Intel's "virtual cable" service: A "cable killer" one week, on life support the next

Two weeks ago, news about a new "virtual cable" service developed by Intel leaked to several outlets. The service was said to use Intel-designed set-top boxes and software to deliver broadcast and cable networks, along with video-on-demand, to televisions and mobile devices via consumers' existing high-speed Internet connections. It would also feature something called "perceptual computing," which would use face and voice recognition as part of the system's user interface. (One possibility is that the system would use a camera to identify the family members in front of the television or mobile device, and automatically select their favorite channels.) The Intel system was to be announced as early as next week's Consumer Electronics Show, and was to be rolled out on a city-by-city basis.

Blogs and websites published breathless stories about how Intel was going to "destroy the cable industry." However, the cablepocalypse lasted only until The Wall Street Journal reported that Intel is delaying the announcement of its virtual cable service for several months, if not indefinitely, because it can't get access to sufficient content. No one should be shocked or surprised that Intel can't get the content it needs; after all, it was widely reported last year that Apple was working on a very similar service, which it too had to rein back because it couldn't get enough content to make it a viable competitor to cable, satellite and IPTV services.

From one perspective, Intel's proposed system is very similar to satellite TV--it would eventually cover the entire country, and I assume that Intel plans to offer local broadcast stations, as Dish and DirecTV do in the U.S. However, there's no legal requirement that broadcasters, cable networks or movie studios do business with Intel. Comcast owns NBC, several cable networks and Universal Studios; it's required to offer its content on reasonable terms to other cable, satellite and IPTV operators, but it has no such requirement to do business with Intel. Cable and satellite operators have made equity investments in some other cable networks over the years; they can influence who the networks license their content to (or don't license it to, as the case may be.) The remaining cable networks and studios have to weigh the revenues they could get from Intel with how Intel might impact their revenues from other distributors. In addition, we don't know what financial terms Intel wants. For example, Intel may want to pay for content as it adds subscribers, while content providers may want Intel to pay a base fee covering millions of subscribers, even if the company might not be able get that many subscribers for years.

In any event, Intel's "cable killer" is apparently on life support, at least for now. Eventually, someone is going to figure out how to get enough content to make an over-the-top Internet video service competitive with cable and satellite. It might be Intel, Apple, Aereo, FilmOn, or a company that doesn't even exist yet. It might require Federal legislation. But, it will happen eventually.

What happens if Apple's announcements are no longer news?

This was the week of Apple's big iPhone 5 reveal, and it was like many of Apple's press announcements: A packed Yerba Buena Center; Apple executives describing product features using superlatives usually reserved for...well, for Apple product launches; and the usual product videos, including designer Jony Ive talking about how incredible his latest design is. There was also the endless parade of television news trucks lining the streets around Moscone Center, and the ever-increasing number of liveblogs covering the events AS! THEY! HAPPENED! What there wasn't was much actual news, and that could be a problem for future Apple product launches.

As the Columbia Journalism Review pointed out, virtually every detail of the iPhone 5 had been leaked before the event. The iPhone checked all the boxes on the "must have" feature list--bigger screen, faster processor, better camera and LTE--but there wasn't anything groundbreaking about its design or functionality. If you didn't know that the iPhone 5's bigger screen can accommodate an additional row of icons, it would be hard to tell the iPhone 5 apart from the 4 or 4S at a glance. (Update, September 23, 2012: The iPhone 5 is actually fairly easy to tell apart from the 4 and 4S, even when it's not turned on. Apple has done away with all the chrome trim on the phone, and the back is metal, not glass.)

In addition, the presentation was long. There was everything you'd expect in an iPhone rollout, followed by everything you'd expect in an iPod rollout. I suspect that Apple tied the two announcements together in order to get more attention for the new iPods, but if the company is actually planning to launch a smaller iPad next month, it probably wouldn't have hurt anything to announce the iPods at that event.

The CJR picked up on some of the liveblogs' sense of disappointment: They noted that Engadget's coverage reached parody levels, with 78 exclamation points in 122 minutes. The New York Times' coverage was deemed sober, although assigning four reporters to the story was overkill. The Wall Street Journal also avoided getting over-excited.

Some observers say that Apple is most likely going down the same path with the iPhone that it followed with the iMac, MacBook Pro and MacBook Air product lines: It's optimized the physical design of the iPhone, and future changes will be more incremental than revolutionary. That makes sense and may very well be true, but you rarely see the huge press turnout and coverage for Apple's Mac product announcements that you see for the iPhone and iPad.

