Thursday, March 31, 2011
Glenn Beck (in a photograph by David Shankbone at right) and Fox News are as inseparable as peanut butter and jelly. Or so we thought. But Beck’s contract expires this December, and his declining viewership and problems with advertisers have led Fox News to start “contemplating life without Mr. Beck” according to the New York Times.
We learn from the New York Daily News that, during the first quarter of this year, Beck lost more than 1/3 of his audience, or more than one million viewers. He's lost more viewers than Keith Olbermann ever had. Plus, according to the Kansas City Star, the viewers lost were predominantly young viewers: Beck lost nearly half of his 18-49 year old audience and nearly 40% of the 24-54 year old crowd.
Perhaps more importantly, Beck has had longstanding problem with advertisers. After Beck went on Fox and Friends and informed us all of President Obama’s “deep-seated hatred of white people”, around 300 advertisers bolted, as the New York Times noted, leaving Beck and Fox News relying on various gold dealers for advertising revenues. Fox News seemed, at first, to be willing to remain committed until death do them part and overlook the advertiser flight. But, according to AOL's Daily Finance site, as more and more advertisers choose Hardball or The Situation Room over Beck, the Beck taboo has become increasingly difficult for Fox to ignore. On top of that, TVNewser reports that when Beck recently went on vacation for a week, former New Jersey Superior Court Judge Andrew Napolitano filled-in and maintained the show’s ratings, perhaps because of his special feature in which he reviewed recent posts from the ContractsProf Blog.
As Seneca counsels, “Every new beginning comes from some other beginning’s end.” In this case, the demise of contract negotiations between Fox News and Glenn Beck could lead Beck to boldly go where Oprah has gone before: The New York Times suggests that he is considering forming his own cable channel. Despite recent losses in viewership, The Belfast Telegraph compiles evidence that Beck still retains a loyal following: his nationally syndicated radio show is the third most listened to in the country, his numerous books have consistently enjoyed great sales, and he can still summon 100,000-plus to travel cross-country and attend his rallies.
Not everyone is on-board with the idea, however. Marc Babej at Forbes argues that the idea is a non-starter. He points out key distinctions between the Oprah Winfrey Network and a possible Glenn Beck Network. Reverence for Oprah is near-universal, whereas Beck promotes a divisive, us vs. them politics. Oprah has been a landmark in television for quite some time, while Beck is a relative new kid on the block. Finally, Oprah has a proven track record of earning her investors a consistent return. Beck has profited greatly, but also shed substantial advertisers and viewers as of late, making such a venture risky.
Perhaps Beck is allowing rumors of a Glenn Beck Network to flourish in order to gain leverage in his upcoming contract negotiations with Fox. But it would not be inconceivable for Beck to make such a move. If it occurred, according to the Times, it would be a “landmark moment for the media industry, reflecting a shift in the balance of power between media institutions and the personal brands of people they employ.” All of this is contingent on the fact that the Progressives don’t nationalize television first. We shall see.
[Jon Kohlscheen & JT]
Wednesday, March 30, 2011
Back in 2003, a government contractor, L-3 Services offered Abdul Wahab Nattah, a dual U.S. and Libyan citizen, a position as a translator in Kuwait. Mr. Nattah alleges that he was assured certain work conditions that would keep him cozy, well-fed and away from combat. Despite these assurances, Mr. Nattah alleges that he spent a few unpleasant months in Kuwait before he L-3 transferred him to the custody of the U.S. Army, now in a condition he described as slavery. The U.S. Army took him to Kuwait, and he provided language services there that frequently brought him into harm's way. After a shell exploded near him, causing him hearing loss and other injuries, he was sent to Germany for treatment and then discharged, he alleges as a corporal in the U.S. Army. Despite this alleged status, Mr. Nattah claims that he has been denied veterans' benefits.
Mr. Nattah sued a number of government and private entities in 2006. The U.S. District Court for the District of Columbia dismissed all claims in 2008. In dismissing the claims against L-3, the court relied on a letter indicating that Mr. Nattah would be an at-will employee. In dismissing claims against the government entities, the court relied on soveign immunity.
