Cities, Local Governments Up Quest for ‘Netflix Tax’ Dollars

As over-the-top video supplants traditional pay-TV nationwide, local governments and cities are looking to cash in (via taxation) on the burgeoning streaming video ecosystem.

In Indiana, the cities 0f Fishers, Evansville, Valparaiso and Indianapolis recently filed a lawsuit seeking 5% franchise fees from Netflix, Disney+, Hulu, DirecTV and Dish Network as part of the state’s Video Service Franchise Act of 2012.

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“Defendants transmit video programming to Indiana subscribers using Internet protocol and other technologies,” read the suit filed in Marion Superior Court first reported by Ars Technica. “When doing so, Defendants transmit their programming through facilities located at least in part in public rights of way within the geographic boundaries of Indiana Units, including public rights of way located within Plaintiffs’ geographic boundaries. Therefore, Defendants are required by the VSF Act to pay the Plaintiffs — and all other Indiana Units in which Defendants transmit video programming through facilities located at least in part in a public right-of-way — franchise fees.”

Following the landmark 2018 U.S. Supreme Court ruling enabling states to charge e-commerce operators such as Amazon for online transactions across state lines, cities and states have ramped up efforts to include taxing streaming video services such as Netflix, Disney+, Hulu and Amazon Prime Video for delivering content via taxable cable, satellite connections.

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Rhode Island and Pennsylvania have imposed taxes on e-commerce while continuing to explore options for streaming video.

In 2015, Chicago became the first city in the country to impose a tax on streaming video platform as part of its entertainment tax code that characterized SVOD as a utility similar to water and power. While the action made headlines in regards to the city’s pursuit of Netflix, actual taxes collected thus far include about $2 million from companies engaging in transactional VOD — not SVOD.

Three years ago, Pasadena, Calif., proposed a 9.4% tax on streaming video services to make up for the shortfall in pay-TV fees as consumer drop the traditional cable bundle. More than 40 California cities have similar laws.

“Cities and states are beginning to experiment with this,” Mark Mazur, director of the Urban-Brookings Tax Policy Center, told CBS News. “People are buying more and more services and less goods, so the sales tax pace is getting reduced, and you end up trying to find ways to raise revenue from services.”

Observers contend municipalities and states will have a difficult time levying taxes on streaming video services that charge a monthly subscription fee and already pay fees for delivering content via third-party ISPs such as Comcast, Charter, AT&T and Verizon.

Harold Feld with consumer-advocacy group Public Knowledge says companies delivering video content through high-speed Internet or broadband networks are not charging consumers per movie or TV show consumed, nor are they necessarily streaming content via cable connections.

“I find it extremely unlikely this lawsuit will prevail,” Feld told the publication.

Robert Callahan, SVP of state government affairs for Internet Association, a consumer advocacy group, in 2016 criticized the move, arguing the proposed taxes were nothing more than a money grab by local and state governments.

“Folks are going to wake up and see line items on their Netflix and Hulu bills, and they’re not going to be happy,” Callahan told CBS News.

Amazon Hits Another Fiscal Quarter Home Run, Media Revenue Up 48%

Amazon July 30 announced it generated $45.9 billion in second-quarter (ended June 30) online retail revenue, which includes physical and digital media content, books, music, videos, games and software. Sales include digital products sold on a transactional basis. The 48% increase compared with $31 billion in online revenue during the previous-year period.

Subscription revenue, which includes annual and monthly fees associated with Amazon Prime memberships, as well as audiobook, digital video, digital music, e-book, and other non-AWS subscription services, increased 29% to $6 billion, from $4.6 billion a year ago.

Total revenue across all operating segments totaled $88.9 billion, up more than 40% from $63.4 billion in the previous-year period.

“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” founder/CEO Jeff Bezos said in a statement.

In entertainment, Prime Video launched Watch Parties, a feature that enables Prime members to interact with each other via chat on a desktop while watching Prime Video content, including TV shows and movies.

Prime Video introduced Prime Video Profiles, allowing customers to create and manage up to six profiles within a single account. Each profile offers individualized recommendations, season progress, and watchlists based on individual profile activity.

