If You Can't Beat'em, Join'em

Despite the early success of Hulu, Hulu has created a Huludotcom channel on YouTube to drive traffic to the Hulu webstie.  This is fascinating evidence of the power of the YouTube website and community as well as the synergy that can be created across multiple platforms and multiple sources.  What's interesting about this, however, is that by many accounts users of YouTube tend not to surf YouTube, but rather search for specific content or are directed there by links form bloggers or friends.  It, therefore, begs the question of how much traffic will actually get pushed to Hulu.  ArsTechnica has more

Read My Lips, No New Tax Collection Requirements

Amazon.com sued New York state and its taxation department today to contest the constitutionality of a new state law requiring out-of-state Internet retailers to collect New York state taxes.  The law, which took effect April 23, requires that out-of-state Web retailers collect sales taxes from customers in the state if the retailers have New York-based representatives soliciting business on their behalf. The state considers Amazon and other retailers to be subject to this law because they have "affiliate" marketing arrangements.   Amazon alleges the law violates several aspects of the U.S. Constitution because it is "impermissibly vague and overbroad" in its requirement that Amazon, which has no physical presence or employees based in New York, to collect sales taxes.

Whither Now DVDs?

It looks like DVDs may be the next technology whose predicted demise may actually come true.  Announcements this week that new releases will be released day and date on iTunes and on video on demand at the same time that they are released on DVD may threaten the sales of DVDs (and undermine the studios hope that consumers will pay for multiple copies of the same movie).  Add to this the news that most consumers can't tell the difference between Blu-Ray and standard DVDs on most televisions and you have to wonder if disks of plastic will only be useful as ironic drink coasters.

The Death of Old Media May Be Sooner Than You Think

There are links to a whole series of stories today that all add up to the fact that the movement of media to the Internet may happen sooner than you think.  I think a lot of us believe that soon enough newspapers will be digital, "television" will be independent of the boxes in our living room and the like, but, if you're like me, you can't help but think of the number of late adopters who need the special converters for when we go to Digital TV in 2009.  Nevertheless,  Google says that the Internet is continuing it's robust growth and that online advertising is looking strong compared to other sectors, http://www.mercurynews.com/google/ci_9064287, the WB network is rising from the ashes as an Internet only destination to compete with Hulu and Joost, http://www.nytimes.com/2008/04/28/business/media/28tube.html, the Capital Times, a Madison, Wisconsin daily is stopping its print edition and publishing only on the web, http://www.nytimes.com/2008/04/28/business/media/28link.html, and, overall, US newspaper circulation continues to drop.  http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003795106.   Even the venerable Hollywood Reporter has realized that it needs to focus more on the web and expand it's blog offerings. 

9 Billion Videos Viewed Every Month

As SAG continued its negotiations with the Alliance of Motion Picture & Television Producers on Thursday, the actors union sent its second report to membership, outlining their position on new media and why it is important to actors.  The report states that people watch 9 billion videos online every month and that by 2010 the 100 leading media companies will be receive over $20B in revenue.  Of course, since this is a union dispute over residuals, undoubtedly we can quibble over the numbers, but regardless of what the "real" numbers are, consumers consumption of video on the web appears to be staggering.

"DRM is not actually doing anything to prevent piracy"

That's what Madeline McIntosh, SVP at Random House Audio Group, told The New York Times when asked about Random House's plans to go DRM-less:

Random House was the first to announce it was backing away from D.R.M., or digital rights management software, the protective wrapping placed around digital files to make them difficult to copy. In a letter sent to its industry partners last month, Random House, the world's largest publisher, announced it would offer all of its audio books as unprotected MP3 files beginning this month, unless retail partners or authors specified otherwise.

Penguin Group, the second-largest publisher in the United States behind Random House, now appears set to follow suit. Dick Heffernan, publisher of Penguin Audio, said the company would make all of its audio book titles available for download in the MP3 format on eMusic, the Web's second-largest digital music service after iTunes.

The entire piece is here.

iTunes Moves Up Notch

Wal-Mart is still tops in music sales but Apple has rolled into second, with Best Buy and Target close behind.

From the SF Chronicle:

Apple said it has sold more than four billion songs to 50 million iTunes Store customers. It added that on Christmas day alone it sold 20 million songs.

Apple had been ranked No. 4 during the fourth quarter of 2006, but it leapfrogged Best Buy and Target to the No. 2 spot in 2007, according to NPD [Group, a market research firm].

Legal downloads, apparently, are on the rise:

Separately, NPD said that 29 million consumers downloaded music legally last year, an increase of 5 million from last year, and that legal music downloads now account for 10 percent of overall music acquired in the United States.

CDs? Consumers reaction seems to be "Meh," according to an AP summary of the NPD data:

Meanwhile, an estimated 1 million consumers did not buy CDs in 2007, and 48 percent of U.S. teenagers didn't buy any CDs during the year, up from 38 percent in the year before, according to NPD data.

Head in the Cloud

If you're curious about "cloud computing," Nick Carr's latest piece in The Guardian gives a nice overview of the subject. Carr became infamous for his widely misunderstood book Does IT Matter? His latest book is The Big Switch, a short, punchy history of technology that supports Carr's current idee fixe: just as electricity became a utility in the late 19th century, computing power is increasingly being provided the same way (in other words, it's now "in the cloud.")

