Apple Inks Content Deal With Oprah Winfrey

Apple June 15 unveiled a multi-year content partnership with Oprah Winfrey, “the esteemed producer, actress, talk show host, philanthropist and CEO of OWN,” the tech giant announced.

Winfrey and Apple will create original programs that “embrace her incomparable ability to connect with audiences around the world,” according to Apple.

Winfrey’s projects will be released as part of a lineup of original content from Apple.

Apple Q2 Services Revenue Increases 31%

Apple May 2 reported second-quarter (ended March 31) “services” revenue of $9.1 billion, which was up 31% from revenue of $7 billion during the previous-year period.

Services includes revenue from digital content and services (i.e. iTunes Store selling/renting movies, TV shows, audiobooks and music); Apple Music subscription service, AppleCare (warranty), Apple Pay, App Store, licensing and other services.

Through six months, revenue is up 24% to $17.6 billion, compared to $14.2 billion last year. Services revenue represented 15% of total revenue in the quarter compared to 13% in the previous-year period. The segment generated 12% of total revenue through six months, compared to 11% last year.

Apple attributed the increase primarily licensing, App Store and iCloud – not digital content sales. Indeed, last summer The Wall Street Journal reported iTunes’ market share selling/renting video content had dropped below 25% from above 50% in 2012.

The decline is due in part to increased SVOD use among consumers, in addition to increased competition from Amazon Instant Video and Comcast – the latter the first pay-TV operator to sell/rent movies and TV shows.

Meanwhile, Apple sold $38 billion worth of iPhones, $4.1 billion in iPads and $5.8 billion in Mac computers, which was up 14% and 6%, respectively, for iPhones and iPads. Mac sales remained flat.

Research: OTT Sub Households to Far Outstrip TV Sub Households in 2020

U.S. OTT subscriber households will far surpass TV subscriber households in 2020, according to new data from Convergence Research.

In five years at the current run-rate Netflix will have in the United States as many subscribers as all the the traditional TV access providers combined, according the Convergence’s Brahm Eiley. Amazon Prime at the current run rate will surpass the traditional U.S. TV access providers in terms of subscribers in three years.

However, the average revenue per unit (ARPU) for U.S. TV subscribers in 2020 will still be four times U.S. OTT subscriber households’ ARPU, down from 6 times in 2017.

Convergence has just released its annual 2018 Couch Potato Reports, “The Battle for the American Couch Potato: OTT, TV, Online” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Convergence estimates that U.S. OTT access revenue (based on 55 OTT providers led by Netflix) grew 41% to $11.9 billion in 2017, forecasts $16.6 billion for 2018 and $27.6 billion for 2020.

The firm estimates 2017 U.S. cable, satellite and telco TV access (not including OTT) revenue grew 1% to $107.6 billion ($94.30 per month ARPU) in 2017, forecasts $107.4 billion ($97.90 per month ARPU) for 2018, and $106.9 billion for 2020.

In 2017, the United States saw a decline of 3.66 million TV subscribers and in 2016 a decline of 2.2 million. Convergence forecasts a decline of 3.72 million TV subs for 2018.

The firm reports that 2010 saw the start of the rise in cord cutter/never households, and as of the end of 2017 estimates 32.13 million U.S. households (or 26.1% of households) did not have a traditional TV subscription with a cable, satellite or telco TV access provider, up from 27.56 million (22.6% of households) at the end of 2016. Convergence forecasts 36.76 million (29.6% of households) will be cord cutter/never households by the end of 2018.

Meanwhile, 2017 saw U.S. residential broadband subs surpass U.S. TV subs, growing to 96.95 million. Convergence estimates 2.33 million U.S. residential broadband subs were added in 2017 (2.66 million in 2016) and revenue grew 7% to $56.8 million; the firm forecasts 2.57 million additions and 6% growth to $60.5 billion for 2018.

“The gloves are off,” commentary in the report reads. “The TV-movie Industry is being reconstructed from the inside and by the outside, as programmers now directly compete against their traditional TV access and independent OTT buyers that rival them in terms of content spend. Amazon, Apple, DAZN, Facebook, Google and Netflix all have the money muscle to finance their own productions or outbid on programming including major sporting franchises.”