It's true that customers don't seem to find the iPhone 5 disappointing--it sold out of its first week's allotment in 30 minutes, and that was with pre-ordering starting at 3:01 a.m. Eastern time in the U.S. However, what matters in this case is whether the press sees a lot of news value in Apple's future announcements. If all the major news leaks before the announcements, the story is going to become what Apple was still able to keep secret, not what it announces. Given that Apple has so many production partners, keeping new products under wraps will only get harder.

Apple's had an enormous advantage over its competitors because it could count on at least $100 million in free publicity for each launch from the world's biggest media outlets, processed through news organizations in order to give it an extra level of authority. If Apple's announcements lose their newsworthiness, they'll also lose their impact. Even if Apple's management figures out how to go back to the CIA-like levels of security the company's product launches had in the past, its "reality distortion field" may be gone for good.

Who do you trust? It depends on your political party

The Pew Research Center for the People & The Press has released a survey of 1,001 U.S. residents ages 18 or older. Of that group, 239 were Republicans, 286 were Democrats and 384 were independents. Keep those numbers in mind, because they're going to be very important in a minute. The top line of the survey, according to Pew, is "Further Decline in Credibility Ratings for Most News Organizations." And, their findings show that the believability of nine of the 13 news organizations rated fell considerably between the last survey in 2010 and the current survey. The average believability of all the organizations fell 6 points in two years, from 62% positive in 2010 to 56% positive in 2012.

Here's the table of overall ratings for the 13 news organizations:

Overall, the most trusted news sources are local TV news and CBS' "60 Minutes", and the least trusted sources are The New York Times, Fox News and USA Today. Many of the reports on Pew's study stop at that point, but they miss the real story: There are huge differences between how Democrats, Republicans and independents trust news sources:

• Democrats trust everyone except Fox News. Every news source except Fox gets a positive believability rating.
• Democrats rate "60 Minutes", ABC News and CBS News (tie), CNN, NBC News and local TV news as most believable.
• Republicans only trust local TV news, Fox News, The Wall Street Journal, and (just barely) "60 Minutes" and USA Today. They distrust every other news source.
• Even though Republicans trust Fox News the second-most, its believability rating has fallen 10 points in two years, from 77% in 2010 to 67% now.
• Republicans and Democrats are closest in their perceptions of local TV news, USA Today and The Wall Street Journal.
• Independents typically fall between Democrats and Republicans--they're less enthusiastic about news sources in general than Democrats, but less pessimistic than Republicans. "60 Minutes", local TV news, The Wall Street Journal, CNN, ABC News and NPR (tie), the respondents' daily local newspaper they know best and CBS News are the news organizations that rate positively with independents.

Here's the overall table:

This is why the overall ratings that lead the survey, while correct, are very misleading about what the survey actually found. The real takeaways are:

• Political views make a huge difference as to people's overall perceptions of news believability and media preferences.
• Republicans, at least in this survey, are too closed to news and opinions that might conflict with their world views.
• Democrats, again in this survey at least, are too trusting of the news they get from most outlets, and perhaps don't recognize that cuts in newsroom budgets since 2008 have led to a deterioration in the quality of news and opinions from most news organizations.
• Independents are the most cynical about believability across most news outlets, and probably represent the best balance of belief and skepticism.

Simon & Schuster revenues up 3%, but operating income down 47% in Q2

The Wall Street Journal reports that CBS issued its Q2 financial results yesterday, including Simon & Schuster. The publisher's revenues increased by 3% year-over-year to $189 million, with a 44% increase in eBook sales offsetting a decline in print sales. eBooks now represent 21% of Simon & Schuster's revenues, and the company expects eBook sales to increase slightly less than 30% for the full year. Operating income before depreciation and amortization was $9 million vs. $19 million in the previous year, down 47%, for a profit margin of 4.8%. The company says that profits were affected by the proposed settlement of eBook litigation with the Justice Department and states.

