About once a week now you'll see a legacy broadcast executive take to the media to try and "change the narrative" surrounding cord cutting. Usually this involves claiming that things are nowhere near as bad as the data clearly shows, with a little bit of whining about an unfair media for good measure. ESPN, which has lost 7 million subscribers in the last two years, has been particularly busy on this front. The broadcast giant has been trying to argue that cord cutting worries (which caused Disney stock to lose $22 billion in value in just two days) are simply part of some kind of overblown, mass hallucination.
Speaking to the Wall Street Journal (registration required), ESPN President John Skipper "plays offense on cord cutting" by effectively denying that ESPN is even in trouble. He starts by proudly insisting that the huge losses in subscribers weren't a surprise to the company:
"We stayed pretty calm. [The loss of subscribers] didn’t come as a bolt out of the blue to us. We had been thinking about this. We had a big town hall meeting in December. We had a priorities meeting earlier where we gathered everybody together to try to ground ourselves in our business."
Right, except that former ESPN employees have said ESPN execs weren't even talking about cord cutting as a threat until 2015. The company was also spending hand over fist (like a $125 million update for the SportsCenter set), suggesting they didn't really see the subscriber dip coming. After pretending that cord cutting didn't catch ESPN by surprise, Skipper proceeds to admit that "cord trimmers" (people scaling back their TV packages) are a big reason for the subscriber hit, but that the losses aren't all that big of a deal because the departing customers are old and poor:
"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."
This narrative that cord cutters and cord trimmers are old, poor, and otherwise of no interest is a popular one among cord cutting denialists, but data consistently shows it's simply not true. Cord cutters and cord trimmers tend to be young, affluent consumers who are just tired as hell of paying an arm and a leg for channels they don't watch. And, if recent surveys are any indication, there are a lot of users who don't watch ESPN and are tired of paying for it. In short, most of the data suggests that ESPN has a lot more subscriber defections headed its way with the rise of so-called skinny bundles (an idea ESPN has sued to stop).
When asked what ESPN plans to do to attack the cord cutting trend, you'll note that Skipper's first instinct is to deny that the legacy cable industry really has all that much to worry about:
"We are still engaged in the most successful business model in the history of media, and see no reason to abandon it. We’re going to be delivering our content through the traditional cable bundle, through a lighter bundle, through Dish’s Sling TV, through new over-the-top distributors, and through some content that is direct-to-consumer."
When pressed for what "direct to consumer" services ESPN plans to offer, Skipper can only provide one example: the company's brief experimentation with streaming the Cricket World Cup. That's because ESPN's contracts with cable companies state that if the company actually evolves and offers a direct streaming service, cable companies are allowed to break ESPN out of the core cable lineup. That means more skinny bundles than ever, and an acceleration of ESPN's problems. So, like a child in the dark, ESPN has decided to hide under the covers and pretend the monster under the bed isn't real.
There's no doubt that Disney and ESPN will eventually figure things out and balance the need for innovation with their desire to protect their existing businesses, but it's pretty clear from public comments and past decisions that it's going to be an ugly transition. That transition would be so much less ugly for many legacy broadcast companies if they spent a little less time trying to "correct narratives" telling them truths they don't want to hear -- and a little more time preparing to compete with the internet video revolution.
Historically, the cable and broadcast industry has made a full-time sport out of trying to ignore the changing TV landscape and the threat posed by internet video. There's a fairly significant number of cable and broadcast execs who still believe that internet video, cord cutting, cord trimmers (users who cut back on cable packages) and recent ratings declines are some kind of mass delusion akin to the yeti or the mysterious chupacabra. Others think this recent commotion is just a fad we're going through that will magically resolve once millennials start procreating.
One of the biggest culprits for rising TV prices is sports programming, which is driving more and more users to either internet video, or so-called "skinny bundles" provided by TV operators. Companies like Verizon have gone so far as to boot ESPN from the core cable lineup (and have been sued for it by ESPN). Like so many broadcasters, ESPN apparently hoped things would stay the same forever, but recent subscriber data suggests that's very much not the case. Analysts, in fact, point out that new data indicates ESPN has lost around 7 million subscribers in just two years:
"ESPN topped out with 99 million US subscribers (“subs”) 2 years ago, according to their filings with the Securities and Exchange Commission. Since then, its sub count has been shrinking. It’s currently at around 92 million. That drop in subs has meant a big drop in profitability for ESPN which has been at the heart of its parent company’s profitability."
