Netflix: Bigger than cable?

Netflix knocked over a new milestone Monday: It now has more subscribers than the largest cable TV operator in the U.S.

Netflix’s global subscriber base grew almost 70% over the past year, to 23.6 million users. With that audience, it dethroned Comcast (CMCSA, Fortune 500) as the country’s biggest provider of subscription video content. More than 7% of Americans now subscribe to Netflix.

Those details came out Monday in Netflix’s (NFLX) first-quarter report, in which the company reported earnings of of $60.2 million, or $1.11 a share. That’s up from $32 million, or 59 cents a share, a year ago.

Revenue rose 46% to $719 million. Both figures topped Wall Street estimates, but shares fell 2.5% in after-hours trade on light forecasts for the second quarter.

Netflix said it expects earnings of 93 cents to $1.15 a share for the second quarter, lower than analysts’ forecasts.

When you’re a giant, growth gets harder.

Netflix said in its release that it expects subscriber growth to continue at a rapid clip for the rest of the year, but it warned that year-ago comparisons will get tougher in the coming quarters.

The release also noted the emergence of new, competing services Hulu Plus Amazon (AMZN, Fortune 500) Prime.

0:00 /3:42Why Netflix avoids new movies

More content: Netflix is hoping to combat increased competition with more unique content. Last month, the company announced it had bought its first original show: “House of Cards,” featuring Kevin Spacey.

“This represents slightly greater creative risk than we’ve taken in the past, but we think it’s reasonable given the popularity of the original BBC show,” Netflix said Monday in a “letter to shareholders” released alongside its earnings report.

Netflix will consider the buy a success “if ‘House of Cards’ is popular enough on Netflix so that the fee we’ve paid is in line with that of other equally popular content on Netflix at the time,” Hastings wrote in the letter.

The company said it hopes to “license two or three similar, but smaller deals” in the future.

Netflix has also brokered deals with networks and studios. In its earnings release, the company admitted its recent deal with CBS “includes only a few on-air shows at present” — but it also makes Netflix the only online subscription service to offer shows from all four broadcast networks.

International concerns: Netflix launched in Canada late last year, and it ended the first quarter of 2011 with about 800,000 Canadian subscribers — lower than the company had forecast.

“We are still learning the seasonality curve and nuances specific to Canada,” Netflix said in its release.

The company had previously said it expected $50 million in operating losses in the second half of the year for the international sector. Now, it forecasts $50 to $70 million in losses — “which we are comfortable with given the size of the opportunity.”

On a post-earnings conference call, many analysts’ questions revolved around the situation in Canada. Hastings shrugged off most of the queries, saying “it takes time” to develop accurate data and forecast correctly in a new region.

Hastings also said developing apps for Google’s (GOOG, Fortune 500) Android operating system is “a big priority,” but he wouldn’t comment further on a timeline.

Source: CNN Money


Tyler Perry vs. Spike Lee

Tyler Perry is not only opening his latest film Madea’s Big Happy Family, he is also opening up about unbalanced criticism from the media and fellow filmmaker Spike Lee.

Back in 2009, Mr. Lee shared his thoughts on the “complex subject” of Tyler Perry’s Madea films and television shows. Lee acknowledged Perry’s accomplishment, but he cautioned the filmmaker and audience against promoting what he considers stereotypes of black people.

Back then Lee acknowledged that regardless of his opinion or anybody else’s, those alleged stereotypes resonate with audiences and have reaped box-office gold for Perry. In an interview with the Wall Street Journal, Perry weighs in on Lee’s criticism:

This is where the whole Spike Lee [thing] comes from — the negativity, this is Stepin Fetchit, this is coonery, this is buffoonery, and they try to get people to get on this bandwagon with them, to get this mob mentality to come against what I’m doing. I’ve never seen Jewish people attack Seinfeld and say ‘this is a stereotype,’ I’ve never seen Italian people attack The Sopranos, I’ve never seen Jewish people complaining about Mrs. Doubtfire or Dustin Hoffman in Tootsie. I never saw it. It’s always black people, and this is something that I cannot undo. Booker T. Washington and W.E.B. DuBois went through the exact same thing; Langston Hughes said that Zora Neale Hurston, the woman who wrote Their Eyes Were Watching God, was a new version of the darkie because she spoke in a southern dialect and a Southern tone.

