Month: December 2016

Just a few days after getting caught editing user comments, the CEO of Reddit, Steve Huffman, is threatening to ban 100’s of the site’s “most toxic users,” most of whom are Trump supporters from the popular r/The_Donald subreddit thread.  Just so we’re clear, Huffman pissed off a bunch of users by edited their comments without their consent, was forced to apologize publicly, got a lot of blowback for his ridiculous behavior and is now banning users who called him out?  According to Yahoo News, that sums it up fairly accurately.

Social media website Reddit Inc, known for its commitment to free speech, will crack down on online harassment by banning or suspending users who target others, starting with those who have directed abuse at Chief Executive Steve Huffman.

 

Huffman said in an interview with Reuters that Reddit’s content policy prohibits harassment, but that it had not been adequately enforced.

 

“Personal message harassment is the most cut and dry,” he said. “Right now we are in an interesting position where my inbox is full of them, it’s easy to start with me.”

 

As well as combing through Huffman’s inbox, Reddit will monitor user reports, add greater filtering capacity, and take a more proactive role in policing its platform rather than relying on community moderators.

Of course, this all comes just a couple days after Huffman used his administrative privileges to redirect abuse he was receiving on a thread on r/The_Donald to the community’s moderators – making it look as if it was intended for them. Huffman has subsequently said it was all an innocent “prank,” though the apology he posted last week seemed to indicated it was more akin to a nervous breakdown.

Huffman offered the following apology admitting that he “messed with the “fuck u/spez” comments” and that “as the CEO, I shouldn’t play such games.”

 

 

Huffman notes that, in the past, Reddit relied on community moderators to enforce site rules but Trump supporters are apparently just too unruly.

In the past, Reddit has worked with moderators of communities to try to enforce its rules.

 

With r/The_Donald in particular, “we haven’t found that to be particularly effective. We might see flashes of success, but things kind of revert,” Huffman said.

 

Under its new strategy, Reddit will take a more active role in dealing with troublemakers, who Huffman said were an “infinitesimal” portion of Reddit’s 250 million monthly visitors.

And while he insists the move to ban certain users isn’t political, Huffman admits that the “first wave of bans will likely be skewed to the r/The_Donald community.”

He stressed that the move was not political.

 

“We don’t want to be censoring political beliefs, but then they do misbehave,” he said. “That’s why we have worked so closely with the r/The_Donald community. We tell them: don’t force us to ban you.“

 

The first wave of bans will likely be skewed to the r/The_Donald community because “that is a catalyst for a lot of this right now. That community is stirred up,” Huffman said.

 

In a draft of a blog post to be published on Wednesday, Huffman said he had been asked by many Reddit users “to ban r/The_Donald outright, but he had rejected that idea, because “if there is anything about this election that we have learned, it is that there are communities that feel alienated and just want to be heard, and Reddit has always been a place where those voices can be heard.”

Since Huffman suddenly seems quite concerned with enforcing Reddit’s harassment rules in a fair and non-partisan way, we’re curious whether Reddit also has rules against soliciting advice on how to violate the Federal Records Act and Congressional subpoenas?  If so, we’d suggest he take a look back through Paul Combetta’s history.

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To our complete shock, the Government Accountability Office has released a report blasting the Education Department’s understanding of basic mathematics and accounting concepts after finding the department drastically underestimated the costs of Obama’s student loan forgiveness programs.  The 100-page report entitled “Federal Student Loans:  Education Needs to Improve Its Income Driven Repayment Plan Budget Estimates” found that taxpayers could be on the hook for $137BN of student loans to be forgiven over the coming years as a result of Obama’s executive actions on “income-driven repayment” (IDR) plans.

For the fiscal year 2017 budget, the U.S. Department of Education (Education) estimates that all federally issued Direct Loans in Income-Driven Repayment (IDR) plans will have government costs of $74 billion, higher than previous budget estimates. IDR plans are designed to help ease student debt burden by setting loan payments as a percentage of borrower income, extending repayment periods from the standard 10 years to up to 25 years, and forgiving remaining balances at the end of that period. While actual costs cannot be known until borrowers repay their loans, GAO found that current IDR plan budget estimates are more than double what was originally expected for loans made in fiscal years 2009 through 2016 (the only years for which original estimates are available). This growth is largely due to the rising volume of loans in IDR plans.

