Google wins summary judgment against Viacom in YouTube case

(Disclaimer: I'm not a lawyer, this isn't legal advice and your mileage may vary.) Google and Viacom have been embroiled in a copyright suit for several years over YouTube. Viacom charged that Google and YouTube knowingly violated copyrights for its video content, and asked for damages of $1 billion. However, earlier today, Judge Louis Stanton of the U.S. District Court in New York ruled that Google is entitled to protection under the "Safe Harbor" provisions of the Digital Millenium Copyright Act (DMCA) and is not liable to Viacom for any copyright infringement.

The court ruled that Google/YouTube abided by all the requirements of the DMCA, and Viacom was, and is, required to state with specificity which content it believes to infringe its copyrights. The court said that Google/YouTube went beyond legal requirements by implementing a system for automatically scanning uploaded content and comparing it with a database of known copyrighted works in order to identify and take down infringing content without having to receive a DMCA notice.

The court also ruled that it's not enough for Google/YouTube to have known that there was some infringing content in its system--it's up to Viacom (or any other copyright holder) to specify the content that infringes its copyrights. When Viacom did provide specific information to Google/YouTube, the company took the content down within 24 hours in virtually every case. In short, Google has won, and Viacom is not entitled to any compensation. Viacom will undoubtedly appeal.

That was fast: Amazon cuts the price of the Kindle to $189

Earlier today, Barnes & Noble cut the price of the 3G nook from $259 to $199 and introduced a WiFi-only model for $149. Now, Amazon has responded by cutting the price of the Kindle from $259 to $189, $10 less than the nook. This is for Amazon's global model, which uses AT&T's network for its Whispernet service. The U.S. domestic-only model has apparently been discontinued.

Amazon is widely rumored to have an updated, thinner and lighter Kindle model in development for release later this year. If that's true, the price of the current Kindle 2 may be cut even further, to compete with the $149 WiFi-only nook. In any event, you may want to wait a week or two (at least) to see how these price cuts shake out; Barnes & Noble may well drop prices further in response to Amazon.

Barnes & Noble drops the price of the nook to $199

CNET has reported that Barnes & Noble has dropped the price of the existing 3G-compatible nook to $199 from its previous price of $259, and has introduced a new WiFi-only model for $149. The new pricing is sure to put pressure on Amazon to drop the price of the Kindle 2 below its current $259. More importantly, it shows that Barnes & Noble recognizes that the nook and similar E-Ink-based eBook readers simply aren't competitive with the iPad.

According to the article, B&N has also made several improvements to the nook's software, and has made arrangements with AT&T to allow it to be used for free at any AT&T WiFi hotspot. This will make the absence of 3G connectivity on the $149 nook less of an issue. One could argue that the true price of the nook has been dropped not to $199 but to $149.

It'll be very interesting to see how Amazon responds, and if $149 is a low enough price to keep monochrome readers viable once Android tablets start hitting the market for $199 or less.

The problem with PDFs

In my last post, I took KFNB Reading Technology to task for developing its own proprietary format for eBooks, and stated that PDFs can provide the same "page fidelity" experience as KFNB's Blio eBook reader. There's a good reason to create a new format, however, and it lies at the heart of PDF itself.

There are lots of ways to create a PDF file that looks good when viewed in a PDF reader, but the internal structure of a PDF file can vary widely, depending on the tool used to create it and even the order in which it was created. For publishers, Adobe's InDesign and Quark's QuarkXPress are the two most popular tools for laying out books. These tools can then generate PDF and ePUB files, and it's those files that are used to create eBooks. However, there are many other tools that can create PDFs, and Adobe's own print drivers can create PDFs from almost any document. Some publishers have written their own page layout and conversion software, and there are dozens of format conversion services around the world that can accept files in a variety of formats and output PDFs.

The internal structure of a PDF is very important if you want to create notes or highlights, select text or perform text-to-speech. Adobe has what's generally considered to be the best PDF rendering technology in the industry, and they handle the variety of ways that a PDF can be constructed very well. However, if you need to write your own converter or renderer, you have to handle all the myriad PDF variations.

That's one reason why a company like KFNB would decide to create its own format and require publishers to convert their titles into its format rather than PDFs. By enforcing a more consistent internal structure, KFNB could bypass many of the problems faced by PDF renderers. However, it still results in compatibility issues--eBooks in KFNB's format can only be read with KFNB's readers. If KFNB goes out of business, no new readers will be available, and if there's DRM on the KFNB eBooks, it may be impossible to use them in the future.

That's why I would have preferred to see KFNB "bite the bullet" and do the hard work of parsing PDF files in its reader, instead of creating its own format and insisting that publishers use that rather than PDF.
 

Disappearing DRM and other thoughts

Note: The opinions expressed in the following posting are mine, and not those of any of my former, current or future clients or employers.

I've long believed that Digital Rights Management (DRM) is a hopeless battle. DRM penalizes the legal, honest customers who purchase content and want to do the right thing. If a hacker is committed, he or she can break any DRM, given enough time and resources. Even if cracking a DRM system is illegal in one country (as the DMCA makes it in the U.S.,) it can usually be cracked legally (or illegally) in another country, and then the cracking software, content that's been unlocked, or both, can get freely distributed around the world. Companies almost never get a positive return on investment from DRM: Distributors are forced to implement it by their content suppliers, and they bear the costs. Content producers can dictate what kinds of DRM are acceptable but rarely bear the costs.