The D.C. Circuit Court of Appeals reversed in part. Since sovereign immunity does not apply to claims for non-monetary relief, Mr. Nattah was allowed to amend his complaint to seek non-monetary relief against the Secretary of the Army. Second, the Court of Appeals found that the existence of the written offer letter did not negate the possibility of a binding oral agreement with the terms described in Nattah's complaint.
On remand, the District Court again dismissed all of Mr. Nattah's claims in a decision handed down on March 17. The Court conceded that sovereign immunity was generally waived on non-monetary claims. However, it noted an exception to the waiver for “acts of ‘military authority exercised in the field in time of war or in occupied territory.’” The District Court noted that the gravamen of Mr. Nattah's remaining claims against the Secretary of the Army was that "the Army bought plaintiff as a slave from L-3 Services, improperly detained him, and forced him to participate in the war in Iraq." Even though some of the conduct of which Mr. Nattah complained occurred before the actual war in Iraq began, the District Court still found that the military exception to the waiver of sovereign immunity applied and again dismissed Mr. Nattah's claims against the government.
In the alternative, the District Court noted that Mr. Nattah's claims under the Geneva Convention, the 13th Amendment, the constitutional right to travel and international law do not state claims that give rise to a private right of action. Moreover, even if they did, since Mr. Nattah no longer claims that he is enslaved, to the extent that he seeks non-monetary relief, his claims are moot.
As to Mr. Nattah's claims against L-3, the District Court first found that the were barred by the applicable three-year statute of limitations on contracts claims and that D.C. does not recognize the doctrine of equitable tolling. Mr. Nattah's allegation that his captivity and his injury from Iraq prevented him from filing a claim within the three-year period was thus unavailing.
While the District Court relied on D.C. law to establish the statute of limitations, it relied on Virginia law to determine that Mr. Nattah's contractual claims were also barred under the statute of frauds. The District Court reasoned that the alleged oral agreement created a potentially indefinite term for Mr. Nattah's service agreement with L-3, thus putting the alleged agreement in violation of the statute of frauds. The partial performance exception to the statute of frauds is an equitable doctrine and in Virginia is not applicable in cases such as Mr. Nattah's that seek money damages.
Crewzers Fire Crew Transport, Inc. v. U.S. arose out of a solicitation issued by the U.S. Forest Service in connection with contemplated Blanket Purchase Agreements (BPAs) for the purchase of buses that would be used by the Service to transport crews in emergencies. The vendors would have to convert school buses to suit the Service's purposes. Once the BPAs were issued, the Service reserved the right to order buses based on "cascading set-aside procedure" that gave preference to certain categories of bidders. The Service wanted to make certain that it would be able to identify vendors who could provide the needed buses in a hurry, so it granted BPAs to multiple bidders. The Solicitation included he following provision:
Since the needs of the Government and availability of contractor’s resources during an emergency cannot be determined in advance, it is mutually agreed that, upon request of the Government, the contractor shall furnish the resources listed herein to the extent the contractor is willing and able at the time of the order. Due to the sporadic occurrence of Incident activity, the placement of any orders IS NOT GUARANTEED.
The Court of Federal Claims interpreted this and other language to mean that neither party was actually promising much. The Service made no promise to order buses to vendors awarded a BPA, and the the vendors only had a duty to maintain their readiness to provide such buses or to notify the Service of changes in their readiness to do so.
Crewzers was never a happy camper. It filed two pre-bid protests that the Government Accountability Office (GAO) rejected. At that point the contracting officer notified all potential bidders that, due to delays in the bidding process (caused at least in part by Crewzers), bidders could not change key terms of their bids. At that point, Crewzers challenged the solicitation as "illusory and unenforceable." Crewzers filed its amended complaint in December 2010. Briefing on cross-motions for judgment on the administrative record was completed in February and oral argument was held on March 11.
