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Power

With nothing left to watch, the entertainment business turns on itself

Relations between content companies and distributors were strained before. COVID-19 is pushing them to the breaking point.

Drive-in theater showing Trolls World Tour

AMC Theatres has taken NBCUniversal's words about "Trolls World Tour" as a declaration of war.

Photo: Vic Micolucci/AFP via Getty Images

The gloves are off in the movie business: AMC Theatres announced late Tuesday that it will not show any films from Universal Studios in any of its 1,000 theaters around the globe going forward. The threat came just hours after reports broke that Dish and other TV service providers were feuding with Disney over hundreds of millions of dollars in fees for ESPN — the most expensive cable network, and one that has become a lot less valuable with live sports shut down.

Conflicts between content production and distribution companies are nothing new. But while the two sides have ultimately always made peace in the past, these latest spats may be a sign that some of these relationships, and the business models they are built on, may not survive in a post-coronavirus world. It's yet another example of the way the current crisis could reshape the power balance between old and new media.

AMC's boycott threat comes after Universal revealed that it had generated around $100 million with premium streaming rentals of the movie "Trolls World Tour," which it released online earlier this month just days after its official theater release date due to the COVID-19 shutdown. "The results for 'Trolls World Tour' have exceeded our expectations and demonstrated the viability of PVOD," NBCUniversal CEO Jeff Shell told The Wall Street Journal, using industry shorthand for premium video on demand. "As soon as theaters reopen, we expect to release movies on both formats."

AMC took Shell's words as a direct attack on the theatrical window — the time a movie is shown exclusively in theaters before making its way to internet and cable on-demand distribution. "This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable," said AMC CEO and President Adam Aron.

"Jeff's comments as to Universal's unilateral actions and intentions have left us with no choice," he added. A Universal spokesperson shot back later Tuesday, telling Variety that it was "disappointed" by AMC's statement, alleging that the theater chain was looking to "confuse" its position.

The back-and-forth between AMC and Universal happened just hours after the New York Post reported that Dish was looking to skip the $80 million to $100 million it is supposed to pay Disney for the right to carry ESPN this month. Dish isn't the only operator unhappy about the April ESPN bill, according to Lightshed Partners analyst Richard Greenfield. "We believe multiple [TV service operators] informed ESPN that affiliate fees should not be paid starting in April 2020 because sports content is not being delivered as specified in their affiliation agreements," Greenfield wrote in an analyst note this week.

Cable subscribers pay around $10 per month for ESPN and Disney's other sports networks, a fact that has long bugged TV fans who are not interested in sports. All together, Greenfield estimated that close to half of a $100 cable bill is going to sports channels — channels that haven't been showing live sports in weeks.

Disney has reportedly rebuffed any demands to reimburse operators, but the conflict isn't likely to go away anytime soon. Outlining plans for reopening his state, California Gov. Gavin Newsom said Tuesday that live sports with audiences won't return until all of the stay-at-home restrictions are lifted, which could take many months. Even sporting events produced for TV without live audiences are being classified as a higher-risk workplace and won't be allowed soon.

The same is true for movie theaters, which will likely have to institute significant social distancing measures before getting the go-ahead to reopen in California and a number of other states. And if there's a second wave of COVID-19 in the fall, as many health experts predict, chances are that most of us won't see the inside of a theater until well into 2021.

That's bad news for AMC, which recently announced that it was raising $500 million in debt to keep the lights on, leading Greenfield to quip on Twitter that "no movies will be released in theaters until after [AMC] files for bankruptcy."

At the core of both disputes are long-simmering conflicts over the business agreements between content companies and distributors, which have a lot to do with the emergence of the internet as an alternative distribution channel. Theater chains have, for instance, long boycotted Netflix for its insistence on releasing movies simultaneously on the big screen and on its service, resulting in the streamer buying its own theaters just to qualify for awards.

Similarly, TV operators have long balked at the fees they have to pay studios to carry their networks, especially as cord-cutting, prompted by cheaper streaming options, is accelerating. This has regularly led to retransmission disputes, with cable networks going dark on some operator services for days or weeks. In the past, networks have had the upper hand in these disputes, but that power dynamic is quickly shifting. Not only is the current crisis, and the economic outfall from it, likely going to accelerate cord-cutting, media companies like Disney are also finding that sports networks, their erstwhile sports network crown jewels, are a lot less valuable these days.


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At the same time, Hollywood is set to benefit from a power shift on the theater side. Studios like Universal aren't just finding premium video rentals that have consumers paying $20 for one-time-access to a newly released movie to be increasingly profitable. Many media companies are now also running their own video subscription services, with NBCUniversal's Peacock set to launch in July. The widening rift with theaters could accelerate plans to boost the subscriber base of these services by streaming movies to paying subscribers — something that Disney has already begun to do with films like "Artemis Fowl."

