The wheels are in motion for that to happen, Bloomberg reports. Intel wants about $500M for OnCue, its ambitious initiative to offer a cable-like service via the Web. Samsung and Liberty Global have kicked the tires. But Verizon‘s said to be already out talking to broadcast and cable channels about possible carriage terms, according to the news service’s unnamed sources. The big question: Would Verizon need new contracts for an online service, or could it just tweak the current programming agreements that apply to territories where it offers FiOS TV? If Verizon proceeds, then it theoretically could compete with cable and satellite companies across the country. Before Intel decided to unload OnCue, it hoped to create a subscription service that would work with its own interactive set top boxes. But it was unable to persuade network owners to let it provide individual channels — not just the bundles offered by cable and satellite — even though it offered a premium over the fees that conventional distributors pay. Some programmers privately doubted that Intel could guarantee them a quality signal over the Internet, and noted that Nielsen initially wouldn’t be able to measure viewership via its non-traditional set top boxes.
UPDATE, 7:50 AM: CBS CEO Leslie Moonves says the deal CBS just signed with Verizon‘s FiOS TV in New York, Los Angeles, and Dallas, among other markets, is virtually identical to the one offered to Time Warner Cable. “This important deal was reached swiftly and amicably in just a few days after our conversations began,” Moonves said pointedly in a memo to staff this morning. “You should know that Time Warner Cable has been offered almost exactly the same deal for CBS carriage to which Verizon has agreed.” TWC is entirely to blame for the “lack of urgency” on its retrans talks with the network, Moonves said. The Verizon deal gives FiOS over-the-air retrans rights; it does not cover digital rights. (Moonves’ full memo after the original story.)
PREVIOUS, AM: Three weeks into its battle with Time Warner Cable, CBS — blacked out on TWC in New York, Los Angeles and Dallas — has announced it had reached a new deal for continued retransmission of CBS-owned stations and wider distribution of CBS Sports Network on Verizon’s FiOS TV in multiple markets nationwide, including New York, Los Angeles, and Dallas. “This important deal was reached swiftly and amicably in just a few days after our conversations began,” CBS chairman Leslie Moonves said pointedly in a memo to staff. The Verizon deal includes all of the approximately 3.5 million subscribers served in markets where CBS owns TV stations. FiOS has about 5 million subs total. (CBS and Verizon already had an existing deal for FiOS to carry its Showtime and Smithsonian networks.) “We’ve reached this agreement in partnership with CBS for our customers, so that they may continue to enjoy CBS content on FiOS,” Verizon VP Video Content and Strategy added, pointedly. “Verizon continues to address areas of change where necessary in current policies to better reflect the interests of consumers.”
The announcement comes the morning after CBS and TWC had a mini-breakthrough in their retransmission head-butting. In New York City, both parties agreed to un-black-out Channel 2 for debates for mayor and comptroller. (The debates will also air on channel 75, a backup arrangement CBS made before the mini-truce was struck). Here’s this morning’s CBS/Verizon announcement:
Verizon and the Disney and ESPN Media Networks Group today announced that an agreement has been reached to provide Verizon FiOS customers the new authenticated services WATCH ABC, WATCH Disney Channel, WATCH Disney XD and WATCH Disney Junior, as well as the yet-to-be-launched WATCH ABC Family service. Verizon will also add Fusion, the upcoming news, information and lifestyle multiplatform network for Hispanics, the youngest and fastest-growing demographic in the U.S. The English-language joint venture from ABC and Univision is set to launch later this year.
Funny how the prices that Big Media companies charge for their pay TV channels rarely have much to do with the consideration that really matters: How many people actually watch? That’s what makes Verizon‘s new effort to link payments with audience levels, which The Wall Street Journal disclosed this morning, so intriguing — but also such a long-shot. The company’s FiOS TV unit wants to base the fees it pays channels on the number of households where someone tunes in for at least five minutes a month. That wouldn’t necessarily reduce subscribers’ bills, Verizon’s top programming negotiator Terry Denson tells the paper. It would simply help to “stabilize retail prices” by rewarding channels when they attract additional viewers. But Denson acknowledges that it will be hard to persuade programmers to abandon their business models which are built on the presumption that they should extract fees from all subscribers including those who never watch their channels. He says that his talks with owners of small and midsized networks are just “inching forward” and he hasn’t broached the idea with Big Media companies that dominate TV programming.
