March 22, 2023

Copyright Lawsuit Targets Cover Songs on YouTube

In the latest sign of friction over the licensing of online music, a group of music publishers has sued Fullscreen, one of the largest suppliers of videos to YouTube, saying that many of Fullscreen’s videos — particularly cover versions of popular songs — infringe on the publishers’ copyrights.

Fullscreen is one of the largest of the so-called multichannel networks, or M.C.N.’s, which produce their own content — the company’s offices are in Culver Studios in Los Angeles, where “Gone With the Wind” and “Citizen Kane” were filmed — and represent the work of thousands of other creators of widely varying sizes. According to Fullscreen, the 15,000 channels the company represents have a total of 200 million subscribers and draw more than 2.5 billion views each month.

Among the most popular videos on YouTube are cover versions of popular songs, often by amateurs or semiprofessionals who have built a following online. But according to the suit, filed in United States District Court in Manhattan on Tuesday by groups represented by the National Music Publishers’ Association, most of these lack the proper licenses and do not pay publishers and songwriters the royalties earned from ad revenue. (Publishers represent the music and lyrics underlying songs, not recordings of them, which are covered by a separate copyright.)

According to the suit, Fullscreen and its founder, George Strompolos, who is named as a defendant, “have willfully ignored their obligation to obtain licenses and pay royalties to exploit the vast majority of the musical content disseminated over Fullscreen’s networks.” A spokeswoman for Fullscreen declined to comment.

The publishers represented in the suit include Warner/Chappell Music, which is owned by the Warner Music Group and is one of the biggest publishers, along with several independents like Songs Music Publishing and Peermusic. An exhibit submitted with the suit lists dozens of songs that Fullscreen is accused of using without proper licenses, including hits by Lady Gaga, Kanye West, Britney Spears and others.

As YouTube has become the default listening service for young people, the music industry has frequently sparred with YouTube and its owner, Google, over the licensing issues, which can be confusingly opaque. YouTube, for example, is responsible for the licensing and royalties of user-generated content loaded directly to its system, but often yields that responsibility to M.C.N.’s and other major partners.

In turn, those networks have come under fire from music groups, and negotiations have been slow. In February, Fullscreen and Maker Studios announced licensing deals with the Universal Music Publishing Group, one of the largest publishers, but most others had no such deals.

An announcement on Tuesday about the publishers’ suit against Fullscreen suggested that it had been prompted by a breakdown in licensing negotiations. At the same time that it announced the suit, the association said it had reached an agreement in principle with Maker Studios on licensing.

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Sirius XM Reports Record Revenue, Aided by Auto Recovery

The satellite-radio provider had $283 million in adjusted earnings before interest, taxes, depreciation and amortization, up 19 percent from the same period a year ago.

But while the pace of Netflix’s subscriber growth worried investors, Sirius has continued to grow quickly, sped along by the recovery in car sales. Sirius reported 25.1 million subscribers, up 716,000 from the same period last year, and the company increased its guidance for the full year, saying that it expected to add 1.5 million subscribers and have more than $3.7 billion in revenue. Shares of Sirius were up a little more than 1 percent in the early afternoon on Thursday.

“The wind has certainly been at our backs with increasing auto sales, and we expect that to continue for the rest of the year,” James E. Meyer, the chief executive, said in an conference call with investors and analysts. Mr. Meyer replaced Mel Karmazin, Sirius’s longtime chief executive, in December.

Mr. Meyer said that there are 54.5 million automobiles in operation with Sirius installed, and that he expected the number to rise to 100 million by the end of 2017.

Sirius also fared well with two particular measurements that investors have paid close attention to. Its “churn” rate, a measurement of customer turnover, has lately hovered around 2 percent, but for the second quarter it dropped to 1.7 percent, meaning that fewer customers were canceling subscriptions.

The number of “self-pay” subscriptions — as opposed to those with trial subscriptions subsidized by automakers — also grew in the second quarter to a high of 20.3 million, up 9 percent from last year. Subscriptions to the satellite radio service start at about $15 a month.

Sirius’s stock has jumped more than 75 percent in the last year, driven by the company’s improved performance as well as the company’s takeover last year by Liberty Media, which has suggested that it may sell the company or combine it with another of its holdings. This year, Sirius has also completed $1.3 billion of a planned $2 billion stock repurchase plan.

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Its Viewers Are Graying, but Their Passion Pays for Fox News

Fox News continues to be near the top in cable television in terms of the number of viewers it attracts, but it is near the top in another category, too: the median age of its audience is among the oldest in television.