Book Fairs are still a big part of Scholastic's marketing efforts

The Wall Street Journal reports that Scholastic's book fairs are still working for them. The fairs have been critical for launching several popular series, including "Goosebumps," "The Baby-sitter's Club" and "Captain Underpants." Book fair revenue increased 3% to $288.1 million for the first nine months of the current fiscal year, and rose 10% from 2007 to 2011. Al Greco (not to be confused with El Greco,) a professor at Fordham University, said that even though Scholastic has had great success with series such as "The Hunger Games" and "Twilight," the company's book fair business faces challenges from eBooks and brick & mortar booksellers such as Barnes & Noble, along with rising shipping and delivery costs. To that end, Scholastic is heavily promoting its new Storia eReader at book fairs, such as the recent one at the Nest, a K-12 school in Manhattan, whose PTA hosts a Scholastic book fair twice a year.

Virtually no profit in the Google Nexus 7

The Wall Street Journal reports on a preliminary estimate by UBM Techinsights of $184 for the cost of components in the new Google Nexus 7 tablet, which sells for $199. That barely allows Google to break even on direct sales, and it's losing money on sales through the channel. By comparison, UBM estimated that the Kindle Fire's cost of components was $153 last November. Specifications for the rumored Kindle Fire 2 are expected to be similar to that of the Nexus 7, and the component cost will most likely also be similar. However, Amazon could probably keep the existing Kindle Fire in the product line, at least as an interim product, at $149. At the same time, however, UBM's analysis suggests that the also-rumored 7" iPad is unlikely to be sold at $199, since Apple won't be able to make acceptable margins at that price. It's more likely to come to market between $249 and $299, if it ships at all.

eBookstores (and some publishers) are tracking how their eBooks are read

The Wall Street Journal reports that retailers (and, in some cases, publishers) know far more about how eBooks are being used than they ever knew about print books. According to the article, Amazon, Apple, Barnes & Noble and Google can track how far readers are getting into their eBooks, how long they spend reading them, how often they read them and which search terms they use. If the eReader supports annotations, they also know what readers are highlighting and the contents of notes. They also know how many times readers open their tablet apps.

This information is just beginning to be studied, and some retailers are sharing the information (albeit selectively) with publishers. Barnes & Noble is in "the earliest stages of deep analytics," but it's already learned some useful information:

• Nook users who buy the first eBook in a popular series tend to read the next title in the series as soon as they finish the first one. 
• Nonfiction eBooks tend to be read a little at a time and are dropped sooner than fiction, while fiction titles are usually read straight through. 
• Science fiction, romance and crime fans often read more eBooks in those genres, and read them more quickly, than do literary fiction readers. 
• Readers of literary fiction quit eBooks more often and tend to skip around between titles more frequently than readers of other fiction genres. 

Amazon has long gathered and utilized information on its customers' purchasing habits; for example, it uses that information to recommend similar titles. Digital security expert Bruce Schneier is concerned that the knowledge that tracking is going on may cause a "chilling effect" on purchases of eBooks on sensitive topics, such as sex, health and security.

Groups such as the Electronic Freedom Foundation want Amazon, Barnes & Noble and other resellers to give their customers the ability to opt-out of eBook tracking. California has a "Reader Privacy Act" that requires government agencies to get a court order before requiring digital booksellers to turn over information about which eBooks their customers have browsed, purchased, read or annotated. The ACLU and EFF are now trying to enact similar laws in other states.

Some publishers, especially those who sell directly to customers, are gathering their own data about reader behavior. Sourcebooks is experimenting with early online "work-in-progress" versions of some of its titles, and is incorporating reader feedback into the final version. Scholastic is using online message boards and interactive games connected to its "39 Clues" series to gather input from 1.9 million registered users. Coliloquy, an interactive digital publisher, is gathering information on the characters and plot lines selected by readers and forwarding it to authors for use in writing future titles.

Justice Department investigates cable and online video companies

According to The Wall Street Journal, the U.S. Justice Department has launched an investigation of the online video market. Justice Department officials have spoken to representatives from Netflix and Hulu, as well as Comcast, Time Warner Cable and other cable operators, about whether the cable companies are acting illegally to limit the access of online video companies to content, limit consumers' access to online video content, and limit the bandwidth that consumers need to access that content.

According to the article, online video services have expressed concern that data caps imposed by cable operators will give those operators an unfair advantage, a fear reinforced when Comcast announced in March that data used by its own Xfinity app running on Xbox 360s wouldn't count toward subscribers' data caps. Netflix's Reed Hastings accused Comcast of trying to skirt FCC rules that prevent Internet Service Providers from giving preferential access to their own content.