Perry is correct. Black celebrities criticizing other black celebrities in the public sphere is nothing new. In fact, hip-hop has built an international industry out of black-on-black beef. At times it would seem there is no pleasing the black peanut gallery. Back in the ’90s The Cosby Show wasn’t authentic blackness. Now, Tyler Perry’s southern grandmama Madea isn’t authentic blackness. And it’s not just among black entertainers that these imbroglios take place. Years ago Salma Hayek made disparaging remarks about Jennifer Lopez for not speaking Spanish and therefore not being an authentic “Latino-ness.”

Now it could be that black people tend to have a much harder time coming to solidarity than civil rights newsreels would have you believe. This isn’t the first public feud this month between two black icons. If you haven’t seen Dr. Cornel West and Rev. Al Sharpton exchange strong words on MSNBC’s The Black Agenda, you should catch it online.

Maybe there is more competitiveness amongst black people due to limited resources and opportunity; or maybe, the reason you don’t hear Jewish entertainers criticizing other Jewish entertainers is simply because the media isn’t asking them to weigh in on one another’s work.

Nevertheless, the cry from minority entertainers for “authentic” representation has a tendency, in itself, to be bigoted. The criticism seems to suggest that minorities are monolithic and that there is no spectrum when it comes to the minority experience. There are actually black people that can distinctly relate to Madea’s family. Just as there are black people and otherwise that can distinctly relate to the Cosby family; and the characters that Jennifer Lopez has played; and the characters that Selma Hayek has played. There is room for all these portrayals and then some.

The problem and the solution to minority representation in Hollywood lies in the “then some,” in the variety of choices available to the public. In that context, Spike Lee is right too. The frustration with black images in Hollywood becomes valid because there are so few images out there to choose from. I have given up on ever seeing a portrayal of myself on screen.

Minorities on the big screen tend to be represented by stereotypes. There is no Asian leading man who doesn’t know kung fu in Hollywood films. You’d have to consult IMDB to find films, especially comedies, featuring moderate Muslims or contemporary Native Americans. In my experience, no one in Hollywood has any interest in changing this status quo.

The common thinking in the industry is the absence of cultural diversity in films is due, predominantly, to the lack of box-office potential. There is no international market for English-speaking Asians, Native Americans and moderate Muslims. India, China, Japan, the Middle East all have their own booming film markets where Asians speak their own languages and play dramatic rolls that don’t involve self-effacing humor or martial arts; and religious Muslim culture is revered and respected.

The international market is also the reason Hollywood gives for not seeking black films that don’t star Will Smith or Denzel Washington. It’s true. I’ve seen the numbers. There aren’t so many movie theaters in Africa and piracy is a real problem throughout the continent. The African Diaspora is so diverse, Europe and Britain’s immigrant groups from all over Africa and the West Indies may have a harder time relating to the distinct Southern American culture presented in Perry’s Madea franchise. And this disconnect goes both ways. How popular with African Americans was the BBC/HBO series No. 1 Ladies’ Detective Agency starring Jill Scott as a Botswanian private investigator? Not popular enough to keep it on the air after just one season. At the end of the day, Hollywood seems to assert that the world doesn’t embrace cultural diversity or cultural stereotypes — depending on how you see it, as much as we would all like to believe.

I think both Spike Lee and Tyler Perry have contributed excellent work to the world that has been groundbreaking, thought provoking and entertaining. They have each brought their distinct style to the big screen. They are different, but that’s entirely positive. Instead of this conflict, it would be more encouraging to see them join forces and build up 40 Acres and Tyler Perry Studios. It would be nice to see them doing more to seek out new screenwriters, new producers and new investors to create new material.

We have the acting talent in spades. Halle Berry, Idris Elba, Rosario Dawson, Don Cheadle and so forth should be working more. We need minority talent behind the camera to make that happen. We need minority talent behind the camera so that new filmmakers, like Perry and Lee once were, don’t have to reinvent the wheel every time they want to make a film with and about minorities. We need this sort of minority talent to help diversify the choices out there to appeal to a broader spectrum of audiences. For the limitation is in the choices not in either filmmaker.