On March 18th -- how's that for efficiency?! -- the CoFC ruled for the Service. In so doing, the court noted that the a BPA is not a contract. Rather, "[i]t is instead a collection of provisions that may mature into a contract between the government and a supplier if and when a purchase order – in this case, a “resource order” -- is entered into by each." Crewzers' arguments focused on the tension in the language of the Solicitation quoted above. While contractors "shall furnish" resources; they only need do so if "willing and able." Crewzers characterized this tension as giving rise to an illusory promise. And so it would be, the CoFC acknowledged, if the BPAs were contracts, but they are not.
The CoFC then proceeded to reject Crewzers' alternative construction of the BPA as an option contract. Actually, it refused to consider the argument, because it was raised as a new argument in Crewzers' reply brief. However, the opinion then spends several pages carefully explaining why, even if the argument had been properly raised, it would have been rejected, which pretty much amounts to a rejection of the claim compounded by a criticism of Crewzers' litigation strategy.
The CoFC rejected Crewzers' attacks on the integrity of the contacting officer's determinations as "fly-specking the solicitation" and also rejected a statutory claim.
Tuesday, March 29, 2011
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal
January 28, 2011 to March 29, 2011
We referred our readers to other sources on the Supreme Court's decision in Stolt-Nielsen v. Animalfeeds Int'l Corp. last term. This time, we are going to bear our share of the burden by reporting on the limited consequences flowing from that case in the Second Circuit case, In re: American Express Merchants' Litig.,although we freely admit that Jill Gross of the ADR Prof blog has beaten us to the punch here.
The issue in American Express is the enforceability of a "class action waiver" provision within a mandatory arbitration agreement. The Second Circuit originally ruled on the issue in 2009, finding the provision unenforceable because enforcement "would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs." The Supreme Court vacated that decision and remanded for reconsideration in light of Stolt-Nielsen. Although the parties filed supplemental briefs on the impact of that decision, the Second Circuit found that its original analysis was unaffected by Stolt-Nielsen and thus affirmed its original decision without oral argument.
The District Court had originally dismissed the action, finding that the issue of the enforceability of the challenged provision was for the arbitrator to decide. The Second Circuit found otherwise in 2009 and the parties did not challenge that ruling.
The Second Circuit's reasoning in the 2009 opinion was as follows: 1) The Supreme Court's 2000 decision in Green Tree Financial Corp-Alabama v. Randolph was controlling and imposed on plaintiffs the burden of establishing that the challenged provision rendered arbitration prohibitively expensive; 2) plaintiffs had met that burden; and therefore 3) to enforce the class action waiver would be to grant American Express de facto immunity from antitrust liability. However, in Stolt-Nielsen, the Supreme Court that "a party may not be compelled . . . to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." American Express interpreted this ruling to mean that courts must simply enforce the parties' agreements, not construe them. In this case, the consequence of Stolt-Nielsen, according to American Express, is that coruts "may not impose class arbitration on unwilling parties."
The Second Circuit was unmoved. There was no confusion about what the parties agreed to. The question was whether such an agreement could be enforced, and on that topic, the Second Circuit concluded, Green Tree still controls. While Stolt-Nielsen prohibits the use of public policy as a means of divining the parties intent, the Second Circuit does not bar a court from using public policy to find contractual language void. The case is now remanded to the District Court for further proceedings.
Monday, March 28, 2011
We previously shared the breach of contract case between the organizers of the Miss San Antonio pageant and the pageant's winner, Domonique Ramirez. The most oft-reported aspect of the story was Ms. Ramirez's claim that she was dethroned after failing to "lay off the tacos." Pageant officials responded that the alleged breach was based not on taco over-consumption but on chronic tardiness and other acts and omissions of Ms. Ramirez. On Friday, a Texas jury agreed with Ms. Ramirez. The result? She gets her crown back and gets to compete at the next level--the Miss Texas pageant. She also has a great story for her law school admissions essay should she go that route later in life. "I knew I wanted to become a lawyer when..."
A Tennessee family is suing McDonald’s for breach of contract, promissory estoppel, negligence, and consumer protection violations for playing keep away with a chicken nugget. The case is Howell v. McDonald's Food Corp.
