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XNetflix, Hulu Beat California City That Sued to Tax Streaming Services
Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.
Netflix and Hulu have won another court battle against a local government trying to force the streaming giants to pay taxes typically imposed on cable TV companies.
A Los Angeles County judge ruled Wednesday that the city of Lancaster doesn’t have the right to sue the streaming services to charge so-called franchise fees, which legacy TV providers have long paid municipalities for the right to dig up streets to lay their cable wires, according to the Hollywood Reporter. L.A. County Superior Court Judge Yvette M. Palazuelos noted that even if Lancaster had the right to bring the case, Netflix and Hulu would be exempt from the fees as they don’t own or operate infrastructure on public property.
The ruling is the latest victory for streaming services facing a flurry of similar lawsuits across the country. Municipalities have argued that companies like Netflix and Hulu should pay franchise fees, which are usually up to 5% of the gross revenue generated from providing video service in a town or city. As more consumers cut the cord on traditional cable TV and opt for streaming instead, local governments are seeing less franchise fee revenue enter their coffers.
Local governments bringing legal complaints against streamers have sought both back payments and fees going forward, according to law firm Duane Morris, which has identified cases in at least 14 states and described the suits as a “billion-dollar battle.”
In addition to the Lancaster case, Netflix and Hulu have already won legal arguments in Arkansas, Nevada and Texas, according to the Associated Press. But the streaming services have lost one ruling at the dismissal stage in Missouri, THR reported. The Ohio Supreme Court considered a similar case this week, while the Tennessee Supreme Court is set to hear arguments next month.
Lawyers for Lancaster, located in northern Los Angeles County, argued in October that Netflix and Hulu were subject to the California law requiring “video service providers” to pay the fees because they used third-party broadband wires to provide similar, if not identical, video programming to cable companies
In response, Netflix noted that it does not own or operate infrastructure in public rights-of-way and argued that it does not even provide “video programming” under the state’s definition, since its services “are not live, linear, channelized, scheduled or programmed,” according to a January court filing.
The two sides have also squabbled over whether California towns like Lancaster have the right to sue for franchise fees in the first place. On Wednesday, Judge Palazuelos said they did not—adding that if Lancaster was allowed to sue Netflix and Hulu, it could open the door for the city to impose fees on a growing list of streaming services including Disney Plus, HBO Max and Peacock.
“Such an interpretation would result in a financial windfall for local entities that the Legislature did not intend,” she ruled.
In a statement to dot.LA, Lancaster assistant city manager Trolis Niebla said the city “has no comment on the ruling and has not determined next steps.” Representatives for Netflix and Hulu did not respond to requests for comment.
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Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.
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Plus Capital Partner Amanda Groves on Celebrity Equity Investments
On this episode of the L.A. Venture podcast, Amanda Groves talks about how PLUS Capital advises celebrity investors and why more high-profile individuals are choosing to invest instead of endorse.
As a partner at PLUS, Groves works with over 70 artists and athletes, helping to guide their investment strategies. PLUS advises their talent roster to combine their financial capital with their social capital and focus on five investment areas: the future of work, future of education, health and wellness, the conscious consumer and sustainability.
“The idea is if we can leverage these people who have incredible audiences—and influence over that audience—in the world of venture capital, you'd be able to help make those businesses move forward faster,” Groves said.
PLUS works to create celebrity partnerships by identifying each client’s passions and finding companies that align with them, Groves said. From there, the venture firm can reach out to prospective partners from its many contacts and can help evaluate businesses that approach its clients. Recently, PLUS paired actress Nina Dobrev with the candy company SmartSweets after she had told them about her love for its snacks.
Celebrity entrepreneurship has shifted quite a bit in recent years, Groves said. While celebrities are paid for endorsements, Groves said investing allows them to gain equity from the growth of companies that benefit from their work.
“Like in movies, for example, where they're earning a residual along the way, they thought, ‘You know, if we're going to partner with these brands and create a tremendous amount of enterprise value, we should be able to capture some of the upside that we're generating, too’,” she said.
