Netflix doubles profit but Wall Street not very happy

Netflix has increased its annual revenues by 35% and doubled profits over the course of 2018, but that didn’t prevent a 3.8% share price drop in overnight trading.

Total revenue across the 12-month period stood at $15.7 billion, though growth does seem to be slowing. Year-on-year revenue increases for the final three months were 27.4%, with 21.4% for the first quarter of 2019, though this compares to 40.4%, 40.3% and 34% in Q1, Q2 and Q3 respectively. However, when you consider the size, scale and breadth of Netflix nowadays this should hardly be considered surprising.

“For 20 years, we’ve been trying to please our members and it’s really the same focus year-after-year,” said CEO Reed Hastings during the earnings call.

“We’ve got all these ways to try to figure out, which shows work best, which product features work best, we’re a learning organization and it’s the same virtuous cycle, improve the service for our members. We grow. That gives us more money to invest. So, it’s the same things we’ve always been doing at just greater scale.”

This is perhaps the reason Netflix has succeeded in such a glorious manner where others have succumbed to mediocrity or failure. Investments have been massive to build out the breadth of content, while the team has not been afraid to alter its business or invest in content which others might snub. Bird Box is a classic example of a movie some might dismiss, whereas we find it difficult many competitors would have given the greenlight to the original Stranger Things pitch.

On the content side of things, investments over the last twelve months totalled $7.5 billion and Hastings promises this will increase in 2019. Perhaps we will not see the same growth trajectory, as despite the ambitions of the team, another objective for Netflix pays homage to the investors on Wall Street. Operating margin increased to 10% during 2018, up from 4% a couple of years back, though the team plan on upping this to 13% across 2019.

Content is where Netflix has crowned itself king over the last few years, aggressively pursuing a varied and deep port-folio, though it will be pushing the envelope further with interactive story-telling.

“I would just say there’s been a few false starts on interactive storytelling in the last couple of decades,” said Chief Content Officer, Ted Sarandos. “And I would tell you that this one has got storyteller salivating about the possibilities.

“So we’ve been talking to a lot of folks about it and we’re trying to figure it out too meaning is it novel, does it fit so perfectly in the Black Mirror world that it doesn’t – it isn’t a great indicator for how to do it, but we’ve got a hunch that it works across all kinds of storytelling and some of the greatest storytellers in the world are excited to dig into it.”

The team are attempting to figure out what works and what doesn’t for the interactive-story segment, but this is one of the reasons why people are attracted to Netflix. The team are exploring what is capable, brushing the dust away from the niche corners and experimenting with experience. They aren’t afraid of doing something new, and the audience is reacting well the this.

Looking at the numbers, Netflix added 8.8 million paid subscribers over the final three months of 2018, 1.5 million in the US and 7.3 million internationally, taking the total number of net additions to 29 million across the year. This compares to 22 million across 2017, while the team exceeded all forecasts.

However, this is where the problem lies for Netflix; can it continue to succeed when it is not diversifying its revenues?

According to independent telco, tech and media Analyst Paolo Pescatore, the Netflix team need to consider new avenues if they are to continue the exciting growth which we have seen over the last couple of years. New ideas are needed, partnerships with telcos is one but we’ll come back to that in a minute, some of which might be branching out into new segments.

This is perhaps most apparent in the US market, as while there is still potentially room for growth, this is a space which is currently saturated with more offerings lurking on the horizon. Over the next couple of months, Disney and AT&T are going to launching new streaming services, while T-Mobile US have been promising its own version for what seems like years. If Netflix is to continue to grow revenues, it needs to appeal to additional users, while also adding bolt on services to the core platform.

What could these bolt-on services look like remains to be seen, though Pescatore thinks a sensible route for the firm to take would be into gaming and eSports. These are two blossoming segments, as you can see from the Entertainment Retailers Association statistics here, which lend themselves well to the Netflix platform and business model. Another area could be music streaming, though as this market is dominating by Spotify and iTunes, as well one with low margins, it might not be considered an attractive diversification.

The other area which might is proving to be a success for the business are partnerships with telcos.

“It’s sort of been this March from integration on devices and just makes that a point to engage with the service to doing things like billing, on behalf of or we do billing integration,” said Greg Peters, Chief Product Officer.