This bizarre case began when father and son went to McDonald’s for dinner and the boy order a chicken nugget happy meal. The 6-year old boy realized that last chicken nugget that looked “redish” and refused to eat it. The local McDonald’s offered a fresh chicken nugget- which the parents declined. That might have been because when their child glimpsed the nugget, he made the sign of the cross and began reciting the lyrics to Beatles' albums backwards. For some reason, the family preserved the crimson nugget. Over the next couple days the child was sick with various stomach ailments, and the parents became concerned. After notifying the local health department, they froze the suspect nugget until they could send it to a nugget testing facility.
McDonald's' insurer, Traveler’s Insurance, offered and the Howells agreed to send the nugget out for tests. The family was assured that they would be notified of the results. The nugget was sent for testing in November of last year. In January, defendants notified the Howells that defendants would not share the test results. Instead, the family received what remained of the nugget -- which was about 20% of the original nugget, now "ashy and charcoal-like" in appearance.
The Howells seek an order compelling McDonald’s to give them the results. They also seek pain and suffering damages, punitive damages, and treble damages for the consumer protection claim. The real damages to the family likely will not be known unless the court compels McDonald's to release the test results. Assuming that the chickens that went into the nugget were not free-range Chernobyl hens, there's probably no reason to think that the Howell's son will face serious long-term effects not already foreseeable from having consumed food.purchased at a McDonald's. One wonders what information defendants are trying to keep concealed.
[Katherine Freeman & JT]
Friday, March 25, 2011
Greetings from Boston! Following brief greetings from Dean Camille Nelson, Suffolk Law Review EiC Tyler Sparrow, and conference organizer Jeff Lipshaw, Charles Fried, whose Contract as Promise inspired today's conference, offered some initial warmly-received comments about what inspired him to write Contract as Promise three decades ago (irritation at arguments Grant Gilmore made in his Death of Contract and Patrick Atiyah made in his classic The Rise and Fall of Freedom of Contract about the nature of contractual obligations and "sound" and "unsound" jurisprudential approaches to understanding and analyzing contractual obligations), and promised to say more at the end of the day -- taking advantage of an opportunity unavailable to the subjects of most such "memorials."
Then came the realization that the first panel wasn't quite ready to go because the conference was running ten minutes ahead of schedule. How promising! We'll see whether the gap between the schedule and real time contracts as the day progresses.
[Keith A. Rowley]
Thursday, March 24, 2011
The NFL’s owners entered into a collective bargaining agreement with the players after the 2008 season. The agreement expired on March 4th of this year. As ESPN.com reports, after several delays and a 16-day federal mediation, the owners locked the players out. A lock-out means that the players can have no contact with teams or their personnel, do not get paid, and also cannot negotiate new contracts with their respective teams or any other teams. This is the NFL's first work stoppage since 1987.
The players union has now dissolved itself, enabling individual players to bring a class-action antitrust suit in federal court. The matter is scheduled to be heard by a federal judge on April 6. The Washington Post reports that the owners have asked the judge to allow the lockout to continue until the National Labor Relations Board has ruled on its claim that the union's decertification was an unfair labor practice.
As the New York Times reports, the main issue dividing the parties is revenue sharing. Under the old deal, the players received nearly 60% of the league revenue from 2006 to 2009 after the owners took $1 billion off the top. The owners are currently proposing a 50/50 split after the owners take $2 billion off the top. The owners need the added money to cover the cost of building new stadiums, and the players should still make at least as much in absolute terms because the new deal would prolong the season to 18 games, thus leading to more revenue -- largely from television deals.
Sporting News provides this run-down of the two sides' positions on the other issues, including the proposed rookie pay scale, benefits for retired players, and the level of the salary cap. The two sides' positions started off $1 billion apart. They negotiated down to around $185 million apart, but then talks broke down when the owners refused the players' request for financial information about the various NFL franchises.
The final major dispute between the two sides is level of the salary cap. The players have said the owners’ current offer is based on unrealistically low revenue proposals. According to ESPN.com the owners’ have offered an increase in the salary cap from $131 million to $141 million for next season in their most recent proposal. The players reportedly seek a cap of $151 million.
