Month / June 2014

by Frank Maduri

TV Wars: Aveo Loses Supreme Court Decision – Follow Up

In a follow up to a previous piece I did on this blog entitled “TV Wars”, the Supreme Court ruled today that the service known as Aveo should be required to pay licensing fees to broadcasters in order to display copyrighted programming. Aveo is a service that transmits broadcasts of TV programming over the Internet via their technology, which subscribers pay a fee to utilize.

 

The argument from Aveo’s side was that their service did not broadcast the programming to everyone over the Internet that the programming was provided only to their subscribers, who paid a fee to receive the service. Since it is not a public broadcast, then they should not be required to pay the licensing fee. The argument continued that they merely rented a small broadcast antenna to each of their subscribers to access the copyrighted programming, which should not require that they (Aveo) pay a licensing fee to the broadcasters.

 

The Supreme Court disagreed, they ruled that the Aveo service was just like a cable television service, which under the current system, are required to pay licensing fees to broadcasters in order to display copyrighted programming. Therefore, Aveo will be required to pay licensing fees to the broadcasters, which they cannot afford to do.

 

It is important to note that if the Court had ruled in favor of the current setup of Aveo, it would have completely altered the landscape of the television industry. A favorable ruling for Aveo would most definitely trigger the major cable television players to develop Internet based antenna rental services similar to Aveo in order to circumnavigate the payment of licensing fees.

 

A favorable ruling for Aveo also would have created a situation where the network television broadcasters would stand to lose huge amounts of licensing fee revenues. It would have created an environment where many people would continue to cancel their cable television plans, known as “cord cutting”, which would have created losses of revenue for the big cable television service providers such as Comcast and Time Warner Cable.

 

Status Quo

 

Instead, the ruling today effectively retains the current system and most likely marks the end of the Aveo service. Their CEO essentially stated that the ruling makes their business model unviable moving forward. The technology that Aveo developed does have an inherent value, which the ownership of Aveo will have to determine if they are going to sell off to an interested party in the future.

 

The ruling today by the highest court in the land also purposefully went out of the way to create a distinguishable difference between the Aveo service and other Internet based entertainment providing services and cloud based services. It is unclear at this point if they went far enough to make that differentiation and only future judiciary activity will determine that scenario.

 

This portion of the ruling opinion of the high court would deal with only certain new technologies and not others that I had mentioned in my original article on this topic. The larger internet based entertainment programming services providers such as Netflix and Amazon already pay huge licensing fees to the broadcasters and movie production companies to obtain the rights to stream copyrighted programming to their subscribers.

 

Big Business

 

In fact, the recent agreement between Amazon and HBO which provides the Amazon Direct internet streaming service with the exclusive rights to a huge catalog of HBO produced series was a deal with significant impact for everyone involved. Those types of exclusive streaming rights deals will only continue in the future, as the popularity of services such as Netflix, Amazon, and now Google’s Fire TV will continue to increase their respective subscriber bases.

 

These types of exclusive rights deals with the big internet streaming services provide a huge injection of revenue dollars to the broadcasters and the networks involved such as HBO or CBS. In fact, CBS syndicates and produces so many different series across a variety of networks that their stock increased on the news of the favorable Supreme Court ruling today.

 

In my view, that is what I take away from the decision today by the Supreme Court that the consumer in some ways is the loser here too. The Aveo service, as the dissenting opinion of the Court explained, was not providing a public display of content rather the service was provided to subscribers. Therefore, the three dissenting and more conservative justices felt that the subscription fee negated the need for Aveo to pay licensing fees to the broadcasters.

 

The Dissent

 

I would tend to agree with the dissenting opinion, the Aveo service was providing the consumer with another option to view broadcast television programming. It was providing choice and fostering competition in the Internet subscription based entertainment space. This decision is going to dismantle Aveo, and in many ways destroys the very ingenuity and entrepreneurial spirit which America should espouse.