Outlining his plans to open up California, Newsom cautioned that we will have to face a new reality once the shutdown is over. "Our stores will look different. Offices will operate differently," he said. And if this week is any indication, the business of media, sports and entertainment will look very different as well.

Protocol | China

China's culture wars, now playing on Bilibili

The streaming site was once a quirky place for young men. Now it's nationalistic and misogynist, and women have had enough.

A cosplayer performs at Bilibili stand during the 2020 China Digital Entertainment Expo & Conference (ChinaJoy).

Photo: VCG/Getty Images

At first glance, Nasdaq-listed Bilibili is going gangbusters. The Beijing-based site is set for a $2 billion secondary listing in Hong Kong, it's become one of China's most popular video-sharing platforms, and it's making big moves into other areas like gaming. But it's in trouble back home: Tens of thousands of female netizens are boycotting and sanctioning the service over what they say is out-of-control misogyny. Bilibili is becoming a case study in what can go wrong when a platform moves from the fringes to the mainstream.

The backlash started in late January. Once a hub for China's Gen Z and a safe haven for ACG (Anime, Comic and Games) fans, Bilibili made the fateful decision to promote "Jobless Reincarnation," an anime series, on its site. Female users quickly noted the show objectified women, and even featured pedophilic elements; at one point, the main character, a 34-year-old man, molests a 9-year-old girl.

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Shen Lu

Shen Lu is a Reporter with Protocol | China. She has spent six years covering China from inside and outside its borders. Previously, she was a fellow at Asia Society's ChinaFile and a Beijing-based producer for CNN. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. Shen Lu is a founding member of Chinese Storytellers, a community serving and elevating Chinese professionals in the global media industry.

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How Stripe, Xero and ModSquad work with external partners and customers in Slack channels to build stronger, lasting relationships.

Image: Original by Damian Zaleski

Every business leader knows you can learn the most about your customers and partners by meeting them face-to-face. But in the wake of Covid-19, the kinds of conversations that were taking place over coffee, meals and in company halls are now relegated to video conferences—which can be less effective for nurturing relationships—and email.

Email inboxes, with hard-to-search threads and siloed messages, not only slow down communication but are also an easy target for scammers. Earlier this year, Google reported more than 18 million daily malware and phishing emails related to Covid-19 scams in just one week and more than 240 million daily spam messages.

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Citizen’s plan to keep people safe (and beat COVID-19) with an app

Citizen CEO Andrew Frame talks privacy, safety, coronavirus and the future of the neighborhood watch.

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Photo: Citizen

Citizen is an app built on the idea that transparency is a good thing. It's the place users — more than 7 million of them, in 28 cities with many more to come soon — can find out when there's a crime, a protest or an incident of any kind nearby. (Just yesterday, it alerted me, along with 17,900 residents of Washington, D.C., that it was about to get very windy. It did indeed get windy.) Users can stream or upload video of what's going on, locals can chat about the latest incidents and everyone's a little safer at the end of the day knowing what's happening in their city.

At least, that's how CEO Andrew Frame sees it. Critics of Citizen say the app is creating hordes of voyeurs, incentivizing people to run into dangerous situations just to grab a video, and encouraging racial profiling and other problematic behaviors all under the guise of whatever "safety" means. They say the app promotes paranoia, alerting users to things that they don't actually need to know about. (That the app was originally called "Vigilante" doesn't help its case.)

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David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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People

Why the CEO of GoFundMe is calling out Congress on coronavirus

GoFundMe has seen millions of Americans asking for help to put food on the table and pay the bills. Tim Cadogan thinks Congress should help fix that.

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Photo: John Lamparski/Getty Images

Tim Cadogan started his first day as CEO of GoFundMe about two weeks before the pandemic wrecked the world. He knew he was joining a company that tried to help people make extra money. He didn't know his company would become a lifeline for millions of Americans who couldn't pay their bills or put food on the table.

And so after a year in which millions of people have asked for help from strangers on GoFundMe, and at least $600 million has been raised (that number could be as much as $1 billion or more now, but GoFundMe didn't provide fundraising data past August) just for coronavirus-related financial crises, Cadogan has had enough. On Thursday, he wrote an open letter to Congress calling for a massive federal aid package aimed at addressing people's fundamental needs. In an unusual call for federal action from a tech CEO, Cadogan wrote that GoFundMe should not and can never replace generous Congressional aid for people who are truly struggling.

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Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

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