Cashing Out: Week of August 28th – September 3rd 2011 in Online Marketing News

DOJ: AT&T T-mobile merger would raise prices, reduce quality

In the game of mergers and acquisitions, sometimes hammering out the terms of a deal is only half the battle.

The proposed acquisition of T-Mobile by AT&T, worth $39 billion, was announced back in March, but the merger was still subject to regulatory approval. Now, with the August 31 filing of an antitrust suit, the Department of Justice (DOJ) is attempting to keep the deal from going through. The complaint is that a merger between AT&T and T-Mobile, respectively the second and fourth largest wireless carriers in the U.S., would hinder competition, overwhelm competitors, and ultimately raise prices and reduce quality.

“The Department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services,” reads a statement on the DOJ’s website.

Meanwhile, both AT&T and T-Mobile have, unsurprisingly, expressed their disappointment and promised to oppose the suit.

In a statement, AT&T’s Senior Executive Vice President and General Counsel Wayne Watts wrote:

“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”

For their part, T-Mobile’s parent company Deutsche Telekom is backing AT&T. The following is an excerpt from their statement on the matter:

“Deutsche Telekom is very disappointed by the DOJ’s action, and will join AT&T in defending the contemplated merger against the complaint in court. DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder, and public benefits.”

As TechFlash reported, the reactions from outside these companies has been varied. The Communications Workers of America, a labor union representing AT&T employees, is stressing the benefits the deal could have for T-Mobile’s employees, who would be unionized as a result. Meanwhile, Sprint is naturally pleased, and supports the DOJ’s suit, as do consumer advocacy groups like Free Press, and politicians such as Minnesota Senator Al Franken, and Washington Attorney General Rob McKenna.

Walmart caught in online sales tax hypocrisy

Apparently, whether they’re living in a glass house or not, Walmart is willing to throw stones.

The retail giant has been pushing for sales tax legislation that would require online rival Amazon to collect sales taxes on items they sell, regardless of if they have a physical presence in a state or not. Most recently, the company has detracted Amazon for opposing such legislation in California, which came into effect July 1.

But, as the Los Angeles Times reported August 29, Walmart may itself be guilty of the very practice for which it has been criticizing Amazon all along.

According to the Los Angeles Times, “The Walmart.com site, based in Brisbane near San Francisco International Airport, offers hundreds of products from a third-party retailer, CSN Stores in Boston, that are sold without collecting taxes when state residents buy them.”

Walmart argues that it is up to the third parties that sell through its marketplace, and not its own responsibility, to collect sales taxes. In other words, unless those third parties specifically ask Walmart to collect sales taxes, they won’t. The following is from an emailed statement from Walmart cited by the Los Angeles Times:

“Marketplace Retailers are responsible for requesting us to collect and remit the sales tax [...] We collect for them upon their request and they are responsible for remitting it to the states.”

It remains to be seen whether this discovery will soften or otherwise affect Walmart’s position on nexus tax laws, though the likelihood that the company will side with the referendum Amazon has called to repeal the legislation is not strong.

Amazon seeks negotiations over online sales taxes in California

For the first time in a while, it seems as though Amazon’s battle against California nexus tax legislation may be settled in a compromise.

A Seattle Times article reported on an August 30 meeting between Amazon lobbyists and representatives for companies that are part of the California Retailers Association.

The draft legislation drawn up at the meeting includes the proposal that, in exchange for a two-year reprieve from the current requirement of collecting sales taxes for goods sold online, Amazon would support the creation of a new, nationwide sales tax. In addition, Amazon promises to build at least two new distribution centers in the state, investing up to $500 million in them, and hiring up to 7,000 employees.

After meeting with Amazon lobbyists, Senate Republican leader Bob Dutton supports the attempt at negotiations, in hopes that an agreement can be reached that will satisfy all parties involved.

“Sen. Dutton encouraged the individual retailers and their association and Amazon to get around the table and try to work out a deal that would be a win-win-win for the retailers, Amazon and the people of California,” a spokesperson for Dutton said.

But others are less optimistic and believe Amazon is simply stalling legislation it has publicly and ardently opposed in each state that has tried to implement it. The Seattle Times quoted one critic of the plans, Lenny Goldberg of the California Tax Reform Association, who slammed Amazon, saying this is “a totally cynical maneuver that’s part of the game that they try to play in every state.”

Starz will stop providing content to Netflix

This hasn’t been Netflix’s best week. Nevermind that the company’s price hike just came into effect, or that its list of rivals may soon grow, as Dish Network prepares its own streaming movie service, but Netflix is also losing one of its content providers.

For a year now, Netflix and Starz have been in negotiations over the renewal of their contract, which expires this coming February. Starz had asked for $200 million a year for renewal but the two companies have reportedly been unable to come to a financial agreement, and Starz announced September 1 that it would not be renewing the contract:

“Starz will cease to distribute its content on the Netflix streaming platform. This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content.”