Amazon premiered several Amazon Original series, including “Upload” from Emmy-winner Greg Daniels, “Homecoming” season two, “Bosch” season six, and “Regular Heroes,” a docuseries focusing on COVID-19 heroes. Additionally, Amazon premiered several original movies, including Selah and the Spades, The Goldfinch, The Vast of Night, 7500 and the family action-comedy My Spy, along with local Indian movies Ponmagal Vandhal and Gulabo Sitabo.

Best Buy, Target Join Walmart Closing on Thanksgiving Day

Thanksgiving Day is slowly returning to a national holiday from the retail ecosystem. Big box stores Best Buy and Target are joining Walmart in not being open on Nov. 26.

“We can all agree that, so far, 2020 has turned out differently than what we might have expected,” Best Buy said in a statement. “And now, the holiday season at Best Buy, including Thanksgiving Day, is going to look different, too.”

Indeed, consumers looking for door specials on big screen televisions, computers, soundbars and DVD/Blu-ray Disc movies will have to wait 24 hours for Black Friday deals. Best Buy, which has been open on Thanksgiving since 2013, reiterated that consumers can still shop on and via the Best Buy app on Turkey Day.

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The announcement follows last week’s disclosure that retail sales are up 255% in the current quarter compared with a year ago — driven by purchases of computers, appliances and tablets.

“Although this holiday season may certainly look different, we’re ready to once again be there for our customers how, when and where they need us, during the most exciting time of the year,” the retailer said.

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Target, like other chains, is accommodating  the Thanksgiving Day closure by offering special deals before and after Nov. 26.

“This year more than ever, a joyful holiday will be inseparable from a safe one, and we’re continuing to adjust our plans to deliver ease, value and the joy of the season,” said CEO Brian Cornell.

Walmart, which was the first major retailer to change it Thanksgiving Day operations, has been a perennial home entertainment retail leader over the Black Friday holiday weekend, which typically began with special deals on Thanksgiving.

That decision was in tandem with corporate announcing plans to spend $428 million on special cash bonuses to store, club, distribution center and fulfillment center associates for their ongoing contributions during the coronavirus pandemic.

“We know this has been a trying year, and our associates have stepped up,” said John Furner, CEO of Walmart U.S. “We hope they will enjoy a special Thanksgiving Day at home with their loved ones.”

Regardless, brick-and-mortar sales on Thanksgiving Day have been waning, up just 2.3% in 2018, according to First Data, with an average ticket amount of $60, a $1 increase over 2017.

Adobe Analytics contends retail trends continue push e-commerce. A record $9.4 billion was spent online by the end of Cyber Monday (Dec. 2) in 2019, up 19.7% from 2018. It was the largest online shopping day of all time in the U.S., topping $7.9 billion spent in 2018.

Report: U.S. E-commerce Will Rise 18% in 2020 Due to Pandemic

The COVID-19 pandemic is fueling online sales, according to new data from eMarketer.

The research firm predicts a 10.5% decline in total U.S. retail sales this year, with a 14% drop in brick-and-mortar sales. In February, the research firm projected growth of 2.8% to $5.6 trillion in total domestic retail sales.

The one bright spot: E-commerce is set to grow 18% this year following a 14.9% uptick in 2019.

“E-commerce sales have been driven by a surge in click-and-collect, specifically curbside pickup, allowing U.S. consumers to make immediate purchases while minimizing human contact,” Alexandra Samet with eMarketer wrote in a post. “We now expect U.S. click-and-collect e-commerce sales to grow to $58.52 billion, up 60.4% from our initial forecast of 38.6% growth.”

Samet said the 18% growth forecast for e-commerce reflects a notable increase in both the number of digital buyers and the average spending per buyer. She said the gains reflect the pandemic’s impact on new buyers joining the online retail space, including 12.2% growth for those ages 65 and older.

“In a pandemic economy, consumers have gravitated toward trusted and reliable retailers,” Samet wrote. “As a result, we can expect the top 10 e-commerce retail businesses [i.e. Amazon, Walmart] to grow at above average rates (21.8%).