Nevertheless, many content producers and distributors demand that DRM be used. My opinion is that there are ways to make DRM less onerous and less risky for consumers while giving content adequate protection. Consider one problem: Company A sells content to producers that is protected with its own DRM system. Then, a couple of years down the road, Company A goes out of business, is acquired by another company that's no longer interested in the DRM system, or decides to stop distributing content. When customers have problems with the DRM system (for example, they want to move their content library to another machine, or they've had a system problem and need to reauthorize their existing library,) there's no one there to help them. The library of content that they might have spent hundreds or even thousands of dollars on is now worthless.

Or, consider a slight modification to the first case: Company A licenses a DRM system from Company B, and Company B goes out of business. Yes, Company A most likely required Company B to put a copy of its DRM software in an escrow account to cover just such an situation, but that doesn't mean that Company A will be able to support and maintain the DRM system by itself. Company A may still be in business but be unable to fix problems in the DRM for its customers.

One way to address these problems would be to create what I call "disappearing DRM." This would be a DRM system for downloaded content that is automatically disabled after a given period of time, perhaps 24 to 36 months. The greatest risk for piracy is when an eBook, music recording or movie is current. Most popular books and music have gone to the backlist or catalog by the time 24 to 36 months elapses. With disappearing DRM, content could be freely archived, copied and moved from device to device once the time limit expires. That way, if the content or DRM vendor goes out of business, is acquired or loses interest, purchased content would still be usable.

DRM is a necessary evil for encouraging distribution of digital media by major publishers, but there are many ways that it could be made more transparent, more convenient and less dangerous for consumers. A disappearing DRM system would be one of them.

Blio finally coming to market; Ray K babbles about distribution deals

According to The New York Times, the Blio software eBook reader is finally going to start shipping. Blio, from KFNB Reading Technology, maintains page fidelity (eBooks look like, and are paginated like, their print equivalents.) Ray Kurzweil, the founder of KFNB, said that a variety of distribution deals are coming soon, including one with Wal-Mart, which Wal-Mart refused to comment on and was probably unhappy about.

Kurzweil points out that Blio's ability to maintain page fidelity is great for "cookbooks, how-to guides, schoolbooks, travel guides and children’s books" He also is quoted saying “The publishers will not give things with complex formats to these e-reader makers. They destroy the format.” What he doesn't say is that Adobe's PDF also maintains page fidelity, there are PDF readers from Adobe and many other vendors, and by and large, they're also free. He also doesn't mention that Blio uses a proprietary format that only his reader supports. So if you buy eBooks in the Blio format, you can only use them with Blio readers. Using a proprietary format may not be a big problem if your name is Amazon.com, but it's a bigger problem when you effectively have no distribution and are completely dependent on other companies to adopt and sell your product.

He also misspeaks about the reason that publishers haven't made graphically rich titles available in eBook formats. It's not that they don't like the available readers, it's that in many cases, they're simply not yet marketing their children's or specialty titles as eBooks.

I've played with the Blio reader, and it has a lot to recommend it. Its text-to-speech and translation capabilities are particularly good--what you'd expect given Kurzweil's experience with readers for the visually disabled. However, introducing a new, proprietary format is a retrograde move. KFNB could have done everything it wanted to do with PDF, but decided to invent its own format. That's bad for customers, bad for publishers and bad for the eBook industry in general. The eBook industry needs fewer formats, not more.

Are apps the future of media?

For more than 15 years, we've been trying to get people to pay for content via the Internet. Companies have tried to sell subscriptions to newspapers, magazines, music and video, pay-per-view services and the like, and with a few exceptions, they've failed. Consumers equate the Internet with "free"; they pay once a month for Internet access, but everything else is included. If someone does try to charge for media, consumers will almost always find an alternate source that's free.

Cable television in the U.S. is in a similar situation. Cable operators have figured out how to get consumers to pay (grudgingly)  for tiers of service that contain multiple channels. The premium channels that are sold on a monthly basis, like HBO, Showtime and Starz, have themselves evolved over time into packages of channels to keep viewer interest (for example, HBO East/West, HBO2, Signature, Family, Comedy, Zone and Latino.) Service providers have to offer discounted packages in order to obtain subscribers, and cancellations rise when the discounts expire.

Video service providers outside the U.S. have experimented with a la carte pricing for individual channels, but the results have usually been disappointing; the operators find that they can make more money by offering pre-packaged tiers of programming, and consumers rarely protest the lack of choice.

Perhaps apps, rather than the Internet, are the future of media. Consumers have shown a great willingness to buy apps, if they're inexpensive. The micropayment schemes that failed so miserably on the Internet work beautifully for Apple's App Store, which takes all the friction out of transactions.

Consumers will pay for eBooks, magazines and newspapers in the form of apps. They've made the Apple iTunes store the world's largest retailer of music. They're willing to pay for content, if it's an app, works on a mobile device and is cheap. In this model, the Internet is (sometimes) the channel of distribution and the app is the medium.