 

I think of all the time, money, and energy that the employees and developers at Aveo dedicated to designing and marketing their service, which is a unique technology, and I think the Court ruling sends the wrong message to the small business owner or the entrepreneur. This type of service should be promoted and not dismantled, other business owners could see this news today and decide not to move forward with a new product or an idea for a new service, and that can and will be detrimental to our collective best interest in American society.

 

However, it should also be noted that I am in no way in favor of a service that would infringe upon the copyright protections that these broadcasters and networks operate within. The networks and television broadcasting industry spends a significant amount of money on the production and the copyright legal protections for their programming. I am in no way promoting a service which would violate any copyrighted programming and broadcast these programs to a general public audience in violation of federal laws.

 

In relative terms, as a writer, if someone took my copyrighted written material and put it out into the general public in a way which misrepresented me and violated my rights that would be a huge issue. However, that was not the issue at hand here, because the subscription fee and the manner in which the programming was presented by Aveo with integrity made this case a difficult one for the judiciary system necessitating a ruling from the Supreme Court.

 

This decision effectively rewards the big broadcasting companies and eliminates a source of competition for the huge cable television operators. We should be fostering competition in the marketplace, yet between mergers and acquisitions and increased regulatory activity, the government is eliminating competition from our marketplace. This type of activity could prove ultimately detrimental, as we have seen in the course of history with monopolies in various industries in the past.

 

This ruling today is being reported by the media that it has moved the TV landscape into a state of clarity and removed some ambiguity. I disagree with that sentiment, I think the ruling today was only the beginning of another mountain of litigation driven by the broadcasters and networks and the groups which represent their collective interests with the goal of elimination of competition from the marketplace.

 

This ruling did not push our court system towards the end of the TV wars, in fact, I would argue, it is just the beginning.

 

 

(Some background information courtesy of Yahoo! News)

by Frank Maduri

Supreme Court Decision on EPA Clean Air Act: Follow Up

In a follow up story to a previous article I wrote on the regulation of greenhouse gas emissions by the Environmental Protection Agency (EPA) via the Clean Air Act the Supreme Court announced their ruling today. The Court ruled, in a close decision, to allow the EPA to continue to oversee the regulation of greenhouse gases particularly in the industry areas of energy and other industrial manufacturing.

 

The decision from the high court did place some limitations on the authority of the EPA, but for the most part, it upheld the notion that the EPA had the authority to regulate the air emissions policies relative to current and future proposed manufacturing plants.

 

In my initial article on this subject, the industry leaders in many segments related to energy and other industrial manufacturing groups were upset regarding the requirements instituted by the EPA relative to the construction of new coal plants and other energy generating facilities.

 

These groups maintained then, and their position has not changed despite the ruling today, that the EPA overreached their authority in interpreting the Clean Air Act and that the proposed limits on carbon dioxide emissions would require new technology which was cost prohibitive. They argued that only Congress, and not the EPA, had the authority to enact any such regulations on their business.

 

Furthermore, these industry groups asserted that these changes would result in a decrease in new coal plant construction and a net loss in jobs. They challenged the EPA in multiple lawsuits which were combined and heard as one case by the Supreme Court, which reached the final verdict earlier today.

 

Big Impact

 

The ruling today will have a big impact moving forward on the future of coal and other energy producing plants. The industry is looking at having to adapt and change their normal business practices, which will have a cost both in time and money to those respective manufacturers.

 

I had mentioned in my prior article that these energy producers may attempt to pass along the increase in the cost of these plant upgrades to the consumer. That would mean increased energy costs for many already cash-strapped American families.

 

The one section of today’s ruling where the Supreme Court provided some limitations to the EPA was with regard to the size of the industry types they could regulate within the confines of the Clean Air Act.

 

Initially, the EPA was seeking to regulate entities which emitted 100 – 250 tons of greenhouse gases and had to increase that amount to 75,000 – 100,000 tons of emissions in order to adequately address the issues with air quality. The Supreme Court decision today reinforced that methodology in their opinion the EPA does not have the authority to start mandating that business across a wide scale have to endure a permitting process.