Because the OTT services are acting more like studios and vying for top content, traditional content owners may fight back, the commentary reads.

“We expect especially for the U.S. market going forward fewer content deals between programmers and independent OTT providers: 2017 saw Disney choose not to renew with Netflix and embrace OTT, HBO not renew with Amazon in the U.S., Hulu (which is spending more on content on a per U.S. subscriber basis than Amazon or Netflix) continue to bolster its offerings, compete more directly against TV access providers, and A+E, AMC, Discovery, Scripps, and Viacom back supply Philo,” the firm commented. “The traditional TV ecosystem does not show decline ‘yet’ except for TV subscribers. TV access players continue to raise prices (ARPU is growing but we forecast TV access revenue decline going forward), and programmers have kept up increases in programming fees and advertising rates, but this architecture cannot last in the long run.”

Apple: ‘We Don’t Know Anything’ About Making TV Shows

Apple knows the appeal of must-have consumer electronics better than anyone. Its brand singularly created markets for mobile phones, tablets, computers, audio speakers and now watches.

Yet, as tech rivals Google and Facebook jump into the video content business hoping to bridge the considerable gap to Netflix, Amazon Prime Video and even Hulu, Apple has taken baby steps.

While the late Steve Jobs infamously considered Apple TV a “little hobby,” current CEO Tim Cook has been equally slow to jump on the bandwagon – until now. Indeed, Apple considers itself anything but expert on the machinations of Hollywood.

“We don’t know anything about making television,” Eddy Cue, SVP of Internet software and services, told The New York Times at the recent South by Southwest media confab in Austin, Tex.

Despite sitting on reported fiscal largess exceeding $250 billion, Apple’s forays into original programing are all but non-existent – perhaps due to cautionary missteps taken by Microsoft and Yahoo, among others.

Apple is expert at creating apps, but recent original 10-episode reality show, “Planet of the Apps,” where contestants attempted turn their app ideas into careers, was largely unremarkable.

“They know music and they know apps, and I’m sure they’ll begin to explore other genres,” Jake Wayne, a participant on the show, told Mashable.com. “For now, they’re doing what they know best.”

Maybe, but Apple is leaving its tech comfort zone and creating a sizeable beachhead in Hollywood. It is building a 128,000-square foot media complex on the former Metro-Goldwyn-Mayer grounds in Culver City, Calif.

Last summer, Cue hired Sony Pictures Television executives Jamie Erlicht and Zack Van Amburg – 15-year veterans behind programs such as “Breaking Bad,” (AMC Networks) spinoff “Better Call Saul,” (Netflix) “The Crown,” (Netflix) “Damages,” “The Blacklist,” “Sneaky Pete” (Amazon) and “Rescue Me,” among others.

“We have exciting plans in store for customers and can’t wait for [Erlicht and Van Amburg] to bring their expertise to Apple,” Cue said at the time.

Indeed, the executives reportedly oversee a staff of more than 40, charged with operating original content divisions around drama, children, South America and European programing.

Production deals with Reese Witherspoon, Jennifer Aniston, Steven Spielberg, Damien Chazelle, M. Night Shyamalan, Kristen Wiig and Octavia Spencer highlight more than 12 original programs greenlighted for completion.

“We’re all in,” Cue said. “We’re completely all in.”

 

European Union Proposes Tax Hike on Digital Companies

The European Union March 21 announced plans to implement an interim 3% tax hike for digital companies aimed at leveling the playing field between local and multinational companies based outside the region.

With almost half of the top 20 global companies by market capitalization digital operations (compared to 5% a decade ago), the EU says digital companies (i.e. Facebook, Google, Apple, Amazon and Netflix) pay an average tax rate half (9.5%) that of the traditional economy (23.3%) in member countries.

The trade union contends profits made through activities such as selling user-generated data and streaming video content are not captured by current tax rules.

Apple infamously parked more than $120 billion in Ireland to avoid taxes in the U.S. and other countries it operates in. A strategy the company reportedly had to outsource to Bermuda and Grand Cayman after Irish authorities sought to close loopholes.