Some of the extreme channel-shifting in Q2 2020 will subside over the course of the year as stores reopen and lockdowns end countrywide, according to eMarketer. However, certain behaviors like click-and-collect and curbside pickup will persist, indicating a long-term trajectory of e-commerce growth.

“Walmart’s accelerating e-commerce growth will take it to the No. 2 position for the first time,” Samet wrote.

eMarketer: 5 Million New Online Shoppers Due to COVID-19

Throughout the coronavirus pandemic, e-commerce has seen an uptick as traditional retail shuttered or reduced normal operations to help curb the spread of the virus.

New data from eMarketer estimates that more than 204 million people ages 14 and older will make an online purchase in 2020 — two-thirds of which will be 45 and older. The updated forecast, which factors in the pandemic’s effects, anticipates a 5.8% increase in the number of digital buyers 45 and older, up from 3.2%. This equates to nearly 5 million new users.

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In separate surveys conducted Feb. 28 and March 17, baby boomers said they had shifted their shopping to online in the three-week span. In the March poll, roughly 23% of boomers said they had been shopping more online due to the pandemic, considerably more than the 8% of respondents in February.

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In a separate Salesforce survey during the first two weeks of May, 28% of baby boomers said they had used contactless delivery more than usual, followed by self-checkout options (23%) and click-and-collect (23%).

And an April 2020 GlobalWebIndex study found that 31% of U.S. Internet users ages 16 to 64 said they will shop online more frequently after the pandemic ends, and 30% expect to visit stores less frequently.

“While we expect some shopping habits to return to normal post-pandemic, it’s likely that consumers who have tried online shopping for the first time will stick with it, at least for occasional purchases,” Cindy Liu, author of the report, wrote in an online post.

Walmart U.S. E-Commerce Sales Expected to Rise More Than 44% in 2020

Walmart’s U.S. e-commerce sales are expected to jump 44.2% in 2020 versus 2019, according to a report from eMarketer, which revised growth up from its January 2020 estimate of 27%.

The leap follows 36.8% growth in 2019 over 2018 and puts Walmart at No. 2 on eMarketer’s top 10 e-commerce companies list, far behind Amazon, but well ahead of eBay, which is expected to grow just 3% in 2020.

“Thanks to Walmart’s prior investments in online grocery delivery and pickup services, the retailer appears to be in a strong position as consumers have increasingly turned to e-commerce amid the pandemic,” according the eMarketer’s Cindy Lui.

eMarketer forecasts that the big-box retailer will grow its share of total U.S. retail e-commerce sales to 5.8% this year, up from 4.7% in 2019.

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For the fiscal first quarter ended May 1, Walmart reported U. S. e-commerce sales grew 74%.

Target Q1 E-Commerce Sales Up 141%, Profit Plummets

Big-box retailer and home entertainment distributor Target May 20 reported a 141% increase in e-commerce revenue for the first quarter (ended March 31), as consumers stocked up on lower-margin products online due to the coronavirus. As the same time, higher-margin apparel and merchandise sales declined, which contributed to a 0.9% increase in same-store sales.

CEO Brian Cornell said saw an increase of 5 million customers in the quarter, while more than 2 million used the drive-up service. The chain said more than 70 million people have downloaded the Target Circle app to access e-commerce.

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Overall retail sales increased 11.3% to more than $19.3 billion, from $17.4 billion during the previous-year period. Yet, net income plunged more than 64% to $284 million, from $795 million a year ago. The culprit: increased product, employee and shipping costs for online sales.

Target said cost-of-sales increased more than 18% to $14.5 billion, from $12.2 billion in the previous-year period. Administrative costs increased 10.9% to $4 billion, from $3.6 billion a year ago.

The decreases reflected actions taken by Target’s merchandising teams, including costs and inventory impairments related to the rapid slowdown in apparel & accessories sales, unfavorable category mix as consumers stocked up on lower-margin categories like essentials and food and beverage resulting in higher digital and supply chain costs, driven by unusually strong digital volume as well as investments in team member wages and benefits.

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Indeed, Target is paying store employees and extra $2 per hour through July 4.