For most of the television business — the segment that relies on advertising — that would be serious cause for concern because ad sales are almost always based on a target age of 25 to 54, and Fox News, for the last two years, has had a median age of 65-plus in its ratings both for the full day and for prime time.

But up until now at least, Fox News has been more able than any other television entity to defy the tyranny of the demos, as they are known in the business. And the network, which has upturned traditions and expectations throughout its history, has earned consistently enormous profits, relying on the commitment and loyalty of its audience.

“I don’t think you can fully capture the value Fox News brings by looking at the Nielsen ratings alone,” said Craig Moffett, the longtime financial analyst who specializes in cable. Mr. Moffett, who heads his own firm, said that the key to Fox News’s continued financial strength has been “the level of passion and engagement” it inspires in its viewers.

That translates into big money because cable systems now pay Fox News one of the highest per-subscriber fees in television, 94 cents a month, topped in cable television only by a few networks, most of which have expensive sports rights to pay. (By comparison, CNN gets 57 cents a subscriber, according to SNL Kagan Research.) As Mr. Moffett put it, “There are a handful of networks consumers are deeply passionate about out of all proportion to Nielsen ratings, and distributors know if you don’t have those networks, then woe be to you.”

With close to 100 million subscribers in total, Kagan estimated Fox News will take in $1.11 billion this year from subscription fees before it ever sells a single commercial. Still, the network faces some significant questions as it goes forward: How old is too old? And when does the issue have to be addressed?

Fox News declined to make executives available for comment, but several recent signs — including changing personalities for some of its weekday programs — suggest the network may have decided the time has come to confront the issue of age.

Just how old is its audience? It is impossible to be precise because Nielsen stops giving an exact figure for median age once it passes 65. But for six of the last eight years, Fox News has had a median age of 65-plus and the number of viewers in the 25-54 year old group has been falling consistently, down five years in a row in prime time, from an average of 557,000 viewers five years ago to 379,000 this year. That has occurred even though Fox’s overall audience in prime time is up this year, to 2.02 million from 1.89 million three years ago.

The network also has been faced with a recent string of nightly wins in that 25-54 audience by CNN, which had been hopelessly behind in recent years.

“The numbers indicate they haven’t been replacing the younger viewers,” Mr. Moffet said of Fox News. Many of the loyal viewers the network has always had are simply aging up beyond the 54-year cutoff for many ad buyers. The result is an audience edging consistently above that 65-plus number.

News audiences always trend old, and the viewers of Fox’s competitors are hardly in the full flower of youth. MSNBC’s median age for its prime-time shows this year is 60.6; CNN’s is 59.8.

In terms of the rest of television, Fox News also is quite a bit older than networks considered to have a base of older viewers. CBS has frequently been needled for having older viewers, but at 56.8, its median viewer is far younger than Fox News’s. (Viewers at Fox News’s sister network, Fox Broadcasting, have a median age of 50.2; at ABC, the median is 54.4; at NBC, it’s 47.7.)

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Aereo as Bargaining Chip in Broadcast Fees Battle

The contract dispute between CBS and Time Warner Cable is the first to unfold in the New York metropolitan area since Aereo came to market there last year. Last week, the companies warned that if the dispute was not resolved by Wednesday, CBS could be taken away from three million of Time Warner Cable’s 12 million subscribers.

Enter Aereo. The service, backed by Barry Diller and a number of other venture capitalists, uses giant arrays of antennas to pick up freely available television signals and stream them to the phones, computers and other screens of paying subscribers. By relying on the antennas, Aereo does not pay the kinds of retransmission fees that distributors like Time Warner Cable pay to broadcasters like CBS — an approach that Aereo says is legal, but that the broadcasters say is not.

Analysts have theorized that distributors could exploit Aereo, or a service like it, to avoid paying increasingly steep retransmission fees. Such fees are at the heart of the current fight with CBS.

While Time Warner Cable does not seem ready or willing to deploy Aereo-like technology, a spokeswoman, Maureen Huff, said Sunday that it would recommend Aereo to its New York subscribers if CBS was blacked out. The distributor may also underline the fact that Aereo, which normally costs $8 a month, offers a 30-day free trial. (Ms. Huff also pointed out that many CBS shows are available online on a delayed basis, and that “all of CBS’s broadcast TV programming is available free over-the-air,” so subscribers can use antennas.)

Time Warner Cable is treading carefully because Aereo is the subject of several lawsuits filed by major media companies. In this case, its invocation of Aereo might be particularly corrosive because CBS has helped lead the charge against Aereo in the courts.

To date, the service has been upheld by the Court of Appeals for the Second Circuit in New York; last week, in its third victory there, the appeals court declined to hear the broadcasters’ appeal.

