Viacom May Bid for EchoStar

A strange twist of business fate may lead to Viacom becoming a suitor for EchoStar reports mergers and acquisitions specialist publication, MergerMarket.

The reason for the surprise is that Viacom and EchoStar are currently locked in legal action. EchoStar Satellite is claiming that Viacom is illegally trying to force EchoStar to buy Viacom-owned MTV and other cable channels at unfair prices in exchange for the right to carry 18 CBS-owned stations in 15 big-city markets. One effect of the dispute might be that 1.6m EchoStar subscribers will not get to see the Super Bowl this coming Sunday.

Researching the pieces, Rick Appin at MergerMarket took a sounding from the markets and found that they felt it was inevitable that EchoStar would be taken over due to large debts and a lack of programming.

Unnamed sources close to the situation said Viacom would only interested in acquiring cable programming, television and radio stations, broadcast properties and outdoors advertising. They saw the benefits of the merger being savings on distribution and fees. Once merged it would also bring Viacom the strength it feels it needs to compete against Rupert Murdoch. News Corp recently to a 34% stake in US satellite company, DirecTV.

There is also speculation that SBC Communications could be eyeing EchoStar, but the timing might right, with SBC having posted lower quarterly earnings on Monday.

Clearly the pursuit of EchoStar would not be a one horse race. One analyst felt others might enter the bidding fray, saying “What is likely to happen is the ignition of a bidding war with the likes of SBC, Viacom and even Disney making a play for it”

Merger Market

TiVo Consumes StrangeBerry

TiVo has announced that it has acquired a company called StrangeBerry. The stock-for-stock deal actually took place on 12 January but the details have only just emerged due to a recent SEC-filing by TiVo. No real details have been released by TiVo as to why they have bought it, but in the filing TiVo describe it as

a small Palo Alto based technology company specializing in using home network and broadband technologies to create new entertainment experiences on television

Very little is known about StrangeBerry and the products they have been working on since its inception in April 2002. What is know is there are only a handful (five) of signed deals with companies like Coke & Fox to place promotional videos on TiVo’s and given TiVo has over one million paid up users, handling this would require a highly scalable solution. StrangeBerry could bring these skills.

Time will tell – but it sounds interesting.

TiVO SEC filing

TiVo announcment about StrangeBerry

MidemNet 2004 report

By Paul Hosford, partner, New Media Law

The fifth MidemNet 2004 opened the week long international music industry’s conference in Cannes. In heavily attended sessions this year, it appears, at least on the surface, that the industry is at last grasping on-demand digital distribution of music – the legal variety that is.

MidemNet is the music industry’s international forum that attracts players from every corner of the business to get together and discuss the issues confronting an industry severely impacted by the illegal distribution of millions of copies of its product.

Ted Cohen, EMI Music’ s senior VP of digital development and distribution, opened with the positive pro-industry message – commercial downloads represent the ultimate way forward for music consumers. He feels that it will come of age in 2004, and when legal battles are overcome and the consumer is empowered by commercialised P2P delivery, the industry’s bad reputation will begin to improve.

Keynote interviewee Eddy Cue of Apple’s Internet services announced what everyone suspected, the iTunes Music Store would launch in Europe at some point. iTunes throws into relief these challenges for the music business. Launched in April 2003 as a proprietary platform download service, the Music Store leverages Apple’s existing back-end infrastructure to offer a flat fee of 99 cents per track, and now offering 0.5 million tracks, made available by the Major record labels under recent licensing, but only available to US consumers. The delay in the European launch has been put down to resolving licensing across countries.

Setting out to develop “a better Kazaa” by 5 January 2004, iTunes has sold more than 30 million tracks in all kinds of genres, predominantly to an over-21 demographic. This has moved the Majors on from a proposition that only 2 and a half years ago was not on their list of potential licensing opportunities.

