Peter Kafka

Here’s who owns everything in Big Media today

The media landscape used to be straightforward: Content companies (studios) — made stuff (TV shows and movies) and sold it to pay TV distributors, who sold it to consumers. Now things are up for grabs: Netflix buys stuff from the studios, but it’s making its own stuff, too, and it’s selling it directly to consumers. That’s one of the reasons older media companies are trying to compete by consolidating. Disney, for example, recently completed its purchase of 21st Century Fox. Distributors like AT&T, which bought Time Warner, are becoming media companies, too.

Here’s why Comcast says it should own Fox’s business — and why Fox says it still prefers Disney

Comcast plans to outbid Disney for Fox’s movie and TV studios, its cable networks and its stake in Hulu, as Comcast announced today it’s in “advanced stages of preparing an offer.” Murdoch, who heads Fox, already turned down a proposal from Comcast late last year in favor of Disney, despite Comcast’s bid that was 16 percent higher.  Now that it’s out in the open, a bidding war is sure to ensue, and Comcast and Disney will offer their respective spins. Here’s what to expect:

Barack Obama isn’t happy with Facebook and Google, either

Google and Facebook aren’t just incredibly profitable tech companies — they are “public goods” with a responsibility to serve the public, says former President Barack Obama. “I do think the large platforms — Google and Facebook being the most obvious, Twitter and others as well, are part of that ecosystem — have to have a conversation about their business model that recognizes they are a public good as well as a commercial enterprise,” the former president said at MIT’s Sloan Sports Conference. “They’re not just an invisible platform, they’re shaping our culture in powerful ways.”

Comcast, the largest broadband company in the US, is getting even bigger

Comcast used to be the biggest cable TV company in the US. And it still is. But now it’s something more important: It’s the biggest broadband company in the US. The company announced it has 22.5 million TV subscribers and 25.1 million broadband subscribers. That puts it a couple million subscribers ahead of Charter, its nearest competitor for internet access, and well ahead of everyone else.

BuzzFeed vs. Trump

In January, we reached out to BuzzFeed in the wake of the dossier to find out whether the company felt it would be putting itself at risk — legal and financial — by publishing such materials. Recently, Aleksef Gubarev, the Russian-born chief executive of tech firm XBT, sued BuzzFeed for defamation.

Though Gubarev’s lawyer insists that his client is in no way tied to the president’s administration and the suit is not political, it does pose a major question for BuzzFeed: What are the potential repercussions of its aggressive approach to journalism, which pushes beyond some of its more traditional competitors? And in the Trump era, how should it balance the risk and reward of hard-hitting journalism at a company that makes most of its money on light-hearted entertainment?

Facebook is going to start showing ads in the middle of its videos and sharing the money with publishers

Facebook wants to show more advertisements to people who watch its videos and start making money for the people who supply it with those videos. Industry sources say the social network is going to start testing a new “mid-roll” ad format, which will give video publishers the chance to insert ads into their clips after people have watched them for at least 20 seconds. For now, Facebook will sell the ads and share the revenue with publishers, giving them 55 percent of all sales. That’s the same split offered by YouTube, which dominates the online video ad business. If the new ads take off, they could represent the first chance many video publishers have had to make real money from the stuff they’ve been running on Facebook.

News Corp, the New York Times and Axel Springer back Scroll, a subscription service from the former CEO of Chartbeat

How much would you pay to read lots of stories, from lots of digital publishers, without having to look at many ads? Tony Haile wants to find out. Haile is the former CEO of Chartbeat, the real-time analytics software used by most of the digital publishing world. Now he’s at work on a new company: Scroll, a startup that wants to roll up a selection of stories from a wide variety of publishers and sell monthly subscriptions.

The big selling point for readers: Haile says they’ll have a better experience than the one they have now, when they read web pages clogged with crummy ads. The big selling point for publishers Haile wants to recruit: He says they’ll make more money sharing subscription revenue with him than they do with those crummy ads. Scroll is a bit difficult to describe, in part because it seems to combine elements of things people have already tried. And in part because Haile hasn’t put it together yet. He has raised $3 million from investors including SoftTech, OATV, Axel Springer, News Corp and the New York Times. And he’s currently out pitching publishers to sign up. It won’t launch until 2017. But let’s try walking through it: Haile wants to create a subscription service that gives readers an ad-free, or nearly ad-free, reading experience for stories from a wide variety of publishers.