The Wall Street Journal's sources say that the Justice Department is examining whether Comcast is violating the legal agreements that it agreed to in order to get permission to acquire NBCUniversal in 2011. It's also looking into whether the TV Everywhere initiative first developed by Comcast and Time Warner is illegally requiring consumers to have a cable subscription in order to access some online programming.

Another area of investigation is the distribution contracts that programming providers sign with cable operators. These contracts usually include "most favored nation" clauses that require programming providers to give the top cable operators the lowest price and best terms and conditions that they give to any of their other customers. The Justice Department is looking into whether there are valid business reasons for these clauses, or whether they're intended to prevent programming suppliers from dealing with over-the-top video providers.

Most favored nation clauses are also part of the Justice Department's case against Apple and five of the Big 6 book publishers. In that case, those clauses were used to insure that all eBook resellers sold eBooks from the publishers under investigation at the same price.

It's important to remember that an investigation doesn't necessarily mean that the Justice Department will prosecute anyone. In some cases, the companies under investigation voluntarily change their practices in order to forestall prosecution.
 

What would you rather have: A monopoly or price-fixing?

Last week, The Wall Street Journal reported that the U.S. Justice Department has warned Apple and five of the "Big 6" trade publishers (Macmillan, Penguin, Hachette, HarperCollins and Simon & Schuster) that it's planning to file suit against them for price-fixing as a result of their implementation of agency pricing for eBooks. Here's a brief overview (and a disclaimer: I'm not a lawyer, and this isn't legal advice):

Until 2009, virtually all publishers in the U.S. sold their books (both print and eBooks) to resellers under the wholesale model. Typically, books would be sold by publishers to resellers at 50% of their suggested list prices--the prices printed on the book covers. Resellers were then free to resell the books at any price they desired. This was the model (along with co-op payments for display locations at the front of bookstores and preferred positions on bookshelves) that Barnes & Noble and Borders used to drive hundreds, if not thousands, of independent booksellers out of business with discounting. In many cases, the "big box" booksellers sold books for less than the price that independent booksellers paid to buy them.

Amazon used the same model to launch its entry into the eBooks business. Amazon's strategy was to sell all its eBooks for $9.99 or less, even if that meant selling them below the wholesale price. Amazon quickly controlled as much as 90% of the U.S. eBook market.

In 2009, as part of its entry into the eBook business, Apple proposed a different model to the Big 6 publishers (all of the companies under investigation plus Random House), which became known as agency pricing. Under agency pricing, booksellers don't actually purchase the books that they sell to customers--instead, they act as "agents" for the publishers and take a commission on each sale, which Apple set at 30%. Since the booksellers don't own (take title of) the books, the publishers can set the prices, and the booksellers are obligated to sell the books at that price. Five of the Big 6 publishers implemented agency pricing for their eBooks (Random House waited a year before it implemented agency pricing, which is why it's not under investigation.)

The five participating publishers went to their resellers at approximately the same time, and told them that, regardless of when their existing distribution contracts were to expire, their contracts would be immediately amended to require agency pricing of eBooks. Any reseller who refused would have their supply of eBooks cut off. The first skirmish was between Amazon and Macmillan--Macmillan implemented agency pricing and Amazon briefly stopped sales of all Macmillan titles, but soon relented. That opened the floodgates, and Amazon agreed to agency terms from the four other publishers (although it has refused to accept agency terms from any additional publishers except for Random House).

So far as consumers are concerned, the net result of agency pricing is that prices of eBooks from the Big 6 publishers have gone up substantially, from $9.99 to as much as $16.99. eBooks from the Big 6 were once less expensive than paperbacks; now, in many cases, they're more expensive. In some cases, eBooks are even more expensive than the discounted price of hardcovers.

Both the U.S. Justice Department and the European Union are investigating Apple and the five publishers for price-fixing. The external evidence is that all five publishers implemented the same pricing policies at the same time, and all five threatened to cut off supply to any reseller who refused to agree to the new terms. In Walter Isaacson's biography of Steve Jobs, Jobs is quoted as saying:

"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway.' 

Jobs continued, "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books."

That certainly gives the appearance of an organized effort to raise prices, orchestrated by Apple and executed by the five publishers. Publishers and their defenders argue that agency pricing is necessary to prevent Amazon from getting a monopoly in the eBook market, which, while only 20% or so of the "Big 6" publishers' sales, is likely to become 50% or more in a few years. A monopoly would give Amazon control over pricing. Advocates of the government's position say that the actions of Apple and the five publishers have substantially increased consumer prices for eBooks, and that it's hypocritical for companies like Barnes & Noble to support agency pricing when they used wholesale pricing to wipe out their independent competitors.