“We’ll continue to be focused on [consumer/employee] safety, not just for the next few quarters, but for years and years to come,” Cornell said on the fiscal call. “We’ve been talking for years about being America’s easiest place to shop. We’re going to need to make sure we combine being an easy place to shop with America’s safest place to shop and make sure that that commitment to safety is ongoing.”

Rakuten TV Launches FC Barcelona Soccer Series

To soccer fans worldwide, Spain’s FC Barcelona (“Barça”) is one of the top professional clubs in the world led by Argentine’s Lionel Messi.

Rakuten TV Nov. 29 launched “Matchday: Inside FC Barcelona,” a free eight-episode reality-based program that follows the club and its players through the 2018-19 season.

Narrated by John Malkovich, the series claims to offer a “no-holds-barred” view of the club and players during a season that saw the club finish atop Spain’s La Liga as well feature prominently in the ongoing UEFA Champions League competition.

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Rakuten is a primary commercial sponsor of FC Barcelona. The series is available for free across the 42 European countries, including Japan.

Rakuten TV is a European-based VOD offering transactional access to new release movies and TV shows. It also includes an AVOD section, Rakuten TV Free, in a blend of thematic channels embracing Hollywood classics, local, exclusive and themed content.

Rakuten, headquartered in Japan, offers ecommerce in the United States. In addition to FC Barcelona, the company has partnerships with the NBA, the Golden State Warriors, Davis Cup and Spartan Race.

Best Buy Eyeing $50 Billion in Revenue, $1 Billion in Cost Cuts By 2025

Best Buy is projecting strength and growth heading into an investor event Sept. 25 in New York.

The consumer electronics retail giant’s “Building the New Blue: Chapter Two” under new CEO Corie Barry includes revised financial targets through 2025.

The company plans to trim $1 billion in costs over the period, while boosting revenue to $50 billion, up from 2020 guidance of $43.1 billion to $43.6 billion.

Heady goals in a retail environment under constant siege from ecommerce giants such as Amazon and Walmart, among others.

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Indeed, Best Buy last month revised downward fiscal-year revenue estimates — largely due to ongoing tariff concerns with China.

The company, like most CE retailers and manufacturers, relies in large part on Chinese-made products, including its line of Insignia TVs.

Second-quarter entertainment same-store sales dropped 13.7% compared to a 8.5% increase a year ago. The business unit includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

Domestic entertainment revenue topped $441 million, down from $608 million during the previous-year period. The segment represented 5% of Best Buy’s domestic revenue compared to 7% last year. Best Buy closed 13 large format stores in the period.

Regardless, CFO Matt Bilunas remains optimistic.

“In this next chapter, our focus continues to be top-line growth,” Bilunas said in a statement. “We also believe the initiatives we will outline today … along with continued focus on cost reductions, will result in operating income rate expansion over the five-year time frame.”

Amazon Ups Q2 Prime Subscription Revenue 37%, Online Media Sales 14%

Amazon July 25 said it increased second-quarter (ended June 30) Prime subscription revenue 37% to $4.67 billion from $3.4 billion during the previous-year period.

Subscription revenue includes annual and monthly fees associated with Prime memberships, as well as audiobook, digital movies, e-book, digital music, and other non-AWS subscription services.

The Prime membership also includes free access to Amazon Prime Video streaming service.

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Online store sales increased 14% to $31 billion from $27.1 billion last year.

Online stores revenue includes product sales and digital media content available in both a physical (DVD and Blu-ray Disc) and digital format, such as books, music, videos, games, and software sold on a transactional basis.

In the quarter Amazon Prime Video received 47 Emmy nominations for its original programming, more than double from last year, including 20 nominations for “The Marvelous Mrs. Maisel” and 11 nominations for “Fleabag.”

Prime Video premiered the Jonas Brothers documentary Chasing Happiness, and original series, “Good Omens,” based on the novel by Neil Gaiman.

In addition, Prime Video is set to debut original series “The Boys,” from creators Evan Goldberg and Seth Rogen on July 26, and “Carnival Row,” starring Orlando Bloom and Cara Delevingne, among others, on Aug. 30.