Vanessa Carmichael’s debut novel Blockbuster will be released this summer. Blockbuster is a fictional tale of life behind-the-scenes of Hollywood, where the treacherous business of show business meets the rarefied world of celebrity.

Source: Huffington Post

Lady Gaga’s Potentially Meaty Tax Deduction

Lady Gaga wears her controversial meat dress, ...Last September, Lady Gaga caused quite a stir by showing up to the MTV Video Music Awards in a dress made entirely of meat. The episode set the blogosphere ablaze, earning Gaga admiration from the avant garde and scorn from vegetarians and other opponents of wretched excess.

Strangely enough, the meat dress and other costumes may end up saving Gaga some cash–in the form of a tax deduction. According to the IRS, “musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.” A meat dress certainly seems to fit that description.

“Her concert wear is far enough out there that it wouldn’t qualify for everyday use,” says Andrew Blackman, an accountant at New York firm Shapiro Lobel, which specializes in representing entertainers. “I’d bet you dollars to donuts that her accountant is deducting everything she wears.”

Blackman estimates that Gaga’s wardrobe expenditures are in the low seven figures, which means she could lower her tax bill quite a bit if her accountant indeed added the cost of her clothing as a business deduction before this week’s tax deadline. Gaga’s income, which totaled $62 million last year and figures to be even higher this year, puts her squarely in the top federal tax bracket of 35%. So if she spent $3 million on clothing and costumes this year–a distinct possibility, given her proclivity for bizarre designer outfits and fire-spewing brassieres–the tax savings could add up to $1 million or so.

There is a bit of gray area, though. The IRS explicitly allows entertainers to deduct unusual outfits used for income-generating performances but frowns on deductions aimed solely at maintaining an image. That didn’t stop Ozzie Nelson from declaring his trademark cardigans as a deduction or Diana Ross for doing the same for evening gowns that were so tight she couldn’t sit down, says Blackman. In Gaga’s case, her offstage behavior is such a part of her income-generating persona any outfit she wears, even when not performing, could be seen as an acceptable tax deduction.

“She may just be the test case the IRS doesn’t want,” says Blackman. “She may be maintaining an image, but she gains so much from being somebody who has the type of image she has. If I’m her accountant, I’d be pushing the envelope.”

If Gaga’s accountant didn’t attempt to claim deductions for costumes this past year, there’s always 2011: it’s safe to say that the giant egg in which Gaga was carted to the Grammys in February doesn’t qualify as “everyday wear.”


MC Hammer Talks Social Media Interests, Getting through Bankruptcy and Web Influence

He had hits from the late ’80s to the ’90s, fromU Can’t Touch This” to “2 Legit 2 Quit,” setting records as the first hip-hop artist to hit diamond-selling (10 million units sold) status. He created a multimillion-dollar brand, from those infamous Hammer pants and dance moves to TV shows, a record-label executive post and a Christian ministry. He’s been in the news for his financial missteps, from dealing with bankruptcy [2] to recent tax woes [3]. And through it all, there were moments where Stanley “MC Hammer” Burrell [4] thrived and others where he had to survive. Now, he has taken his business and his brand into new arenas by learning to diversify.

Most recently, Hammer has reinvented himself as a social networking mogul [4]. With an audience of millions (more than 2 million on Twitter alone) and a passion for the possibilities of social media platforms,  he is often tapped to share his wisdom at prestigious universities such as Oxford, Stanford and Wharton. Calling social media a “tool of empowerment,” he believes in the power of its influence and the importance of being able to mold and control the message you want to send to the world, whether it’s political, social, or about one’s business. “People are able to mobilize, communicate and get the message out,” says Hammer, who is slated to be a speaker at this year’s Black Enterprise Entrepreneurs Conference May 22-25 [5]. “And local governments can no longer control the messaging. As long as you can control the messaging, you can create a perception of what life is, or even of who a person is, with social media.”

In 2008, the Oakland, California, native found a way to combine social media, dance and music via DanceJam [6], an exclusive Web community where one can watch, learn, and highlight their talents among others in the industry. “It  was the culmination of some particular thoughts I had over the years in watching the social Web start to develop, in particular video-on-demand on sites such as YouTube,” he says. “I had an idea of a concept of how I’d like to see that on the Web, and that’s how DanceJam was created.”