One of the most important things to understand about U.S. antitrust enforcement is that it's illegal to be a monopolist, but it's not illegal to have the potential of becoming a monopolist. At the time that Amazon had a 90% eBook market share, the eBook market was new ("nascent") and both small in units sold and dollar volume.  The Justice Department almost never goes after a monopoly in a nascent market. Today, Amazon has between 60% and 65% of the U.S. eBook market--a big share to be sure, but not a monopoly. If agency pricing went away tomorrow and Amazon went back to its old pricing strategy, it's very unlikely that the millions of people who own Nooks and eBooks from Barnes & Noble, Apple and other resellers would throw away their eReaders, tablets and eBook collections and start buying from Amazon. So, Amazon didn't have a monopoly, doesn't have a monopoly now and isn't likely to have one in the future.

On the other hand, price-fixing is illegal, and it doesn't even require a formal agreement among the parties to prove that price-fixing exists. There's no question that agency pricing has raised priced for consumers, at least for titles from the "Big 6". (Statistics rolled out by some defenders of agency pricing that show that eBook prices have dropped also include titles from self-publishing authors, some of whom sell their eBooks for as little as $0.99.)

Publishers argue that Amazon is a very difficult company to do business with, and all the evidence I've seen supports them. However, tough bargainers are a fact of life: Wal-Mart has made the lives of vendors miserable for years while pursuing an "Always the Lowest Price" strategy, but vendors have learned to live with it. Taking illegal action to prevent a company from becoming a monopoly is still illegal.

YouTube's scattershot channel strategy

Earlier today, the New York Times reported that YouTube will launch more than 100 channels of third-party video programming. YouTube is said to be paying the producers of the new channels, which will begin launching in November and continue throughout 2012, as much as $100 million to create original programming. The producers who have signed on with YouTube range from well-known media brands such as The Wall Street Journal, The Onion, Lionsgate, Reuters, Rodale Press and the WWE, to companies that were entirely unknown until today. Celebrities such as Ashton Kutcher and Deepak Chopra are also involved.

YouTube's plan, which is intended to eventually produce 25 hours of original content each day, is to build the new channels into places where viewers will return day after day, and advertisers will be willing to pay substantially higher rates than they pay for user-generated content. It's a good idea, but YouTube is taking a very scattershot approach to implementing it.

In the past, I've written about YouTube's plans to attract more and better programming. Last December, YouTube gave $1,000 credits to 500 of its YouTube Partners. At the time, I wrote that there's not much useful that a video producer can buy for $1,000 that would make a significant improvement in their productions. YouTube would have been much better off giving $10,000 credits to 50 well-targeted producers.

I feel much the same way about YouTube's new plan. The channels selected are all over the board in terms of content, and are likely to be equally all over the board in terms of quality. Instead of starting with 100 channels, YouTube should have started with 20 or 25, and worked carefully with the producers to insure that the quality of the channels would be high. Then, they could roll out a second wave of channels, perhaps six months down the road. By greenlighting 100 channels at the outset and rolling them out rapidly, YouTube has almost guaranteed that it will end up with a confusing mishmash of shows.

YouTube's intention is to build up a big library of compelling original programming quickly, but they're just as likely to create an assortment of channels carrying junk that would have never been produced had YouTube not committed to pay for it.

Speculation: The game any number can play

Late last week, TechCrunch's MG Siegler reported that he had not only gotten his eyes on a prototype of a new Amazon tablet, but his hands as well. He reported many details about the hardware and software, the price, when it will be announced, and even what kinds of promotions Amazon plans for it. Siegler's story triggered a flood of speculative articles, all primarily based on his description. For example:

• From Forbes:  Amazon Can Become Tablet King With E-Commerce Underwriting
• From The Wall Street Journal: Amazon.com Says It Is Testing Website Redesign (Changes, Which Will Roll Out Gradually, Were Made With Tablet Computers In Mind)
• From Wireless World: Amazon's $249 tablet could shake up pay TV business

I take Siegler at his word that he saw and used a prototype of an Amazon tablet, and that he spoke with a source with inside information about Amazon's plans. However, we have no independent verification that the tablet he used is representative of the final product, or that the pricing, availability and promotional details that he got are correct and won't change by the time the product finally ships. Nor do we have any independent verification of what he wrote about a second tablet, or about Amazon's plans for other black & white Kindles.