"Did ESPN or Disney see the cord-cutting decline coming? It doesn’t look that way, despite predictions from a number of market watchers that it was a sizable risk. The sports network reportedly spent $125 million or so on a revamp of the Sports Center set, which seems like an odd investment if you think your viewership is going to fall. Former Grantland editor Bill Simmons also said on a recent podcast that he never heard ESPN executives talking about their concerns about cord cutting until last year."
ESPN now finds itself at a notably tricky crossroads. It could remain comfortably in denial, or it could embrace the modern era and start building its own, more flexible sports streaming video empire. The problem? ESPN's contracts with cable operators dictate that if it launches a standalone streaming service, cable operators will be allowed to boot ESPN from their core cable lineups. That will of course accelerate ESPN's losses, but it would also accelerate ESPN's adaptation to a market evolution the company has refused to take seriously.
from the a-device-is-not-a-person,-even-if-they're-inseperable dept
A plaintiff invoking the Video Protection Privacy Act (VPPA) has just been handed a second defeat in his lawsuit against Cartoon Network. The Eleventh Circuit Appeals Court has reached the same conclusion as the lower court, albeit for different reasons.
Originally written to protect consumers against the release of their VHS rental history, the VPPA has since been invoked in various lawsuits to address the release of protected "subscriber information" to third parties, including more than one against the Blockbuster of today: Netflix.
The most recent VPPA lawsuit against Netflix argued that showing viewing history (upon login to an account) violated the account holder's privacy. The Ninth Circuit Court of Appeals found in favor of Netflix, rather than the person who felt they should still have viewing history privacy despite leaving accounts logged in and/or sharing login information.
This one is a bit more tangled and involves Cartoon Network's phone app, rather than the new face of video rentals. The CN app allows users to view the network's videos. It does not require a login to do so. Because no login was required, the plaintiff felt the app wouldn't gather or disseminate "personal information." Well, the app does collect some information, which is specific to the device, but not necessarily the person.
Cartoon Network identifies and tracks an Android smartphone user on the CN app through his mobile device identification or Android ID, which is “a 64-bit number (hex string) that is randomly generated when a user initially sets up his device and should remain constant for the lifetime of the user’s device.” Cartoon Network keeps track of an Android user’s viewing history by maintaining a record of “every video clip or [episode] viewed by the user” via the Android ID number. Cartoon Network then sends this information to a third-party data analytics company called Bango. Each time a user closes out of the CN app on his Android device, “[a] complete record”—including the user’s “Android ID and a list of the videos he viewed”—is sent to Bango.
Bango, of course, is the subsidization behind the free app.
Bango specializes “in tracking individual behaviors across the Internet and mobile applications . . . [and claims] that its technology ‘reveals customer behavior, engagement and loyalty across and between all [ ] websites and apps.’” Bango uses Android IDs “to identify and track specific users across multiple electronic devices, applications, and services.” Because Bango is apparently “smarter than the average bear,” see The Yogi Bear Show, Trying to Escape Jellystone Park (Hanna-Barbera Prod. 1961), it can “automatically” link an Android ID to a particular person by compiling information about that individual from other websites, applications, and sources. So when Cartoon Network sends Bango the Android ID of a CN app user along with his video viewing history, Bango associates that video history with a particular individual.
It was this tracking that bothered Mark Ellis, who sued on behalf of himself and "others similarly situated."
The decision doesn't head off into a discussion of what is or isn't personally-identifiable and subject to the restraints of the VPPA. Instead, it discusses the difference between a "subscriber" and someone with no viable legal claim at all. The lower court decided Ellis' minimal connection to Cartoon Network (via its free app and his phone's ID) was enough to grant him standing as a "subscriber." But it also found that the information gathered by CN wasn't "personally identifiable" under the VPPA definitions. An Android ID identifies a device, not a person, even if only one person uses it for the lifetime of the device (see also: privacy arguments about license plate readers).
