WarnerMedia Alleges Politics in Dish Network Dispute

WarnerMedia is accusing the Department of Justice of using a carriage disagreement with Dish Network as leverage in its appeal of a federal judge’s favorable verdict in AT&T’s $85 billion acquisition of Time Warner.

AT&T’s WarnerMedia — which includes HBO, Turner and Warner Bros. — for the first time (Nov. 1) pulled HBO and Cinemax from Dish Network after it claimed the satellite operator refused to negotiate. The move reportedly affected about 2.5 million of Dish’s 13 million pay-TV subscribers.

“Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement,” Simon Sutton, HBO president and chief revenue officer, said in a statement as reported by Reuters.

While carriage disagreements and negotiations aren’t uncommon, the AT&T/Time Warner merger is different. The deal has been entangled in partisan politics since the election of President Donald Trump.

Trump’s ongoing characterizations of certain media outlets — notably Turner’s CNN — as fake news and biased against him has prompted allegations the Justice Department’s last-minute objection to the merger was more about politics than antitrust issues.

The DOJ contends AT&T has too much power owning and controlling major content creators and distribution channels — leverage it claims hurts consumers. The carriage dispute, says the government, offers a blueprint example of that.

“This behavior, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” said a DOJ representative. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

WarnerMedia says Dish is using the current political environment to extract more favorable contract terms. Indeed, it alleges Dish is collaborating with DOJ on the issue.

“That collaboration continues to this day with Dish’s tactical decision to drop HBO — not the other way around,” said a WarnerMedia rep. “DOJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

Andy LeCuyer, SVP pf programming at Dish, argues otherwise.

“It seems AT&T is implementing a new strategy to shut off its recently acquired content from other distributors,” he said.

Trump Signs ‘Music Modernization Act’, Easing Legal Requirements for Streaming Services

Lost in the haze of President Trump’s Oct. 11 bizarre news conference with rapper Kanye West, was the president signing into law the Music Modernization Act, passed unanimously by Congress in September.

Officially known as the “Orrin G. Hatch – Bob Goodlatte Music Modernization Act of 2018,” the legislation simplifies the “mechanical license” required for “musical composition” (music and lyrics) and sound recordings from record labels played on subscription music streaming services such as Spotify, Apple Music, Pandora and Amazon Prime Music, among others.

Before passage of the law, streaming music services were required to complete license forms for each song placed on their platforms – upwards of 10,000 titles per day.

Now, a new licensing agency will be established within the U.S. Copyright Office offering music services a blanket mechanical license to stream content. The agency will keep track of music streams and in turn pay royalties to rights holders.

The bill also allows for royalties to artists and songwriters for songs written prior to 1972. It also, for the first time, will afford compensation for a song’s producer played on satellite radio and online music service.

“There’s a lot more that needs to be done here,” said Kid Rock, who attended the bill’s signing. “We need to go after the record labels next, and things like free goods. But this is a great start to protect songwriters, producers, engineers — the unsung heroes behind many of these songs that go out there. People like [me], who are maybe more at the top of the food chain, it really doesn’t affect as much. But I know many people it does affect.”

California Inks Net Neutrality Bill; Trump Administration Sues

California Gov. Jerry Brown Sept. 30 signed legislation that returns key provisions of net neutrality law enacted by the Federal Communications Commission under President Obama.

Brown approved SB822 — dubbed the California Internet Consumer Protection and Net Neutrality Act of 2018 — prohibiting fixed and mobile Internet service providers (ISPs) from engaging in actions concerning the treatment of Internet traffic.

The law prevents ISPs (including Comcast, AT&T and Verizon) from blocking lawful content, applications, services, or nonharmful devices, impairing (i.e. throttling) or degrading lawful Internet traffic on the basis of content, application, service or use of specified practices known as “zero-rating,” which enable users to consume select content without impacting their monthly data caps.

It also denies ISPs from offering or providing services other than broadband Internet access service that are delivered over the same last-mile connection into consumer homes, if those services have the purpose or effect of evading the above-described prohibitions or negatively affect the performance of broadband Internet access service.

The Trump Administration responded with the Department of Justice filing a federal lawsuit claiming the state law violates provisions of the FCC’s rolled back net neutrality guidelines enacted under new chairman Ajit Pai.

“Under the Constitution, states do not regulate interstate commerce — the federal government does,” Attorney General Jeff Sessions said in a statement. “Once again, the California legislature has enacted an extreme and state law attempting to frustrate federal policy.”