Tax avoidance strategies used by Apple and other digital multinationals deny governments around the world as much as $240 billion annually in lost revenue, according to a 2015 estimate by the Organization for Economic Cooperation and Development, reported by The New York Times.

Netflix reportedly paid less than £400,000 ($565,000) in 2015 corporate taxes in the U.K. on revenue of £36.5 million.

Netflix told The Guardian it contributed financially in other ways, including wages, value-added taxes (VAT) and funding myriad British-based original content productions.

Maybe, but to USC law professor Edward Kleinbard, U.S. multinational firms are “global grandmasters” of not paying their fair share of taxes.

“[They employ] schemes that deplete not just U.S. tax collection but the tax collection of most every large economy in the world,” Kleinbard told the Times.

New EU rules would deem multinational digital companies having a European presence if they meet at least one of the following criteria: exceed €7 million in annual revenue in a member state, having more than 100,000 users or 3,000 business contracts in a member state in a taxable year.

The new taxes, which the EU believes would generate €5 billion ($6.1 billion) in annual revenue, would apply primarily to online advertising, sale of user-provided data and third-party ecommerce.

Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs at the EU, said the digital economy is a “major” two-way opportunity for Europe and digital firms based outside the region – with legal and fiscal concerns.

“Our pre-Internet rules do not allow our member states to tax digital companies operating in Europe when they have little or no physical presence here,” said Moscovic. “This represents an ever-bigger black hole … because the tax base is being eroded. That’s why we’re bringing forward a new legal standard as well an interim tax for digital activities.”

 

Amazon on Top in Harris Reputation Poll

Amazon took the top spot in the 2018 Harris Poll Reputation Quotient Rankings.

Disney ranked high at No. 5, and Netflix, at No. 21, beat out fellow tech giants Google and Apple, ranked Nos. 28 and 29, respectively.

Among mass merchant/consumer electronics retailers, Costco (No. 17) topped Best Buy (No. 46), Target (No. 49) and Walmart (No. 69).

According to Harris, the Reputation Quotient is “technically designed to understand how a company is perceived in modern culture.” The measure takes the top most visible companies (for good or bad reasons) and evaluates them across six dimensions of corporate reputation attributes to arrive at a corporate reputation ranking. If a company is not on the list, it does not necessarily suggest that they have either good or bad reputation, but rather they didn’t reach a critical level of visibility to be measured.

The Weinstein Co., which has been embroiled in executive Harvey Weinstein’s alleged sexual assault scandal, and Takata, with its infamously defective airbags, came in last on the list at Nos. 99 and 100, respectively.

Apple, Disney and YouTube Top Millennial Brands in New Report

Apple, Disney and YouTube, respectively, ranked as the top three most “intimate” brands among millennials, according to MBLM’s Brand Intimacy 2018 Report, which is the largest study of brands based on emotions. Brand intimacy leverages and strengthens the emotional bonds between a person and a brand.

“We were surprised and pleased to see YouTube as an addition to the top three most intimate brands for millennials this year,” stated Mario Natarelli, managing partner, MBLM. “We believe its rise is due to our culture’s continued need for escape and the brand’s immediate, diverse content, personalities and growing offerings in movies and live TV. YouTube is clearly an established ritual in the lives of many millennials today.”

By comparison, in MBLM’s 2017 report, Disney placed first, followed by Amazon and Netflix.

The other brands that rounded out the top 10 were Target, Amazon, Nintendo, Google, Xbox, Netflix and Whole Foods.

The age group of 18-24-year-olds had a slightly different mix of top companies. The top 10 for that group were Apple, Amazon, YouTube, PlayStation, Starbucks, Nintendo, Google, Netflix, Coca Cola and Walmart.

The report analyzed the responses of 6,000 consumers and 54,000 brand evaluations across 15 industries in the United States, Mexico and the United Arab Emirates. The full report will be released on March 13, 2018.

Ex-FCC Chairman Powell Comes Out Swinging Against Net Neutrality, Tech Giants

Former FCC chairman Michael Powell calls the net neutrality debate old news, contending the real battle lies with the burgeoning power of tech giants such as Amazon, Google, Apple and Facebook.