AT&T says nothing will change when it buys Time Warner. AT&T says everything will change when it buys Time Warner.

When AT&T owns Time Warner, nothing will change; AT&T will treat Time Warner like a standalone company. When AT&T owns Time Warner, AT&T will offer Time Warner stuff to its customers that they can’t get anywhere else. Which version of that is true? Both versions! Just depends on who AT&T execs are trying to convince, as they look for government regulators and Wall Street to bless their $86 billion deal.

The regulator part is the really hard hurdle: Washington seems to be increasingly skeptical about mega deals like this — which is why it nixed Comcast-Time Warner Cable — and so AT&T has to convince officials that it won’t make it harder for people who don’t have AT&T to get “Game of Thrones” or the next Batman movie, or CNN. AT&T has common sense on its side when it makes this argument, since if it limits access to Khaleesi or Batman or Wolf Blitzer, or provides special access to them, all of those things become less valuable for Comcast customers or Verizon customers or anyone who doesn’t get AT&T. And even if AT&T wanted to do that, there’s zero chance regulators will let it happen. It’s a non-starter.

The last Time Warner deal was the worst deal in history. What is AT&T thinking?

More than 16 years ago, AOL bought Time Warner for $160 billion, in a deal that is now commonly cited as the worst merger in history. Now AT&T wants to buy Time Warner. What the hell is it thinking? The Wall Street Journal thinks the deal could close within days, so we may hear a rationale from AT&T CEO Randall Stephenson shortly. In the meantime, here are some educated guesses about why he thinks the deal is worth doing:

  • AT&T doesn’t want to be a dumb pipe — or at least, not just a dumb pipe.
  • AT&T knows DirecTV is a shrinking business.
  • This deal makes more sense than taking on Google and Facebook
  • AT&T isn’t AOL. Neither is Time Warner.

Silicon Valley built an app to beat Trump where it matters

Silicon Valley has signed petitions against Donald Trump. It is also writing checks and telling employees that it’s important to vote. But so far the brightest minds in tech haven’t deployed much in the way of ... tech to defeat the Republican nominee. Amit Kumar says he wants to try, with a mobile app designed to rally votes against Trump where it matters: In swing states.

Kumar is CEO of Trimian, a sort-of-stealth company that is building networking apps for groups like college alumni. But in August he built #NeverTrump, an app that’s supposed to tell mobile users about people they know in battleground states, so they can reach out to them and ask them to vote. If you want, #NeverTrump will do the asking, too, with pre-programmed messages it will send up to four times before the election. It’s an explicit acknowledgement that Silicon Valley workers’ votes won’t have any impact on the electoral college, since California is already a lock for Hillary Clinton.

The Cable Guys Have Become the Internet Guys

[Commentary] The cable TV business hit an important milestone in July: It turned into the Internet business. For the first time ever, the biggest cable TV providers has begun selling more broadband subscriptions than video subscriptions, according to a new tally from Leichtman Research Group.

This is directionally important. The future for the pay TV guys isn’t selling you pay TV -- it’s selling you access to data pipes, and pay TV will be one of the things you use those pipes for.

Coming to the Internet: Shows From CBS That You Won’t See on CBS

CBS is working on shows that you won’t see on CBS. Instead, the plan is for you to see them on the Internet, via video services like Netflix or Amazon’s Prime Instant Video.

If that happens, it means CBS will have opened up a new revenue source: In addition to selling its reruns to Netflix and its competitors, it will also be selling them brand-new shows those services can stream exclusively.

What Happened to the Cord Cutters?

New data from analysts MoffettNathanson show that the pay-TV business lost about 300,000 subscribers in the second quarter. But that’s basically flat compared to 2013, and that’s a change from the year-on-year declines of the previous few quarters.

And after factoring in the housing market -- a key driver for pay TV -- the research firm concludes that “it appears that cord cutting slowed to an annualized rate of 400k homes, a meaningful deceleration and well below the peak (but still modest) rates of cord cutting seen in 2012.”

