Comcast and Verizon Decide They Don’t Need to Compete With Apple, Google and Everyone Else, After All

never mind

Last year, when Verizon Wireless and Comcast were trying to get lawmakers to sign off on a giant wireless spectrum sale/noncompete pact, the two companies also said they were going to create a technology/R&D joint venture. It was supposed to come up with really cool tech products that consumers would love.

That JV is now dead. Verizon announced its demise today during the company’s earnings call, but said the partnership actually ended in late August.

The news here is that the most important part of the Comcast/Verizon deal hasn’t changed. Verizon still owns valuable spectrum it purchased from Comcast, and the two companies are still agreeing not to compete – or at least not to compete very vigorously.

It’s not surprising that Comcast and Verizon have concluded that their JV didn’t make sense. Most JVs don’t. And if there is an example of two companies at the scale of Comcast and Verizon successfully working together to create cool consumer tech, I’d love to hear about it.

For the record, though, the two companies didn’t seem to have those doubts back in March 2012. Back then, when the companies were still trying to get federal approval for the deal, they were pointing to the JV as a big win for consumers.

Here’s what Comcast executive vice president David Cohen told a Senate subcommittee back then:

“By enhancing the Cable Companies’ and Verizon Wireless’s own products and services, the Joint Venture will compete with similar solutions that AT&T, Dish Network, Google, Apple, Microsoft, and others already have introduced into the marketplace. This, in turn, will spur other companies to respond, perpetuating a cycle of competitive investment and innovation.”

And here’s what Verizon is saying, via a spokesperson, today:

“The joint venture was formed to bring innovation to the marketplace and enhance the customer experience through technology that integrated wireline and wireless products and services. Evolving technology and market changes since the joint venture was formed have led all parties to conclude that a joint venture, per se, is no longer needed to deliver innovative services to customers. Verizon Wireless and the cable companies will continue to explore ways to collaborate on technology in the future. Each company remains committed to bringing innovation to its customers and will continue to find ways to optimize the user experience for each company’s products.”

If you’re a skeptical person, you might think that Comcast and Verizon were overselling the benefits of the JV from the start. You might think that they never really thought they could successfully compete with the likes of Apple and Google, but were holding out the idea because consumer groups were unhappy with the other parts of their pact, which seemed likely to reduce competition between the two companies.

On the other hand, both Comcast and Verizon did assign people to work on this stuff together, and they did do some work. Comcast, for instance, points to the Xfinity TV Player app, which lets you download movies and TV shows to your iPad and iPhone and take them with you, as an example of the joint venture’s output. [Update: Strike that. A Comcast rep tells us we had bad information: The app was made in-house, not via the JV.]

So, if you were a different kind of skeptical person, you might think that Comcast and Verizon really did think they could successfully compete with the likes of Apple and Google. And the fact that it only took them 17 months to realize they were wrong – and pull the plug – is a good thing.

(Image courtesy of Shutterstock/Carlos Caetano)

Netflix Hits Its Numbers, Investors Go Nuts, Reed Hastings Tells Them to Chill Out

orange is the new black

Netflix’s Q3 numbers are what Wall Street was looking for: The company now has 31 million subscribers in the U.S., and another 9 million in the rest of the world. Investors, who either hate Netflix or love Netflix but never feel neutral about it, are pushing the stock up 10 percent to $390 – an all-time high.

Given that Netflix was trading in the $50s just a year ago and is basically the same company plus a few new original shows, it might be useful to have some perspective on the disconnect between the company and its stock.

So CEO Reed Hastings provides it, right at the end of his investor letter:

In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.

Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we’ve continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock. The progress we’ve made over the last 10 years is stunning. We want to make the next 10 years even more remarkable.

(Hear that? That’s the sound of investors ignoring Hastings’ counsel.)

Okay: On to the company itself. As many of my colleagues have noted, Netflix now has more paying subscribers in the U.S. than Time Warner’s HBO – or at least the last numbers that HBO reported.

Unlike previous comparisons some of my colleagues have made between Netflix and, say, Comcast, this one is relevant, since Netflix and HBO are actual competitors who make roughly the same amount of money per paying subscriber. But as both Netflix and HBO have noted in the past, there is a high degree of overlap between HBO and Netflix subscribers: If you have one, you’re likely to have the other.

Meanwhile Netflix, which sort of suggested last quarter that its “Orange Is the New Black” show was doing really well, is much more explicit about it this time around.

The company specifically calls out the show as a great marketing device: “[G]reat press coverage and social buzz generated by” OITNB, as well as the company’s Emmy nominations, helped push up the company’s numbers in the U.S.

But at the same time, Netflix also argues that people spend most of their time on the service watching stuff that isn’t made just for Netflix.

Specifically, Netflix calls out shows like “Breaking Bad” and “The Walking Dead,” where it offers exclusive access to reruns; it says those kind of shows generate “a bigger percentage of overall Netflix viewing.” Which makes sense, because my hunch is Netflix spends more on those kind of shows (for now) than it does on its originals.

But that’s a pretty good summary of the Netflix strategy right now: Use its original shows, and the attention they generate, to help sell the service to new users, and use TV’s reruns to help keep them. Looks like it’s working pretty well, regardless of stock price.

EA has been voted “Worst Company in America” – Again.

ea_logo

For the second year in a row Electronic Arts has been voted as the worst company in America by the readers of the consumer-watchdog website The Consumerist. This makes them more hated than Bank of America, Comcast and Ticketmaster (of which took second, third, and fouth).

Despite the fierce competition this year they managed to take home the not-very coveted “Golden Poo” award. They won this because of a love of microtransactions, the price of their games and use of DLC as well as the irritating DRM practices. But the spectacular failure of the SimCity launch was a particular sore spot that was poked a few times.

More…

“EA made a royal mess of the SimCity release by failing to foresee that the people who would buy the game and who would, per the game’s design, be required to connect to the EA servers and might actually want to play at some point in the week after making their purchase…But that’s just the latest in EA’s long history of annoying its customer base with bad support. Customers who paid full price for games, or who spent or saved huge piles of in-game cash in EA’s online products, would suddenly find a problem with their accounts, but attempts to rectify the problem, or even get a response from EA, would go unheeded.” – The Consumerist

EA chief operating officer Peter Moore, in an open letter to gamers last week, admitted the company could do better, but said the label of “worst company” was undeserved:

“Are we really the ‘Worst Company in America? I’ll be the first to admit that we’ve made plenty of mistakes. These include server shut downs too early, games that didn’t meet expectations, missteps on new pricing models and most recently, severely fumbling the launch of SimCity. We owe gamers better performance than this. … But I am damn proud of this company, the people around the globe who work at EA, the games we create and the people that play them.”

No company wants to win an award like this, EA specifically does not need any more bad press like this amongst everything else that is going on with them. They are already dealing with more significant issues such as the CEO John Riccitiello resigning at the end of last month not to mention the fallout of the SimCity ordeal.

With all of this fueling the internet hate-bandwagon I expect to see a slew of new memes being created in regards to this. But will this actually deter anyone from buying any of EA’s new games? Battlefield 4 will be releasing later this year and there is quite a bit of excitement around it and regardless of this news gamers everywhere will be buying and playing on the “broken” servers they complain about.