As much as many of us have been railing against "old media" companies for bringing their business models to the app world, it seems to be working a lot better than anything they've tried on the Internet. I don't think that we're ever going to be able to erase the perception that "everything's free on the Internet." By comparison, consumers aren't just willing to buy apps, they eagerly buy. If we want to sell content, the most likely way to do it is as apps.

You go back, Jack, do it again

A few weeks ago, I had a conversation with a manager with one of the biggest eBook companies in the business. (I'm not using names to protect the innocent.) This manager asked me what I thought the company should offer in the way of self-publishing services for authors. I told the manager that one way to add value would be to offer promotional services to authors. When I was writing computer books, I got virtually no promotional support from my publishers, so I and a friend had to arrange media bookings, book signings and speaking opportunities ourselves.

The manager told me that the company's self-publishing division already provides promotional services. I checked their website while we spoke, and I found nothing about promotional services on their homepage. As I dug into the site, however, I did find some promotional services. So, I asked the obvious question: Since the company already has its own self-publishing division, surely the eBook operation would take advantage of its services, wouldn't it? The manager replied that yes, they own a very successful self-publishing operation for print books and other media, but they've decided to build their own self-publishing operation for eBooks.

I didn't pursue the point because I was so shocked by the manager's response. Why reinvent the wheel when you've already got a self-publishing operation in-house? If that division isn't doing something that you think you need, why not get them to do it rather than build your own self-publishing operation? It makes absolutely no sense for authors to work with one group if they want to self-publish books that get printed on paper and another group for eBooks.

There may be a good reason why this company has decided to "do it again," but overall, it smacks of both bureaucracy in action and a strong case of "Not Invented Here" syndrome. This is a company that's highly praised for the quality of its management. I have my doubts.

Big set-top box changes underway at Comcast

ESPN 3D, the cable network carrying 3D coverage of the World Cup in the U.S., is available to cable operators via both MPEG-2 and MPEG-4 compression. MPEG-4 is significantly more bandwidth-efficient than MPEG-2. and according to Cable360, Comcast customers who want 3D programming will have to use MPEG-4 compatible set-top boxes starting in August. Comcast has approximately 10 million MPEG-4 set-top boxes in the field, and 25 million set-top boxes that only support MPEG-2.

Most of Comcast's MPEG-4 set-top boxes are from Motorola, but the company is said to have chosen Pace to supply its next-generation set-top boxes. The Pace STBs will support MPEG-4 H.264 compression and Tru2Way applications, and they may be compatible with Switched Digital Video (SDV) services. Comcast's choice of Pace will have a major impact on both Motorola and Cisco in the U.S. market. Pace has been very strong everywhere but the U.S., but supplying the largest video service provider in the U.S. will dramatically increase its presence and shake up the market.

It may require a new generation of game consoles to do true 3D

The first reviews of Sony's 3D games for the PlayStation 3 are coming in from E3. Keep in mind that the games being shown are alpha or even pre-alpha, so the experiences that reviewers are having could improve by the time the games are released. Nevertheless, reviewers are complaining that the resolution of 3D games is significantly lower than that of the same games in 2D mode. In addition, the requirement to use 3D glasses both decreases contrast and makes everything look darker; this is especially a problem with adventure and first-person shooter games that already fairly dark to begin with. The combination of these two problems makes some games much less enjoyable in 3D.

The reason that the resolution of 3D games is significantly lower than the same games in 2D is that the game console has to render images twice as fast in 3D than in 2D. Even the vaunted Cell processor in the PlayStation 3 doesn't have the horsepower to double its rendering speed for complex images, so game designers have to render lower-resolution images for 3D and hope that the 3D effect compensates.

It may take a new generation of game consoles to provide 3D games that look as good as today's 2D games. Nintendo is hinting that the successor to the Wii will be built for 3D from the ground up, and Sony's likely to find that it will take a PlayStation 4 to truly do 3D justice. Dual GPUs are likely to be needed in order to render graphics equal to the best of today's 2D games for 3D.

Is rapid proliferation of Android handsets doing more harm than good?

As you may have heard, Verizon and Motorola are planning to launch the Android-based Droid X on June 23rd, the day before the iPhone 4 goes on sale in retail stores. Last month, Sprint and HTC released the EVO 4G, and Verizon and HTC released the Droid Incredible not long before that. Android handset manufacturers are rapidly pushing the "state of the art", but are they pushing it too fast?

Consider the buying decision from a consumer's point of view, comparing the Android and iPhone situations:

• iPhone: Apple releases a new iPhone once a year, so depending on when I buy my iPhone, I can avoid "buyer's remorse" for as long as a year. Also, Apple updates the operating system, so I can take advantage of the new features in the latest version of iOS as soon as Apple releases it.
• Android: Should I buy an Android phone now or wait for the better model that's coming next month? Since my service provider controls Android upgrades, will I get the new version of Android, and if so, when?

For risk-averse buyers, both the iPhone and BlackBerry present safer alternatives to Android. How can Google and its Android partners get around this problem?