 

Education’s approach to estimating IDR plan costs and quality control practices do not ensure reliable budget estimates. Weaknesses in this approach may cause costs to be over- or understated by billions of dollars.

 

As the Wall Street Journal points out, the so-called IDR plans set caps on borrowers’ monthly student loan payments at 10% of discretionary income, which is defined as earnings above 150% of the poverty level.  Then, whatever principal balance is left over on the loans at their maturity date is simply forgiven. 

The report, to be released on Wednesday by the Government Accountability Office, shows the Obama administration’s main strategy for helping student-loan borrowers is proving far more costly than previously thought. The report also presents a scathing review of the Education Department’s accounting methods, which have understated the costs of its various debt-relief plans by tens of billions of dollars.

 

Senate Budget Committee Chairman Mike Enzi (R., Wyo.) ordered the report last year amid a sharp increase in enrollment in income-driven repayment plans, which the Obama administration has heavily promoted to help borrowers avoid default. The most generous version caps a borrower’s monthly payment at 10% of discretionary income, which is defined as any earnings above 150% of the poverty level.

 

That formula typically reduces monthly payments of borrowers by hundreds of dollars. Any remaining balance is then forgiven after 10 or 20 years, depending on whether the borrower works in the public or private sector.

 

Enrollment in the plans has more than tripled in the past three years to 5.3 million borrowers as of June, or 24% of all former students who borrowed directly from the government and are now required to be making payments. They collectively owe $355 billion.

Congress approved the IDR plans in the 1990s and 2000s, but Obama used executive actions, starting in 2010, to extend the most-generous terms to millions of borrowers.  Ironically, that is precisely when loan volumes under the program started to skyrocket.

 

While there are numerous viewpoints on how to address the student loan crisis in America, we kind of like this guy’s idea that borrowers should stop playing video games in their parents’ basements and get a job…it just might be crazy enough to work.

???????? ???? ???? ???????? “It’s Horrible!!! You don’t understand!!! America is doomed!!! Trump is the &§$@#* President!!! http://pic.twitter.com/CWfQgg3EOW

— tom alex (@rejialex7) November 29, 2016

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Via TheAntiMedia.org,

Last week, Washington State Senator Doug Ericksen announced plans to propose a bill in January that would criminalize certain protests as “economic terrorism,” to be punishable as a Class C Felony.

The proposed bill would penalize protesters who engage in “unlawful disruption of transportation and commerce,” and if passed, those found in violation of the law could face punishment of up to five years’ imprisonment, a fine of up to $10,000, or both.

The proposed bill would also go after organizations and funders backing the protests by forcing them to pay restitution at a rate of three times the calculated amount of damage. In an interview with the Seattle Times, Ericksen specifically named philanthropists George Soros and Tom Steyer, as well as the Sierra Club organization, as intended targets of the legislation.

“We are not just going after the people who commit these acts of terrorism,” Ericksen said in his press release. “We are going after the people who fund them. Wealthy donors should not feel safe in disrupting middle class jobs.”

Ericksen, who is chairman of the Senate Energy, Environment & Telecommunications Committee, has historically positioned himself as an ally to the fossil fuel industry. His proposal came just days after a group of anti-fracking protesters calling themselves “Olympia Stand” set up an encampment that blocked a rail line from the Port of Olympia. The police later forcibly disbanded the encampment and arrested 12 protesters on November 18th.

While the Washington Times reports that this bill would be unlikely to pass both in Senate and Democratically run-house, Ericksen’s proposal is just one in an increasing trend of legislation that criminalizes and limits the rights of protestors.

Ericksen’s proposal came in the same week that Iowa State Representative Bobby Kaufmann announced plans to propose legislation he calls the “Suck it up Buttercup” bill in response to anti-Trump organizing and protests. The two-part bill would withhold funding from universities that organize election-related grief counseling or sit-ins. It would also establish increased penalties for protesters who shut down highways or roads.

“I have no issue with protesting,” Representative Kaufman told the Des Moines Register. “In fact, I would go to political war for anyone who wanted to protest or dissent and they couldn’t. But you can’t exercise your constitutional right by trampling on someone else’s. When they blocked off Interstate 80, they crossed a line.”

