Wible's Weekly-Janney/MediaEntertainment - Retrans Regulation, IPTV Updates and Public WiFi

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Welcome Tony Wible, our newest MediaBizBlogger.

  • Retrans – Growing retransmission fees have prompted the American Cable Association to urge the FCC to end coordinated retrans negotiations. The ACA claimed coordinated actions by separately-owned, same-market broadcasters is resulting in anti-competitive behavior, leading to 22% higher fees than if each station had negotiated on their own. We could start to see increasing pressure on broadcaster by technologies such as ad-skipping and Aereo. GCI implied that retrans fees increased 37% in 4Q versus the prior year. DISH had mentioned that GCI had demanded a 300% increase in its recent negotiations, as well as disabling the Auto Hop ad-skipping feature in its Hopper DVR.
  • Public WiFi – The FCC wants to create public access WiFi networks, powerful enough to rival the mobile data networks in operation today. As a result, the wireless industry, which relies on data for much of its growth as smart device adoption and usage increases, kicked off a lobbying campaign to persuade policymakers to reconsider the idea. Tech firms, including GOOG and MSFT are in favor of a free public WiFi service, saying it would benefit most Americans (especially the poor) through increased innovation. This proposal could have broader consequences, including becoming a free alternative to MVPD broadband service for certain users. MVPDs are also adding WiFi hotspots for their subscribers. GOOG is starting a WiFi trial in New York's Chelsea neighborhood, complementing its expanding broadband fiber ambitions.
  • IPTV Updates – Free streaming is making inroads with TV viewers, although the usage still heavily favors SVOD, according to NPD. According to the report, 12% of US TV viewers reported streaming TV shows for free, with Hulu topping the list (43% of free streams), followed by broadcast network sites (30%). The vast majority (83%) is viewed on a computer, as opposed to mobile. Free streaming of movies is getting a boost on YouTube, where the availability of pirated full-length films appears to be increasing (generating hundreds of millions of views over the past year), according to the WSJ. Interestingly, instead of forcing YouTube to take down the content, some content owners seem to be allowing it, opting to have YouTube monetize it through commercials, with a revenue share back to them.
  • Online Advertising – FB is preparing to become a more significant challenge to the dominance of GOOG in online advertising through the purchase of MSFT's Atlas ad-serving business, according to media reports. FB could use the technology to better measure effectiveness and use FB data in a controlled way without exposing the data to intermediaries. Atlas competes with GOOG's DoubleClick business and will likely see more investment under FB. Separately, GOOG and YHOO struck a deal to show contextual ads from AdSense partners on YHOO inventory of content, which will also include mobile. GOOG is making a bigger push in mobile and recently updated AdWords to allow advertisers to manage campaigns across multiple devices and to narrow the CPC gap.
  • Privacy – Consumers are becoming more aware (and wary) of what information they provide online and are looking for new tools to protect their data and make them "invisible" to data mining efforts, according to a report by Ovum. The study notes that 68% of those surveyed would select a do not track option if available and goes on to predict that this trend will result in a "data black hole" that will reduce the effectiveness of targeted advertising. We believe that this could put some pressure on ad pricing metrics, although many consumers may actually opt in because the increased relevance of target advertising.

Tony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup Investment Research—most recently covering the Broadcasting and Entertainment Services industries.
Tony can be reached at twible@janney.com.

Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Disclosures may be reviewed at Wible's Weekly.

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