It isn’t a la carte but Verizon’s proposal to tie what it pays to carry TV channels to the number of viewers who actually watch is what big media companies might consider “disruptive”, according to the Wall Street Journal. Verizon’s FiOS TV is the nation’s sixth-largest pay-TV provider and has begun negotiations with some smaller companies about basing what Verizon pays on audience size. Under the established industry model, cable and satellite operators pay a monthly per-subscriber fee to carry channels based on the number of homes the channels are available. Verizon’s chief programming negotiator Terry Denson suggests that in many cases “We are paying for a customer who never goes to the channel”.
This agreement shouldn’t come as a surprise after NBCUniversal struck a similar deal early this month with Cablevision. The cable and phone companies are engaged in the business equivalent of hand-to-hand combat in the tri-state area …
CFO Fran Shammo had little to say to analysts this morning about Verizon‘s planned video streaming service with Redbox, aside from the fact that it’s “very close to launching” this quarter and should improve his company’s profits next year. Still, Verizon investors seem content with the company’s direction after it delivered solid Q3 results. The share price is up 1.4% in early trading after Verizon reported net income of $4.3B, +21.2% vs the same period last year, on revenues of $29B, +3.9%. The revenue figure exactly matched Wall Street’s consensus forecast. So did earnings per share, which came in at 64 cents not including charges tied to its payments to TiVo to settle its patent infringement case against the communications giant. The FiOS video business continued to slow: Subscriptions rose just 2.7% vs Q2 to 4.6M. The increase of 119,000 customers fell short of Wall Street’s expectation for 142,000. The company’s FiOS broadband unit also missed analyst targets. It ended up with nearly 5.3M customers, +136,000 vs the consensus forecast of +165,000. “The read-across for cable and satellite incumbents is self-evidently positive; lower growth for FiOS means smaller losses for their competitors,” Bernstein Research’s Craig Moffett says.
27% Of Australians Admit To Illegal Downloads
Some 27% of Australians persistently or casually download screen content illegally and at a growing rate over the past 12 months, according to new research from the Intellectual Property Awareness Foundation, a coalition of film and TV organizations. The report showed 86% of people who download or stream illegally at least once a week admit they do so because it’s free. Incongruously, 71% of the 1,654 adults surveyed acknowledge that piracy is stealing but 76% don’t think they contribute to the problem. Some 50% of respondents agree that Internet Service Providers should take more responsibility to prevent the illegal distribution of movies and TV shows online. — Don Groves
Univision Signs New Deal With FiOS
Univision Communications has reached a comprehensive multiyear agrement with Verizon FiOS to continue carrying the U.S. Spanish-language media leader’s Univision and TeleFutura network feeds and owned-and-operated broadcast stations, the cable network Galavisión. Multichannel News reports the deal also includes Univision’s new cable services sports network Univision Deportes, telenovelas network Univision tlnovelas and FOROtv, a Spanish-language news network. The FiOS agreement also includes plans for multiplatform authentication rights for Univision’s upcoming interactive digital video platform for existing and new networks. The FiOS pact is Univision’s third far-reaching affiliate agreement in 2012. Dish Network and AT&T U-verse reached deals in January and May.
For all the talk about cord-cutting in the digital era, movement in that direction is relatively slow, as many viewers switch from cable to satellite or telepone providers rather than drop multichannel service altogether. Nielsen reports that 98% of viewing remained on traditional TV in Q4 2011. Cable lost more than 2.9 million subscribers as viewers switched to telephone or satellite providers. U.S. homes subscribing to cable, satellite or telephone providers for their TV service declined 1.5% or about 1.5 million last year, according to figures Nielsen released this week. Subscribers adding telco (about 1.9 million) or satellite service (roughly 280K) weren’t enough to make up the difference.