Similarly, earlier this year, Republican Senator John Kavanagh of Arizona introduced SB1054, a bill that would make it a felony to record police without their permission and within 20 feet of the ‘law enforcement activity.’ The bill generated such public outcry that Kavanagh eventually abandoned it.

While these recent proposals have been construed as a backlash from Republican lawmakers emboldened by Trump’s presidency, one of the most contentious protest laws passed in recent memory was, in fact, a law signed by Obama in response to Occupy protests in 2011.

HR 347, also known as the Federal Restricted Buildings and Grounds Improvement Act, lowered the intent requirement of a 1971 trespass law, making it easier to criminalize someone who enters or remains in “any restricted building or grounds,” with “restricted” applying broadly to any event where the Secret Service is present. The law, which was widely seen as an attack on the First Amendment, essentially criminalized protesting in proximity to any elected official under the protection of the Secret Service, which includes President Obama himself — and now, President-elect Trump. Under the current law, violators could face a fine and up to 10 years of jail time.

In the wake of the increasingly militarized response to DAPL protests in North Dakota, this proposed legislation in Washington and Iowa is emblematic of the escalating tension between protesters and government officials. As anti-Trump protesters gear up for nationwide Inauguration Day demonstrations that may already be facing restrictions, January promises to be a crucial moment for the future of First Amendment and the criminalization of dissent in America.

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Last month we noted that ESPN lost 621,000 subscribers in the month of the October (see “ESPN Loses A Record 621,000 Subscribers In One Month“).  Unfortunately, the sports media powerhouse can’t seem to make the bleeding stop as evidenced by another 555,000 subscriber losses this month as reported by Nielsen.  For those keeping track, that’s roughly 1.2mm in sub losses in just two months, which, at $7 of revenue per sub, represents about $100mm of lost annual revenue for ESPN’s parent company, Disney.

Obviously this is not welcome news for a company that is locked in to $7.3 billion in sports content deals or roughly 70% more than the second highest network, NBC.

In 2017 ESPN to spend $7.3 billion on content more than any source; then Netflix ($6bn), NBC (4.3bn), CBS ($4bn) & Amazon ($3.2bn) #snlkagan

— Brad Adgate (@badgate) October 18, 2016

 

According to Outkick The Coverage, that $7.3BN in content deals includes $1.9BN for Monday Night Football, $1.5BN for NBA content and a host of other MLB and college sports content.

Presently ESPN is on the hook for the following yearly sports rights payments: $1.9 billion a year to the NFL for Monday Night Football, $1.47 billion to the NBA, a deal I told you flat out wasn’t sustainable back in July because it meant every single cable and satellite subscriber in the country was paying an average of $30 a year for the NBA whether they watched or not, $700 million to Major League Baseball, $608 million for the College Football Playoff, $225 million to the ACC, $190 million to the Big Ten, $120 million to the Big 12, $125 million a year to the PAC 12, and hundreds of millions more to the SEC.

Meanwhile, ESPN isn’t the only cable network bleeding subs.  As we pointed out last month, Pay TV subscribers have been shrinking for years as streaming alternatives have grown in popularity.  Moreover, the pace of the decline seemingly accelerated in early 2015.

 

Of course, cheap, streaming-only services like the one just launched by AT&T’s DirecTV only serve to put even more pressure on content providers by offering more choices and smaller channel bundles to consumers.  Meanwhile, as The Verge points out, this latest offering from AT&T just adds to the other streaming services already offered by Dish’s Sling TV, Sony Playstation Vue and upcoming services from Hulu and YouTube.

 

As we’ve said before, the beginning of the end for the TV bundle is upon us and ESPN, which has extracted excess value from cable distributors for decades at the expense of consumers who had no choice but to suck-up their exorbitant fees, will be among the biggest losers.

* * *

For those who missed it, here is some additional analysis on ESPN from our post last month.

Last April, HBO effectively marked the death of the cable TV bundle when they decided to launch “HBO Now” and sell their content directly to consumers for $15 per month.  While other “over-the-top” providers have existed for years, this decision was pivotal because it was the first time that any major content provider decided to break with the traditional cable delivery model and go direct to consumer.  Within a year, HBO Now had amassed 1 million subscribers.  Meanwhile, Pay TV households collapsed around the same time as “cord cutting” accelerated.