 

In response to the assertion that the agency did not have the proper authority to require these changes to the policy, the Court wrote that, in essence, the EPA was acting in the best interests of Congress and the American people by regulating this area and saving the costs of creating a separate government program or regulatory entity to do so.

 

This decision has huge positive environmental protection ramifications because it provides the EPA with the authority to regulate the entities which contribute the most carbon emissions into our air. The effective management of these emissions will have a dramatic impact on the protection of the ozone layer and reverse the negative aspects of global warming and climate change.

 

The Future

 

The EPA, through the ruling today, will be able to regulate the entities responsible for 83 percent of greenhouse gas emissions in the United States. The industry groups involved and their representative interest groups are obviously unhappy with the decision today, and they will mobilize a concerted effort to file more legal suits and injunctions in an effort to reverse this decision.

 

In the end, whether you think the EPA overreached its authority or not, the vast emissions of huge amounts of carbon dioxide and other greenhouse gases has been linked in numerous scientific studies to have a negative effect on the quality of our air.

 

I also think that the government should look into some sort of cap on the amount the energy industry could potentially raise on rates to the consumer. I understand they have to maintain profitability, but it would be patently unfair to pass along a large percentage of the cost to the average American family based on these new potential regulatory requirements.

 

A government sanctioned regulatory process, whether it is via the EPA or Congress, was bound to be instituted based on the evidence at hand. I know I would like our children and future generations to be able to take a deep breath when they turn 30, and I think we all have a vested interest in having cleaner air. If you disagree with that sentiment, then this society has more problems than I initially thought we had.

 

(Statistics and some background information courtesy of The Washington Post and Associated Press)

 

 

by Frank Maduri

Gender Based Marketing

The concept of gender based marketing is not a new strategy to sell products or develop new business but it is now being utilized with greater effectiveness. The enhancements to this marketing principle are driven largely by the incredible amount of data which can be populated to provide businesses with very accurate trend analysis.

 

It does not take a marketing genius to figure out that most businesses will craft a product message based on the target gender market: beer commercials tend to skew toward men, while most cleaning products tend to be geared toward a female consumer target. The role of gender bias has been a hot button topic in our societal discourse as well, whether some of these product campaigns are based on preconceived notions about the role of men and women respectively in Western society.

 

However, I will be focusing on the changing patterns of the gender based marketing strategic concept as it relates to the shifting demographics in the United States. In particular focus is the impact of the economic recession and the evolving job market which caused a scenario where American society now has more female business travelers than at any other point in history.

 

The recessionary economic activity caused businesses to react by cutting costs to maximize profit margins. The easiest way to achieve this profit retention is to cut jobs and close facilities or office branch locations and consolidate your respective cost factors. In some business types, that included cutting the jobs of higher salaried employees in order to protect profitability during the economic downturn.

 

Gender Wage Gap

 

All of these cost cutting maneuvers in the business world created conditions where many men found themselves out of work, and women found themselves in the role of primary financial providers for their respective families. This shift brought the issue of the gender wage gap back front-and-center to the American national consciousness. The “equal pay for equal work” debate sprang up on the national media news outlets, and still is a largely unresolved issue facing our society.

 

The labor market is slowly starting to rebound, but even in the current conditions, the months of economic stagnation and stubborn job creation has changed the American family dynamic. I have read several studies which demonstrate that the stereotypical gender roles have changed with men taking on more of the domestic duties of grocery shopping and child care.

 

Meanwhile, the woman’s role in the family unit has shifted and the business travel industry and the hotel industry have made certain marketing program changes to appeal more to the increase in female business travelers. The major hotel chains have made adjustments to their floor plans, bathroom layouts, and other amenities to cater to an influx in female business executives.

 

The major hotel chains have also made changes to their respective restaurant menu offerings to provide more healthy meal options which appeal to women. Even the lighting and the colors of some hotel rooms and suites have been altered to suit this change in the customer demographic for business travel today.