Whilst we all know and covet that beautifully packaged piece of must-have hardware that is the iPod, the reality is that Apples share of the 99 cents may not, in isolation, be sufficient to rev-up their share price. What is clear is that sales of iPod are going through the roof.

There has been a lot of discussion here about iTunes downloads not being platform-independent and that ultimately this may become a sticking point for the device-rich consumer who wants the flexibility to listen to their paid-for music on any device they own. In the meantime, iTunes sales still represent small numbers when compared to the world of illegal P2P sharing.

The European iTunes delay has highlighted a major problem. What will remain firmly as the principal challenge for any pan-European initiative is an industry with differing product release dates, differing licensing and rights collection mechanisms across the European territories – and differing price models. The message is clear – the industry must push through change in these licensing and publishing practices across the major markets.

In the panel sessions representatives of OD2, EMI Music, RealNetworks, French ISP Wanadoo and mmO2, debated the very real technical problems of delivering to consumers a single product where the industry’s marketplace and accounting mechanisms are territorially divergent and a very long way from uniformity. Whilst EMI’s goal is obviously, to sell more music by making it available in multiple formats on any platform, corralling all the various rights holders that share in recorded music remains the Major Labels most immediate challenge.

For the content aggregators, the ISP’s mobile networks and digital music intermediaries, the problems are different, but equally complex. They must deal with multiple payment mechanisms, differing pricing regimes and a complex value chain that makes it very challenging to deliver cost effective alternatives to paying consumers demanding of quality content. What will be critical to delivering a successful consumer experience is cross-platform transferability of the downloaded track that is paid for once.

In the meantime, the disc media formats are very much alive and kicking representing over 90 percent of music bought today. Your correspondent for one is looking forward to experiencing SACD recordings – real surround sound.

Warner Music Group to have New Head is not just about the content and the technology, it is also significant changes within companies behind them. This time interesting moves in the music world. It looks like there are grand plans afoot for the new Warner Music Group, after the completion of its $2.6Bn purchase by a consortium of investors led by Edgar Bronfman, Jr.

Bronfman, who transformed Seagrams from an company that only sold alcohol to one encompassing music (Polygram music) and film (Universal pictures) empires, is not know for his mellow view on file sharing networks – “We must restrict the anonymity behind which people hide to commit crimes. As citizens, we have a right to privacy. We have no such right to anonymity”, he said when commenting on the Napster controversy.

That might not mean that some of his ideas might not be radical. He has just hired Lyor Cohen, the current CEO of Island Def Jam Recordings, whose 21 year stint with Def Jam has included launching the careers of Run DMC, the Beastie Boys, Public Enemy. He is highly rated for his different approach to business by his long-time friend and business partner Russell Simmons – “When most people throw money at things, Lyor throws creativity … his vision is just different. You have to find new ways to do things. You have to be creative. The whole business needs to be revamped and Lyor knows how to do this and that’s why this new job is perfect for him.”

Cohen will have control over the second most powerful music entertainment company, which according to Nielsen SoundScan have an 18% share of the market with only Universal ahead with 28%. Not bad for someone who starting as road manager for Run-DMC, especially given his package is rumoured to be worth $50 million.

Hoffman is clear in his intentions, “Our fundamental focus is growing a competitive company”.

USA Today – Lyor Cohen to head Warner Music Group

Edgar Bronfman, Jr – profile

Wireless Broadband Week

UK telco, BT, is offering free Wireless Internet access for a week starting today Monday, 26 January 2004.

Simply sign up on the BT Openzone site and cost-free WiFi access is available at their 1,700 hotspot venues around the UK.

Many sites already offer either permanent cost-free (, or free-if-you-buy-stuff (benugo) wireless access, but do not have the marketing budgets BT have.

Openzone recently launched a Pay-as-you-go service, which they say caters for the occasional WiFi user. Bundle of credits can be bought in advance of usage and access prices start at 20 pence per minute.