The New Yorker's James Surowiecki is most eloquent on the reasons why "in a contest between millionaire athletes and billionaire socialists it’s the guys on the field who deserve to win."
[Jared Vasiliauskas & JT]
Wednesday, March 23, 2011
Note-writers take note! This is a fascinating case and involves a Circuit split!!!
In Crosby v. City of Gastonia, a Fourth Circuit panel that included retired Supreme Court Justice Sandra Day O'Connor affirmed the District Court's order, dismissing a Contracts Clause claim brought by retired members of the Gastonia police department. The case arose over a retirement Fund for police officers established by the North Carolina Assembly in 1955. In the early 1990s, the Fund began to experience financial difficulties. There were various attempts to supplement the Fund's resources, all of which were inadequate. In 2005, the Fund's assets were exhausted. Along the way, the North Carolina legislature allowed active officers to cease their contributions to the Fund and to recover their prior contributions in their entirety prior to retirement.
Plaintiffs brought suit alleging various state law claims but also claiming federal jurisdiction by making a § 1983 claim based on the City's alleged violation of the Contracts Clause. The District Court found no impairment of obligation within the meaning of the Contracts Clause but retained jurisdiction over the remaining claims and granted the defendant City summary judgment on all claims.
In affirming the District Court's judgment on the Contracts Clause issue, the Fourth Circuit discusses Carter v. Greenhow, an 1885 case in which a Richmond property owner engaged in a tax dispute tried to rely on the Contracts Clause to assert a civil rights violation -- i.e. a "deprivation of any rights, privileges or immunities secured by the Constitution" under color of law. In that case, the Supreme Court ruled that, while plaintiff had indeed identified a potential civil rights violation, the clause in question did not provide him with a cause of action. Rather, it seems, he could only rely on the Contracts Clause if the state had somehow impaired his ability to seek injunctive or declaratory relief in connection with his alleged deprivation of property.
In 1991, in Dennis v. Higgins, the Supreme Court seemed to favor a narrow reading of Carter, suggesting that plaintiff's claim was unsuccessful in that case because he chose to plead a contracts claim rather than a "right secured to him by" the Contracts Clause. The Ninth Circuit relied on this dictum in 2003 in ruling that § 1983 can give rise to claim sounding in the Contracts Clause. The Fourth Circuit found the Supreme Court's dictum in Dennis unpersuasive because the Clause at issue in Dennis was the Commerce Clause and not the Contracts Clause.
The Fourth Circuit acknowledges that Carter was decided largely on procedural grounds and did not "substantively explore the contours of a properly pleaded claim" and that Justice Matthews' opinion in Carter is thus "of limited utility in determining whether § 1983 might afford a remedy for infringement of federal rights not previously considered in that context." Nonetheless, it concludes that this case is in the same procedural posture as Carter and therefore that they cannot rely on § 1983 to pursue a Contracts Clause claim. That is, the plaintiffs cannot claim a violation of their civil rights because they do not allege that the City "impermissibly thwarted [them] in any prior attempt on their behalf to vindicate the application of the Contracts Clause to the parties' dispute by resort to the courts."
Frankly, the distinction is subtle, and neither the Fourth Circuit nor the Supreme Court have provided litigants with much guidance about what litigation strategy one ought to pursue in order to bring such an action.
Another interesting element of the opinion is that the Fourth Circuit's construction of plaintiffs' Contracts Clause claim is different from that of the District Court. The District Court treated the claim, somewhat creatively, as a direct Contracts Clause claim and ignored the link to § 1983. The District Court dismissed under Rule 12(b)(1) for lack of subject-matter jurisdiction. The Fourth Circuit found this improper. So why not just remand, especially since the Fourth Circuit notes that retention of jurisdiction over state law claims after dismissal on 12(b)(1) grounds is "problematic?"
