Technology News

Facebook’s shares debuted on the Nasdaq today at $42 and immediately skidded downwards to the original IPO price of $38.

The social network set its IPO price last night at $38, valuing it at $104bn. However, through the mysteries of IPOing, it actually opened at $42, shortly after 11am Eastern Time. That price values the company at more than GM or Boeing, as The Telegraph among others reported.

This price was maintained for at least minutes before it started to slip down to around the $38 mark, troughing for a while then beginning what appears to be a bit of a bumpy ride back upwards.

At time of writing it was trading at $40.70. Which charitably could be described as around the middle of its price range.

Of course, it’s early days yet and there’s still time for it to stage a massive recovery and meet some of the wilder expectations for its first day closing price. One Twitter-based panel put the firm’s first day closing price at $58.

And it’s not as if investors have only just heard the first contrary voices claiming that Facebook might not be a guaranteed money printing machine after all. The IPO was tarnished by the revelation earlier this week that GM had pulled some advertising cash from the firm,sparking debate about the efficacy of the firm’s advertising platform.

Going more to the jugular, a German data protection exec told the Frankfurter Allegmaine Zeitung that the $38 price was based on practices that breach Europe’s data privacy rules, and that the firm’s business model would implode if those rules were properly enforced.

One group who will be conflicted about Zuckerberg’s net worth will be the class action group which has just filed a $15bn suit over Facebook’s user tracking.

the class action suit claims the firm tracked users even after they logged out of their account. The suit alleges the firm breached the US’s wiretapping legislation. The lawyers behind the suit are looking to add non-US users to the class.

While the plaintiffs are obviously unhappy about the way Facebook does business, its ability to carry on doing business and stoke up its stock price will have some bearing on whether it ultimately decides it’s easier to just pay them to go away.

A Facebook spokesman told Bloomberg in an email that it would “fight it vigorously”. Presumably when the legal affairs department gets back from the Santa Clara Ferrari dealership.

Meanwhile, in other economic news, no-one has fixed the Euro crisis, leaving a number of European countries facing economic cataclysm, and sending non-US stock markets remorselessly downwards.®

Bootnote

Facebook closed the day at $38.23. While some would say this suggests the IPO price was spot on, most market types would not view this as a spectacular debut. Not least because the price was seen as being propped up by the underwriters. Longer term, it’s worth remembering that today’s debut only covered a fraction of the company.

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The Falcon 9 rocket from private space company SpaceX, intended to launch this morning and send a Dragon capsule loaded with supplies to the International Space Station, has failed to take off. The rocket’s computer aborted the launch automatically at almost the final possible moment, when its engines had already ignited but the vehicle had not yet been released from the pad.

“The computer saw a parameter it didn’t like,” commented launch controllers after the abort, which saw the Falcon’s 9 main engines flare briefly into life as the countdown reached zero before cutting out again.

The rocket is not thought to have been damaged by the aborted launch, and controllers announced a provisional plan to check the craft, refuel it and make another launch attempt on Tuesday morning at 03:44 AM local time (08:44 UK time).

NASA issued a brief statement:

The Falcon 9′s computers picked up an anomaly with the rocket and aborted the launch just before liftoff. Early data shows that the chamber pressure on Engine 5 was high. The teams will continue to look at the data and assess a launch attempt on May 22.

The Dragon’s cargo is composed of supplies and non-essential items for the ISS. The mission is intended to prove the viability of the Falcon and Dragon for the task of supporting the station. Dragon has only been launched once before, in a successful test flight to orbit on which it carried only a large cheese. A similar secret spoof cargo, along with the regular supplies and experiments, is thought to be aboard the Dragon now.

As and when SpaceX can prove the Dragon’s capability, it will be a major milestone for commercial space. Existing Progress and ATV supply ships from the Russian and European space agencies cannot return to Earth for re-use, and are much more expensive.

Tech multimillionaire Elon Musk, founder and initial bankroller of SpaceX, also intends that the Falcon and Dragon should carry people as well as cargo in coming years, restoring America’s manned space capability and ending the ISS’ dependence on old-fashioned Russian Soyuz capsules to carry its crews up and down. Musk has even stated that the Dragon, once upgraded with the planned “Draco” retro-rockets, could land on other planets including Mars (though as yet there is no rocket package and other necessary hardware officially on the drawing boards which could send it there).

For now though, Musk and his SpaceX colleagues will be hoping simply that they can get the Falcon off the ground on Tuesday. ®

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In the latest episode of the US ad-skipping saga, Dish Networks is facing the wrath of broadcasters such as NBC and Fox, but winning praise from customers and no doubt causing a little churn among competitors. That at least is the intention of the Dish PVR ad skipping feature called Auto Hop, with the company gambling that the gain in subscription revenue will make the pain of having to defend a possibly protracted case against it from broadcasters worthwhile.