“And now the latest sort of iteration that we’re working with is, is bundling model, right. And so, we’re early on in that process, but I would say we’re quite excited by the results that we’re seeing.”

This is a relatively small acquisition channel in comparison to others, but it is opening up the brand to new markets in the international space, a key long-term objective, and allowing the team to engage previously unreachable customers. This is an area which we should expect to grow and flourish.

The partnerships side of the business is one which might also add to the revenue streams and depth of content. Pescatore feels this is another area where Netflix can generate more revenue, as the team could potentially offer additional third-party content, hosting on its platform for users to rent or purchase. Referral fees could be an interesting way to raise some cash and Netflix certainly has the relationships with the right people.

Netflix has long been the darling of Wall Street, but it might not be for much longer. The streaming video segment is becoming increasingly congested, while the astronomical growth Netflix has experienced might come to a glass ceiling over the next couple of years. The businesses revenues are reliant on how quickly the customer base grows; such a narrow focus is not healthy. Everyone else is driving towards diversification, and Netflix will need to make sure it considers it sooner rather than later.

iChief’s Samsung tie up is long overdue

The first (proper) week in January always promises a deluge of stories from CES and one opening gambit is a content-based partnership between Samsung and Apple, which should probably have happened much sooner.

Beginning in the Spring, new Samsung Smart TV models will offer iTunes Movies & TV Shows and Apple AirPlay 2 support for Apple customers, while 2018 models will also be made compatible via firmware update. iCultists with Samsung TVs can access their existing iTunes library and browse the iTunes Store to buy or rent new content, while Apple content will also work with Samsung’s Smart TV Services, such as Universal Guide, Bixby and Search.

The iTunes Movies & TV Shows app will feature on Samsung Smart TVs in more than 100 countries, while AirPlay 2 support will be available on Samsung Smart TVs in 190 countries.

On the surface this could be a very positive partnership for Apple and Samsung, both of whom have struggled to make a significant impact when searching for diversified revenues.

“Fascinating move as both companies have struggled to make strides in services,” said independent tech and telco analyst Paolo Pescatore. “Arguably it is a smart strategic move for both companies which underlines the need for companies to work more closely together. Samsung has made numerous failed moved in video services while Apple is still seeking to crack the TV landscape.”

Looking at Apple to begin with, this is a move which should have perhaps happened a while back. Stagnation trends in the devices and hardware segments will not have surprised anyone in the Apple business, this is the reason why CEO Tim Cook has been emphasising gains in the software and services business units so proudly, but it is now abundantly clear the ‘us versus everyone else’ mentality which made Apple great will not work outside its traditional stomping ground.

Apple has seemingly long-defied trends in the technology world by swimming against the ‘open’ euphoria. This mentality dates back to its stubborn but brilliant founder Steve Jobs, who constantly resisted the idea of openness, instead tightly integrated Apple within Apple, creating a closed ecosystem which forces iLifers to buy more Apple products. Back during a 2010 earnings call, Jobs stated “open systems don’t always win”.

When Apple was creating wonderful products, with each new release offering a brilliant new feature, this was enough to ensure the loyalty of customers despite the closed nature of the Apple business. However, innovation in the hardware segment has stalled and the closed mentality does not work in the software and services world. What some proof? Have a look at the profit warning last week.

The profit warning was the first one released by Apple in 15 years, and despite progress being made in the software and services segment, the gains could not compensate for the downturn. Although Cook pointed the finger of blame at a slowing Chinese economy, the team could not convince enough consumers to buy the ludicrously priced flagship devices in other territories either. This is a wider trend in the hardware segment, consumers are extending the lifecycle of current devices, while some are leaning towards second-hand models, but the software and services unit could not fill the $5 billion hole created.

To make the content business work, Apple will have to become a more open company, adopting the culture which it has resisted for so many years, and in Samsung it has an interesting partner.

In Samsung, Apple has found something which its own smart TVs cannot deliver; scale. According to market research firm NPD, Samsung is the leader in the US premium smart TV market (August report), holding 34% market share. Considering just over 43% of Apple’s revenue comes from the Americas, this is potential a very positive catapult to secure additional services revenues from customers. And this is before we’ve even started talking about the other territories.