Tuesday, March 22, 2011
In today's NYLJ, Stephen Kramarsky writes about "IBM's Hard Lesson in Non-Competes" (subscription required). He discusses International Business Machines Corp. v. Visentin, a recent SDNY decision that denied IBM a preliminary injunction to enforce a non-compete very similar to one it had successfully enforced just a few years ago, demonstrating the difficulty of predicting the enforceability of a non-compete in NY.
The article begins:
One of the hardest things to explain to a client (particularly a sophisticated business client) is that some contracts, no matter how carefully drafted and heavily negotiated, may simply be ignored when push comes to shove before a court. For technology lawyers, that conversation often takes place as the client tries to figure out how to retain its key employees or protect its trade secrets and intellectual property through a non-compete clause.
Definitely worth a read.
[Meredith R. Miller]
As Broadway watchers likely already know, the Bono/The Edge-inspired Broadsay musical, Spiderman: Turn Off the Dark has already cost $65 million dollars to produce, which is more than twice the amount of any Broadway production. The show also costs $1 million a week to run, but that's okay, since it brings in $1.3 million a week -- and that's in.
Still, critics who have attended previews of the show have been less than enthusiastic. Here, for example, is what Ben Brantley had to say in the New York Times. It seems like the show is not coming together under its current artistic team, and the producers recently announced that the show's opening, most recently scheduled for March 15th, will be delayed again. My spidey-sense and the New York Times suggest that the new opening date will be June 14th.
News broke earlier this month that Tony Award winning director, and recipient of the MacArthur Foundation Genius Award, Julie Taymor, is stepping down from her position as director of the musical: . According to this report on popeater.com, the move is now official and the two sides are determining how to work out the contractual issues.
It seems that both parties are trying to avoid anything approaching litigation. Time reports that, although it seems like Taymor was ousted, the producers of the show issued a press release indicating that she has simply agreed to step aside from her day-to-day duties" so that the show can be overhauled [again] under the direction of the new team led by Philip William McKinley. From the Press Release:
Julie Taymor is not leaving the creative team. Her vision has been at the heart of this production since its inception and will continue to be so. Julie's previous commitments mean that past March 15th, she cannot work the 24/7 necessary to make the changes in the production in order to be ready for our opening. We cannot exaggerate how technically difficult it is to make such changes to a show of this complexity, so it's with great pride that we announce that Phil McKinley is joining the creative team. Phil is hugely experienced with productions of this scale and is exactly what SPIDER-MAN Turn off the Dark needs right now.
The New York Times notes that Taymor will retain her title of "director" of the show and will also be credited as a script writer, but that sources close to Taymor claim that she was forced out because she would not agree to make substantial changes to the show. These include scaling back the "Arachne" character and dropped a big production number called "Deeply Furious" that involved numerous shoed lady-spiders. Pity. The Times characterized Ms. Taymor's contract as giving her "broad creative control over the musical."
[Jared Vasiliauskus and JT]
Monday, March 21, 2011
In Anselma Crossing v. United States Postal Service, the Third Circuit Court of Appeals affirmed the District Court's ruling that a federal court is not the proper venue for a breach of contract action against the United States Postal Service (USPS).
The dispute arose out of an alleged spring 2007 oral agreement according to which the USPS would lease from Anselma Crossing a new post office facility in Chester Springs, Pennsylvania. Anselma was to build and lease a building to the Post Office beginning in or around 2010. In reliance on this agreement Anselma asserted that it expended "substantial sums" on engineering and environmental services for the property. However, in 2008, the Post Office made the decision to rescind all new projects, which effectively cancelled the Anselma project along with about 400 others. Anselma sued USPS in District Court, alleging promissory estoppels and breach of contract, claiming it had incurred $150,000 in costs. The court first had to determine whether such a suit could commence a District Court.
Two conflicting Acts govern suits against the Post office. The first is the Postal Reorganization Act (PRA), which allows the USPS to “sue and be sued.” This act also gives District Courts original (but not exclusive) jurisdiction over all actions brought by or against the Postal Service. Easy enough for Anselma, right? The wrench in the works is the contradictory provision in the Contract Disputes Act of 1979, whichpushes any disputes by government contractors against the USPS- and other executive agencies into either the appropriate board of appeals- in this case the Postal Service Board of Contract Appeals, or the United States Court of Federal Claims. The Third Circuit determined that the provisions of the PRA were general, while the CDA is more “recent and precisely drawn.” Therefore the CDA’s specific provisions prevail over the RPA’s general ones. Anselma’s claims should have been brought to the Postal Service Board of Contract Appeals instead of the District Court.