It's easy (and fun for the whole family) to base articles on a single, unconfirmed story, but they take as fact what is only rumor and hearsay. The problem with piling speculation on top of hearsay is obvious: If the hearsay is incorrect, the speculation based on it is even more incorrect, and the whole pile tumbles down like a badly-constucted Jenga tower.

We know what TechCrunch published. Let's get some independent confirmation of the facts before we start drawing conclusions or determining what the impact will be on the industry. If Siegler is correct, we don't have long to wait before we get confirmation from Amazon itself. There's plenty of time to determine the implications of Amazon's actions once we know the "true facts".

What could comScore learn from Domino's Pizza?

Last week, The Wall Street Journal's AllThingsD ran an article about comScore, the Internet website traffic measuring service. Yesterday, Jason Calacanis chimed in with his own heated remarks about comScore and one of its investors, and today, Michael Arrington and TechCrunch got sucked into the debate. I've linked to the articles on all three sites, so I won't rehash their arguments. However, let me summarize what I understand as the facts, and then make a few suggestions.

For more than ten years, comScore has used a diary approach for measuring website traffic, the same basic approach used for decades by Nielsen and Arbitron to report broadcast ratings. comScore's users manually reported the sites that they visited, and then their reports were aggregated and extrapolated to come up with gross visit counts. The problem was that almost since comScore's inception, many website operators claimed that their own reports showed much higher traffic than comScore, but comScore defended its methodology and claimed that it was accurate.

Radio and television broadcasters and their advertisers knew for decades that the diary method was inaccurate. People forgot to report programs that they watched or listened to. African-American and Hispanic households were underrepresented in diary samples, as were low-income households in general. Everyone knew that the methodology had serious problems. With the implementation of people meters that automatically track television viewership, the industry saw just how inaccurate the old diary-based system was.

The comScore diary system had similar deficiencies to the broadcast systems, but the company adamantly denied any flaws. Then, a few years ago, Google and Quantcast, among others, introduced "beacon" technologies that would report every time a webpage was viewed, bringing people meter-like technology to the Internet. These systems provided results that were generally much closer to the publishers' own logs than comScore.

Last week, comScore announced its own beacon-based system and stated that it will be significantly more accurate than its diaries. However, for a website operator to get comScore beacons, it either has to pay $10,000 per year to subscribe to comScore's report service or pay a one-time $5,000 fee for the company to "audit" the placement of the website's beacons to insure that one and only one beacon is on every page. If the website operator doesn't want to pay, comScore will continue to use its diary method, which it admits is inaccurate, to measure that site's traffic. It was this "pay for accurate numbers" approach that AllThingsD reported and that made Calacanis go ballistic.

comScore has the right to charge whatever it wants for its service, although $5,000 to "audit" beacon placement seems like a lot of money, given that it's likely to be a largely automated service. What I have problems with is comScore continuing to offer the diary service at all, and that's where my gratuitous Domino's Pizza reference comes in.

Recently, Domino's began running television ads taken from focus groups, where participants said things like "the crust is rubbery" and "the box tastes better than the pizza." Domino's ads say that it has taken the criticisms to heart and has changed its pizzas so they taste better. Domino's no longer sells its old, crappy pizzas, only the new ones. comScore, however, continues to offer the old, crappy diary measurements, right alongside the new, superior, beacon-based ones. If the old methodology doesn'r work very well, STOP USING IT!

If I was an advertiser, I'd now take comScore's diary ratings with a grain of salt. Mixing the two methodologies would actually make it more likely that I'd look at a competitive rating system, not less. I'm sure that comScore is afraid that dropping the diaries before it has a critical mass of beacon-equipped sites will make its overall service much less valuable, but there's an alternative approach it could have taken that would allow them to phase out diaries quickly and still generate revenue:

1. Make the beacons available to website operators free, just like Quantcast and Google do.
2. Provide the auditing service for the first year at a much lower price, and make it an annually renewable service.
3. Clearly distinguish in ratings reports which sites are audited and which are not. This will alert advertisers to sites that may be "gaming the system" by placing multiple beacons on a single page.

It's in comScore's best interest to get rid of the diaries and go to the audited system it's pursuing. It should do everything it can to make the transition as quickly as possible, even if it means leaving some money on the table in the short term.