Samsung is another business which has struggled to make headway with alternative revenue streams, though its prominent position in the premium home electronics space offers an excellent opportunity for the aggregator business model. When looking for new money each business has to decide where it can add value to the ecosystem; sometimes it is offering new products in parallel segments, but occasionally it means helping other businesses achieve their ambitions. Embracing openness could be an excellent move here.

If Apple wants to make any meaningful impact on the software and services industry, it will have to move away from the closed mentality which brought it success in the Jobs era and embrace the idea of collaboration. It will certainly be difficult to redirect such a massive supertanker, but one thing is clear; the faltering hardware segment, as it currently stands, will not support Apple’s indulgent ambitions.

A bunch of telecoms predictions for 2019

It’s that time of year again and before we set about the food, booze and pressies with shameless abandon we decided to collate some predictions from the cognoscenti of our industry.

2019 will be the year of rhetoric – William Webb, Telecoms Consultant

A lot of talking, not much doing. Everyone will be talking about their 5G deployments but many will be trials, not many handsets will be available, and there will be many teething problems with initial deployments. With 5G taking up so much attention, the industry will not be looking at alternative business models, hetnet concepts, or pushing for mergers. Current trends will continue – more fibre will be laid, more wifi connectivity provided, data requirements will continue to grow. Oh, and academics will start to talk up 6G….

Fixed Wireless Access put the revenue back in 5GBengt Nordstrom, CEO of Northstream

Fixed Wireless Access (FWA) has evolved into a separate 5G use case, especially by Verizon in the US. Of all the suggested 5G use cases – including eMBB and mIoT – it is FWA that provides the most tangible revenue growth opportunity over the next five years, for both the US and in specific markets in Europe. Furthermore, operators can use their existing physical network assets and competencies for FWA. In 2019, FWA will emerge as a mainstream 5G revenue opportunity beyond the US, and particularly in Europe.

The 5G hype bubble will inevitably burst, revealing its true value – Jennifer Kyriakakis, VP of Marketing at Matrixx Software

As operators battle each other to out-hype their consumer 5G offerings, the breathless mania will surely run into the hard reality of the consumer marketplace. The roll-out of next-generation capabilities will be lengthier than consumers expected, device manufacturers will be slow to adopt the standards, and a whole host of other challenges to 5G enthusiasm will surely arise. While initially painful, this bursting of the hype bubble will provide the impetus necessary for operators to pivot away from today’s heavy focus on speed, coverage and price, and refocus their businesses on monetization opportunities for new and emerging technologies. By embracing innovation as a way to help pay for their substantial network investments in the near term, it will afford Telcos breathing room for the consumer ecosystem to catch-up and fully leverage the new capabilities that 5G will offer in the long run.

Smartphone market to revive in 2nd half with 5G volume – Wei Shi, Telecoms.com Intelligence Manager

The smartphone market has registered the first 4-quarter recession by the end of Q3 this year, and is likely to continue into the first half of the next. The market needs a stimulus for revival, and that should come from 5G. With the first commercial 5G chipset launch by Qualcomm, the enthusiastic smartphone makers, led by Samsung and the Chinese OEMs and, will ride on the wave of excitement to bring a strong line-up of 5G enabled products to the market in the second half of the year. This will provide another impetus for replacement in addition to the normal Galaxy-iPhone driven cycle. However most users who buy 5G phones will not be able to use 5G services overnight.

Telcos scale back efforts in content and media – Paolo Pescatore, Tech, Media and Telecoms Analyst

Cost of premium content rights continues to escalate. In part driven by new bidders such as the online giants. This will force telcos to rethink their current strategies towards investing in content. Some telcos like AT&T and Telefonica will continue to invest heavily. While others like BT will scale back their own ambitions and take a different approach in this landscape such as partnering more closely with providers like Amazon and Apple.

Amazon will acquire DAZN to create a global sports TV challenger – Ed Barton, Analyst at Ovum

Sport is the missing piece of the content puzzle for the tech giants – but not for much longer if Amazon continues to bid for distributors with existing rights deals, such as Fox’s regional sports networks in the US. By acquiring DAZN, Amazon would gain strong sports rights in key global markets including Germany and Japan. DAZN is committed to the sports market but might find the support and growth acceleration offered by Amazon – and its huge existing subscriber base – too alluring to resist.