[Katherine Freeman & JT]
An update on last week's post on Netflix's purchase of two entire seasons of the Kevin Spacey/David Fincher joint, "House of Cards."
1. The deal that we reported as imminent has apparently been closed now, as reported in The New York Times here.
2. As we suspected, the new "House of Cards" is an American adaptation of the brilliant BBC series "House of Cards," which we highly recommend and which is available on Netflix!
This deal could change many things about the way serialized television programs make their way into our living rooms. Indeed, it may increase the percentage of television programs that are never watched in anything like a living room because they are watched on an iPad, some other tablet or the next generation of hand-held 4-D holographic projection systems complete with smell-o-vision.
One aspect of the change is that Netflix plans to release episodes in bunches for those who need a good 4-hour fix of their latest addiction.
Friday, March 18, 2011
We at the blog often link to stories that we find in The New York Times. Why? Because it's the paper of record, because it's comprehensive and reliable, and most of all, because it's free. Well, it was free. As the Old Grey Lady announced today, the Times now will allow non-subscribers to read twenty stories a month. After that, if you want to continue to access the Times's content, you have to pay $15/month to become a "digital subscriber."
Why is the Times doing this when, as the Times's publisher, Arthur Sulzberger Jr. acknowledged, it has long been almost an article of faith that "people would not pay for the content they accessed via the Web"? It appears that financial pressures are forcing the Times to find new ways to generate revenue. As the Times reports:
“This is practically a do-or-die year,” said Ken Doctor, an analyst who studies the economics of the newspaper business. “The financial pressures on newspapers is steady or increasing. They’re in an industry that is still receding. Newspapers are trying to pay down their debt, but they have fewer resources to do it.”
The debate consuming the newspaper business now centers on the question that The Times hopes to answer: Can you reverse 15 years of consumer behavior and build a business around online subscriptions?
Not all visits to the Times's website will count towards the monthly twenty-visit limit. If you get to a Times story via a search engine or a social networking site, you get a free pass, but only five free passes a day are allowed. The Times, in an odd lapse in its comprehensive coverage, does not mention whether or not clicking on a link to the Times posted on the ContractsProf Blog counts.
Of course, if you are not inclined to keep a pad next to your computer so that you can keep track of your monthly visits, you can always just subscribe to the newspaper, which entitles you to unlimited access to the website. Otherwise, the $15/month fee is not too pricey. It's the cost of two lunches at McDonald's. How do we arrive at that figure? Simple. We read it in The New York Times.
Netflix's strategy is like that of the wise player in the board game Risk, who starts in Australia and patiently builds armies while the super powers fight amongst themselves. For those of you who think we have just exceeded the acceptable nerd quotient by: 1) blogging; 2) about contracts; and 3) mentioning a board game (at least it's not D&D), here is a clip to illustrate the effects of such a noiseless-patient-spider approach:
According to the New York Times, Netflix has gradually developed its assets so that it can compete with traditional TV networks like HBO and AMC and shift from “a DVD-by-mail service to an online library of films and TV programs.” Up until now, Netflix has focused on acquiring the rights to concurrent access to several network TV shows.
This all might change soon, however, as The Atlantic reports that Netflix is the lead bidder to purchase the exclusive rights to House of Cards, a new marquee television series created by Kevin Spacey and David Fincher. Not only would this deal signal the beginning of Netflix’s foray into original programming, but it is significant due to the potential terms of the contract as well. Netflix has offered $100 million upfront for two full seasons, each with 13 episodes. Such a bold commitment has never been done before for a TV drama, and if the bid is accepted, according to New York Magazine it could “upend the way television deals are made…” just like an angry Ukrainian can upend a Risk game.