Ellis appealed this finding, and struck out again, but from the other side of the plate.
Mr. Ellis did not sign up for or establish an account with Cartoon Network, did not provide any personal information to Cartoon Network, did not make any payments to Cartoon Network for use of the CN app, did not become a registered user of Cartoon Network or the CN app, did not receive a Cartoon Network ID, did not establish a Cartoon Network profile, did not sign up for any periodic services or transmissions, and did not make any commitment or establish any relationship that would allow him to have access to exclusive or restricted content.
Mr. Ellis simply watched video clips on the CN app, which he downloaded onto his Android smartphone for free. In our view, downloading an app for free and using it to view content at no cost is not enough to make a user of the app a “subscriber” under the VPPA, as there is no ongoing commitment or relationship between the user and the entity which owns and operates the app. Importantly, such a user is free to delete the app without consequences whenever he likes, and never access its content again. The downloading of an app, we think, is the equivalent of adding a particular website to one’s Internet browser as a favorite, allowing quicker access to the website’s content. Under the circumstances, Mr. Ellis was not a “subscriber.”
Having found that Ellis is not a subscriber, the court doesn't weigh in on the issue of the information gathered and distributed by the app. It infers -- by its discussion of previous cases -- that the app behaves more like a website cookie that tracks unregistered users by device info rather than more personally-identifiable data.
Had Ellis increased his level of interaction -- say, by creating an account -- he would have had a better chance at being recognized as a "subscriber." Of course, had he done this, he would have had to agree to CN's terms of service, which likely contains plenty of fine print "disclosing" its relationship with Bango, as well as to what is specifically collected and passed on. So, there would have been no cognizable injury in that case either.
First, Wright takes on the evidence Prenda Law presents, consisting of a "snapshot" of possible infringement in progress. He points out that a time-coded screenshot hardly makes the case that actual infringement occurred.
This snapshot allegedly shows that the Defendants were downloading the copyrighted work—at least at that moment in time. But downloading a large file like a video takes time; and depending on a user’s Internet-connection speed, it may take a long time. In fact, it may take so long that the user may have terminated the download. The user may have also terminated the download for other reasons. To allege copyright infringement based on an IP snapshot is akin to alleging theft based on a single surveillance camera shot: a photo of a child reaching for candy from a display does not automatically mean he stole it. No Court would allow a lawsuit to be filed based on that amount of evidence...
And as part of its prima facie copyright claim, Plaintiff must show that Defendants copied the copyrighted work. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). If a download was not completed, Plaintiff’s lawsuit may be deemed frivolous. In this case, Plaintiff’s reliance on snapshot evidence to establish its copyright infringement claims is misplaced. A reasonable investigation should include evidence showing that Defendants downloaded the entire copyrighted work—or at least a usable portion of a copyrighted work. Plaintiff has none of this—no evidence that Defendants completed their download, and no evidence that what they downloaded is a substantially similar copy of the copyrighted work. Thus, Plaintiff’s attorney violated Rule 11(b)(3) for filing a pleading that lacks factual foundation.
RULE 1. IN ORDER TO SUE A DEFENDANT FOR COPYRIGHT INFRINGEMENT, YOU MUST PROVE THAT THE DEFENDANT DOWNLOADED THE ENTIRE COPYRIGHTED VIDEO.
RULE 2. A “SNAPSHOT OBSERVATION” OF AN IP ADDRESS ENGAGED IN DOWNLOADING AT THAT MOMENT IS INSUFFICIENT PROOF OF COPYRIGHT INFRINGEMENT
This sort of lawsuit has almost always relied on little more than a snapshot and an IP address as "evidence," the latter of which has been shot down by multiple courts for its inability to correctly identify alleged infringers. Now, Wright is throwing out Gibb's precious bundle of snapshots as well.
Wright tackles the IP address issue next, under a heading titled "Lack of reasonable investigation of actual infringer's identity." He points to earlier explanations by the plaintiffs as to how they arrived at the identity of the alleged infringer and picks apart their "methodology." Here's Ingenuity 13 LLC's explanation of their deductive process.