We will finally get the message on RCS – Mary Clark, CMO of Synchronoss

2019 is actually going to be the year of carrier sponsored RCS – some 12 years or more since the technology was introduced. Between the launch of the operator led solution in Japan and the many other operators we are talking to about this around the world, I think by the end of 2019 we will see multiple launches of interoperable RCS messaging within countries and across countries, allowing for an improved customer experience as well as commerce.

Bringing people and things closer together with applications – Patrick Joggerst, CMO and EVP of Business Development for Ribbon Communications

2019 will be the breakout year for applications that combine people and things, communicating with each other, whether through voice activated commands (“Alexa, call Mum”), or messaging alerts (“A stranger is on your doorstep.”) The lines will blur and tremendous value will be created when companies design applications, connected on secure networks, that make it as easy to develop a relationship with your smart car, smart home, or smart campus as it is to develop a relationship with human beings. The impact will be substantial and meaningful, with applications that leverage sensors to help us age at home more safely, to get to and from work more conveniently, and to generally reduce the “friction” in life that can lead to exhaustion and despair. Look for major changes to the contact center industry, as virtual and human assistants help millions of people navigate this brave, new hyperconnected world, and look for value creation in securing communications throughout.

Rise of SIM-only contracts could be bad news for operators – Kevin Gillan, Europe MD at SquareTrade

Expect to see the slump in smartphone sales continue, and subscribers increasingly turn to SIM-only contracts in 2019. Operators will need to think carefully about alternative revenue sources to combat the unavoidable slump in contract sales. Additional services such as music, TV or device insurance that will retain customers and improve subscriber engagement, while driving new revenue, will be critical.

Operators fully embrace eSIM for devices and the IoT- Bengt Nordstrom, CEO of Northstream

After years of concern about the impact on their businesses, operators are coming to realise the considerable benefits of eSIM technology. These include simpler provisioning, reduced logistic costs and lower barriers for new use cases. Thanks to the rising number of eSIM use cases plus the launch of major handsets equipped with GSMA-based eSIMs, 2019 will be the year that operators in Europe and North America properly embrace eSIM for both handsets and IoT use cases.

The first sixth/seventh play bundle – Paolo Pescatore, Tech, Media and Telecoms Analyst

Most converged telcos already offer a portfolio of multiplay services including fixed line broadband and pay TV. These telcos include the likes of Deutsche Telekom, Comcast, Orange, and Telefonica. Expect these providers to launch the first sixth/seventh play bundle. This will consist of but not limited to other services such as banking, financial services, utility services and other connected services. Orange is likely to lead the race with its march into financial services.

Microsoft is to finish 2019 as the world’s most valuable company – Wei Shi, Telecoms.com Intelligence Manager

Microsoft has been delivering stellar performances in recent quarters, and has weathered the market gloom better than its main competitors. The strategy shift to becoming a platform and to focusing on cloud and gaming will continue to power its resurgence. Meanwhile, its main competitors on the top of the world’s most valuable company table are seeing their share prices being depressed for different reasons. Apple’s overreliance on iPhone makes it vulnerable when the market sniffs weakness in the shipment of its latest products; Amazon’s AWS is growing slower than Microsoft’s Azure; Alphabet is still a one-trick pony: advertising through Google, which continues to throw the company into troubles. As a matter of fact, Microsoft did briefly become the most valuable company in late November. Next time this crossover happens it may last longer.

Now that they’ve got to actually do it everyone gets bored of 5G and starts banging on about 6G – Scott Bicheno, Telecoms.com Editor

So 5G just ended up being about capacity, efficiency and industrial applications. How boring is that? Once the first couple of 5G conversational gambits at MWC fall flat, people will soon realise it’s much more fun to focus on more distant technology, about which they can make all sorts of utopian predictions without fear of being called out. There will be talk of a wireless neural network connecting everyone and everything to a hive mind overseen by benign artificial super intelligence. What they won’t say is that the ultimate aim of 6G will be to erase all traces of individuality in order to create a global AR/VR Borg that will combine Chinese social credit, American cultural puritanism and European imperiousness to free us all from the burdens of disappointment, inconvenience and choice. Happy New Year!

T-Mobile US won’t be rushed on TV proposition

The T-Mobile US TV launch has been anticipated for some time now, but we’ll have to wait until at least mid-2019 for this dream to become a reality.