Partnering in this way also allows her clients to work with a wider range of brands, including small brands that often can’t afford to spend millions on endorsements. Investing allows high-profile individuals to represent brands they care about, Groves said.
“The last piece of the puzzle was a drive towards authenticity,” Groves said. “A lot of these high-profile artists and athletes are not interested, once they've achieved some sort of level of success, in partnering with brands that they don't personally align with.”
Hear the full episode by clicking on the playhead above, and listen to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.
dot.LA Editorial Intern Kristin Snyder contributed to this post.
Rivian Stock Roller Coaster Continues as Amazon Van Delivery Faces Delays
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Rivian’s stock lost 7% yesterday on the back of news that the company could face delays in fulfilling Amazon’s order for a fleet of electric delivery vans due to legal issues with a supplier. The electric vehicle maker is suing Commercial Vehicle Group (CVG) over a pricing dispute related to the seats that the supplier promised, according to the Wall Street Journal.
The legal issue could mean that Amazon may not receive their electric vans on time. The dispute hinges on whether or not Commercial Vehicle Group is allowed to raise the prices of its seats after Rivian made engineering and design changes to the original version. Rivian says the price hike from CVG violates the supply contract. CVG denies the claim.
Regardless, the dispute could hamper Rivian’s ability to deliver electric vans to Amazon on time. The ecommerce/streaming/cloud computing/AI megacorporation controls an 18% stake in Rivian as one of the company’s largest early investors. Amazon has previously said it hopes to buy 100,000 delivery vehicles from Rivian by 2030.
The stock plunge marked another wild turn for the EV manufacturer. Last week, Rivian shares dropped 21% on Monday after Ford, another early investor, announced its intent to sell 8 million shares. The next few days saw even further declines as virtually the entire market saw massive losses, but then Rivian rallied partially on the back of their earnings report on Wednesday, gaining 28% back by Friday. Then came yesterday’s 7% slide. Today the stock is up another 10%.
Hold on tight, who knows where we’re going next.
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Snapchat’s Attempt to Protect Young Users From Third-Party Apps Falls Short
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Some Snap Kit platform developers have skirted guidelines meant to make the app safer for children.
A new report from TechCrunch released Tuesday found that some third-party apps that connect to users’ Snap accounts have not been updated according to new guidelines announced in March. The restrictions, which target anonymous messaging and friend-finding apps, are meant to increase child safety. However, the investigation found a number of apps either ignore the new regulations or falsely claim to be integrated with Snapchat.
The Santa Monica-based social media company announced the changes after facing two separate lawsuits related to teen suicide allegedly caused by the app. Over 1,500 developers integrate Snap features like the camera and Bitmojis. Snap originally claimed the update would not affect many apps.
Developers had 30 days to revise their software, but the investigation found that some apps, such as the anonymous Q&A app Sendit, were granted an extension. Others blatantly avoided the changes—the anonymous messaging app HMU, which is now meant for adult users, is still available to users "9+" in the App Store. Certain apps that have been banned from Snap, like Intext, still advertise Snapchat integration.
“First and foremost, we put the privacy and safety of our community first and expect the products built by our developer community to adhere to that standard in addition to bringing fun and positive experiences to people,” Director of Platform Partnerships Alston Cheek told TechCrunch.
The news is a blow to Snap’s recent efforts to cast itself as a responsible social media platform The company recently announced Colleen DeCourcy would take over as the company’s new chief creative officer and CEO Evan Spiegel to recently made a a generous personal donation to graduates of Otis College of Art and Design. The social media company currently faces a lawsuit from a teenager who claims it has not done enough to protect minors from sexual exploitation. In April, 44 attorney generals sent a letter to Snap and TikTok urging the companies to strengthen parental controls.
Lawmakers are considering new policies that would hold social media companies accountable for the content on their platforms. One such bill would require social media companies to share data with independent researchers.
Snapchat recently rolled out augmented reality shopping features and influencer-led original content to grow its younger base of users.
Snap Inc., Snapchat's parent company, is an investor in dot.LA.
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.