• Move to once-a-year major Android updates. Google's Andy Rubin has already said that the company plans to do this.
• Time new handset releases to coincide with new Android releases. That way, consumers will see all the new handset options at one time.
• Get service providers to push new Android releases out day-and-date with Google's official release, so that there's no question as to when, and whether, an Android phone will get a new release. (If an existing phone isn't compatible with the new release, both Google and the service provider should publicize that fact in plenty of time for phone owners to upgrade to a new model if they choose.)

3D won't help Sony escape its competitors

Sony introduced a slew of 3D games at E3. Existing PlayStation 3 consoles are already 3D-compatible, but to play 3D games, you need a 3D-compatible HDTV. Sony's logic is that 3D games will drive the sales of its 3D HDTVs, thus increasing overall corporate revenues. The only problem is that Sony isn't the only player in 3D HDTVs. Next week, Vizio, one of the leaders in low-priced HDTVs, will demonstrate two 3D HDTVs at the CES line show in New York City. One model will have a 55" active 3D display with Bluetooth-enabled 3D glasses and a 480Hz refresh rate; the other model will have a 65" passive display and use simple polarized lenses for the 3D effect.

Sony's goals with its 3D initiative are to spur a new wave of consumer electronics sales, and to insulate itself from competition. It may accomplish the first goal, but it's not going to escape the competitors who are plaguing it in the HDTV and Blu-Ray markets.

E3: Thoughts on Microsoft, Nintendo and Sony

Microsoft, Nintendo and Sony have now all had their press events at E3. Let me preface this by saying that I'm at best a casual gamer, and I track the game console market only where it intersects with online video or other areas of interest. Therefore, I'm going to focus mainly on technology, not titles.

In my opinion, perhaps the most important product shown by the three companies was Nintendo's 3DS, both because it's a new platform and it displays 3D without requiring separate glasses. Nintendo dominates the handheld game console market, and the 3DS will help to maintain Nintendo's lead. What was disappointing, however, was that Nintendo announced neither a ship date nor a price for the 3DS.

Microsoft's Kinect (the new name for Project Natal) will serve as a strong mid-life "kicker" for the Xbox 360 platform. Kinect has a price ($150 in the U.S.), a release date (November 4th) and a collection of 14 games that will take advantage of the Kinect technology. Kinect and similar products could lead to controller-free remote controls and user interfaces for a variety of devices in the living room.

Sony announced pricing and availability for PlayStation Move, Sony's take on the Wiimote. The Move will be available in the U.S. on September 19th for $49.99, or as part of a bundle with one Move, a PlayStation Eye (one Eye is needed per PlayStation 3 in order to use Move controllers) and a copy of the PlayStation Move Sports Champions game, for $99.99.

This generation of game consoles is beginning to look a bit old, and both Microsoft and Sony are trying to inject life into their platforms with new controllers. Nintendo apparently feels that Microsoft and Sony are only now beginning to catch up with the Wii, and is focusing its attention on the 3DS and more Wii games. In any event, there weren't any overwhelming announcements from any of the three console makers.

AT&T Lunacy

"There's this new iPhone 4 coming, and we're going to start getting pre-orders on June 15th, and lots of people are going to want one, so be sure to have everything working on the website in time, okay?" Apparently, that message never got to AT&T's website team, because it's been all but impossible to upgrade existing iPhone accounts to the iPhone 4 all day. It can't be done through AT&T's site, Apple's site, or the new Apple Store app that the company just released for the iPhone. It's gotten so bad that the title for Apple's own ordering page is "iPhone 4 Goes on Pre-Sale, Purportedly."

Could THIS finally be the straw that breaks the camel's back, the event that causes Apple to say "We need a second carrier in the U.S."? Probably not. I don't know what it would take for Apple to say "Enough's enough," but I wouldn't want to be part of AT&T's website team right now.

Update: I just managed to place an upgrade order through AT&T. It's a miracle!

Microsoft's Applied Sciences Group demonstrates glasses-free 3D system

At last month's SID conference in Seattle, Microsoft's Applied Sciences Group demonstrated a 3D display technology that doesn't require glasses. It uses a "wedge lens" which modifies the critical angle of light coming from the lens/backlight to determine the direction and location of light coming through the LCD. The system also requires a camera to determine the location of viewers in order to provide a convincing 3D effect, but Microsoft's new Kinect (formerly Project Natal) should do the job.

There are some limitations to the system: A minimum 240Hz refresh rate is needed for two people to be able to simultaneously view 3D video, and the viewing angle is currently only 20 degrees, although Microsoft hopes to increase it to 40 degrees. Microsoft is also encouraging LCD manufacturers to go beyond 240Hz in order to increase the number of simultaneous viewers.

My belief is that 3D in the home won't really take off until glasses-free systems become practical, both technically and economically. We may still be five years away from that happening, but once it does, demand for 3D will explode.

A crack in the wall: Xbox Live gets ESPN3.com

Earlier today, Microsoft made a number of Xbox-related announcements, including that ESPN will be making ESPN3.com available as part of annual Xbox Live Gold subscriptions, which cost $50/year. When I first heard the announcement, I thought that it referred to on-demand sports events that had already taken place, but ESPN3.com provides more than 3,500 live sporting events each year in the U.S.