After closing the Layer3 acquisition at the beginning of this year, it was assumed T-Mobile US would sharply enter the TV market with another ‘Uncarrier’ move. These disruptive plays have formed the foundation of T-Mobile US’ rise through the ranks in recent years, luring customers away from the still dominant duo of AT&T and Verizon.

But for those who were eagerly anticipating the launch of a TV service, don’t hold your breath. The launch has been kicked back, with no concrete commitments made. Why? Because CEO John Legere has high standards.

According to Bloomberg, people working on the project have suggested the wild-eyed CEO has set the bar so high, the team are struggling to meet expectations. This is not necessarily a bad thing and demonstrates Legere has the patience to produce a good product instead of being rushed to market due to the pressure of other players.

The first moments of life for this product could be the beginning and the end. Such is the competition in the ‘cord-cutter’ space, bringing a poor product to market could result in the venture failing before it has even started. If T-Mobile US wants to make a splash in this pond, he’ll have to meet consumer expectations, most of whom are dissatisfied at the moment.

While cable has had a place in the hearts of consumers for years, this trend is ending with the cord-cutting generation of today. Digital alternatives are wanted by the consumer, though with expensive and sub-standard options on the market as it stands, there is the opportunity for disruption. This is a perfect storm for Legere and the magenta army, but only if the proposition is right.

It’ll have to be cheap enough to attract interest, expensive enough to allow for future content investment, stylish enough to meet the visual and experience demands of the digital natives and have the content depth to attract a broad range of customers. This is a complicated equation to get right, but the rewards are potentially massive. We’re pleasantly surprised the team is taking its time and getting the proposition right.

Another factor to consider is the increased competitive threat from Disney. Disney has already shown its intention to go toe-to-toe with Netflix on the content battlefield, though should this entertainment heavyweight get its own OTT service right upon launch next year, the content gains for everyone else will get considerably smaller.

With a host of services already on the market, and more to come in 2019, T-Mobile US will have to make this Uncarrier move perfect if it wants to cash in on the content bonanza. Consumers are fickle and un-loyal enough to mean late-comers to the market can make a splash, so don’t expect Legere to be rushed with this challenge to the status quo.

AT&T suggests Dish and DoJ are collaborating

With AT&T’s WarnerMedia and Dish arguing over a distribution deal, one AT&T executive has suggested Dish and the Department of Justice are collaborating to reverse the green light on the Time Warner acquisition.

The conspiracy theory is hitting new highs here. AT&T is effectively accusing Dish of actively working to create a no-deal situation in negotiations with WarnerMedia over rights to air HBO content. Although having HBO and Cinemax channels go dark on the Dish service would have a negative impact on business, it does coincidentally work well for the Justice Departments case appeal against the Time Warner merger.

WarnerMedia have been in negotiations over the right to air content, with it claiming it offered to extend the previous contract while negotiating but Dish declined. As a result, HBO content has disappeared from the Dish service.

“Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement,” said Simon Sutton, HBO President and Chief Revenue Officer, in a statement to Reuters.

With the appeal based on the grounds the AT&T acquisition of Time Warner would offer it undue control and influence in the industry, stagnant negotiations certainly add credibility to the objections from the Department of Justice. Manipulating the playing field however, as AT&T is accusing Dish of, is a serious no-no when it comes to the courts.

“This behaviour, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” said a representative of the Department of Justice. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

“The Department of Justice collaborated closely with Dish in its unsuccessful lawsuit to block our merger,” WarnerMedia responded. “That collaboration continues to this day with Dish’s tactical decision to drop HBO – not the other way around. DOJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

The $85 billion acquisition of Time Warner proved to be a messy affair for AT&T. While some would have expected some resistance from the industry, the objections of President Trump seems to have encouraged the Department of Justice to chase down every lead, and make life as difficult as possible. The Department of Justice’s appeal against the approval of the deal, is effectively built on the assumption Judge Richard Leon didn’t know what he was talking about.

Publicity stunt? Monopolistic ambition? Nefarious schemes? Whatever the basis of this story, more fuel has been added onto one of the longest running sagas in the telco industry.

AT&T will launch Netflix competitor next year

In an SEC filing, AT&T has confirmed it will launch a new streaming service focused around HBO content to challenge the dominance of Netflix and Amazon Prime.