AOL’s Amazing, Inexplicable Money Factory

The most amazing thing about AOL’s business is the thing that drives AOL’s business: Millions of people, who started paying the company a monthly fee for Internet access more than a decade ago, who continue to pay the company a monthly fee for Internet access, even though they likely aren’t getting Internet access from AOL anymore.

Here’s how AOL makes money: Getting a shrinking number of subscribers -- 2.34 million this quarter, down from 3.62 million at the beginning of 2011 -- to pay an increasing amount -- the average AOL subscriber now pays $20.86 per month, up from around $18 a few years ago.

Time Warner Explains Why It Doesn’t Want to Sell to Fox or Anyone Else (For Now)

Not surprisingly, Time Warner told analysts not to ask it about Fox’s now-dormant $80 billion bid.

Instead, analysts asked Time Warner CEO Jeff Bewkes, in several different ways, to explain why he rejected the deal.

If you like succinct versions, here it is: There’s really no point in us buying a big company or being bought by a big company, because we’re really big, and those deals are a mess. But never say never!

Why TV Still Looks Pretty Good to Big Media

[Commentary] Television may have peaked, but it’s going to have a very long run ahead of it. That’s the thinking behind a series of big media moves in the past few years, where conglomerates that own big investments in TV have been doubling down -- or trying to double down -- by acquiring more TV assets.

Even if TV ad dollars are shrinking, TV still generates a lot of ad dollars -- that’s why Facebook, Twitter and everyone else on the Web wants a piece of the TV business.

Meanwhile, the fees that cable providers pay broadcasters for their programming, which had theoretically been threatened by Aereo, now look like they’ll continue to be reliable, high-margin cash-flow generators, after all.

Dish Gets Closer to a Web TV Launch With A&E Deal

Dish Networks, which says it wants to launch an Internet TV service in 2014, is getting closer to its goal: The satellite TV company has signed a deal with A&E Networks that lets it stream the cable programmer’s shows on the Web.

The deal gives Dish the rights to stream live and on-demand programming from A&E’s lineup of channels, which include A&E, History and Lifetime.

Here’s How Many Subscribers Aereo Had Last Year

While Aereo generated lots of attention from the media world in the run-up to its Supreme Court case, consumers may have been less interested. Paperwork filed with the US Copyright Office indicates that the startup ended 2013 with 77,596 subscribers, spread out among 10 cities.

About 27,000 of those subscribers lived in the New York City area, which was Aereo’s first market, and launched in the spring of 2012. Boston, which launched in the spring of 2013, had 12,000 subscribers. The Atlanta area, which also launched in 2013, accounted for 10,000 subscribers.

Why Aereo’s Loss Hurts the TV Industrial Complex in the Long Run

[Commentary] So it looks like Aereo will have to fold up the tent. What else will happen in the wake of the Supreme Court’s decision? Nothing. Which is a problem, both for consumers and for the media companies celebrating their victory.

Aereo’s legalized presence would have certainly given the networks and providers a reason to move much faster to provide their own specialized packages. Not “a la carte” TV, where a TV subscriber can sign up for Disney and Comedy Central, but not ESPN and MTV. But at least a slimmed-down offering with a range of options and prices.

Now we’re back to a world where the only incentive the TV guys have to move faster is the nagging fear that their growth has permanently stalled, and that their subscription rolls will decline as new generations of video-watchers enter a world where paying for TV seems ridiculous. That group of “cord-nevers” hasn’t grown big enough to show up on the TV Industrial Complex’s books yet. But it’s hard to imagine it won’t get there.

Apple Is Happy to Sell You the Hachette Books Amazon Won’t Stock

Amazon doesn’t want to sell books from Hachette Book Group. More for us, says Apple, which is taking advantage of the fight between the world’s biggest bookstore and one of the world’s biggest publishers.

Its iTunes store is promoting a sale on digital versions of popular Hachette titles, including upcoming books from James Patterson and JK Rowling. Apple won’t come out and say that, exactly.

But if you head to the iTunes book page, you’ll see Apple is highlighting a “Popular Pre-Orders: $9.99 or Less” section. Meanwhile, Amazon won’t allow customers to preorder digital versions of any of those titles, and generally isn’t selling paper-and-ink versions, either.