The Christian Science Monitor to cease daily publication

In what's likely to be the first of a wave of fundamental restructurings in the newspaper industry, The Christian Science Monitor announced today that it will cease publication of its daily newspaper by April of next year. According to Online Media Daily, the newspaper will shift to a weekly print edition, along with a continuously updated version of its website, CSMonitor.com, and a daily electronic subscription product. There's been an ongoing debate within the Christian Science church over whether or not to keep the newspaper alive, and this strategy appears to be a compromise that will keep the Christian Science Monitor in business by shifting daily coverage to the web and dramatically decreasing costs.

Weekly newspapers are about the only bright spot in the newspaper industry, and moving from a daily to a weekly will help the Christian Science Monitor capitalize on this trend. I think that this is likely the model that many newspapers will follow--daily coverage on the web and a weekly print version. Whether that will save enough money to keep hundreds of newspapers from failing is anyone's guess, however, especially with advertisers pulling back across the board, including online.

It seems likely to me that in many markets, the job of providing daily local coverage will fall to the websites of television stations, not newspapers. The local newspapers in those markets will either have to survive as weekly lifestyle-oriented publications, or not survive at all. The strategy pursued by The Christian Science Monitor will work best for the national or quasi-national newspapers, such as The Wall Street Journal, New York Times or Washington Post.

In any case, we're witnessing the start of the final transition of print newspapers to electronic distribution, or to history.

Update: According to Advertising Age, only two of the top 25 U.S. newspapers gained circulation in statistics from the Audit Bureau of Circulation for a year-to-year six month period ending September 30th. Those two are USA Today and The Wall Street Journal, and the gains were 0.01% in both cases. Some of the other changes were The New York Times down 3.6%, the Los Angeles Times down 5.2%, The New York Post down 6.3%, the New York Daily News down 7.2%, the Chicago Tribune down 7.8% and the Houston Chronicle down 11.7%. Overall, daily circulation declined 4.64%, and Sunday circulation dropped 4.85%. In both cases, the overall rate of decline increased from the year-ago rate, which was 2.6% for dailies and 3.5% for Sunday. Not an encouraging trend.

Apple: Human, After All

Ever since the launch of the 3G iPhone, Apple has been showered with decidedly mixed news. One the one hand, iPhone sales took off much faster than sales of the original iPhone, but who can forget the lines, delays and frustration of buyers when Apple's iTunes-based authorization system failed? In the U.S., the 3G iPhone is still subject to inventory shortages and a long purchase and approval process.

Now, 3G iPhone users from around the world are complaining of poor 3G reception and speeds little better than the EDGE 2G service of the original iPhone. In the U.S., AT&T and Apple maintained a stony silence about the problems, but in other countries, service providers laid the problem at the feet of Apple. An industry analyst conjectured that the Infineon chipset that Apple used for the 3G iPhone was to blame, a Swedish engineering magazine confirmed the problem (though not necessarily the source), and a Business Week article appears to substantiate that conclusion.  While Richard Windsor, the Nomura Securities analyst who wrote the original report, believes that the problem is in hardware, the BusinessWeek article indicates that the parties involved think that the problem can be fixed in firmware. None of this matters to customers, who just want a phone that works as advertised.

The iTunes Application Store has been a grand success, generating a million dollars in sales a day for Apple and still growing. On the other hand, developers are complaining about Apple's slow (and seemingly capricious) approval process for adding their software to the Store--an approval process that nonetheless let through a program called "I Am Rich," which cost $999 and did nothing except flash a red icon on the iPhone's screen. According to reports, eight people actually bought the package before Apple took it down.

mobileMe, Apple's replacement for .mac, was launched well before it was ready, which caused millions of .mac users who were forced to switch over to mobileMe to lose access to their email and be unable to synchronize their devices for long stretches of time. The problems caused The Wall Street Journal's Walt Mossberg, who's usually an Apple champion, to warn users to stay away from mobileMe until the service matures.

Let's not forget AppleTV, which even in its second version has failed to gain market traction. Roku's Netflix Player sold out quickly, and the company has had a hard time catching up with demand, but AppleTVs gather dust on store shelves around the U.S.

These glitches indicate that there are some serious problems in Apple's product review and release process, as well as its online infrastructure. How Apple responds to these problems, and how long they persist, will indicate whether or not the company has gotten too big for its own good. In any event, Apple is human, after all.