While details are relatively thin for the moment, though AT&T Entertainment boss John Stankey formally announced the new offering at the Vanity Fair New Establishment Summit in Los Angeles confirming the Time Warner assets would form the foundation of the streaming platform, with some third-party content building out the breadth and depth.

“On October 10, 2018, we announced plans to launch a new direct-to-consumer (D2C) streaming service in the fourth quarter of 2019,” the SEC filing states.

“This is another benefit of the AT&T/Time Warner merger, and we are committed to launching a compelling and competitive product that will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation loved by consumers around the world. We expect to create such a compelling product that it will help distributors increase consumer penetration of their current packages and help us successfully reach more customers.”

HBO, Turner and Warner Bros content will create an interesting proposition, though this of course relies on a successful merger with Time Warner. As it stands, District Court for the District of Columbia Judge Richard Leon has given the green light for the deal, though the Department of Justice is appealing the decision, suggesting Judge Leon did not appropriately consider the implications of the merger. It looks to be a done deal, though the DoJ is being as awkward as possible.

The question which remains is whether the Time Warner content will be enough, even with its library of titles and additional third-party content. Netflix and Amazon Prime are surging ahead of the competition in terms of subscriptions, 130 million and 100 million respectively, though Disney’s new streaming service could be an interesting offer with the 21st Century Fox programming assets. Hulu might not be on the same scale as these three, but with 20 million subscribers it is certainly a platform worth considering. AT&T is entering a very competitive market.

What this does also offer AT&T is potential entry to the international content market. This is where Netflix is targeting future growth, suggesting at IBC 2018 competitiveness in the US market won’t bring the growth figures investors consider appropriate.

The Time Warner acquisition has been one of the biggest talking points of the industry for the last 18 months, though one of the big questions is whether AT&T can effectively manage a business in such a different vertical. The traditional telco approach to risk and expansion will not work here, for this venture to be a success AT&T will have to be a lot more aggressive and embrace the concept of the fail-fast business model.

With the cards now laid out on the table, it won’t be long before we find out whether AT&T has the capability to effectively diversify outside of the traditional telco battlefield.

Even Snapchat is getting into the original content game

With social networking services seeking to improve the quality of content they host by making their own, even ephemeral messaging service Snapchat has felt compelled to act.

Snapchat has been teasing the idea of creating its own video content for at least a year, but this somewhat counter-intuitive move has taken a while to become reality. There is presumably only a very specific type of video content that is best consumed via a mobile messaging apps and now we finally get to see what that is.

“Today, we’re excited to debut Snap Originals – exclusive shows created by some of the world’s greatest storytellers, with new episodes released every day,” said the announcement. “Our first slate of Snap Originals includes Co-Ed, a new comedy from the Duplass Brothers; Class of Lies, a mystery thriller from one of the minds behind Riverdale; and Endless Summer, a docuseries following rising stars in Laguna Beach — from Bunim/Murray, the creators of Keeping Up with the Kardashians.

“Snap Originals will also feature new Show Portals, letting you swipe up and step inside a scene from a Show to experience it for yourself. Snap Originals will also have Lenses, Filters, and other fun ways for you to share the show experience with your friends.

You can see the promotional video below. It indicates that Snapchat is trying to do some novel things that play to the strengths of video consumed via a smartphone. This trend also reinforces the consensus that video-driven mobile data consumption is growing exponentially and will continue to do so for the foreseeable future.

 

UK news media want tech giants to pay them annual license fees

A UK governmental review into threats to the press, principally from the internet, has led to calls for tech giants to pay for news content that appears on their platforms.

The Cairncross review asked for submissions on the matter earlier this month and has so far received them from the News Media Association, press regulators IPSO and IMPRESS, and the National Union of Journalists. The NMA one is headed “NMA Calls For Licence Fee Agreement With Tech Giants”.

“A fair and equitable content licence fee agreement would ensure that news media publishers are appropriately rewarded for the use of their content by the tech giants, safeguarding the future of independent journalism which underpins our democracy,” opened the NMA press release.

“The primary focus of concern today is the loss of advertising revenues which have previously sustained quality national and local journalism and are now flowing to the global search engines and social media companies who make no meaningful contribution to the cost of producing the original content from which they so richly benefit.”

