Connected consumer fourth-quarter 2012 analysis

1. Summary

The fourth quarter saw new fissures emerge in some corners of the digital media business, while some old fissures reemerged in others. Having held off the immediate challenge of over-the-top video, the traditional pay-TV industry began to show signs of severe internal stresses, while the music industry, having seemingly weathered the worst of the chaos that followed Napster, fell into a new, internal battle over performance royalties.

More-detailed highlights from the quarter include:

• The spiraling price of sports programming caused tremors that were felt throughout the pay-TV industry, as cable and satellite operators looked to defray the rising cost of sports networks by cutting fees to other networks or dropping them from their platforms altogether.
• Disney struck a landmark licensing deal with Netflix that is already remaking the pay-TV business, while Fox scrambled the long-standing sequence of movie windows with a new digital offering.
• The Internet Radio Fairness Act, introduced in Congress in late 2012, set the stage for a major showdown in 2013 over the payment of performance royalties to recording artists and record labels by over-the-air and internet broadcasters.
• The Justice Department’s lawsuit against Apple and five major publishers over ebook price fixing put an end to agency pricing of ebooks and opened the door to innovation in publishing and bookselling.

This quarterly wrap-up discusses these developments as well as offers trends and topics to watch in 2013.