This isn’t what you usually hear from broadcast execs — and it certainly doesn’t jibe with the industry’s message to Wall Street. But the National Association of Broadcasters takes the bearish view in a new filing at the FCC that responds to a Justice Department attack on arrangements that enable a TV station to handle ad sales, programming, and other chores for rivals in the same market. The FCC is poised to restrict these widely used deals. That would be dangerous, the NAB says, because stations need help: “Largely as a result of marketplace fragmentation and the growing number of options for advertisers (including online), television broadcasters’ revenues and profits have fallen significantly,” it says. Ad sales were lower in 2012 than they were in 2004, and a forecast from SNL Kagan shows that they “will not reach the level of revenues earned in 2004 until the year 2020.” Broadcast lobbyists are singing the blues to counter the Justice Department’s claim in a recent filing that shared services agreements make stations less competitive and diverse. Although the deals are supposed to protect both goals, by propping up weak stations, “our investigations have revealed that these ‘sidecars’ often exercise little or no competitive independence from the other station.” But the NAB says the argument lacks “direct evidence” and its proposal “would harm consumers and the public interest.” The collaborations “have become vital to local station operations.” They need economies …
This map from Free Press shows how commonplace so-called “sidecar” agreements have become — and today the Justice Department says it’s time for the FCC to hit the brakes on the deals that enable one station to sell ads or provide services for others in a market. The alliances too often lead to artificially inflated ad prices and weak local newscasts, antitrust officials said in a filing today. Lawyers want the FCC to reject joint sales arrangements in cases where ownership caps would bar stations from being jointly owned, and scrutinize local marketing agreements and shared services agreements. “Failure to account for the effects of such arrangements can create opportunities to circumvent FCC ownership limits and the goals those limits are intended to advance,” the filing says. Although the deals are supposed to protect competition, by propping up a weak station, “our investigations have revealed that these ‘sidecars’ often exercise little or no competitive independence from the other station.” The National Association of Broadcasters rejected the conclusion. “Joint sales agreements allow local TV stations that might otherwise go out of business to increase local news and community service, and to provide robust competition to pay TV giants,” EVP Dennis Wharton says. But the die appears to be cast for an FCC vote scheduled for March 19. The DOJ filing probably “was coordinated at some level with the FCC,” says Guggenheim Partners’ Paul Gallant. “Nothing is settled yet, but we …
Consumer advocates say that this pretty much ends prospects that cable and phone companies will vigorously compete in wired and wireless broadband. But government officials believe they extracted enough compromises from the companies to resolve antitrust concerns and protect the public interest. The Justice Department filed a consent decree to let Verizon pay close to $4B to a consortium of cable companies led by Comcast for some airwave spectrum they control, as the erstwhile competitors also strike a series of agreements to develop products and cross-market each other’s services. The FCC also is teed up to endorse the deal; Chairman Julius Genachowski said he will circulate an order based on the consent decree to be approved by the full commission.
It sure looks that way for the controversial deal after the companies, the FCC, and Justice Department “reached broad agreement to settle antitrust concerns,” The Wall Street Journal says this morning. Verizon agreed in December to pay close to $4B to a consortium of cable companies led by Comcast for some airwave spectrum they control, as the erstwhile competitors also strike a series of agreements to develop products and cross-market each other’s services. The Journal says that Justice officials warmed to the deal after the companies agreed to apply for anti-trust clearance at least every five years. In addition, Verizon and Comcast reportedly assured officials that they wouldn’t cross-market services in communities where Verizon’s FiOS service competes with Comcast for video, broadband, and phone customers. Still to be resolved: whether the restriction applies to markets where Verizon provides phone and broadband service, but not FiOS which uses state-of-the-art fiber optic lines. Verizon has said that it only intends to finish building out its current markets, and won’t enter new ones. Verizon also recently said that it would auction off some of its airwave spectrum if the cable deal is approved. Critics say that consumer prices could rise if Verizon and cable become collaborators instead of competitors. It would “diminish incentives [for Verizon] to expand FiOS deployment,” 32 House Democrats wrote last month. “This would leave many of the communities that we represent on …
The letter from 32 House Democrats to FCC chairman Julius Genachowski and Attorney General Eric Holder comes as the two agencies head into the home stretch of their review of Verizon‘s nearly $4B deal to buy wireless spectrum from Comcast and other cable companies — and cross-market each other’s services. The FCC is expected to approve it, but the Justice Department remains concerned that it might result in rate hikes, Reuters reports. The FCC declined Friday to grant a critic of the deal, Public Knowledge, additional time to comment on it. The letter today from the House Democrats says that the Verizon-cable deal would “appear to turn the promise of the 1996 Telecommunications Act on its head.” When the law wiped away many cable regulations, “consumers were promised the benefits of increased competition between cable and phone companies, driving investment in broadband networks, creating jobs, enabling new and improved services and applications, and lower prices.” But Verizon’s deal with cable “would eliminate or reduce cross-platform competition and diminish incentives to expand FiOS deployment. This would leave many of the communities that we represent on the wrong side of the digital divide.” The companies have told Congress that the new arrangement would help the companies to create broadband services without diminishing competition. “There’s nothing in these transactions that will stop us from trying to beat the brains out of FiOS,” Comcast EVP David Cohen said in March. Here’s today’s letter:
Amazon did a victory dance of sorts today after the Justice Department filed its e-book pricing antitrust case against Apple and five book publishers — three of whom (Hachette, HarperCollins and Simon & Schuster) have agreed to a proposed settlement. The e-retailer called it “a big win for Kindle owners” adding that it looks forward “to being allowed to lower prices on more Kindle books.” Barnes & Noble, which sells the Nook e-reader, had no comment. If a court approves, then Justice’s settlement with the three publishers would require them to let retailers including Amazon and Barnes & Noble set their own prices for e-books. It also would wipe out their most-favored-nation deals with retailers including Apple — agreements that guarantee other retailers won’t undercut their e-book prices. “In recent years, we have seen the rapid growth – and the many benefits – of electronic books,” Attorney General Eric Holder said. ”E-books are transforming our daily lives, and improving how information and content is shared. For the growing number of Americans who want to take advantage of this new technology, the Department of Justice is committed to ensuring that e-books are as affordable as possible.” Apple, along with publishers Macmillan and Penguin, have decided to go to court to fight the charges. Acting Assistant Attorney General Sharis Pozen sayd the Justice Department “will pursue vigorously our claims against those companies to ensure that consumers get the full benefits of the competition they deserve.”
The suit was filed at the federal district court in New York and alleges that Apple conspired with Hachette, News Corp’s HarperCollins, Macmillan, Penguin, and CBS’ Simon & Schuster to limit competition — thereby keeping e-book pricing artificially high. But this may be a prelude to the announcement of a settlement: the Justice Department said that it will unveil an “unspecified” antitrust settlement today, Bloomberg reports. Word of the federal investigation into e-book pricing leaked last month. Officials were interested in a series of events that took place around 2010 when Apple introduced its iPad. Book publishers allegedly wanted to end Amazon’s practice of selling e-books for a deeply discounted $9.99, part of the company’s strategy to promote sales of its Kindle e-readers. Hoping to loosen Amazon’s grip on the market, and help its new iPad, Apple encouraged publishers to stop selling books wholesale — which enabled retailers to set the selling price– and to adopt a so-called “agency model.” That empowers publishers to set the sales price, and pay retailers a fee of about 30%. The late Apple CEO Steve Jobs told biographer Walter Isaacson that he told publishers “the customer pays a little more, but that’s what you want any way.” He added that publishers “went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.’” Publishers denied that they conspired …
New Zealand authorities may be forced to return millions of dollars in personal property of MegaUpload founder Kim DotCom that was seized in connection with his January arrest because of a procedural error in court documents, according to the New Zealand Herald. Luxury cars, cash and other property were seized under a specific type of court order which should never have been granted, a judge ruled late last week, declaring the order “null and void” and having “no legal effect.” Police arrested DotCom on January 19 at his mansion outside Auckland at the request of the United States government. U.S officials allege he is the mastermind of a criminal enterprise designed to facilitate massive theft of movies, TV shows and music. Police and government officials acknowledge making the embarrassing “procedural error” in documents filed to authorize seizure of DotCom’s assets. Unless his attorneys can prove authorities acted in bad faith, however, Dotcom isn’t necessarily guaranteed to get his property back. Seizure of those assets have crippled DotCom’s financial ability to fight the charges and his extradition to the U.S., but he was released on bail about a month after his arrest.
The group Anonymous appears to have crashed sites for the Justice Department, Universal Music, and the MPAA — apparently to retaliate for the Justice Department’s effort to close Megaupload. The so-called hacktivist collective claimed responsibility on Twitter. “We are too many for them!” one tweet said. Another said that it’s “the largest attack ever by Anonymous — 5,635 people confirmed” trying to bring down sites. This is the second major incident recently involving Anonymous after The New York Times reported last week that the group disclosed personal information about Time Warner’s Jeff Bewkes and Viacom’s Sumner Redstone — as well as other executives at NBCUniversal, Sony Pictures Entertainment, and Disney — to protest their companies’ support for two anti-piracy bills: the Senate’s Protect IP Act and the House’s Stop Online Piracy Act.
CEO Chris Dodd calls the site — shuttered today by the Justice Department — “the largest and most active criminally operated website targeting creative content in the world.” Here’s the MPAA statement:
WASHINGTON — The U.S. Justice Department and the Federal Bureau of Investigation (FBI) today announced one of the largest criminal copyright cases in U.S. history. Seven individuals responsible for operating Megaupload.com and their associated companies, Megaupload Limited and Vestor Limited, have been charged in the United States with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement. The following is a comment from Chris Dodd, Chairman and CEO of the Motion Picture Association of America, Inc.(MPAA):
“By all estimates, Megaupload.com is the largest and most active criminally operated website targeting creative content in the world. This criminal case, more than two years in development, shows that law enforcement can take strong action to protect American intellectual property stolen through sites housed in the United States. Similar tools are needed to go after foreign-based websites that threaten the livelihoods of the 2.2 million hardworking Americans whose jobs depend on the motion picture and television industry, and the millions of others who produce creative content in this country.