Pai, who was appointed to the FCC by Obama, and promoted to chairman position by President Trump, has long argued previous net neutrality provisions represented government overreach on private enterprise and thwarted capital investment.

The revamped FCC last December voted to reclassify ISPs as “information service providers.” That action — restoring lighter regulatory oversight — overturned the prior FCC’s 2015 ruling that classified ISPs as common carriers under Title II of the Communications Act of 1934.

“Not only is California’s Internet regulation law illegal, it also hurts consumers,” Pai said, citing “zero rating” data plans he said enable low-income consumers to stream video and music.

“They have proven enormously popular in the marketplace,” Pai said.

Eddie Kurtz, with Courage Campaign, a civil liberties group, applauded the signing of SB822.

“Governor Jerry Brown did the right thing by choosing to institute the strongest net neutrality rules in the country, sending a clear signal to Californians that guaranteeing access to the internet for all, helping California communities — particularly low-income communities — and  boosting small businesses is a priority for our state,” said Kurtz.

 

AT&T Reiterates Operating Turner Separate from WarnerMedia Pending DOJ Appeal

AT&T CFO John Stephens reaffirmed the telecom will continue to operate Turner Broadcasting System as a separate business from WarnerMedia.

Turner, which includes CNN, TBS, TNT, Turner Classic Movies, Cartoon Network, Adult Swim, Boomerang and TruTV, had been included under the Time Warner corporate umbrella prior to latter’s $85 billion acquisition by AT&T.

With the Department of Justice appealing its federal court antitrust loss stopping the merger, AT&T said it would operate Turner separately until the appeal deadline on Feb. 28, 2019.

Speaking Sept. 10 at an investor event in New York, Stephens said that while Turner would historically operate under WarnerMedia – headed by John Stankey – it would remain independent until resolution of the DOJ appeal.

“While we have committed to running Turner as a separate business pending the appeal, we intend to move the results of some of our other network properties such as our regional sports networks under Turner when we report [third-quarter, ending Sept. 30] results,” Stephens said.

It’s been speculated that CNN, which has been in the crosshairs of President Donald Trump’s “fake news” allegations, was the reason the DOJ filed its late antitrust litigation in the first place.

AT&T had sought to obtain communication between the White House and the DOJ regarding the case but was denied by the judge overseeing the case.

“This just continues what has been a very odd series of procedures by the DOJ,” Paul Sweeney, media analyst at Bloomberg, told The Dallas Morning News in July. “It’s perplexing to legal experts I’ve spoken to, and certainly investors.”

Meanwhile, Otter Media, the digital media company co-owned by AT&T and former 21stCentury Fox executive Peter Chernin, has been moved from AT&T’s entertainment group segment to WarnerMedia following the telecom’s acquisition of Chernin’s stake last month.

“We will continue to show financials at a reporting unit level for Turner, HBO and Warner for comparability purposes,” Stephens said.

Trump Wades Into ‘Roseanne’ Debacle

Leave it to President Donald Trump to make Roseanne Barr’s May 29 racist tweet about a former Obama Administration official about him — and turn it into a social media attack on Bob Iger, CEO of The Walt Disney Co.

Barr’s comments resulted in widespread condemnation in the media (including from Fox News rightwing firebrand Sean Hannity) and cancellation by Disney-owned ABC of her top-rated “Roseanne” TV show reboot.

While Barr has apologized, she also blamed the incident on her use of insomnia medication Ambien, to which the drug’s manufacturer responded that racism is not a known side effect.

Iger, who called cancellation of the “Roseanne” show the “right thing to do,” reportedly reached out to Valarie Jarret, the former senior advisor to Obama at the center of Barr’s racist tweet.

That was enough to irk Trump, who first took to social media May 30 asking for his own apology — from Iger.

“Bob Iger of ABC called Valerie Jarrett to let her know that “ABC does not tolerate comments like those” made by Roseanne Barr. Gee, he never called President Donald J. Trump to apologize for the HORRIBLE statements made and said about me on ABC. Maybe I just didn’t get the call?” Trump tweeted.

The same day, Trump’s press enabler, Sarah Huckabee Sanders, called out ABC and Disney-owned ESPN on a list of alleged political wrongs originated by the media giant’s personalities.

Trump was referring to an “ABC News” report last year by Brian Ross that alleged former national security advisor Michael Flynn had been instructed by Trump to contact Russian sources prior to the 2016 election. That turned out to be false. Flynn had been in contact with the Russians on his own accord, which he later lied about to Congress and was subsequently fired for by Trump.

