An Ignoble Experiment

2. Shareholder files class action suit against AT&T and DirecTV

One day after his counterpart at Comcast (NASDAQ: CMCSA), CEO Brian Roberts, sat in the same red chairs and accused him of trying to essentially get free digital postage on the transmission of digital movies, Netflix (NASDAQ: NFLX) CEO Reed Hastings accused Roberts and pay TV's top service provider of trying to tax the Internet.

Hastings

"They want the whole Internet to pay them for when their subscribers use the Internet," said Hastings Thursday, addressing a wide range of issues at the Code Conference in Palos Verdes, Calif., the first business confab produced by tech blog mavens Kara Swisher and Walt Mossberg since moving on from the Wall Street Journal-backed All Things Digital brand. (Transcripts come courtesy of Re/code, which had its reporters cover the event. Deadline Hollywood and Pando Daily were also there.)

Certainly, it was an active week as far as high-profile media executives speaking at big business events, with the likes of Time Warner Inc. Chairman and CEO Jeff Bewkes speaking simultaneously Thursday at the Sanford C Bernstein Strategic Decisions Conference in New York.

But it was the pointed back-and-forth between Roberts and Hastings that stood out, framing an impasse on net neutrality that the latter executive believes won't be overcome without government intervention.

"Right now, we don't have anywhere close to an agreement," Hastings said.

The rhetoric, of course, is important. As it looks to remake laws governing the fair use of Internet infrastructure, the Federal Communications Commission finds itself constrained by the fact that its first attempts to create such laws back in 2010 were already struck down by a federal court.

But the net neutrality Comcast ultimately agrees to might not fall under any new mandates put forth by the FCC, but rather concessions made with federal regulators in order to get Comcast's proposed $45.2 billion takeover of Time Warner Cable (NYSE: TWC) approved.

Lawmakers were likely watching what came out of Code this week, and Roberts and Hastings seemed to understand that.

Beyond net neutrality, Hastings discussed several other Netflix-salient issues. For one, he said the company does not use the copious data it gathers on subscriber taste to influence the creative decision-making for its original series.

For another, Hastings addressed the "chill out" message he gave investors last fall when Netflix's stock price was surging over $400 a share.

"It's just honesty," Hastings said. "There just felt like there was this hype fest" with the stock.

Finally, the top Netflix executive looked back at his ill-fated decision in 2011 to spin off the compay's DVD rental division into a new unit called Qwikster.

"In hindsight, we were so focused on not dying with DVD," Hastings noted. "We looked at all these businesses like Kodak and Blockbuster. It was really a hard problem ... "It turned out it didn't work out at all. We mispredicted a number of factors."

For more:
- read this Re/code story
- read this Deadline Hollywood story
- read this Pando Daily story

Read more about: Brian Roberts, net neutrality
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By Daniel Frankel

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3. Bewkes isn't worried about Dish's new OTT service

Claiming that $49 billion is not enough to pay for a satellite TV programming service "on the rise," a Los Angeles shareholder has filed a class action suit against AT&T (NYSE: T) and DirecTV (NASDAQ: DTV) over their proposed merger.

In the suit, which was obtained by Deadline, investor Teresa Silvestri claims that "DirecTV's recent financial performance is indicative of a company on the rise with growth potential yet to be recognized."

She also names as defendants DirecTV board members, including Chairman Mike White, as well as Peter Lund and Tony Vinciquerra, former top executives at CBS and Fox, respectively.

"The individual defendants have breached fiduciary duties of loyalty, good faith, due care and disclosure by … agreeing to sell DirecTV without first taking steps to ensure that plaintiff and class members would obtain adequate, fair and maximum consideration under circumstances and engineering the proposed acquisition to benefit themselves and/or AT&T without regard for DirecTV public shareholders," the suit adds.

Silvestri is being represented in the matter by Beverly Hills law firm Brodsky & Smith, which aggressively kicks the tires on mergers and acquisitions across a range of industries.