Per the following data from Barclays’ Media and Telecom analyst, Kannan Venkateshwar, the decline of Pay TV households really accelerated in 2Q 15 around the same time that HBO Now was launched. 

 

Meanwhile, the number of broadband-only households also surged.

 

Now, the biggest beneficiary of the cable TV bundle, ESPN, which exploited it’s “must have” content for decades to negotiate ever higher rates with cable TV providers while forcing those rates down the throats of consumers by insisting its content be included in all of the channel “bundles”, finds itself in the unfamiliar territory of losing millions of subs per year amid surging contents costs.  In fact, according to Outkick The Coverage, ESPN lost over 600,000 subscribers in October alone which is worth over $50mm in annual revenue.

Yesterday Nielsen announced its subscriber numbers for November 2016 and those numbers were the worst in the history of ESPN’s existence as a cable company — the worldwide leader in sports lost 621,000 cable subscribers. That’s the most subscribers ESPN has ever lost in a month according to Nielsen estimates and it represents a terrifying and troubling trend for the company, an acceleration of subscriber loss that represents a doubling of the average losses over the past couple of years, when ESPN has been losing in the neighborhood of 300,000 subscribers a month.

 

These 621,000 lost subscribers in the past month alone lead to a drop in revenue of over $52 million and continue the alarming subscriber decline at ESPN. Couple these subscriber declines with a 24% drop in Monday Night Football ratings this fall, the crown jewel of ESPN programming, and it’s fair to call October of 2016 the worst month in ESPN’s history. But this isn’t just a story about ESPN, the rapid decline in cable subscribers is hitting every channel, sports and otherwise. It just impacts ESPN the most because ESPN costs every cable and satellite subscriber roughly $7 a month, over triple the next most expensive cable channel.

The historical cable TV game goes a little something like this…in any given market there is typically 3-4 subscription TV providers (2 satellite companies, 1 (or more) cable providers and a Telco).  Those providers sign multi-year deals to buy content from media companies (e.g. ESPN, Discovery, Time Warner, Viacom, etc. etc) and then bundle them all together and pass the costs of those contracts along to consumers. Every 3-5 years those content contracts come up for renewal and the cable providers (i.e. consumers, since the costs just get passed along) are effectively forced to pay whatever increase ESPN (and others) asks for or risk losing millions of subscribers. 

Now, there are roughly 100mm pay TV households in the U.S. and, because of the channel “bundling” scam, approximately 90% of them are forced to “buy” ESPN whether they consume sports content or not.  Moreover, because ESPN is considered “must have” content they’re able to extract the most value from the cable providers getting roughly $7 per sub per month, or more than double the next highest content provider…tack on a little extra margin for the cable provider and the average consumer is paying $120 per year for ESPN even if they never watch a single minute of sports programming…seems fair, right? 

Fortunately for consumers, and not so much for ESPN, the power in the system, courtesy of “over-the-top” content providers like HBO and Netflix, is just starting to shift from the media companies to consumers…which will be disastrous for the historical beneficiaries of the cable bundle.  Outkick The Coverage laid out the math on what pay TV sub losses means for ESPN:

A loss of 3 million subscribers would leave ESPN with 86 million subscribers in 2017. That would be down roughly 15 million subscribers in the past five years alone. Given that ESPN makes right at $7 a month from every cable and satellite subscriber a year, that means ESPN’s subscriber revenue would be $7.22 billion in 2017. Toss in an additional $1.8 billion or so in advertising revenue and ESPN’s total revenue would be $9 billion. We don’t know what the costs of running ESPN are — employees, facilities, equipment, and the like have to cost a billion or more — but it’s fair to say that ESPN is probably still making money in 2017. Just nowhere near what they used to make.

 

But those sports rights costs are going up and those subscriber revenue numbers are going down.