BT have been pleased with the increased usage of with WiFi hotspots and they report a 300 per cent increase in the number of minutes of activity on the BT Openzone network over the past three months. They plan to have 4,000 sites operating by this summer.

BT Wireless Broadband Week

IFPI Report Positive on Digital Music

The International Federation of the Phonographic Industry (IFPI) published a report yesterday where they stated that the music business has now got to grips with digital music distribution and sees 2004 as the year it take root with the consumer.

They feel the IFPI Online Music Report 2004 takes a thorough, global look at the music business and includes the results of a surveys they have funded investigating digital music habits in Denmark, France, Germany and UK. It shows that two thirds of those surveyed thought that downloading commercial music without paying for it was wrong, but worryingly for the marketing departments of the online music sellers, only a quarter of the same respondent know that there are now commercial services available. One sign of encouragement for them is their figure show that half million European user have signed up to sites that sell downloadable music. Figures of how many of them have paid for tracks were not detailed.

The IFPI are keen to stress the relationship between the music industries anti-piracy campaign and the consumers uptake of pay-for digital music. We feel what is far more likely is that commercial download service have now actually become usable in the way the consumer feel comfortable with, at a price they are content to pay – previously this has not been the case.

IFPI online music report 2004 (PDF)

AOL Offer MovieLink Films Online for 99c

AOL will launch a promotion offer, “Winter Movie Special”, in the US today giving their broadband subscribers access to download and watch some of the movies on MovieLink for only 99c per film.

Once the movie has downloaded, it can be watched as many times as the payee feels they can bear, but it must be watched within 30 days of the download or it will self-delete. The 99c offer is up to 80% less than current MovieLink customer spend, but only a select number of films will be available at that price, the other 600 films that MovieLink has can be watched for the normal $3.95 to $4.99.

AOL who have been losing large amounts of their subscribers, they lost nearly 700,000 dialup customer in the final quarter of 2003, are very keen to stop this slide and hope that bundled content deals will persuade people.

Movielink, the joint venture of six of the big Hollywood studios (Universal Studios, Paramount Pictures, Metro-Goldwyn-Mayer Studios, Sony Pictures Entertainment and Warner Bros) has, in the past, received criticism of the breadth and quality of the films they offer, despite their recent upgrade to version MoveLink 2.0.

Commenting on the AOL deal, Jim Ramo chief executive of Movielink said “This is our first promotion with a major portal, and we’d like to do it with all the major portals,” he added hopefully.

The promotion will last until Feb. 26, and the companies do not have specific plans to extend it beyond that date.

We see many more deal like this coming along as broadband providers make offers, try to keep hold of the subscribers, and more significantly, as more computer become able to show content on the household TV.



Stratospheric Broadband Floated

A new European Union funded research project, called CAPANINA, was started in November 2003 to investigate the viability of providing broadband coverage to rural areas using High Altitude Platforms (HAPs). HAPs are solar-powered airships or planes that fly between 17 – 22 km above the earth, higher than normal plane flight but below satellites.

CAPANINA is an example of what is being called Stratospheric Broadband and is aimed at bringing access speeds of up to 120Mbp/s to static small office and home users as well as mobile users, such as those on trains. Mobile users will use “smart” antennas that will point themselves at the HAP.

The three year, €5.6M project is lead by Dr David Grace at the University of York, hopes to deliver broadband inexpensively and explore issues such as fast propagation of content and resource management.

This reminds us of TeleDesic, the joint venture between Bill Gates and US cellular billionaire, Craig McCaw, that was a buzz in the Internet boom. They planned a constellation of hundreds of low-earth-orbit satellites (LEOS) flying less than 1,000 miles above the Earth, beaming broadband joy to the earth below. Looking at the TeleDesic site, the idea is clearly on the back burner, there are no working links on the site and the copyright is dated 2002 and we all know how keen Bill is on copyright.

CAPANINA project

Dr David Grace profile