Ross apologized for the inaccurate report and was suspended.

But to Trump, who remains in the crosshairs of a Russian collusion investigation headed by former FBI leader Robert Mueller — with Flynn cooperating as part of a plea agreement — the grievance remains personal.

“Iger, where is my call of apology? You and ABC have offended millions of people, and they demand a response. How is Brian Ross doing? He tanked the market with an ABC lie, yet no apology. Double Standard!” Trump tweeted May 31.

Iger, who seeks to acquire 20th Century Fox Film in a deal that would require regulatory approval, has not responded. Nor should he.

Rudy Giuliani Says Trump ‘Denied’ AT&T, Time Warner Merger

NEWS ANALYSIS — Depending on what side of the political aisle you walk, Rudy Giuliani is either a gift that keeps on giving or a self-inflicted wound that won’t heal.

The former mayor of New York and newest member of President Donald Trump’s legal team is either carrying out a shrewd scorched-earth policy in the media, or an idiot who can’t keep his mouth shut.

In a May 11 interview with The HuffPost, Giuliani was defending allegations that Trump’s personal lawyer and problem “fixer,” Michael Cohen, had not influenced the president on the AT&T, Time Warner $85 billion merger.

AT&T has admitted paying Cohen $600,000 as a consultant to help ascertain Trump’s mindset on corporate mergers — notably its own — a move CEO Randall Stephenson has apologized for.

“Whatever lobbying [in favor of the merger] was done didn’t reach the president,” Giuliani said. “The president denied the merger. They didn’t get the result they wanted.”

Technically, Trump hasn’t denied anything. A federal judge in June will decide whether the merger goes through.

Yet, Giuliani’s comment is significant considering the White House has refuted getting involved in the M&A that would give AT&T control of Time Warner, whose assets include Warner Bros., Turner (TNT, TBS and CNN) and HBO.

While Trump argued against the merger on the campaign trail, a sitting president usually doesn’t get involved in M&A activity before the Department of Justice’s antitrust division.

The DOJ filed a lawsuit against the merger, claiming it was bad for consumers. Trump, of course, has railed publicly against CNN, claiming the news organization peddles “fake news” about his administration.

“If Giuliani didn’t misspeak, this is major news,” Renato Mariotti, a former federal prosecutor, tweeted May 11, as reported by CNN.

Of course, misspeaking has become a hallmark of Giuliani, who earlier this month made news when he told Fox News that Trump had personally reimbursed Cohen for the $130,000 hush payment made to porn star Stormy Daniels just before the 2016 election about an alleged 2006 affair.

“That was money that was paid by his lawyer, the way I would do, out of his law firm funds,” said Giuliani. “Michael would take care of things like this like I take care of this with my clients. I don’t burden them with every single thing that comes along. These are busy people.”

Those comments resulted in Giuliani taking a leave of absence from the law firm he worked for — Greenberg Traurig, a leave that is now permanent.

Greenberg Traurig May 10 issued a statement — first reported by The New York Times — saying its lawyers do not send secretive payments for clients.

“We cannot speak for Mr. Giuliani with respect to what was intended by his remarks,” read the statement. “Speaking for ourselves, we would not condone payments of the nature alleged to have been made or otherwise without the knowledge and direction of a client.”

Corporate Apology Tour Goes Public Following Michael Cohen Hire

NEWS ANALYSIS – Showtime’s compelling drama, “Billions,” showcases fictional machinations and strange bedfellows underscoring Wall Street greed and political malfeasance.

A setting apparently not unlike corporate America operating under President Donald Trump.

AT&T CEO Randall Stephenson May 11 became the second senior executive to apologize to employees for corporate decisions related to the hiring of Trump’s personal attorney Michael Cohen to gain better insight into the president’s mindset and executive decision making.

Media reports say AT&T paid Cohen $600,000 to assuage Trump on the merits of its $85 billion acquisition of Time Warner, which includes Warner Bros., Turner and HBO.

Trump, on the campaign, had voiced opposition toward the merger – a stance many observers attributed more to his dislike of CNN, which is owned by Turner, than concern for consumers.

The AT&T/Time Warner deal appeared heading to regulatory closure when the Department of Justice filed an antitrust lawsuit in opposition. A federal judge will rule on the matter in June.

