Tag / Digital streaming

by Frank Maduri

Content Wars: Disney Gains Full Control Of Hulu

The content wars in the media landscape, a frequent topic of past articles on this site, took a surprising turn on Tuesday with the news that Disney has obtained what the press release deemed as “full operational control” of streaming service giant, Hulu.

The analysts and other media experts had predicted that Comcast would try to oppose ceding full control of Hulu to Disney, especially given their contentious recent bidding wars for Sky TV and 21st Century Fox. Comcast owns 31% of Hulu through their subsidiary business unit, NBCUniversal.

The deal announced Tuesday between these two media goliaths is a “put/call”. The terms of the deal translate to provide mechanisms to both sides. Comcast could by January 2024 initiate the mechanism that would require Disney to purchase their 31% stake at a market valuation determined by independent analysts.

Furthermore, Disney could require Comcast to sell their stake if certain market factors are realized in the future. It depends upon the performance of the service and reports state that Disney has committed to a minimum value of $27 billion. Disney stock jumped Tuesday to over $130 per share and is nearing an all-time high based on the Hulu acquisition news.

The agreement also includes that Comcast will continue to stream Hulu over the X1 set top box and that Comcast has extended the rights to their NBCUniversal content to be streamed through Hulu for another three years. However, the fine print of the deal also allows for some of that content to be pulled in a year to be streamed through a Comcast streaming service at a later point.

The timing was very good for Disney as they needed to gain full control of Hulu at this point in time with the planned launch of the streaming service known as “Disney+” by the end of this year. Some analysts have predicted that the Hulu platform is where Disney will put some of their “non-family” content, which would make sense.

The deal makes sense for Comcast because the advertising revenue and the subscription bases for Hulu and Hulu Live TV services will both grow exponentially with the trend toward “cord-cutting” in the next four to five years. They will also have options on whether they want to pull their NBC and Universal based content in the future, once their streaming service is optimized. In the meantime, they will get a deal for sharing that content with Hulu from Disney. Comcast is going to get a big check from Disney in five years.

Disney has now stated that they plan to position a future offer to customers that “cord-cut” from cable and satellite a package to buy two or all three of their streaming services: Disney+, Hulu, and ESPN+ for a bundled rate. That is an interesting approach and signals the way of the future for television that is becoming increasingly customized and internet streaming reliant.

The agreement today puts pressure on the other players in the industry, especially CBS, which has to figure out how they will grow to compete in a world that is being dominated by Disney and Comcast. The DirecTV Now service is losing subscribers already to Hulu Live and You Tube Premium because DirecTV changed their packages for channel offerings and increased prices.

These changes alienated long-time customers and drove them to seek alternative service providers with better rates and packages. This deal today is only going to strengthen Hulu and their tiered offerings: $5.99 per month for commercials, $11.99 per month for commercial-free streaming, and $44.99 per month for Hulu Live television service which is a 60 channel package.

Disney took another step toward dominating the relatively new industry space of the subscription streaming services. It remains to be seen how the rest of the industry will respond, how it will impact the NBCUniversal streaming service set to launch in 2020, and what Comcast will do with the money it will receive for their stake in the “put/call” arrangement they made in five years.

One thing is clear: times are changing in the television programming industry.

(Some industry background information courtesy of: Fox Business, USA Today, and CBS Market Watch)

by Frank Maduri

Music Modernization Act: Fate Hinges on Amendment

The Music Modernization Act (MMA) had been on a fast-track pace through Congress with the next stop set to be vote on the Senate floor. The legislation seeks to redefine copyright laws for songwriters, song publishers, and song producers in the age of digital music content.

However, the fate of the bill is now in doubt because of an amendment that an interest group from within the industry seeks to attach to the legislation. This amendment has the aim of creating a “collective” of songwriters who would negotiate their fees as a group. This development throws a wrench into the process for this bill and could send it back to “square one”.

The original intent of the MMA was to have Apple Music, Spotify, Amazon, and other streaming music services work with publishers to manage the licensing process of music in a collaborative way. The main issue being that in the age of streaming music, songwriters are leaving the industry in droves because they make literally no money.

The antiquated laws around the licensing of songs resulted in songwriters being paid pennies for material that they produced. It has resulted in a situation in the music industry that is in dire circumstances and in need of reform. It is estimated that 80% of songwriters have left the industry. The royalty rates for streaming are drastically lower than the royalties made back when an artist recorded the song for placement on their respective album. The archaic laws prohibit songwriters from reconfiguring contracts or entering new arrangements with streaming services to potentially earn a higher royalty.

My own experiences in writing music reflect that, I chose to not pursue the industry after copyrighting several songs because the return on the investment was just not viable. The current conditions in the industry make it very hard for a new songwriter to gain traction because the income scale is completely imbalanced. The writer also has to pay self-employment taxes on the little income earned in the process of publishing the song and marketing it to be recorded.

This scenario also has spawned a feature length movie titled “The Last Songwriter” which was featured at the Nashville Film Festival winning several awards in the festival circuit. The film was produced by Netflix and sheds light on the current state of dysfunction within the music industry as it relates to paying the songwriter.

The argument can be made that the “big time” established songwriters will make out very well if the MMA is passed into law because they will receive larger royalties for their hit songs. The less established, or new entrants into songwriting will still face difficulties staying in the industry with bills to pay and families to support.

The emergence of this amendment, which some claim will help “level the playing field” and others claim will make the situation more acrimonious; in the end analysis could cause the Senate to vote the bill down. A week ago the MMA looked like a “sure thing”, that it was going to sail through passage and change the way the music industry operates with respect to the pay scale for the songwriters, publishers, and producers.

It is a sad state of affairs because the songwriter is the backbone of the industry, without the songwriter the artist has no material with which to work. The songwriter generates the material which then becomes a finished product. It is similar to eliminating the source of a key ingredient like wheat and expect a baker to make bread.

The music industry is struggling to adapt to the changing ways that people are listening to content, and the lack of legislation like the MMA only exacerbates those problems. The listener wants “on demand” and customizable approaches to music, nobody listens to the traditional radio for the most part, and the rights to songs cannot be scaled the way they were twenty or thirty years ago.

Please learn more about this legislation and contact your local Congressional representatives, contact your Senators. The fate of the music we all enjoy hangs in the balance.

(Some background information courtesy of Billboard.com, Rolling Stone, Digital Music News, and www.congress.gov)