Digital entertainment in 2013: Five predictions

How much stock can you put in the many predictions being made for the tech sector in the new year?

Well, here's my record as a tea-leaf reader from last year: 1-for-2 on the major picks. That's right, I was wrong -- dead wrong -- when I said the Stop Online Piracy Act (SOPA) would pass. Going into 2012, the entertainment sector appeared to have all the congressional support it needed to pass the legislation designed to make it easier for federal authorities to shut down accused pirate sites. The reason the defeat of the bill was such a big story is that few, if anyone, anticipated that the tech sector could rally such massive political support.

In the win column, I wrote that the entertainment sector would try to close down MegaUpload in 2012. Just a month after that prediction, New Zealand police arrested MegaUpload's leaders, including founder Kim DotCom and shut down the cloud-storage service. The case is ongoing.

Going into 2013, here's what to keep an eye on in online media.

1. Apple will not launch a Pandora competitor in the first half of the year.
I've written this twice now, but it's worth repeating because of the continued rumors. Listen up: Apple isn't anywhere near to locking up agreements with the top three recording companies for a Pandora-like Web radio service that some have dubbed iRadio. Numerous music industry sources have told CNET that Apple has made offers to the labels and the labels have rejected them. A deal could eventually get done, but Apple will likely have to loosen the purse strings.

At one time, Apple pretty much had its way with the record companies, but the Cupertino, Calif.-based company is no longer in as powerful a position. Download sales are flat, and the top three record companies have made big bets on subscription music services. The good news for Apple is that none of these streaming services, such as Spotify and Rdio, are generating much in the way of profits. Eddy Cue, Apple's iTunes chief, is the wildcard. He is so well-liked and respected among music-industry honchos that he's very capable of bringing in the needed signatures eventually, but it won't be for a while.

2. Pandora will see Internet Radio Fairness Act go down in flames.
Anyone who saw a recent hearing on Capitol Hill regarding the Internet Radio Fairness Act (IRFA), a bill that seeks to lower the royalty rates paid by Web radio services, already knows that lawmakers were unsympathetic to Pandora's complaints about music costs. Pandora showed it doesn't have the clout or the political savvy to get this done on its own.

Everything could change, however, if Apple, which also wants a Web radio service (see item 1) and Google, the unsung hero of the SOPA opposition, throw their vast resources behind the efforts to get the bill passed. Apple and Google haven't indicated any position on IRFA, but leaders in the music sector have certainly considered such a scenario, my industry sources tell me. After SOPA, they aren't taking any more chances.

3. The United States will fail to extradite Kim DotCom.
One of the other predictions I got correct in 2012 was that DotCom, the former street racer and convicted stock cheat, would give the United States all it could handle in a public relations war. That's exactly what he did. Not long after he was charged with criminal copyright violations by the U.S. Attorney, DotCom took to Twitter to win support and also was a master at generating media headlines.

He has received well wishes from all over the world and from such tech notables as Apple co-founder Steve Wozniak and computer hacker Kevin Mitnick. DotCom's lawyers have shown that New Zealand police broke laws during their surveillance of him. To many in New Zealand, it appears their government caved into the whims of the United States, and that hasn't played well for prosecutors. New Zealand authorities have an out. They can point to the case of Richard O'Dwyer, a student in the U.K. who operated alleged pirate site TV-Shack. U.S. officials tried to bring O'Dwyer to this country to stand trial for copyright violations, but the U.K. courts refused once he agreed to pay compensation. Anticipate a similar resolution to the MegaUpload case.

4. Appellate court will side with TV Networks and vote to shut down Aereo.
This is not an easy one to call. Aereo is the service that connects subscribers with tiny antennas that capture over-the-air TV signals without compensating networks. The networks said in a lawsuit filed last spring that Aereo violates their copyrights, but a district court judge sided with Aereo. The networks took their case to a federal appeals court, and during arguments, all three judges on the appeals panel appeared skeptical of Aereo's argument.

Not only that, but Denny Chin, one of the appellate judges, once made a ruling in a similar case favorable to the TV networks. When Chin was a federal district judge, he ruled that Cablevision's DVR service violated the copyrights of the same TV networks suing Aereo. Cablevision appealed, and Chin's ruling was tossed out. In the Aereo case, the district court judge said that the law had failed to keep up with technology and just didn't offer enough protection for the networks.

5. Netflix will return to its winning ways.
Not initially at first, but I'm betting Netflix will start adding large numbers of subscribers once again.

CEO Reed Hastings is likely properly chastised for his self-inflicted errors of 2011, a period when he said he had grown "arrogant." In contrast to the days in 2011 when he rammed a price increase down the throats of customers and then confused them by trying to spin off DVD operations, Hastings is now giving subscribers what they're demanding: more movies.

Netflix's recent agreement to offer Disney films starting in 2016 was big news and helps Hastings gain back some of his lost credibility. Once consumers start forgetting about the bungling of 2011 and start doing the math about which home-video service offers the most content for the lowest price, Netflix will once again draw a crowd. Still, Hastings made some hasty moves in 2011 and earlier this year in terms of hires, and I'm betting we'll see continued changes in the management structure.