The $200 million annual renewal cost aside, TechCrunch suggested another factor that might have played a part in Starz’s decision to stop distributing its content though Netflix: “pressure from companies like Disney, which reportedly wanted to limit the movie channel’s ability to provide movies to Netflix.”

And though, as of this month, Canadian and Latin American Netflix subscribers will have access to new CBS content as a result of a recent deal, the loss of Starz as a provider equates to the loss of 1,000 movies a year, some of which are Disney or Sony titles, and many of which are new.

Limelight’s EyeWonder ad unit sells to DG for $66 million

In a deal announced August 30, digital media solutions and tech firm DG is acquiring EyeWonder, the video and rich media ad unit belonging to Limelight Networks.

The deal, worth $66 million in cash, will “combine the resources of EyeWonder and MediaMind to create a global, at-scale provider of interactive advertising services,” according to the press release.

It’s all part of DG’s plan of “expanding software-as-a-service (SaaS) solutions. These solutions include mobility, web and video content management, web application acceleration, cloud storage, and consulting.”

According to DG’s estimates, EyeWonder will bring in between $36 million and $37 million in revenues in 2011 alone.

Wildfire Storyteller App elicits content for sponsored stories

Facebook’s Sponsored Stories ad format has been around since January, but a new Facebook app is giving those stories a better telling.

While Sponsored Stories, which take content about a brand from Facebook users’ feeds and turn them into ads for those brands, are more engaging than previous Facebook ad formats, that content often doesn’t go any further than a simple mention of the brand’s name, or a check-in with its Facebook page. On the whole, the content of Sponsored Stories is less than titillating, and furthermore, it can’t be controlled by the brand planning to use it as advertisement.

Now, with the introduction of the Wildfire Storyteller App, companies can shape the kind of content Facebook users generate in relation to their brands. The app provides brands with a new tab on their Facebook Pages, which allows them to ask users a specific question about their brand, or to encourage opinions. For instance, an ice-cream maker could ask fans “what’s your favorite flavor?”

All told, Facebook users are more likely to respond to a Sponsored Story about how “Cherry Garcia rocks my world,” than they are to a simple mention that a friend has liked a particular ice-cream brand. Another little advantage is that the app comes with filtering features, to weed out negative comments.

According to Wildfire Interactive CEO Victoria Ransom, as cited in a recent Mashable article, “ads generated via the Storyteller app are four times more effective than traditional Sponsored Stories. While the traditional Facebook ad has a 3.3 percent conversion rate, Storyteller-generated ads have a 17 percent conversion rate.”

Dish Network vies to buy Hulu, prepares movie streaming service

It’s a good year for Dish Network. It scooped up Blockbuster this April and is looking to do the same with online video service Hulu, if it can.

According to a September 3 article on Mashable, Dish is one of five interested parties bidding to acquire Hulu. If they succeed, the article says, Hulu’s owners, which include Disney and Comcast, “will give the new buyer five years of rights to TV shows, including two years of exclusivity.”

And though that eventuality is still a big “if” for Dish, they’ve got something else on the horizon that’s a certainty.

The company will be using their recent acquisition, Blockbuster, to launch its own movie streaming service in direct competition with Netflix. A September 2 article on AdAge reports that the subscription-based streaming service will be introduced next month, in addition to Blockbuster.com’s existing on-demand, one-time-purchase service.

Dish’s introduction of this new service is likely timed with Netflix’s price hike in mind, though Dish isn’t telling what their own prices will be yet.

There’s also the possibility that users of Dish’s satellite service could watch their streamed movies directly on their TV sets, a nice advantage for Dish. And, in a best-case-scenario outcome for Dish, as the AdAge article suggests, the company might even be able to sign an agreement with content provider Starz, which just announced it wouldn’t be renewing its deal with Netflix.

ValueClick’s acquisition of Dotomi closes

Last month, Revenews reported on the purchase of ad tech company Dotomi by digital marketing firm ValueClick for an estimated $295 million. The news that the deal has finally been completed came August 31, in a press release that simultaneously announced updates to ValueClick’s share repurchase program.

Since August 5, just days after the Dotomi acquisition, ValueClick has repurchased 3.4 million shares of its common stock, worth $49.5 million. Not only that, but ValueClick’s board of directors has also increased its share repurchase program authorization by $86 million. In their press release, ValueClick says these updates indicate their optimism about how Dotomi will help their media division:

“As illustrated by our recent share repurchase activity and our board’s increased share repurchase authorization, we remain confident in our ability to gain market share as our media division expands further into branding, mobile and video, and capitalizes on cross-selling opportunities with our affiliate marketing advertisers.”

About Emily Wilkinson

Emily Wilkinson is a Montreal writer and editor who recently joined ReveNews.com. Her experience comes largely from her work at print publications like La Scena Musicale, where she alternated between positions as content manager, copy editor and journalist.
She believes in the importance of strong writing, be it in journalism or in other media, like blogging or even social networking. Her prerogative: though language will and ought to evolve, a good writer need never sacrifice the communicative power of text that is written with thought and care, whatever the venue.
Find Emily on Twitter @EditorWilkinson

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