Scatter Update, Hulu and FCC Retrans

Healthy Scatter Market amp8211 Network scatter market channel checks indicate relative strength While impression underdelivery is playing a part both buyers and sellers tell us that advertisers might have overplayed their hand with respect to scatter pricing expectations post an Upfront that was priced relatively softly Premiums are still modest mid to highsingle digits but the bear case that pricing would collapse this fall simply has not played out and the TV advertising environment appears stableFor investors to really capitalize on the pricing environment though the Media operators will have to generate improved impression delivery in order to drive real advertising outperformance We39ll be watching ratings closelyHulu39s CommercialFree Option Chasing Netflix amp8211 On September 2 Hulu announced an 1199month subscription option to watch Hulu commercialfree Hulu39s premium service had unlike its main SVOD rivals Amazon and Netflix shown commercials With recent content investments we believe Hulu is looking to aggressively grow its 9mm sub base and make its SVOD service more competitive with Netflix Over the last year Hulu has invested heavily in acquired content including Seinfeld Empire Fargo South Park CSI etc and original programming including 12263 from Stephen King and JJ Abrams as well as Amy Poehler39s comedy series Difficult People Recently it acquired streaming rights to EPIX theatrical content from Lionsgate Paramount and MGMBut Is Hulu Punting On Its Potentially Biggest Opportunity Targeted Premium TV Advertising What makes Hulu such a unique and valuable asset is its almost unmatched ability to offer online content at quotscalequot that should be screen quotagnosticquot to Madison Avenue it39s all quotpremiumquot TV content By layering on adtech Hulu could be the first nonlinear TV platform to offer true TV contextually with digital targetability and CPM premiums We aren39t so sure that Hulu should walk away from this opportunityFCC NPRM Reviewing Good Faith Retrans Negotiating Rules Released amp8211 On September 2 the FCC issued its long awaited NPRM to reexamine retransmission consent rules Included is a review of the quottotality of the circumstances testquot The totality of circumstances test allows the FCC to determine an MVPD or a broadcaster to be negotiating in bad faith in violation of FCC rules even if neither party has violated a predetermined list of individual violations This is crucial to investors as the currently legal ability of broadcasters including network OampampO39s to limit access to quotmust have programmingquot can be a negotiating tool in retransmission consent negotiations Recent highprofile standoffs against consumer backlash from increasing PayTV subscription costs have created an opportunity for the FCC to revisit the regulatory paradigm with a potentially stricter frameworkFCC Asking More Questions Than Listing Regulatory Prescriptions But Agenda Is Clear amp8211 Essentially the NPRM asks lots of questions rather than lists conclusions about what should be included in totality of circumstances As one of our DC sources told us quotthey39re throwing everything against the wallquot The NPRM asks whether there are any specific practices it should identify as evidence of bad faith as part of the totality test such as Internetrelated practices like broadcasters preventing online access to programming as an apparent tactic to gain leverage in a retransmission dispute or whether it should address the practices of the bundling of retrans negotiations with carriage agreements for cross owned cable networks Although the questions are clearly quotleadingquot in a quotproMVPDquot fashion the NPRM is written as more of an openended question than a prescription because as our sources tell us the FCC isn39t certain of its authority or how exactly to write the rules Whatever happens we think resolution is 6amp821112 months away and subject to litigationLink to Full Research Report including Required Disclosures and DisclaimerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom MyersBizNet Inc management or associated bloggers amp160

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Scatter Update, Hulu and FCC Retrans

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David Bank

We Are the Outliers - By Jack Myers

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Scatter Update, Hulu and FCC Retrans

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