Emboldened by the rulings, Aereo, which is so small that it has not shared any New York subscriber data, recently expanded to Boston and Atlanta; its next market is Chicago, it says, with many more to come. But it has not announced any plans in the West Coast markets covered by the Ninth Circuit Court, where a service similar to Aereo was rejected in December. Given the uncertain state of play, Aereo is of limited use to Time Warner Cable currently; along with New York, the fight with CBS affects subscribers in Los Angeles, Dallas and several smaller markets.

David Bank, a media analyst for RBC Capital Markets, said he would not be shocked if the distributor somehow used Aereo to skirt the blackout, or encouraged subscribers to do so. But he wrote in an e-mail message: “I think it would be more of ‘negotiating tactic’ than a real business solution.”

A CBS spokesman declined to comment. In a statement last week about the potential blackout, the company, whose broadcast network is the highest-rated network in the United States, said it “remains committed to working towards a mutually agreeable contract.”

“This conflict just further highlights the importance of having alternatives in the marketplace,” Chet Kanojia, the chief of Aereo, said in a statement. “It’s also a great reminder that consumers have the right to watch over-the-air television using an antenna. Whether they use Aereo or some other type of antenna, it’s their choice. That’s the beauty of having alternatives.”

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A Turnaround at Netflix, as Its Mail Sector Shrinks

The company posted total revenue of $875.6 million, up 47 percent from the quarter last year. As the company invested in content rights and spent more to gain new subscribers, its profit, $40.7 million, or 73 cents a share, was down nearly 14 percent from the quarter last year, when its profit was $47.1 million, or 87 cents a share.

Reed Hastings, the company’s chief executive, said he was encouraged by the number of new sign-ups for streaming video, the service that he is emphasizing as Netflix’s DVD-by-mail service shrinks. In a letter to investors, he and the company’s chief financial officer, David Wells, called Netflix a “global Internet TV network,” reflecting the growing importance of TV shows to a company that started as a distributor of movies on DVD. Netflix is also beginning to make its own shows, in much the same way that HBO and Showtime do.

The fourth quarter was the first full quarter since a price increase and a bungled — and later abandoned — plan to spin off its DVD-by-mail service hurt the company’s reputation and decimated its stock price. It lost about 800,000 subscribers in the United States in the third quarter, leveling off at 23.8 million; at the end of the fourth quarter, it had 24.4 million, somewhat more than it had expected to have.

Investors welcomed these signs of recovery, sending the stock up about 15 percent in after-hours trading on Wednesday, after ending regular trading at $95.04. The stock, which plummeted from $300 to well under $100 last summer and fall, has rebounded about 30 percent in the last few weeks.

Of those 24.4 million subscribers in the United States, 21.7 million have the streaming service, and 11.2 million have the DVD service. (Many have both.) Netflix expects to gain 1.7 million streaming subscribers in the first quarter of this year, and lose 1.5 million from the DVD service.

“The truth is, the DVD business is going to see declines no matter what we do,” said Ted Sarandos, Netflix’s chief content officer, at a TV conference in Miami on Tuesday. As evidence, he pointed to a recent agreement between Netflix and Warner Brothers that will further delay the availability of DVDs to Netflix subscribers.

Warner succeeded in doubling the length of time that Netflix waits to receive DVDs after they go on sale at stores, to 56 days, from 28 days previously. When asked about the agreement, Mr. Sarandos said that the confusion that DVD delays cause consumers “ultimately may be a net negative for the DVD service.”

Not that Netflix is overly concerned about DVDs. Its future, it says, is in streaming; Mr. Hastings said on a conference call Wednesday evening that the company has no plans to market the DVD service this year.

Netflix has 1.9 million streaming subscribers in other countries now, mostly in Canada; it is also starting to gain subscribers in Latin America, Britain and Ireland.

Increased investments in those new markets is expected to cause modest losses through this year, the company predicted. Mr. Hastings and Mr. Wells said in their letter Wednesday that “until we achieve our goal of returning to global profitability, we do not intend to launch additional international markets.”

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Room For Debate: Have We Become More Willing to Pay for Content?


pay for Netflix?Paul Sakuma/Associated Press Despite the recent price hike, Netflix’s streaming service is still popular.

Sure, Netflix lost a million subscribers when it raised its prices by 60 percent. But that means 24 million people stuck with the service. Is this, like the success of the iTunes music store and the Apple App Store, a sign that consumers have become more willing to pay for content? Do members of the Napster generation still expect some media, like news, to be free?

 Read the Discussion »


Topics: Business, Internet, Netflix, Technology


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