UPDATE, 6:45 AM: CFO Fran Shammo, the only Verizon exec on today’s call with analysts, blasted commentators who said yesterday that the telecom giant was forced announce that it will auction off some of its airwave spectrum — if the government approves its deal to buy licenses held by Comcast and other cable companies. “This is nothing near a fire sale,” he says. If Verizon doesn’t like the offers it receives “then we won’t go through with the sale.” He also denied charges that the company was forced to sell the spectrum “because we ran into a roadblock at the FCC,” which — along with the Justice Department — must approve the cable deal in order for it to close. “We’re being good stewards” of the publicly owned airwaves, he said. Most of the questions dealt with Verizon’s growing smartphone and wireless data business. The company says it now offers its speedy 4G LTE service in 230 markets, about two-thirds of the country. About 9.1% of its wireless customers have 4G devices, up from 0.6% a year ago. While Shammo steered clear of specifics about the earnings hit Verizon takes for subsidizing iPhones, he says that the company is supporting Microsoft’s effort to build what he called “a third ecosystem” for Windows-powered mobile devices in addition to Apple’s iPhones and Google’s Android systems. He’s bullish about tablet sales: Verizon sold 390,000 in Q1, up 60% vs the same period last year, but probably can improve on that. There was a slowdown in anticipation of the roll out of the new iPad, which was only available for two weeks in the period.
Verizon is starting to hold “major discussions with content providers on cross-synergies” for the phone giant’s still mysterious streaming video venture with Redbox — which is due to go live in August — CFO Francis Shammo told investors today at the Deutsche Bank Media & Telecom Conference. Verizon’s hoping that the new offering, seen as a potential rival to Netflix, will give it more leverage when it negotiates programming deals for its FiOS video service which competes with cable and satellite. “We were last to market and, obviously, the content providers made us pay a premium price for that,” Shammo says. But in its new negotiations with studios, Verizon’s seeking “a content play for all of our platforms, not just for one.” He notes that FiOS is now the fifth largest video provider, Verizon Wireless has about 100M subscribers, and Redbox attracts about 30M customers to its 35,000 kiosks. There’s still no word on what the venture with Redbox will offer and how much it will cost. The companies have said that it will be a national service, involve electronic sales and rentals, and include a tie-in with Redbox’s DVD rental kiosks. Verizon’s wireline unit will own 65% of the joint venture. ”Wireless is not involved,” Shammo says.
It will be interesting to see whether Cablevision ever discloses how much it spent on legal bills since 2009 to prevent customers of Verizon’s FiOS and AT&T’s U-verse from seeing HD feeds of MSG and MSG+. The regional sports channels are owned by Madison Square Garden, a company that’s controled by the Dolan family which also controls Cablevision. Whatever the cost, it seems to have been for naught: Cablevision today threw in the towel in one of the industry’s longest and most baffling battles after the U.S. Court of Appeals for the Second Circuit denied the company’s appeal of an FCC order in September requiring MSG to provide the HD feeds to two of its toughest competitors. FiOS customers in the New York area began to receive the sports channels in HD today; U-verse should have them soon.
It’s hard to figure out Verizon’s place in the infotainment world — and CEO Lowell McAdam kept things murky in his appearance today at the UBS Annual Global Media and Communications Conference. He wouldn’t address this week’s surprising report that the phone giant might launch its own national movie and TV streaming service, potentially pitting it against Netflix. But he’s clearly interested in the business: McAdam said that Verizon seriously considered bidding for Hulu. “The jury’s out, but I do believe there’s a place for over-the-top” — jargon for a digital alternative to traditional pay TV — he said. “That model has yet to be determined and I hope we’ll be a player in that.” Wouldn’t that hurt Verizon’s FiOS, which provides a cable-like TV service to 4M subscribers? “Over-the-top can be complementary,” McAdam says. ”I don’t think it’s one thing or the other.” He was equally certain that FiOS “will not be disadvantaged” by Verizon’s new agreement with Comcast and other cable operators: The phone company will pay them $3.6B for their wireless spectrum — but also give them opportunities to sell Verizon Wireless phone service, even in markets where they compete with FiOS. McAdam says that he expects FiOS to eventually capture as much as 50% of the video and broadband customers in the markets it serves.
Verizon Communications plans to launch a movie-and-TV streaming service that would compete with Netflix, cable TV systems and potentially Amazon, Reuters reported Tuesday. In a strategy that would make the service available to 85 million US households, Verizon is …