Speaking March 6 at the Cable Congress in Dublin, Powell – now CEO of the National Cable & Telecommunications Association trade group, whose members include Comcast, AT&T, Charter, Cox and CenturyLink – characterized net neutrality as yesterday’s news, while calling for greater oversight on the “fairy tale stories” spun by tech companies that “do no evil.”

“Net neutrality has become like mindless trench warfare,” he said, adding that current Title II regulation of the Internet is antiquated and “designed for a slow-moving telecom monopoly in the 1930s.”

The FCC, under new chairman Ajit Pai, in December voted to repeal net neutrality guidelines approved in 2015 mandating open access to the Internet.

Powell advocates lawmakers in the United States not fight “the last war” and instead focus on the next one involving companies whose $2.8 trillion market capitalization he claims rivals the GDP of France.

“They are the market,” he said, as reported by The Economist.

Powell, a free market advocate, who was nominated to the FCC by President Bill Clinton in the 1990s, contends government regulation should apply to social media platforms that “massively increase our subjugation to algorithms,” and, he believes, increasingly ignore privacy, social relationship and mental health concerns.

He says unregulated social media and Internet has resulted in global cyber security concerns, proliferation of fake news, sex trafficking and polarization of society, among other issues.

“Fragmentation is dangerous in a democracy,” Powell said. “This demands a government response.”

 

Gun Safety Activists Urge Tech Companies to Drop NRA TV Streaming Service

In the wake of the Florida high-school shooting that left 14 students and three teachers dead, gun safety activists are asking tech companies to stop streaming NRA TV, an ad-supported service of the National Rifle Association.

Launched in 2016, NRA TV features original programming supporting gun rights and other issues, in addition to covering conservative events such as C-PAC.

“Moms Demand Action for Gun Sense” and “Everytown for Gun Safety” are calling on companies such as Amazon, YouTube, Roku and Apple to stop carrying the NRA TV app, claiming the platform “promotes dangerous conspiracy theories, racially charged rhetoric and violent demonization of the NRA’s political opponents,” among other issues.

“Everytown,” which is fighting to close existing loopholes in gun purchase background checks and curbing the illegal trafficking of firearms, is helping spread hashtag #DumpNRATV.

The groups are also asking pay-TV operators such as DirecTV Now to cancel programming produced by the NRA.

“American businesses have the responsibility to make ethical decisions about the content they will provide on their platforms,” Shannon Watts, founder of Moms Demand Action, said in a statement.

Watts, a mother of five children, founded “Moms Demand Action” following the Sandy Hook Elementary School shootings in 2012 that left 20 children and six adults dead.

Roku spokesperson Tricia Mifsud took the high ground, saying the over-the-top video pioneer merely acts as a conduit to programming users voluntarily choose to stream.

“We operate an open-streaming platform; however, our content policies prohibit the publication of content that is unlawful, incites illegal activities or violates third-party rights,” Mifsud said in a statement to CNN.com.

 

Winter Holiday Tablet Sales Return to Growth

Sales of detachable tablets (convertible laptops with keyboard), including iPad and Galaxy, increased 10.3% to 6.5 million units in the fourth quarter of 2017 compared to the previous-year period, according to new data from IDC.

Tablet sales for the year increased 1.6%, which trailed significantly from 24% growth in 2016.

IDC attributed slowness to the launch cycle of high profile devices like Microsoft’s new Surface, which was off schedule, leaving older Surface models on shelves as consumers waited to see the upgrades.

Meanwhile, slate tablets (without keyboards) shipped 43.1 million units in Q4, and 141.7 million for the year – down about 7.6% from 2016. The report suggested sales have remained relatively steady as consumers increasingly use slate tablets to consume media, including over-the-top video and SVOD.

Top tablet vendors include (in order), Apple with 24.3% market share and 0.6% annual growth and Amazon Fire Tablet with whopping 50.3% growth and 9.6% market share. Samsung ranked third with 14.9% market share (13% sales decline), Huawei (5.9% market share, 11.9% growth) and Lenovo (6.6% market share, 13.1% sales decline.

“Continued success of [the tablet category] hinges on the willingness of other PC vendors to participate and more importantly, consumers from other countries to adopt the [detachable tablets] over convertible PCs,” Jitesh Urbani, senior research analyst with IDC, said in a statement.