There's a fairly large community of cable subscribers who subscribe mainly to get ESPN. If they can get ESPN3.com, plus Netflix and other services, through their Xbox 360s, they may drop their cable subscriptions (they'll still need cable or DSL for high-speed internet) and use a combination of Xbox Gold and over-the-air broadcasts. Though small, this is a crack in the cable operators' ability to keep control of programming.

News Corp buys Skiff from Hearst, invests in Journalism Online

Earlier today, News Corporation announced that it acquired Skiff from Hearst, and made an investment in Journalism Online. Skiff is developing a large-form-factor eBook reader designed for magazines and newspapers, and Journalism Online is a venture led by Steve Brill that's developing ways to monetize online content.

News Corporation's investment in Journalism Online makes perfect sense, but its acquisition of Skiff opens up some questions. Rupert Murdoch has made it clear that he believes that the era of free content on the Internet is over, and Journalism Online may give him the tools that he needs for monetization. However, News Corp doesn't need its own tablet platform...unless it's planning to make its sites "walled gardens" and close off access to the open Internet.

Here's a potential scenario: News Corp's newspapers would maintain a token presence on the web, but to access to their full contents, you'd need to buy a Skiff reader. News Corp will discount the price of the Skiff when it's purchased with an annual subscription to one of its newspapers. It may still support dedicated apps for the iPhone and iPad, but you'll no longer be able to get to the "meat" of its sites with a web browser.

News Corp would make its platform available to other publishers (for a price,) just as Hearst had planned to do, so it wouldn't necessarily be a News Corp-only reader. It's likely that News Corp will also make its eBooks available on the Skiff reader.

This strategy would undoubtedly sacrifice advertising revenues for subscriptions in the short term, but Murdoch may be willing to make that trade-off. Over time, he may believe that he can build a big enough subscription audience to generate substantial advertising revenues along with subscriptions. Also, by owning the hardware platform, News Corp can control the pace of development and insure that it gets eBook readers at the lowest possible price. News Corp would also not be at the mercy of Apple or Amazon; if those companies change pricing or distribution models in their favor, News Corp can move subscribers over to the Skiff.

There are a number of questions, however: If the Skiff is perceived as a closed platform, would News Corp sell enough to get a profitable subscriber base? (One could argue that the Kindle is a closed platform and it hasn't hurt Amazon.) Can News Corp keep the Skiff platform competitive over time with tablets and eBook readers from competitors? Are customers going to be willing to add a Skiff reader to the other devices that they already carry? It'll be interesting to see how News Corp integrates Skiff into its plans over the next 12 months.

Update: According to PaidContent, News Corp acquired Skiff's intellectual property and software from Hearst, not the Skiff reader hardware, for which Hearst is still trying to find a buyer. It appears that News Corp will try to license the Skiff software to other manufacturers.

50Mbps 1080p MJPEG from Panasonic GH1

A developer who goes by the name of Hacker13 has managed to increase the encoding bit rate on the Panasonic GH1 from the base rate of 17Mbps using AVCHD to 50Mbps using MJPEG. In turn, EOSHD.com has come up with optimum settings for the GH1, and shot some spectacular footage, which I've embedded below. The 50Mbps bit rate is higher than that of the Canon 5DMkII, and because the GH1 doesn't do line skipping, it's easier for the camera to scale and encode the incoming images.

This firmware hack, and a similar one for Canon's DSLRs called Magic Lantern, illustrate that there's a lot of potential untapped capabilities in today's DSLRs. Less expensive cameras with hacked firmware can exceed the capabilities of more expensive cameras with factory firmware. Here's the footage:


Longshan's People Part II - 50Mbit GH1 MJPEG from Andrew Reid on Vimeo.

The eBook reader bloodbath has begun

SlashGear is reporting that iRex Technologies, a Dutch eBook reader manufacturer, has filed for bankruptcy in the Netherlands. iRex had a distribution deal with Best Buy, but it wasn't enough to save the company.

In the eBook business, it's the eBook distributors and retailers who have the power, not the reader manufacturers. Amazon, Barnes & Noble, Apple and Kobo will continue to do well, since they've got content, readers and established distribution channels. Distributors like Ingram and Baker & Taylor have an opportunity to serve as "arms merchants" for those reader vendors without a strong in-house source of content, but in general, the non-integrated reader vendors are going to have a very difficult time of it. The readers themselves have largely become commodity products; factories in China and Taiwan can crank out just about any variation you want, so product differentiation is almost impossible. iRex is likely to be only the first of a string of failed eBook reader vendors.

Is Apple backing itself into a corner?

On Monday, when Apple made the release candidate of iOS 4 available to developers, it released yet another variation on its iPhone Developers Agreement. This time, it barred developers from sharing analytic data with advertising services owned by companies that either make mobile devices or offer mobile operating systems. That means that Google, Microsoft, Nokia and any other company that competes with the iPhone, iPad or iOS can't get analytic data, which will make it impossible for them to track viewership or clickthroughs. (Keep in mind that this applies to apps; developers can use any advertising service they want for web content.)