Examples abound, but consider SmugMug (where I store my photos.) Rather than build a huge data center itself, SmugMug relies on Amazon's S3 service, which is essentially a computational utility for storage. (Amazon also has another service that that is even more utility-like, EC2.)

In any event, Carr makes a compelling case. More details can be found in this piece from Technology Review, which discusses Carr's prognostications. For an overview of some of the legal/biz issues, check this out--a couple years old, but still useful, in my view.

(Cloud illustration by tinney used under Creative Commons license.)

Huawei and 3Com

Bain Capital is looking to buy 83.5% of 3Com, the networking equipment provider. Chinese telecom equipment maker Huawei is looking to snap up the other 16.5%.

But some in the U.S. Government are concerned, according to the FT, since "3Com supplies intrusion prevention technology to the US defense department, designed to protect the Pentagon against cyber attack."

The FT asked Xu Zhijun, Chief Marketing Officer for Huawei, for comment and he didn't hold back:

Asked about concerns that the deal could endanger US national security, Mr Xu said through an interpreter: "That would be bullshit."

Continuing with the barnyard theme, Mr. Xu also suggested that what's good for the goose is good for the gander:

Mr Xu said Cisco, the leading US network equipment maker, supplied products to Chinese telecoms companies: "Cisco's equipment is everywhere in China." he said. "If the US government is concerned about Huawei, if some of the lawmakers are concerned about Huawei, Cisco is everywhere within China. Who should be more concerned?"

The Committee on Foreign Investment apparently will finish vetting the deal by the end of February.

Gauging Interest in SaaS

Phil Wainewright has a nice piece here on why SaaS will surge in 2008. It's pretty convincing. If nothing else, interest in SaaS seems quite strong relative to those other software darlings everyone is talking about, social networking and virtualization:

Mice Love Rice

This week's issue of The Economist has some interesting numbers on Internet usage in China. The most intriguing statistic, at least to me, is that the ringtone of the song "Mice Love Rice" brought in $10 million in 2005. Who knew?

Anyway, here are the other staggering stats:

  • The number of internet users in China is currently 210 million. (That's more than three times as many users as in India.)
  • Internet penetration is only about 16%. (Read: lots of room for growth.)
  • "Leading" Chinese Internet firms have operating margins of 28%. (Compare that with the 15% that comparable American companies earn.)
  • China has 500 million mobile phones.

Much more here.

Selling What Can't be Copied

"When copies are free," writes Kevin Kelly at Edge.org, "you need to sell things which can not be copied." Like what, you ask? Kelly has a few ideas. Eight in fact. Here they are:

1. Immediacy. "Sooner or later you can find a free copy of whatever you want," says Kelly, "but getting a copy delivered to your inbox the moment it is released — or even better, produced — by its creators is a generative asset." Another example is a hardback versus a paperback book. Hardbacks cost more. If you want to read the latest Sue Grafton novel, you have to pay for hardback. If you can wait, you can get the paperback for less. In each case, you are buying the same story.

2. Personalization. Kelly notes that a "generic version of a concert recording may be free, but if you want a copy that has been tweaked to sound perfect in your particular living room — as if it were preformed in your room — you may be willing to pay a lot."

3. Interpretation. Kelly's most interesting example is genetic data. "Right now getting your copy of your DNA is very expensive," says Kelly, "but soon it won't be. In fact, soon pharmaceutical companies will PAY you to get your genes sequence. So the copy of your sequence will be free, but the interpretation of what it means, what you can do about it, and how to use it — the manual for your genes so to speak — will be expensive."

4. Authenticity. "You might be able to grab a key software application for free, but even if you don't need a manual, you might like to be sure it is bug free, reliable, and warranted. You'll pay for authenticity." This idea is worthy of a book. In fact, it's already been written: Authenticity: What Consumers Really Want. It's a pretty good read and has lots of case studies about authentic companies like REI and Starbucks.

5. Accessibility. "We'll pay Acme Digital Warehouse to serve us any musical tune in the world, when and where we want it, as well as any movie, photo (ours or other photographers). Ditto for books and blogs. Acme backs everything up, pays the creators, and delivers us our desires." I'm in.

6. Embodiment. I'm with Kelly here: "sometimes it is delicious to have the same words printed on bright white cottony paper, bound in leather. Feels so good." Another example: there's lots of poetry on the web that you can read absolutely free. But many people, myself included, still buy nicely bound volumes of, say, Milton. Embodiment matters.

7. Patronage. In other words, tipping. "Radiohead's recent high-profile experiment in letting fans pay them whatever they wished for a free copy is an excellent illustration of the power of patronage. The elusive, intangible connection that flows between appreciative fans and the artist is worth something."

8. Findability. "A zero price," says Kelly, "does not help direct attention to a work, and in fact may sometimes hinder it. But no matter what its price, a work has no value unless it is seen; unfound masterpieces are worthless. When there are millions of books, millions of songs, millions of films, millions of applications, millions of everything requesting our attention — and most of it free — being found is valuable."