Further adding to his portfolio, Hammer founded a mixed martial arts company, Alchemist Management, in 2010, tapping into a passion for the sports business that began when he worked as a youngster in the front office of the Oakland As. “I’ve always seen the energy around sports, and sports fans are a tremendous opportunity from a business standpoint.” With Alchemist, Hammer is able to manage, market, promote, and brand-build for fighters.

As an award-winning music industry veteran, Hammer has learned a thing or three about resilience and persistence, especially when it comes to finances. Infamously known for amassing millions and then having to file for bankruptcy in 1996–and reportedly having recent problems with the IRS [7]— Hammer attests to relying on solid business principles and forward movement to stay in the game. What got him through?  “Faith first, and then a true understanding of business second,” he says. “There was never a stopping point. The creation of new ideas and new businesses was a continuous process.” Throughout his career, with the building of relationships, getting into new ventures and using the skills he learned throughout his career to amass a multimillion-dollar fortune, he was able to keep the momentum going, he adds.

So what’s next for Hammer? With music always being part of what he does, he says fans can look for more Web-related projects, including a one based around utilizing the total potential of social media and social Web. He’s also continuing growing Alchemist Management, having recently signed two new fighters to the roster.

By Janell Hazelwood (Black Enterprise)


Apple sues South Korean firm Samsung on allegations of copied Smartphones and tablet computers with it’s Galaxy tab. Apple accused Samsung of violating several patents and trademarks, but Samsung officials suspect Apple has violated Samsung’s wireless technology patents instead.

As the second-largest client of Samsung, Apple accounts for 4% of Samsung’s $142 billion annual revenues. “ Apple is one of our key buyers of semiconductors and display panels. However, we have no choice but to respond strongly this time,” an unidentified official told the news agency. Samsung is responding by taking legal measures to protect their intellectual property. “This kind of blatant copying is wrong,” Apple spokeswoman Kristin Huguet said in a statement

As both technology driven companies go head to head, it is clear that this feud can only be resolved through the legal system. It is unclear which of these two companies are in violation of patents, but further investigation will take place to prove the claims made by each party.


Innovating Comedy and Changing Hollywood

Funny or Die is more than a website for laughs. Will Ferrell, Adam McKay, and Chris Henchy are changing Hollywood.

Adam McKay and Will Ferrell have a funny attitude about money. Hollywood needs more people like Will Ferrell, Chris Henchy, and Adam McKay.

We say this not because we enjoy Eastbound and Down, the bender of a sitcom they produce for HBO, and The Other Guys, the buddy comedy that Henchy, 46, and McKay, 42, wrote and in which Ferrell, 43, starred. We say it because the three men could have easily spent the past few years focusing exclusively on extracting money from their existing franchises. (Step Brothers 2, anyone?) Instead, they have chosen to do work on something risky, ambitious, and, at least in Hollywood, entirely strange: a start-up.

Funny or Die was born in April 2007 with seed funding from Sequoia Capital. The idea: to combine low-budget shorts created by professionals with videos submitted by amateurs. The founders shot the first video in an afternoon at Ferrell’s house and cast McKay’s 2-year-old daughter, Pearl, as a foulmouthed (“You pay now, bitch!”), drunk landlord. “It seemed like there was a melding of TV, film, and the Internet,” says McKay. “But we didn’t dare think that we would be on the cusp of that change.”

They were wrong. Within a matter of days, “The Landlord,” which is as offensive and hilarious as it sounds, had been seen by more than a million people. At presstime, it has been viewed 74 million times, and Funny or Die now attracts 10 million viewers a month, succeeding where numerous websites created by studios and TV networks have failed. The company employs 60 people and is booking revenues in the tens of millions of dollars, mostly through the sale of ads. This past year, it turned its first profit.