Once again, questions are arising about antitrust violations on the part of Apple, and once again, the simple answer is that Apple doesn't have enough market share in smartphones, mobile phones or tablets to warrant action. The simple answer may no longer necessarily be true, however. Apple has been engaging in a series of actions to close down access to its platform, from controlling which apps get into the App Store to banning cross-platform development tools and cross-compilers, to dictating which programming languages can be used on the platform, to now banning advertising from services run by Apple's competitors. Any one of these actions, taken on their own, would probably get a pass, but put them all together and it spells trouble.

At this point, I wouldn't be surprised if the U.S. Federal Trade Commission and/or Justice Department formally open an investigation of Apple. Either agency would have to demonstrate that Apple's actions are causing harm to consumers. The argument could be made that the overall effect of Apple's decisions limits consumer choice, in that applications and features that they could otherwise get are being kept from them by Apple. Consumers have a high switching cost if they want to move to another platform, especially for mobile phones. They could be locked into the Apple iOS platform and be subject to Apple's restrictions for as long as two years.

This argument might not prevail in court, but Apple's reputation could be severely damaged if it's charged with monopoly actions. That might be enough to get Apple to backpedal on some of its recent decisions.

Consolidation in the market research business

According to PaidContent UK, iSuppli, a well-known U.S.-based technology research company, has acquired Screen Digest, a UK-based market research company that tracks media markets. Three years ago, Screen Digest acquired Adams Media Research, one of the top researchers following the home video market in the U.S. Now, all three companies will be under one roof. The acquisition is intended to raise iSuppli into the ranks of companies like Forrester, which acquired Jupiter Research two years ago.

The multiyear recession has taken its toll on market research and industry analysis companies. Budget cuts by large clients have made them much more selective as to which research they buy. Some clients have gone out of business, and others have gone away through mergers and acquisitions. For example, the market research firm I worked for a few years ago had Nortel, Tandberg and Ericsson as clients, among others. Nortel has since gone bankrupt, and Ericsson acquired Tandberg. This same scenario is playing out for research firms in a variety of industries. It's hard to replace customers of that size, especially in a recession.

Small market research and market analysis firms are in a particularly bad spot, in that their values lie in the heads of their researchers and analysts. Unless they're highly specialized, their customer accounts are usually of little value to an acquirer that often serves the same customers and has superior sales capabilities.

The acquisition trend is likely to continue, with the following outcomes:

• Individual researchers and analysts (one-person firms) will hold on, because they tend to be more cost-effective and more flexible than the big firms.
• The small (2 to 10-person) research firms will have the biggest problems, because they're too small to be of interest to the big acquirers and most likely to be cut when customers whittle down their market research contracts.
• The medium- and large-size research firms will merge to get into new areas of practice and penetrate new customer bases. These mergers will result in consolidation of back office operations, with resulting layoffs.

Doin' the Dump on Apple

I've noticed a fairly abrupt editorial shift at Silicon Alley Insider. They're strongly featuring anti-Apple articles. I was just over at their homepage, where there were eight articles that could be read as negative to Apple, one positive, one neutral and eight that didn't have anything to do with the company. More than half of the total articles were about Apple, and most were strongly negative. They even dredged up a year-old post by Jason Calacanis.

I can understand the interest in Apple, given the iPhone 4 announcement and the other news from the Worldwide Developers Conference this week, but eight negative articles on one page seems like overkill. Years ago, when I worked at Netscape, Fortune's Editor-in-Chief at the time decided that he was going to put Bill Gates on the cover of at least every other issue, so the editorial policy of the magazine became taking a hatchet to Netscape. They reported every negative piece of news they could find, ran negative editorials dismissing the company's ability to compete with Microsoft, and even made stuff up when they couldn't find enough negative facts to fill an issue.

Editors do this because controversy sells papers. Netscape was the "golden haired boy" of the period, but Microsoft spent tons of money on advertising, so Fortune could win two ways: They could generate newsstand sales with controversial articles and at the same time attract more advertising from Microsoft. Silicon Alley Insider is no different; controversy gets visits and page views, which it can sell advertising against.

I too pay attention to what visitors to this blog read. Other than the front page, the most popular recent article was a piece that I wrote about Yahoo buying a large tract of land in Santa Clara, CA to build a new campus. I wondered if that was the best use of Yahoo's capital, given the company's problems and the huge number of empty and under-occupied buildings in Silicon Valley that they could get a great deal on. Since that story got so much interest, I could have written multiple variations on it, returning to the theme again and again, but I haven't. I made my arguments in that post, and I see no reason to belabor the point.

Controversy sells newspapers, magazines, cable news channels, websites and blogs. That's fine with me, but eight negative articles on the front page in one day is piling on. It's not just Apple--I'd feel the same way if the articles were about Google, Microsoft, Yahoo or someone else. If all you can do is kick sand in the face of the same company over and over, perhaps you need to give your reporters a little broader range of assignments.