Though the subscriber, David Wagar, remained silent, Plaintiff’s investigation of his household established that Benjamin Wagar was the likely infringer of Plaintiff’s copyright. As such, Plaintiff mailed its Amended Complaint to the Court naming Benjamin Wagar as the Defendant in this action. (ECF No. 14, at 2.)...
In cases where the subscriber remains silent, Plaintiff conducts investigations to determine the likelihood that the subscriber, or someone in his or her household, was the actual infringer. . . . For example, if the subscriber is 75 years old, or the subscriber is female, it is statistically quite unlikely that the subscriber was the infringer. In such cases, Plaintiff performs an investigation into the subscriber’s household to determine if there is a likely infringer of Plaintiff’s copyright. . . . Plaintiff bases its choices regarding whom to name as the infringer on factual analysis. (ECF No. 15, at 24.)
"Factual analysis?" Really? Wright calls it for what it is.
The Court interprets this to mean: if the subscriber is 75 years old or female, then Plaintiff looks to see if there is a pubescent male in the house; and if so, he is named as the defendant. Plaintiff’s “factual analysis” cannot be characterized as anything more than a hunch.
Wright gives Ingenuity 13 LLC several suggestions on how to narrow this list of suspects down, including "wardriving" to check whether the WiFi connection in question is open, whether several downloads have occurred at the same IP address, or just a good old-fashioned stakeout.
Such an investigation may not be perfect, but it narrows down the possible infringers and is better than the Plaintiff’s current investigation, which the Court finds involves nothing more than blindly picking a male resident from a subscriber’s home.
This sentence is damning enough, but the followup is the killer:
But this type of investigation requires time and effort, something that would destroy Plaintiff’s business model.
Wright notes the difference between criminal and civil suits that rely on IP addresses for identification. In criminal proceedings, the court usually can rely on the fact that an actual investigation has taken place prior to the charges being brought. In a civil case, the court has no such guarantee, but that doesn't mean the judicial system has to entertain these claims.
[W]hen viewed with a court’s duty to serve the public interest, a plaintiff cannot be given free rein to sue anyone they wish—the plaintiff has to actually show facts supporting its allegations.
Back to TorrentLawyer with another addition to California federal court case law and another blow to trolling-as-business-model.
RULE 3. BEFORE SUING A DEFENDANT FOR COPYRIGHT INFRINGEMENT, YOU MUST DO A “REASONABLE INVESTIGATION” TO DETERMINE THAT IT WAS THE NAMED DEFENDANT WHO DID THE DOWNLOAD, AND NOT SOMEONE ELSE WITH ACCESS TO HIS INTERNET CONNECTION.
All in all, this smackdown is going to make copyright trolling in California a rather unprofitable venture. Expect to see some venue-shifting in the future. Unfortunately for Ingenuity 13 LLC, it's already entrenched in a losing battle, and it's going to get even worse. Wright also had some choice words for Brett Gibbs' misconduct. Two allegations stem from his failure to comply with the Court's orders to cease discovery. Gibbs first told the court the plaintiffs had not obtained any information about the subscribers in question, before later regaling the court with tales of its efforts to obtain the forbidden information when responding to Orders to Show Cause.
The third allegation is more serious, alleging fraud on the court. This circles back to the mysterious "Alan Cooper."
Upon review of papers filed by attorney Morgan E. Pietz, the Court perceives that Plaintiff may have defrauded the Court. (ECF No. 23.) At the center of this issue is the identity of a person named Alan Cooper and the validity of the underlying copyright assignments. If it is true that Alan Cooper’s identity was misappropriated and the underlying copyright assignments were improperly executed using his identity, then Plaintiff faces a few problems.
First, with an invalid assignment, Plaintiff has no standing in these cases. Second, by bringing these cases, Plaintiff’s conduct can be considered vexatious, as these cases were filed for a facially improper purpose. And third, the Court will not idle while Plaintiff defrauds this institution.
Wright then orders Gibbs to show cause why he should not be sanctioned for this misconduct, while declining to extend the sanctions to AF Holding and Ingenuity LLC -- based on Gibbs' "fiduciary interest" in the plaintiffs and the likelihood that the plaintiffs are "devoid of assets."
