lewandowska/Getty Images
© Monika Lewandowska/Getty Images

Some people wonder what they will do with all their extra time after they retire. They fear they’ll become irrelevant, aimless or out of sorts.

There’s no doubt there are some pitfalls of retirement, such as boredom, loneliness and even depression. That’s why retirees should decide what’s important to them, plan out their future and appreciate retirement for the exceptional opportunity that it really is.

To get you started, I recently spoke to a variety of retirees about their lifestyles. Here are the dozen favorite things about retirement retirees cite most often.

1. I’M FREE OF THE DRUG OF AMBITION

Suddenly you don’t care whether or not you get promoted, and the jockeying for a better title or an office with a window seems so petty. A weight is lifted from your shoulders when you quit the rat race.

Despite financial concerns, retirement is often a lot of fun.

2. I CAN CATCH UP ON MOVIES I’VE ALWAYS WANTED TO SEE.

Maybe you were too busy with your career and kids to follow some of the great directors like Alfred Hitchcock, Woody Allen and Robert Altman. Now you can go on Netflix or Amazon or just borrow CDs from the library and enjoy some of the great stories of our time.

3. I KEEP UP ON CURRENT TV PROGRAMS

Whether you’re watching cable or Netflix, you can join the conversation about “House of Cards”, “Orange Is the New Black”, “Better Call Saul”, “Grace and Frankie” and the other smart TV shows.

4. I JOINED A BOOK CLUB

Some groups alternate between classics like “Anna Karenina” and modern stories like “Gone Girl”. Others keep up with the bestseller lists from “The Girl on the Train” to “The Boys in the Boat”. And still others are theme oriented, whether it’s mindfulness and spiritual issues or history and politics. Regardless, a book club is both socially engaging and intellectually stimulating.

5. I CAN STILL WORK PART-TIME

Just because you’re retired doesn’t mean you can’t pick up a job here and there. A lot of people carry over assignments from their old company, while others parley their personal interests into a moneymaking gig.

6. I BABYSIT MY GRANDCHILDREN

Many retirees feel both useful and appreciated when they make it possible for their children to pursue a career, and they relish the opportunity to create deep and lasting memories with their grandchildren, memories that will last long after grandma and grandpa are gone.

7. THERE’S TIME TO GIVE BACK

Many retirees find it enormously rewarding to volunteer their skills to worthy charitable organizations, whether it’s the Lions Club or the Kiwanis Club, their condo association, the local food pantry or a community college.

8. TRAVEL, TRAVEL, TRAVEL

Almost everyone’s bucket list includes a trip to some special place, from the Pyramids or the Great Wall of China to the Grand Canyon or the Empire State Building.

9. I HAVE THE TIME TO DO NOTHING

Finally, there’s time to enjoy the pleasure of sitting on the front porch or the back deck and soak up the atmosphere, reflecting on your life and enjoying the cool breezes wafting across your face.

10. I’M LIVING MY DREAM

Some people have a half-written novel in their study, or a half-finished piece of woodworking in the basement. Retirement gives you the time to write the rest of your story and even publish it online, complete the projects in your workshop or make jewelry or crochet sweaters and sell them on Etsy.

11. THERE’S NO PRESSURE, NO STRESS AND NO PROBLEMS

It’s the freedom that many retirees appreciate so much: Freedom from the pressure to get ahead at work, get your kid into college and keep up with the neighbors.

12. I DO WHAT I WANT TO DO, INSTEAD OF WHAT OTHER PEOPLE WANT ME TO DO

In retirement there are no more expectations. You no longer have to please your parents or bear responsibility for your kids. You can move to the city or the country. You can do something or do nothing. No matter how well-financed you may or may not be, you can live the lifestyle of the truly wealthy: You can do what you want and answer to nobody.

Written by Tom Sightings of U.S. News & World Report

(Source: U.S. News & World Report)