We applaud the U.S. Justice Department, the FBI and the National Intellectual Property Rights Coordination Center and the U.S. Immigration and Customs Enforcement’s Agency at the Department of Homeland
There goes the $4B break-up fee that AT&T promised to pay T-Mobile owner Deutsche Telekom if the merger went awry. Meanwhile, shares of Sprint Nextel — which risked being marginalized by the AT&T/T-Mobile combo — are up 7.9% in after-hours trading, after falling 4% during the day. AT&T’s dream deal effectively was cooked after the Justice Department and FCC said that a merger would result in less competition and higher consumer prices. Justice said it would sue to block the deal, and the FCC began a process that promised to drag things out even more. But AT&T says that its decision to scrap the plan doesn’t change the fact that wireless carriers need more spectrum. “The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage,” the company said. “In the absence of such steps, customers will be harmed and needed investment will be stifled.” CEO Randall Stephenson added that his company “will continue to invest” in wireless. He urged lawmakers to approve AT&T’s bid to buy spectrum controlled by Qualcomm, and ”enact legislation to meet our nation’s longer-term spectrum needs.” That’s code for: Let’s pry spectrum away from TV broadcasters.
UPDATED: The Department of Justice’s Antitrust Division and the Federal Trade Commission made the announcement today. Justice is filing a civil suit against Comcast’s Brian Roberts, but with the proposed settlement agreement that includes the fine. Officials went after him because this is the third time Roberts failed to report that he had been granted stock above a government-set threshold that required him to make an official disclosure. The question is: How could a company that employs so many high-priced lawyers be so sloppy?
Still, the Federal Trade Commission — which brought the case to the Justice Department — says that it only sought a modest fine. It notes that ”the violation was inadvertent and technical; that it was apparently due to faulty advice from outside counsel; that Roberts did not gain financially from the violation; and that he reported the violation promptly once it was discovered.” Comcast says that executives “take very seriously our obligations to comply with all aspects of the Hart-Scott-Rodino Act and working with our lawyers we have put in place additional safeguards to ensure that an inadvertent violation does not occur in the future.” Here’s the DOJ release announcing the fine:
Obama administration officials unveiled today a series of TV, radio, print, and Internet public-service ads that link bogus goods including pirated movies and music with higher crime, lost jobs, and child labor. Intellectual property crimes “are anything but victimless,” Attorney General Eric Holder said, calling them “a significant and growing threat” to economic and national security. “With holiday shopping season now upon us, this information could hardly be hitting the airwaves at a more appropriate time.” One TV ad, produced with help from MTV Networks, shows a woman envisioning the misery she might create from buying an illegal DVD. The tag line: “It’s not only a few dollars. … Know the real cost. Don’t buy counterfeits.” Another TV spot creates an analogy between illegal music downloads and New York subway riders stealing tips from the guitar case of singer-songwriter Addie Brownlee. Radio and print ads reinforce the theme that “you have the power” to stop IP theft. Most also direct people to the website for the National Crime Prevention Council’s “Get Real” campaign. Other agencies supporting the campaign include the Office of the U.S. Intellectual Property Enforcement Coordinator and U.S. Immigration and Customs Enforcement.
A federal judge cleared the Comcast-NBC Universal deal today with the provision that the court will retain oversight of its effect on the online video market for the next two years. U.S. District Judge Richard Leon ruled in Washington that the Justice Dept and the new company must report on arbitration actions initiated by online video distributors such as Netflix or Hulu. The distributors had told the court they feared losing access to NBC content because of the merger. “Since neither the court nor the parties has a crystal ball to forecast” the effectiveness of the final judgment, the additional steps are necessary to protect the public interest, Leon wrote. The deal won approval Jan. 18 from U.S. regulators under an agreement with the FCC and Justice Dept. in a deal which required court approval of provisions regarding online video.
Hacking Update: Attorney General Meets With 9/11 Families; News Corp Reportedly Paying Arrested UK Editor’s Legal Fees
Today’s meeting between U.S. Attorney General Eric Holder and a group of family members of 9/11 victims was held in Washington and lasted more than hour, according to attorney Norman Siegel, who represents the 9/11 families. The group sought the meeting in the wake of reports that News Corp reporters may have attempted to hack into victims’ family members’ phone numbers, much in the same way journalists at Rupert Murdoch’s News of the Worldhacked into phones of the families of London bombing victims and murdered children, as well as of politicians and celebrities. That fallout from that scandal caused NOTW to shutter and eventually ended News Corp’s bid to take over the UK’s biggest satellite TV provider BSkyB. Holder didn’t say today whether there were phone records indicating tampering on this side of the pond, Siegel said, but did say that the FBI investigation is in the preliminary stages.