Dish, the second largest US satellite operator with 14 million customers, and its bullish CEO Joseph Clayton, also believe there is a principle at stake in that service providers should be allowed to give their customers choice of functionality, providing it does not directly infringe copyright.

It is over this last point that the whole case will hinge. Firstly Fox, NBC and other broadcasters contend this a direct assault on the pay TV ecosystem upon which all participants depend including content producers, broadcasters, operators, brands and advertisers, but this is more a reaction of indignation and annoyance without any real legal foundation unless it can be proved the technology represents unfair competition. The legal argument is that Dish Networks is infringing copyright on the basis that by automatically facilitating ad skipping it is changing the content. The point here is that at present anyone with a DVR can skip ads on recorded content if they wish but have to do it manually. But automating the process by recognizing the cues and then skipping to the end of commercials, there is then an argument that the content as supplied under a contractual agreement is being altered.

There is plenty of historical precedent and it looks like the broadcasting and content industry may regret not having nailed the issue after previous cases. The story began early in the days of DVR in 1999 when a company called Replay TV introduced a DVR allowing time shifted viewing of content with the help of a feature called “Commercial Advance” that was a forerunner of the Dish AutoHop. Of course time shifting had been possible for over two decades before that with the VCR, but with a hard drive based system ad skipping became much easier and faster, with the potential for automation.

Replay TV attracted the attention and anger of copyright holders, which finally sued two years later. This brought Replay TV to its knees, and its parent company was bankrupt two years later still. Since then most cable and satellite operators have been wary of taking on broadcasters and content owners by introducing features to help consumers skip ads, even though it has been technically quite straightforward. At the same time though the broadcasters failed to see the case through to establish a lasting precedent, because they thought the issue had already been settled.

At the time when Replay TV‘s owner, a company called Sonicblue, declared itself bankrupt, a consumer group sought a legal judgment over the legality of the device, and content owners failed to take the chance of pursuing the case to a conclusion and obtaining a definitive ruling. Perhaps by then they feared they may fail to get such a ruling and that it was better to let sleeping dogs lie. The case ended up being dismissed in 2004 leaving the issue still hanging in the air. As a result the entertainment industry may find itself without the legal recourse to take on Dish, or at the very least having to face a long battle. Another difference is that Dish is a more powerful adversary than Sonicblue and has deeper pockets, with a determination to fight, having known full well what reaction AutoHop would elicit among broadcasters and advertisers.

There have also been one or two other US cases with some relevance, and most notably involving cable operator Cablevison after it introduced a network based DVR, or RS-DVR, in 2006, offering remote storage to give customers a much quicker and easier way of recording content without having to worry whether they had enough space left on their hard drive, although at a premium price.

A number of content providers sued Cablevision for this on the basis it violated the principle of one-to-one transmission of content to users, subject to carriage fees. These included 20th Century Fox, Universal Studios, and Walt Disney, which sought a permanent injunction that would effectively prevent Cablevision from implementing the system, and they initially prevailed at district court level.

But then Cablevision appealed, leading to the so called 2nd US Circuit Court of Appeals in August 2008 reversing the lower district court verdict that had found the use of RS-DVRs in violation of copyright law. This court agreed with Cablevision that a RS-DVR was logically and legally the same as a customer owned DVR.

Some content providers began the process of appealing to the US Supreme Court, but this was eventually thrown out. As a result network DVR is now legal, but subject to the ludicrous rule that a particular piece of content has to be stored separately for every user that wants to record it, rather than having just one copy and an updateable list of subscribers who can access it.

Logically this would be no different, but legally operators have to maintain a separate physical copy for each user, so the content owners have ensured operators with network DVR offerings continue to spend a lot on storage. This absurdity led Comcast recently to argue that the industry needs to wake up to its responsibilities on the energy front and avoid the unnecessary power consumption that current practices, including network DVR, insist on.

The relevance for Dish with its Auto Hop is that the Cablevision case validated the legality of DVR functionality. Dish has been careful to confine use of Auto Hop to programming where it has a clear licensing agreement with the content provider. This means that the key legal question in the event of a case being brought will be whether Dish has breached that agreement by allowing automated ad skipping.

It is also worth reflecting why Dish has taken this move. It is partly we think to generate momentum behind and publicity for a radical change of strategy from being a low cost provider of programming, undercutting its rivals, which had been unsuccessful, to being a value added player promoting the interests of consumers with features they like. As such Dish could stand to win even if it loses a case over ad skipping.

Copyright © 2012, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week’s events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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