In outlining the alleged undervaluing of the acquired asset, the suit notes, "DirecTV is the premier pay TV provider in the United States and Latin America, with a high-quality customer base, the best selection of programming, the best technology for delivering and viewing high-quality video on any device and the best customer satisfaction among major U.S. cable and satellite TV providers."

The suit does not mention DirecTV's utter lack of broadband wherewithal.

For more:
- see this lawsuit
- read this Deadline story

Complete coverage: AT&T and DirecTV

Read more about: AT&T
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By Daniel Frankel

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4. Google joins Netflix in the ISP rating game, says its report is more comprehensive

It's not going to be big enough to worry about.

That was the essential message put forth by Time Warner Inc. Chairman and CEO Jeff Bewkes Thursday, while talking about Dish Network's (NASDAQ: DISH) new over-the-top venture at the Sanford Bernstein Strategic Decisions conference in New York--a speaking engagement covered by Deadline and Multichannel News.

Bewkes

"They limited the volume that would go through this over-the-top thing to 2 million subs with one distributor, 5 million overall," said Bewkes, noting that Dish's OTT service is targeted to young, single consumers. "That's a constructive way to make an offering to a given part of the market that does not undermine the other part of the market, which is the 90 percent of households with a number of people in them that want five TVs, TV plus Internet, etc. It seems like it's a promising experiment in market segmentation."

Dish set a summer launch date for its new OTT service shortly after announcing its sweeping, landmark carriage agreement with The Walt Disney Company, in which the satellite TV service provider secured ample digital streaming rights. It's been reported that the new digital service will launch with 20-30 channels and cost around $30 per month.

But details about the service had been rather sketchy, at least until Thursday, when Bewkes at least gave some sense of its limited scope and ambition.

Bewkes said that he believes that many members of the Millennial-aged subscriber base targeted by Dish's new service will eventually become pay-TV subscribers.

"Once they take the mattress and get it off the floor, that's when they subscribe to TV," he said.

Bewkes also addressed the issue of consolidation in the pay TV industry.

"In some ways it could help because they'll be more effective distributors," he noted. "It's a question of what happens to innovation and technical advances. Is it used to stifle competing products?

For more:
- read this Deadline story
- read this Multichannel News story

Read more about: Dish Network
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By Daniel Frankel

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5. Time Warner Cable launches local news channel in San Antonio

With even more dogs in the hunt than Netflix (NASDAQ: NFLX), given that it's slowly rolling out a high-speed broadband service, Google (NASDAQ: GOOG) on Thursday announced its own ISP ratings report through its YouTube division.

The Google Video Quality Report breaks down ISP quality in individual markets based on the level of streaming performance: an "HD Verified" rating means the provider supports streaming of 720p resolution without buffering or interruptions, while a "Standard Definition" rating means that the service's performance is OK for 360p. "Lower Definition" is for speeds too low to play back 360p resolution video images without buffering.

As FierceOnlineVideo editor Samantha Bookman notes, the individual market data can be very compelling to consumers. In Boston, for example, only four of the seven operating ISPs are currently rated "HD Verified," according to Google.

Explaining its methodology, Google touts superiority over Netflix's ISP Speed Index, claiming it broadly culls data from cable operators, telcos and other broadband service providers, while Netflix relies purely on its own data.

"Rather than being based on data from a small sample of users, this report is based on billions of YouTube videos watched across thousands of ISPs," Google notes.

As a platform, YouTube is second only to Netflix in peak-period bandwidth usage on North American broadband networks, according to research conducted in March by Sandvine, accounting for 13 percent of usage compared to 34 percent for Netflix.

But beyond keeping tabs of which ISPs are delivering its programming best, Google's new report might have marketing benefits for the company, as it continues to roll out its super-fast Google Fiber ISP service.

For more:
- see this Google site
- see this FierceOnlineVideo story
- see this Gigaom story
- see this Variety story

Read more about: Broadband Speed, Google
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By Daniel Frankel

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