Beyond the fact that Apple’s happy to take advantage of a (much bigger) rival’s fight, what’s particularly interesting about the promotion is that one of the chief disputes between Hachette and Amazon is over pricing of digital books -- Amazon wants to push prices down; Hachette does not.

Netflix Nags Another New Partner, Blaming Verizon for Slow Streams

In April, Netflix signed a Web traffic deal with Verizon. Now it is telling some of its customers that Verizon’s pipes -- and, presumably, other Internet service providers as well -- aren’t up to snuff.

Vox Media designer Yuri Victor tried watching Netflix on his MacBook and ended up seeing this message from the streaming service on his browser, blaming Verizon for slow speeds:

“The Verizon network is crowded right now.” Netflix spokesman Jonathan Friedland, via Twitter, described the messaging as a way to “keep members informed.” Via email, he said the wording was a “test that advises members when their network is congested,” and that it isn’t specific to Verizon. “We’ll see whether they think it is valuable or not.”

Verizon PR representative Robert Elek responded: “This is a PR stunt. We’re investigating this claim but it seems misleading and could confuse people.” This messaging is much clearer, and Netflix is delivering it directly to its customers: There’s a problem with your picture. Blame the guy who owns the pipe.

Apple Will Buy Beats for $3 Billion

The Apple/Beats Electronics deal is now official, and Apple says it will spend up to $3 billion to buy the headphone maker and streaming music company.

Why? Because Apple likes the businesses Beats has already built, and wants to make new stuff with the help of its employees, says CEO Tim Cook.

“We could build about anything that you could dream of. But that’s not the question,” he said in an interview with Re/code. “The thing that Beats provides us is a head start, and it provides us with incredible people, kindred spirits.”

Apple says it will keep the Beats hardware brand intact, as well as the Beats Music streaming service. It also says Beats Electronics co-founders Jimmy Iovine and Dr. Dre will join the company as full-time employees.

Apple says the deal will close by the end of its fiscal year, which means by the end of September 2014. It says the deal will be accretive in its next fiscal year.

ESPN Floats a Netflix-Style Trial Balloon. But It’s Not Giving Up the Bundle.

ESPN has already said it may let you pay for its sports programming on the Web without subscribing to a traditional pay-TV package. Now it is floating the idea of selling some of its stuff directly to consumers, just like Netflix does.

ESPN boss John Skipper says that in 2015, the company may sell a package of Major League Soccer games to Web viewers, who could pay for the games without subscribing to ESPN itself. That would essentially replace the MLS Live service that the league currently markets to fans on its own, which costs $65 a season and gives subscribers digital access to most of the league’s games.

If ESPN goes through with those plans, it would mark the first time the network has served up sports on an a la carte basis. And if you’re a certain kind of TV-of-the-Future thinker, you can argue that it’s evidence that the bundle that supports the entire TV Industrial Complex is starting to unwind.

But the other way to look at ESPN’s trial balloon is that it shows the cable company’s commitment to the cable business model, where pay-TV subscribers pay a lot of money to get all of ESPN’s programming, and all of ESPN’s channels, whether or not they actually want ESPN. That’s because ESPN isn’t taking anything out of its bundle -- it’s just talking about adding a premium tier for a tiny slice of fans willing to pay extra.

Upworthy’s Traffic Is Still Headed Down. Blame Us, Not Facebook, Says Upworthy.

Earlier in 2014, when viral content spreader Upworthy saw its traffic decline, lots of people assumed that this was because of Facebook, which is tinkering with the way it surfaces other people’s stuff in its News Feed.

Not so, say Upworthy’s leaders: Traffic is an unpredictable thing, and it had shot up dramatically last fall, so it was reasonable for it to move around a bit. But a couple months later, Upworthy’s traffic continues to head downward.

It’s not falling off a cliff, but it is shrinking, according to comScore. In April it had 10.7 million visitors, its lowest levels since August 2013 -- but still way ahead of where it was before.

So what’s going on now? It’s our fault, says Upworthy co-founder Eli Pariser. But it’s also a choice, he explains.