Making 3D TV Practical

You'd have to be living under the proverbial rock to not be aware of the explosion in 3D technology, first in theaters and, more recently, at home. However, a lot of work needs to be done in order to make consumer 3D more practical. Here are three examples:

• 3D sets are far more expensive than their 2D equivalents. For example, the cheapest 3D set that Best Buy current has in the U.S. is a 40" Samsung model that sells for $1,800. A roughly equivalent 2D Samsung model can be had for $1,080.00, and if you're willing to settle for a 42" 2D Vizio from Walmart that's even better equipped than the Samsung, you can get it for $900. Best Buy's prices run as high as $6,300 for a Samsung 55" 3D model.
• Viewers need to use 3D glasses in order to see the 3D effect, and every receiver manufacturer has its own format for 3D glasses. Glasses for a Samsung set won't work on a Sony, and vice versa.
• A small but far from insignificant percentage of 3D viewers get headaches or have other problems when they watch it, due to the refresh/flicker rate. 

There are solutions in the pipeline for all of these problems, but they're going to take some time to implement:

• Prices for 3D sets will go down as manufacturing quantities go up, but it's unlikely that the price difference between comparable 3D and 2D sets will ever go below $250 or so.
• The Consumer Electronics Association and a company called XpanD are both working on 3D glasses that will work with any 3D television set.
• Last week, Toshiba demonstrated a technology that enables viewing 3D video without the use of glasses. (That was far from the first time that 3D without glasses has been demonstrated.) The new technology has a number of shortcomings: It requires three LCD panels to be sandwiched together, which dramatically decreases the brightness of the display, it cuts the resolution of the 3D image by almost 90% compared to the 2D image, and it has nine fixed viewpoints from which a 3D image can be seen. So, it's likely to be years before a 3D technology that doesn't use glasses and is both practical and cost-efficient will be available.
• The flicker rate issue is going to remain controversial for some time. Most 3D sets currently use a 240Hz refresh rate, and that may be enough to solve the problem for most people.

3D's content production problems are getting solved faster than the problems of viewing 3D in homes, so we may find ourselves with with a lot more content than viewers for quite a while.

The Kindle conundrum

According to Amazon, the Kindle 2 is its single most popular product, and according to the Book Industry Study Group, the Kindle is the second most popular way for consumers to read eBooks, just behind PCs. So, why is Amazon worried about the future of the Kindle? (They won't say that they are, but their actions demonstrate something different.)

The current-generation Kindle has fallen into a "no man's land": It's not as attractive to users as Apple's iPad, but it's still too expensive to be an impulse buy. The iPad is making up ground in the eBook reader business very quickly, and even if one discounts Apple's statistics about the percentage of eBooks sold for the iPad, it's likely to exceed the Kindle's installed base by the end of this year.

Amazon is trying to encourage application development on the Kindle, but the limitations of the current-generation reader make it unappealing as an application delivery platform. There are rumors of Kindles with color displays and touch screens under development, but Amazon is always going to be playing catch-up, not only with Apple but with developers of Android tablets. And then, there's Amazon's penchant for control--the only DRM that works on the Kindle is Amazon's proprietary system, which Amazon refuses to license to any competitors. So, when you buy a Kindle, you're locked into Amazon's bookstore for everything except free (non-DRMed) content.

The iPad, on the other hand, is open to the extent that other companies can write eBook reader applications for it, and both Amazon and Barnes & Noble have. So, iPad owners can purchase and use DRMed eBooks from Apple, Amazon, B&N and, over time, many other vendors.

Amazon's eBook business is in no danger, since its eBooks can be used on Kindles, PCs, iPhones and iPads, so does it even need to stay in the hardware eBook reader business long-term? Probably not, but the company is unlikely to abandon the business. If that's the case, what does Amazon need to do in order to keep the Kindle viable in the long run? Here are a few suggestions:

• Launch an entry-level reader priced under $100. Turn it into an impulse buy. It doesn't need to be as fully-feaured as today's Kindles.
• If the company wants to keep a product in the $200-$300 SRP range, add color and open it up to competitors. License the Kindle DRM; even better, make it open source on a fairly permissive license. 
• Rather than spin its wheels with a general application developer program that's likely to go nowhere, it should focus on a few key applications that it believes to be essential for adding value. For example, dramatically improve the web browser and feed reader. Add applications that will enhance the text reading experience. Don't try to be an "iPad light".

The Kindle is still going strong, but it's what will happen in the next 12 to 24 months that's the concern. There will still be a niche for an inexpensive, small, easy-to-use eBook reader will full access to Amazon's collection of eBooks, but if Amazon tries to move the Kindle into direct competition with full-featured tablets like the iPad, it's likely to lose. 

w00tstock: The melody lingers on…and on…and on…

I attended w00tstock 2.1 in Chicago last night—three hours of entertainment that lasted 4 ½ hours. I’m not kidding you. The show was scheduled to run from 7:30 to 10:30 p.m., but it didn’t end until after midnight. If the show had been 4 ½  hours of unalloyed entertainment, that would have been fine, but it was a few entertaining performances sandwiched in between a lot of filler. The introduction to the last song of the night by Paul and Storm ran more than 30 minutes long. It got so bad that Peter Sagal, the host of NPR’s “Wait, Wait, Don’t Tell Me,” who had earlier done a very funny reading about the everyday life of a James-Bond-villain-type henchman, came out and told them to “finish the f*%#ing song.”