Wright gets in a little dig at the still-nonexistent Alan Cooper:
If Mr. Gibbs or Mr. Pietz so desire, they each may file by February 19, 2013, a brief discussing this matter. The Court will also welcome the appearance of Alan Cooper—to either confirm or refute the fraud allegations.
Things were already looking pretty grim for Brett Gibbs, but the worst may still be on the very near horizon:
Based on the evidence presented at the March 11, 2013 hearing, the Court will consider whether sanctions are appropriate, and if so, determine the proper punishment. This may include a monetary fine, incarceration, or other sanctions sufficient to deter future misconduct. Failure by Mr. Gibbs to appear will result in the automatic imposition of sanctions along with the immediate issuance of a bench warrant for contempt.
What started out for Gibbs and co. as a route to easy money has morphed into possible jail time and a complete undermining of the "business model" Prenda Law, AF Holdings and Ingenuity 13 LLC hoped would make them, if not actual millionaires, at least slightly richer. And so another chapter of the Gibbs/AF Holdings/Prenda Law saga concludes, leaving us with the sort of cliffhanger that only those whose names haven't been listed above will enjoy seeing played to its conclusion.
Some are making note of the fact that, for the first time, "circulation revenue" is higher than advertising revenue for the NY Times. Of course, it appears that much of this is due to a sharp drop in ad revenue. That's not to say there hasn't been an increase in circulation revenue -- which includes both print and digital. The NYT raised print prices, and it didn't seem to scare people off that much. And it's continued to sign up people to its not-really-a-paywall. It's so easy to get around the paywall that, at best, it should be considered a nagwall for a donation -- with many people happy to pay something.
Still, one has to wonder if some of the softness in the ad side of the business is caused by the fact that there's this nagwall that can sometimes get in between readers and the site. It certainly could be limiting advertisers' willingness to sign onto campaigns. And, there are still significant questions about the sustainability of the NY Times in its current structure. Because there's still this bottom line: for the second quarter, the company had an operating loss of $143.6 million. We can argue all you want over paywalls vs. advertising and whether or not one side is up or one side is down, but if the company isn't make money, the whole system has to be in question.
"The decision announced Wednesday morning represents a hedge, an operating model that puts maximum flexibility in the hands of the leadership of the newspaper. As the digital czar Martin Nisenholtz said over and over in a meeting about the decision on Tuesday, "the idea is to maximize revenue" with an eye toward the cyclical state of the advertising business. With Times Select, The New York Times lost eyeballs at precisely the time when sheer tonnage of readers became the defining metric in advertising. By building a metered system, the executives have installed a dial on the huge, heaving content machine of The New York Times. Access can be gradually ramped up or down depending on macro trends in the market. Given the dynamic state of the advertising business and how quickly things change on the Web, not so dumb when you think about it."
Sounds great, right? Except that where they see flexibility, I see conflict. They've saddled themselves with two opposing business models: the old one, where the audience is the product and the advertisers are the customers, and the new one, where news is the product and the audience is the customer. The "dial" is going to become a tug-of-war between an advertising team that wants more eyeballs to sell and a subscription team that wants more walled-up content to sell. It will be virtually impossible to make business decisions that are good for both sides, and by trying to have the best of both worlds they may end up with no growth for either.
One could argue that this conflict has always existed in news organizations, but it's never been as charged as it's about to become at the Times. In the past, readers were readers, and increasing circulation was always the number one goal. But a newspaper that sacrifices casual readers, challenges the loyalty of dedicated readers and reduces its value to advertisers, all in one fell swoop, and succeeds? I'll believe it when I see it.
Mobile operators around the world have been pushing the sales of data modems and laptop dongles in a bid to grow their subscriber figures and revenues, and they've largely been successful. But Comscore says that growth in data-modem subscriptions in the US slowed significantly in the fourth quarter, and it puts the blame on cutbacks in discretionary spending. That's one likely explanation, but another is that the market for people who want to spend $60 per month on mobile broadband is pretty much tapped out. The Comscore report says that mobile data users didn't add to their overall internet usage, but rather just shifted some of their time from fixed to mobile connections, making the mobile service one of convenience. When that convenience costs more than most home broadband connections, and can generally deliver lower speeds, it doesn't seem particularly surprising that user growth doesn't continue to skyrocket.