 

The “Mr. Mom” approach

 

The grocery stores and the manufacturers of food and beverage products have all made marketing plan alterations and advertising changes to appeal to the growing prevalence of male shoppers. The study data available varies on the percentage of men identified as the primary shopper for their respective family in the U.S. from 31% to as high as 51%. The larger number was quantified in a survey done by Yahoo! which also studied male shopping trends.

 

The increase in male primary shoppers is driven by a few factors but most notably the increase in the unemployment during the peak of the recession, the increase in underemployed males who are working shift type jobs to replace lost wages, and the increase in the number males who primarily work from home or telecommute.

 

Both the grocery store chains and the food product manufacturers have responded to this shifting demographic by changing the layouts of the stores to grab the attention of the influx of male shoppers who are also prone to impulse buying. Most stores have what is known in the industry as “The Man Aisle” which is filled with all types of products which appeal to male shoppers.

 

The consumer goods product giant, Procter & Gamble, even has a website called “Man of the House” which features products geared toward the male consumer as well as recipes and health tips geared toward helping men in this new shift in their domestic responsibilities.

 

The U.S. Grocery Shopping Trends Study displayed that women shoppers are 12% more likely to produce generic or store brand products than male shoppers. Male shoppers are statistically more likely to be loyal to a particular national brand and will pay more to get that brand even if a comparable product made under another brand is reduced in price.

 

This study also revealed that male shoppers spend $10.00 more on an average shopping trip than a female shopper, and that male shoppers frequently had no shopping list and carried no coupons. More male shoppers use the self-checkout option than female shoppers, but females placed a higher value on customer service than males.

 

Other studies have demonstrated that the words “low calorie” and “diet” do not test favorably at all with male shoppers. This was the driving principle behind the Dr. Pepper Snapple Group launching a line of new diet sodas they decided to call “10” so that it reflected the amount of calories in the beverage but did not emphasize the term “diet” in the labeling or the promotion.

 

In my research I found another case study of a frozen yogurt chain in the Midwest which decided to do a social experiment by promoting a new low fat product. When the male shopper came into the yogurt shops with their wives or girlfriends the ladies would try the low fat product offering and 90% of the males would not try it.

 

The frozen yogurt chain took the same product which was also high in protein, and three weeks later they promoted the same product as “high protein” and close to 90% of the male shoppers tried it and were repeat customers. Many food manufacturers are following the same positioning to appeal to men, developing high protein concepts that are low in fat and promoting them as “high protein”.

 

Many products such as Hamburger Helper have changed their packaging to darker colors with bolder graphics to gain the attention of the increased number of male shoppers. The laundry detergent brand, Tide, has partnered with the NFL and is in the midst of an ongoing promotional campaign to make doing laundry more “macho”.

 

Influencing Change

 

It has been listed in several studies that about 41% of men make the meals at home. The food product manufacturers have taken notice of this but initially had offered quick, processed meal solutions to try to grab market share of this shift in cooking responsibilities.

 

However, those efforts largely failed because several studies show that male shoppers look for rather different elements in their meal purchases than the stereotypes would seem to indicate.

 

In fact, a Pew study recently indicated that 95% of men consider the nutrient values a meal will provide to their family. This study also revealed that 90% of men prefer to use fresh ingredients and that 86% choose to limit the use of processed food in their meal selections.

 

The food companies have quantified all of this data and future food product launches will certainly reflect this criteria. The male shoppers have influenced change in the marketplace.

 

In the end, the change in gender demographics has had a profound impact on not just hotels, the travel industry, food products, or grocery store layouts. It has had a profound effect on our society, on the family unit, and on the gender roles that were once inherent in Western society. We will not know exactly the implications of these changes for many years, but what we do know is that these shifts are here to stay as technologies change and impact both the job market and our society in the years to come.

(Statistics and some background information courtesy of Pew Study, US Grocery Shopping Trends Study, ESPN.com, Yahoo! News, Food Product Design, Specialty Food News, and CBS News)