On one hand this smacks of special pleading by an industry that has found its business model rendered obsolete within a generation. But on the other there are good arguments that the press should receive special treatment given their democratic role in holding power to account and informing the population. This is also a good time to be trying to extract money from tech giants, following the approval of tough new digital copyright rules by the EU.

Given the virtual impossibility of tracking every news link published on every digital platform, the plan seems to be to come up with some kind of arbitrary license fee, essentially a special tax, and impose it on any tech company that is perceived to be profiting from news stories in any way. This cash would then be handed over to news media organisations according to a formula yet to be determined.

One of the potential variables for determining how much of a kick-back a given title would get could be the highly subjective concept of ‘quality. The NUJ and the regulators all dwell on this a fair bit but seem to all have their own definitions of quality.

“The union believes that the best definition of what constitutes ‘high quality journalism’ is work that complies with the NUJ’s long-established ethical code of conduct and the NUJ’s submission to the review highlights that NUJ members work hard to produce quality content for websites and newspapers in extremely challenging circumstances,” said the full stop-averse NUJ.

“Another problem with the move towards accessing our news online is the proliferation of fake news, often disseminated through social media,” said IPSO. “Without a thriving press, there’s little antidote to online disinformation – and the effect this might have on the public’s ability to participate meaningfully in society should be of concern to us all.”

IMPRESS wants the UK government to “create a new legal identity – ‘Public Interest News’ – for the publishers of high-quality journalism. This identity would be distinct from charitable status, so that publishers could still publish political news and comment, but it would have some of the benefits of charitable status.”

By definition a free press should be unshackled by external quality control. The European Commission has recently indicated it would like to regulate newspapers to prevent them criticising it and campaigning organisations such as Hacked Off (which supports IMPRESS, incidentally), want to restrict the press according to their own systems of weights and measures.

But that doesn’t mean we should ignore this issue. Google and Facebook account for a very high proportion of all ad spend in most places they operate and a lot of the traffic they monetise is driven by content produced by professional journalists. Even alternatives to mainstream media are dependent on tech platforms such as YouTube and Twitter. While this internet tax has many flaws it is at least a reminder to the tech giants that if they don’t do more to ensure a healthy and diverse news media environment, governments might take matters into their own hands.

AT&T launches online advertising marketplace Xandr

Two multi-billion dollar acquisitions and a funny name later, the AT&T content business vision starts to become a bit clearer.

AT&T has announced the launch of Xandr, its new content business unit which will combine current capabilities (e.g. AT&T AdWork and ATT.net), the Time Warner and AppNexus acquisitions, as well as distribution partnerships with Altice USA and Frontier Communications into a notable advertising entity. While the initial plan is to capture a slice of the digital advertising bonanza which has been fuelling the monstrous growth at Facebook and Google, long-term ambitions are a lot grander.

“Xandr is a name that draws inspiration from AT&T’s rich history, including its founder Alexander Graham Bell, while imagining how to innovate and solve new challenges for the future of advertising,” said CEO Brian Lesser. “Our purpose is to Make Advertising Matter and to connect people with the brands and content they care about. Throughout AT&T’s 142-year history, it has innovated with data and technology, making its customers’ lives better. Xandr will bring that spirit of innovation to the advertising industry.”

In the first instance, Xandr will combine the distribution and data capabilities of AT&T, with content catalogues from Time Warner, Frontier and Altice USA and the technology platform of AppNexus to make a more complete advertising offering. With its 170 million subscriber base of mobile, broadband and OTT products, and the data collected on these customers, AT&T believes it can offer a hyper-targeted advertising solution and more effective ROI, to rival the likes of Facebook and Google.

But this is only the first step of the business. In the long-run, AT&T hopes there will be an opportunity for advertisers to bring their own data, augment this with the AT&T customer insight to provide an even more targeted and efficient proposition. These are the foundations of what the business hopes will eventually become an advertising marketplace, where all distributors, content owners and advertisers can combine. AT&T will enrich these offerings with its own data, and even offer tie-ins to Insight Strategy Group and Advertiser Perceptions in order to understand the dynamics between consumer sentiment and the advertising experience. We might have been waiting a while for this move in the content space, but it certainly is an in-depth one.

The partnerships with Insight Strategy Group and Advertiser Perceptions are certainly interesting ones as well. Understanding the dynamics between sentiment and advertising can aid advertisers in placing the right type of advert, in front of the right consumer, at the right time. Its a science which leans on art, but has the potential to be very useful.