 

So if we’re very conservative and project that ESPN continues to lose 3 million subscribers a year — well below the rate that they are currently losing subscribers — then the household numbers would look like this over the next five years:

 

2017: 86 million subscribers

 

2018: 83 million subscribers

 

2019: 80 million subscribers

 

2020: 77 million subscribers

 

2021: 74 million subscribers

 

At 74 million subscribers — Outkick’s projection for 2021 based on the past five years of subscriber losses — ESPN would be bringing in just over $6.2 billion a year in yearly subscriber fees at $7 a month. At $8 a month, assuming the subscriber costs per month keeps climbing, that’s $7.1 billion in subscriber revenue. Both of those numbers are less than the yearly rights fees cost.

 

Uh oh.   

But that’s just the short-term incremental impacts.  The real question is how many consumers would actually purchase ESPN if the bundle truly disappeared and consumers were given the option to buy all content a la carte (which we suspect is the inevitable end game)?  If we assume that 45mm households would be willing to purchase ESPN directly, at their current cost of $7 per month, then that would equate to roughly $3.8BN in revenue per year or about half of their $7.5BN in annual content costs…which we suspect is a slight problem for Disney.

But, like it not, a la carte content purchases are the way of the future.  While cable providers used to be incentivized to protect the “channel bundle” the advent of the internet and over-the-top content providers means that their true value offering to consumers is now in their broadband and not the content.  Therefore, it’s not terribly surprising that, as Bloomberg points out, new a la carte, streaming TV services are becoming very popular.

AT&T Inc. set a price of $35 a month for a new online-streaming TV service with 100 channels or more, and the company may experiment with “a la carte” programming, giving customers choice on what channels they pay to watch.

 

DirecTV Now will be priced to compete with two leading online TV providers — Sony’s PlayStation Vue and Dish Network Corp.’s Sling TV. PlayStation Vue starts at $39.99 for 60 channels and runs as high as $54.99 for more than 100 channels. Sling TV begins at $20 for 28 channels and goes as high as $40 for a 48-channel multi-screen package.

 

The competition for cable-like online services is suddenly fierce. YouTube has been working for months on the paid live-TV streaming service, called Unplugged. Hulu LLC, which is co-owned by Fox, Disney, Comcast Corp. and Time Warner, will introduce its own service in the coming months, and Amazon.com Inc. and Apple Inc. have explored the idea.

Of course, ESPN isn’t the only content company that has benefitted from the forced charity of the American consumer.  We suspect the many other cable content providers are also about to face a very turblent transition as well.

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Having claimed the job of CEO John Stumpf, the Wells Fargo cross-selling fiasco continues to reverberate within the org chart of the scandal-ridden bank. Reuters reports that James Strother, the general counsel of Wells Fargo, who had originally planned to retire at year-end, will be forced to stay on indefinitely in the position to deal with fallout from the bank’s sales scandal, according to a bank spokesman.

“In light of recent events the decision was made to have Jim Strother remain with the company and continue to serve as our general counsel,” said Peter Gilchrist, a Wells Fargo spokesman. The decision to keep Stroher on was made by the bank’s board of directors according to Gilchrist.

Strother became Wells’ top lawyer in 2003, and sat behind then-CEO John Stumpf at a bruising congressional hearing about the scandal in September. He has been at Wells Fargo and its predecessor, Norwest Corporation, for the past 30 years. Reuters explains that having turned 65 this year, Strother would ordinarily be required to retire at the end of the year, according to an internal policy at Wells Fargo affecting members of the bank’s operating committee. However, the bank occasionally makes exceptions to this rule in extraordinary situations, which the bank’s current litigation-plagued scandal clearly is. During the financial crisis, then-Chairman Dick Kovacevich postponed his retirement by slightly more than a year.

Having lost its CEO after two grueling sessions in Congress, Wells remains under fire for opening as many as 2 million accounts in customers’ names without their permission. The bank is facing lawsuits from former employees and customers, as well as increased regulatory scrutiny. Having reached a $190 million settlement in September, the largest American mortgage lender is now working to answer questions from politicians and regulators, replace a flawed compensation system that incentivized employees to open phantom accounts, and repair its reputation among customers, including municipalities that have cut business ties.

Two weeks ago the bank reported for the first time that its new account openings had plunged by 44% while credit card applications had tumbled by half in the period immediately following the scandal. It recently launched an ad campaign seeking to explain to the general public that it is “making changes to make things right.”

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