Cohen, of course, is much more than a lawyer and confidante for Trump. His skills reportedly revolve around “fixing” Trump’s problems – including an alleged 2006 affair with porn star Stormy Daniels, in which Cohen facilitated a $130,000 hush payment to Daniels before the 2016 election.

The AT&T/Cohen connection was first disclosed by The New York Times.

Calling the matter, a PR blunder, Stephenson, in a letter to employees, said the decision had damaged AT&T’s reputation and put the telecom in the headlines for “all the wrong reasons.”

“There is no other way to say it, AT&T hiring Michael Cohen as a political consultant was a big mistake,” Stephenson wrote.

Novartis CEO Vasant Narasimhan the same day issued a similar memo to employees after it was disclosed the pharmaceutical giant paid Cohen $1.7 million for guidance regarding Trump’s approach to healthcare policies.

“We made a mistake in entering into this engagement and, as a consequence, are being criticized by a world that expects more from us,” Narasimhan wrote, as reported by CNBC.

U.S. Supreme Court to Punt E-commerce Sales Tax Case?

The United States Supreme Court reportedly appears unsure how to rule on a case involving sales tax charged on out-of-state e-commerce transactions.

Amazon, among other e-commerce services, has long been able to avoid charging sales tax on out-of-state on purchases — a loophole that rankles in-state brick-and-mortar businesses.

A lawsuit brought in South Dakota challenges a 1992 Supreme Court ruling that states can’t charge sales tax on businesses without a physical presence in the state. A reversal of the law could be worth $18 billion to states and could significantly impact (raise prices) on e-commerce.

A lower court case involving Wayfair, Overstock.com and Newegg ruled in favor of the e-commerce platforms.

Interestingly, in an era of tax avoidance, the justices April 17 heard arguments, with comments against taxes coming from left-wing justices Elena Kagan and Sonia Sotomayor, while conservatives, including President Trump appointee Neil Gorsuch, appeared in favor of taxes, according to Reuters, which is following the case.

“Congress is capable of craftly compromises,” Kagan said without irony. Sotomayer wondered if changing the law would set off an avalanche of new state taxes, hurting Internet start-ups.

In 2015, Justice Anthony Kennedy said the landmark law was outdated and left most of e-commerce tax free.

“Given … changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the court’s holding,” Kennedy said. “The legal system should find an appropriate case for this court to [revisit the original case].”

South Dakota in 2016 passed a law requiring out-of-state businesses collect sales tax if they generate at least $100,000 in revenue or 200 transactions. It is supported by business groups, including the National Retail Federation, whose members ironically feature e-commerce subsidiaries Walmart.com, Target.com and Amazon.

Trump upped the politics of the case when he went after Amazon on Twitter, accusing the company of having an unfair tax advantage. Amazon founder/CEO Jeff Bezos owns The Washington Post, which frequently criticizes Trump.

The Supreme Court is expected to rule on the matter by this summer.

 

Trump Looking to Nationalize 5G Development?

The federal government reportedly is considering nationalizing nascent commercial efforts in the development of a 5G mobile network under the guise of national security interests, among other factors.

According to Axios.com, which cited a National Security Council PowerPoint presentation regarding the issue, the feds would help expedite 5G development within three years in an effort to safeguard the nation’s burgeoning telecommunications network.

5G is about 1,000 times faster than the current 4G network and could enable the download of an HD movie in less than a second.

A 3G network has download speeds up to 384 Kbps, with 4G at 100 Mbps and 5G reportedly up to 10 Gbps.

Nationalizing a private and largely unregulated industry such as mobile communications would be unusual and run counter to the GOP-controlled small government Congressional mindset. Not to mention President Donald Trump.

Yet with China reportedly set to spend more than $400 billion on 5G, U.S. officials worry the pseudo Communist power could undermine similar efforts in the U.S. due in part to much of the technology being manufactured in China.

“[The government wants to] build a network so the Chinese can’t listen to your calls,” said one official as reported by Reuters.

While the report suggested private 5G development remains an option, it is believed rollout could take longer.

Trump reportedly will weigh in on the matter sometime this year.

Then again, he could call Verizon, which is rolling out 5G in five major U.S. cities in the second half of the year — the first wireless carrier to do so.

Verizon aims to harness 5G technology with its new Oath platform, whose content brands include Yahoo, HuffPost, AOL, Tech Crunch and Engadget, among others.

“The next industrial revolution will be on Verizon’s [5G] network and will positively impact society like no technology we have seen before,” CEO Lowell McAdam boasted on the fiscal call.