Ferrell calls reaching profitability “amazing, especially in this economy.” We think it’s amazing that the guy who played Jacobim Mugatu in Zoolander has created a new kind of movie studio. Funny or Die has TV shows on HBO and Comedy Central and has filmed a pilot for TBS. Next year, it will produce its first feature film. “This company is becoming a great place for young comedy people to work,” says Ferrell. “Hopefully, down the road, you’ll hear, ‘I worked at Funny or Die for two years and went on to direct my award-winning short.'”

By Max Chafkin (Inc Magazine)

China: Facebook’s undiscovered country

If Mark Zuckerberg wants in on the biggest boom country in Asia, the social networking champ will have to make some tough choices about what kind of company he wants Facebook to be.

“Like” it, hate it, or just plain don’t care, there’s no denying the Facebook effect. In six years, the social networking site has usurped both Friendster and MySpace and amassed nearly 600 million registered users who access it in more than 200 countries across six continents, from Tunisia to Qatar.

But there’s one huge country where the site has failed to make headway — China. Where America represented the land of opportunity to immigrants during the first half of the 20th century, China now represents the country with the most untapped potential for Mark Zuckerberg and Facebook. Facebook used to have a presence there, but for the better part of two years, the site has been mostly inaccessible, thanks to government censorship. And given Facebook’s incredible penetration statistics in the U.S., China’s 420 million Internet users represent a pretty large pool for a company still in an aggressive growth stage to have to pass up.

That’s probably why the idea of a Chinese Facebook presence is so tantalizing for Zuckerberg, who visited the country last December. Though vacationing with his girlfriend, the CEO also found time to meet with tech companies, including Robin Li, CEO of Chinese search engine giant Baidu.

“Obviously this is one of the big dark spots for Facebook because it is blocked here,” Baidu spokesman Kaiser Kuo said recently. “I’m sure [Zuckerberg] wants to get the advice of someone who knows the Internet landscape well here.”

Zuckerberg himself has all-but-admitted his own interest.

“Our theory is that if we can show that we as a Western company can succeed in a place where no other country has, then we can start to figure out the right partnerships we would need to succeed in China on our terms,” Zuckerberg said during a speech at Stanford University last year. “How can you connect the whole world if you leave out 1.6 billion people?”

The Great Firewall

When it comes to Internet access, Chinese citizens don’t have a whole lot of say in the matter. Facebook remains off-limits to them, though that wasn’t always the case. The social network launched a remotely hosted, Chinese language version in June 2008, but extremely slow access plagued the service until 2009.

Then in July of that year, riots erupted in Urumqi, the capital of China’s Xinjiang region. Some 1,400 protesters were arrested, and among the media, the situation was dubbed “the next Tiananmen.” Soon after, Chinese Facebook users who tried to log in ran up against a “Network Timeout” error message. The government had been officially blocked the social network, pushing it beyond “The Great Firewall of China” to, according to Li Zhi, the Communist Party of China’s Urumqi police chief, “quench the riots quickly and prevent violence from spreading to other places.”

Facebook has remained blocked ever since, forcing some loyal users to get creative. Search the Internet long enough, and you’ll find underground forums populated by disgruntled Chinese users discussing ways to get around the firewall, including web-based proxies like SecuriTales, a plug-in-free, installation-free paid service, or a Virtual Private Network (VPN) like GoTrusted, that accesses the Internet through an Internet Service Provider (ISP) in another country.

“When Facebook was blocked, everyone was devastated,” an American expatriate in China who runs his own business told Fortune. A regular Facebook user since 2008, he now uses a VPN to access the social network. He views censorship as a necessary evil.

“Before the [Shanghai] World Expo started, they shut down a whole server farm for three days without warning so police could go through and look at each and every server and see if there was content they didn’t like,” he said, one of many such anecdotes emanating from the country that gives credence to the government’s commitment to censorship.

As free speech advocates argue, the government shouldn’t wield such power. But to succeed over there, a foreign product like Facebook would have to tolerate it. If Facebook grows large enough, it will, like Google (GOOG), have to face down a set of tough choices about how much it is willing to let the Chinese government peer into its server farms, in exchange for the ability to do business in the country.

Facebook’s gameplan

So far, Facebook has managed to stay mum on a market entry strategy.

“We are interested in China and are just starting to study and learn about the country, as part of evaluating various possible approaches to China that would most benefit our users, developers and advertisers,” Debbie Frost, Facebook’s Director of Global Communications, told Fortune.