Many analysts are calling the move a necessary step for Netflix to stay competitive with rivals coming from all sides. Nellie Adreeeva of Deadline.com points out that Netflix has been under great pressure as of late from various challengers in the streaming movie market, like HBO, Amazon.com, and even Facebook. Original content would differentiate Netflix from its rivals and branch out into a new customer base.
Some are skeptical, however. the Atlantic's Megan McArdle highlights some of the drawbacks and risks. While Netflix may have dominated the DVD rental market, pinpointing the next hit TV show requires an entirely different skill set, one that Netflix has not demonstrated thus far. Netflix could not expect that many people would subscribe to Netflix's service, if they haven’t already, in order to get access to a single program. Netflix thus likely will have to make significant investments in several original programs before it starts to see real returns from this kind of investment, which heightens the risk inherent in branching out.
Regardless, if Netflix wins the contract for the rights to House of Cards, it could herald a major shift in the way TV programming contracts are negotiated and transform Netflix into a major competitor for traditional TV networks.
[Jon Kohlscheen & JT]
Thursday, March 17, 2011
Gilbert Gottfried, pictured at left, is a comedian, but he is probably best known for providing the voice of that delightful duck in those Aflac commercials. Who knew insurance companies could be so charming?!? On the right, we have a picture of a duck, but this duck is not the actual Aflac duck, as far was we know.
The New York Times reported this week that Aflac has fired its spokesduck -- or at least its voice -- on the ground that Mr. Gottfried posted some insensitive jokes on his Twitter account about the earthquake and tsunami that have had devastating effects in Japan. Aflac did not find Mr. Gottfried's jokes funny -- his jokes rarely are -- but the company found these particular jokes especially unfunny, given that Aflac derives 75% of its revenue from the Japanese market, according to the Times. Friends of the blog will not be surprised to learn that, in canning Gottried effective immediately, Aflac invoked a morals clause, according to the Times. These clauses raise no end of interesting issues. I mean, is it really credible for Aflac to claim that it is shocked, shocked to learn that Gottfried posted tasteless jokes on his Twitter page? What else does Gottfried post?
Interestingly enough, the same week, Cappie Pondexter, a member of the WNBA's New York Liberty team, made a series of posts on her Twitter page reasonably construed to indicate that Pondexter believed that the Japanese deserve whatever happened to them. As reported in the New York Times as well, the Liberty and the WNBA seem to have elected not to discipline Pondexter for her tweets. Pondexter has apologized and both the league and her team seem to think the apology suffices. Safe to say that Japan does not account for 75% of the WNBA's market.
Tuesday, March 15, 2011
In what we expect will be the second (here's the first) in a steady stream of posts relating to Lady Gaga's contractual exploits (Sorry, Charlie, you will be upstaged), we are please to announce that Rolling Stone reports that Lady Gaga and Target have apparently parted ways. Tensions have arisen only about a month into a deal that was to give Target an exclusive license to sell the deluxe edition of Lady Gaga’s new album Born This Way. The timeline of the conflict is a bit confusing. Apparently, Lady Gaga's contract with the big box store included a clause that Target was to increase support of LGBT charity groups.
Lady Gaga is (now?) upset with Target because last election season (i.e., well before Lady Gaga entered into a contractual relationship with the company) Target gave $150,000 to MN Forward- a Minnesota advocacy group that backed Tom Emmer in his losing run for governor of Minnesota. Tom Emmer is decidedly pro-life and anti gay marriage, as evidenced by his promotion of a state constitutional amendment to ban gay marriage and contributions to a Christian Rock organization that promotes violence against homosexuals.
Lady Gaga knew about Target's support for MN-Forward before entering the agreement. She told Billboard last month she was not “comfortable” with the arrangement from the beginning but was trying to use this agreement to turn Target around and push them into making amends for their past wrongdoing. So why bring this up after Target has already given away free MP3s of her latest single? As of now, Target is still pre-selling the album, which is to release in May. Given those facts, it's not clear how Lady Gaga is going to be able to back out of the deal, unless of course she just goes back into her egg.
[Katherine Freeman and JT]