The AppNexus acquisition was only completed in August for $1.6 billion, having announced the intention to buy the business in June. Through AppNexus, AT&T has been able to bolster its capabilities with an advertising marketplace, which provides enterprise products for digital advertising, serving publishers, agencies and advertisers. With AT&T’s first-party data, content and distribution the offering becomes more complete, as the focus turns to creating a platform that makes linear TV buying more automated and data-driven. Of course, part of this deal relies on the successful acquisition of Time Warner, which is proving to be more difficult business.

That said, while this is a good idea from AT&T to provide additional value to the content ecosystem, there will be complications. AT&T will have to convince competitor media companies to put their premium inventory on its network, while regulation could prove to be a hurdle as well. With data privacy a hot topic in the technology world right now, shifting around sensitive information and augmenting in such a marketplace might raise some concerns from privacy advocates.

Some have questioned whether AT&T’s venture into the content world, but this does look like to be a comprehensive strategy, incorporating several promised aspects of the digital economy. There are of course significant hurdles for the business to overcome, but it is a creative idea, perhaps one which would have been more likely to emerge from other segments of the technology world. More importantly, it is an opportunity for AT&T to provide value above connectivity.

The telcos will always have an important place in the digital economy, providing the connectivity cornerstone, though this runs the risk of utilitisation, slipping down the value chain. Using data for the purposes of advertising has always been a sensitive issue, though should AT&T be able to negotiate the red-tape maze, Xandr will enable AT&T to secure ‘UnTelco’ revenue. This is a case of a telco using what it has to add value to a parallel segment, as opposing to disruption and attempting to steal a limited amount of revenue. Its creating additional revenue streams and value.

Twitter wants your help with censorship

Social network Twitter continues to agonise over how it should censor its users and thinks getting them involved in the process might help.

While all social media companies, and indeed any involved in the publication of user-generated content, are under great pressure to eradicate horridness from their platforms, Twitter probably has the greatest volume and proportion of it. Content and exchanges can get pretty heated on Facebook and YouTube, public conversation giant Twitter is where it seems to really kick off.

This puts Twitter in a tricky position: it wants people to use it as much as possible, but would ideally like them to only say nice, inoffensive things. Even the most rose-tinted view of human nature and interaction reveals this to be impossible, so Twitter must therefore decide where on the nice/horrid continuum to draw the line and start censoring.

To date this responsibility has been handled internally, with a degree of rubber-stamping from the Trust and Safety Council – a bunch of individuals and groups that claim to be expert on the matter of online horridness and what to do about it. But this hasn’t been enough to calm suspicions that Twitter, along with the other tech giants, allows its own socio-political views to influence the selective enforcement of its own rules.

So now Twitter has decided to invite everyone to offer feedback every time it decides to implement a new layer of censorship. Do date the term ‘hate’ has been a key factor in determining whether or not to censor and possibly ban a user. Twitter has attempted to define the term as any speech that attacks people according to race, gender, etc, but it has been widely accused of selectively enforcing that policy along exactly the same lines it claims to oppose, with members of some groups more likely to be punished than others.

Now Twitter wants to add the term ‘dehumanizing’ to its list of types of speech that aren’t allowed. “With this change, we want to expand our hateful conduct policy to include content that dehumanizes others based on their membership in an identifiable group, even when the material does not include a direct target,” explained Twitter in a blog post, adding that such language might make violence seem more acceptable.

Even leaving aside Twitter’s surrender to the Slippery Slope Fallacy, which is one of the main drivers behind the insidious spread of censorship into previously blameless areas of speech, this is arguably even more vague than ‘hate’. For example does it include nicknames? Or as the BBC asks, is dehumanizing language targeted at middle-aged white men just as hateful as that aimed at other identity groups?

Perhaps because it’s incapable of answering these crucial questions Twitter wants everyone to tell it what they think of its definitions. A from on that blog post will be open for a couple of weeks and Twitter promises to bear this public feedback in mind when it next updates its rules. What isn’t clear is how transparent Twitter will be about the feedback or how much weight it will carry. What seems more likely is that this is an attempt to abdicate responsibility for its own decisions and deflect criticism of subsequent waves of censorship.