The challenges for when Facebook does enter though are formidable. At the very least, it must confront the following issues:

Work locally. First and foremost, Facebook should be prepared to work with the Chinese government at an unprecedented level. If it wants to bypass the “Great Firewall,” which affects all sites outside the country, it needs to be hosted locally. To do that, Facebook will need a business license, a difficult thing to get unless it partners with a local company. It’s possible Facebook could position acquiring this license as a partnership, possibly by pairing up with a large, established Chinese player like Baidu. Doing so, whether it’s a serious joint venture or just a formality, will help Facebook cut through many layers of red tape and bureaucracy and expedite the process.

Censor. China is renowned for its strict supervision of Internet content. Currently, YouTube, Human Rights Watch, Voice of America, and a number of other sites remain inaccessible, and sites that are locally hosted find themselves policed by the government on a day-to-day basis. Chinese Internet companies like Baidu get by because they cooperate, deleting content in response to phone calls and instant messages from authorities requesting that they do, with far less protection of speech than U.S. law provides to Internet companies and users.

The issue most recently came to a head last year, when Google made history and withdrew from China, sacrificing billions of dollars in future revenues in the process, all based on co-founder Sergey Brin’s business and personal principles. (As Fortune reported, Brin was uncomfortable doing business with a stifling regime that resembled his native Soviet Union.)

If Facebook wants to run on local servers, it must be prepared to censor, though even then, it runs into the problem of just how it should censor content, and how far it should go. Should users be banned from “Friend”-ing others who “Like” taboo pages about say, Tibet or Tiananmen Square? Will status updates with verboten keywords, subjects, or links from banned sites be automatically deleted from News Feeds? Facebook must figure out how to address those issues and more. It’s arguable that censoring an interconnected social network will be far more challenging than simply deleting certain search results or links to website. Censorship on a Facebook page would likely look much more obvious, unless Facebook made a big committment to developing a version of its service that could mask that censorship from its users. And that’s probably a a must, because if Facebook doesn’t censor to the government’s satisfaction, it would probably be right back on the outside of China looking in before long.

Create a new Facebook? The social network could go down a different route entirely, creating a China-exclusive section or network that adheres to government regulations but operates separately from Facebook proper. Such a Facebook Great Firewall might be a somewhat easier undertaking. By balkanizing Chinese users and putting them in a sort of bubble, it’ll be much easier to control what content they can and can’t see, rather than trying to figure out a way for them to interact with international members.

Challenge local competition. Ever heard of Orkut? Launched in 2004 by Google, the social network ultimately failed to gain traction in markets like the U.S., but became a surprising hit in Brazil, so much so that the company’s offices are headquartered there now. According to Forrester analyst Nate Elliot, Orkut’s success was largely due to the fact that there wasn’t much in the way of local competition.

China is a different story. There are several locally-established players already, including popular Facebook copycats Renren and Kaixin001. Facebook may be champ in the U.S. and in other countries, but in China, it would need to start from scratch. Social networks at their core are about the people — after all, who really populates the News Feed with status updates, videos, photos, and links?

Local partnerships could benefit Facebook in terms of wider visibility and drawing potential users. Of course, the whole exercise could be irrelevant. China has made an economy out of copying and customizing the world’s ideas for its own customers and exportation– from handbags to cars to Japanese bullet trains, it’s simply part of the way the country does business and those local players aren’t waiting around for Facebook to get its operating license. That’s why one Chinese Internet company is already promising to learn from and adapt Facebook — ie, copy it — for Chinese users.

In the end, Facebook will have to ask itself, given all the financial, moral, and political sacrifices, if it’s willing to go this far for new users. It will have to ask if the very idea of a social network is undermined if the content on it is limited not by users’ imaginations or interests, but government interference. For the world, the question then becomes whether the Chinese Facebook will resemble the experience current users take for granted, or whether it will be an unrecognizable product that goes too far towards appeasement to be legitimate.

If it’s the latter, new users in China — and politically minded users worldwide — could find themselves pushing the “dislike” button on Facebook — by not logging on at all — pretty quickly.

By: JP Mangalindan (Fortune)

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