Long ago, entertainers recognized that it was much better to leave audiences wanting more than to have them grumbling about how long the show was. Last night’s w00tstock could have been a tight, well-organized 2 to 2 ½-hour show, sans filler acts, filler videos and the excruciatingly long final act. If you haven’t seen the show, I won’t spoil it for you further, and if you enjoyed the show last night, please accept my apologies. I enjoyed large parts of the show—it was just way too long.

For whatever reason, the Internet seems to encourage people to throw away schedules—there’s no clock, so you can go as long as you want. But, one of the reasons for schedules is to keep audience attention spans in mind. w00tstock is hardly the only offender; there are many “talking heads” podcasts and webcasts that run 90 minutes long or longer. If you clipped out the asides, the digressions, and the requirement that every member of the panel answer every question, you’d have a much tighter, more interesting 60 or even 30 minutes.

“Leave ‘em laughing” and “leave them wanting more” may be clichés, but they’re true. And, if you don’t buy that, at least listen to the immortal words of Albert Brooks, performing his own candidates for new National Anthems: “Get on with it!”

ARM to support Google TV, but will Intel let them?

According to Engadget, the president of ARM, Tudor Brown, said that ARM support for Google TV is "in the works, and now that they support Flash and Google Chrome, they plan to "optimize" for Google TV on Android. If it happens, it'll be a big boost for the Google TV platform, which to date only supports Intel's Atom platform. Atom is expensive and power-hungry relative to ARM's processors, and the availability of ARM processors will make Google TV much more practical and cost-effective to implement.

There's a question, however, as to whether Intel has veto power over other processor vendors joining the Google TV initiative. The way that the Google TV project has been run makes it look like Intel is actually calling the shots rather than Google. Consider that Google TV is being released on a down-rev version of Android without any support for WebM. If Google was running the show, you'd think that it would want to showcase WebM and use the most advanced version of Android, but that's not what happening.

ARM may be waiting until Google open sources the Google TV platform, which Google said would happen next summer. By that time, however, Intel could change some portion of the platform to make it work better on Intel's architecture, or not work at all on any architecture other than Intel's. So, just as Adobe kept saying that support for Flash on the iPhone was "coming real soon" until it was obvious that it wasn't, I'll believe that ARM is participating in Google TV when I see representatives from ARM, Intel and Google sitting side-by-side at a Google TV press conference.

Dear Microsoft: Kick Steve Ballmer upstairs, please?

The D8 Conference in Rancho Palos Verdes, California has become a showcase in the highs and lows of corporate management. The most visible high was the kickoff interview with Steve Jobs, while the lows have included Rupert Murdoch's exhortations about the digital future while reading his comments off a paper notepad, and Mark Zuckerberg's meltdown in the face of persistent questioning about Facebook's privacy policies. An interview that, overall, fell into the "low" category was the tag team of Steve Ballmer and Ray Ozzie of Microsoft. During the interview, Ballmer demonstrated that he's seriously out of touch with both market realities and technology; in his mind, for example, anything with a CPU and a display--tablet, smartphone, microwave oven, you name it--is a PC. Ray Ozzie, on the other hand, demonstrated a much firmer grasp of the market, technology trends and the competition than did Ballmer.

Even though he's spent almost his entire career at Microsoft, Ballmer remains a sales and marketing person, not a technologist. He's the kind of executive that's best at milking a "cash cow", not driving growth through developing new technologies. Microsoft very successfully milks Windows and Office, but it's not growing, and it's falling far behind in today's and tomorrow's growth markets. Ray Ozzie, on the other hand, is a technologist. He seems to have a firm grasp of where Microsoft needs to go in order to regain its momentum. Unfortunately, the "Bombastic Ball-boy" either isn't listening or doesn't understand what he's saying. That's a big reason why there's been a steady stream of good people leaving Microsoft.

The best thing that Microsoft's board could do is kick Ballmer upstairs to the Chairman position, make Ozzie CEO and let him rebuild the organization to face the challenges represented by Google, Apple, RIM and who knows who else is coming up behind them.

BP: Stop the ads, send Hayward homeward and put someone in charge we can trust

I apologize for going off topic, but I've been enraged about BP's actions in the Gulf of Mexico--not only its "Three Stooges" approaches to stopping the spill, which now threatens to kill all life in the Gulf, but the idiotic responses from BP CEO Tony Hayward. Hayward is one of the least sympathetic spokespeople ever offered up by a major corporation. In my opinion, he has zero credibility with the U.S. public, yet BP made him the spokesperson in its new series of television commercials. To top it all off, BP hired Dick Cheney's former PR manager to assist it with crisis management. Cheney was the most defensive Vice President since Spiro Agnew, and his PR strategy was to talk to no one except Fox News. Cheney could have had a lead-lined container for a PR manager.

BP needs to stop its advertising campaign right now. Just seeing Hayward talk about everything that BP is doing to protect the environment is infuriating, when the evidence is overwhelming that BP is trying to cover up the damage it's doing.  They also need to get Hayward out of the picture and ship him back to London. He wants his life back; give it to him. In his place, they need to bring in someone from the outside who has high credibility and give that person the power to do whatever it takes to stop the leaks, clean up the oil and restore the environment, no matter what it costs.

Kno thanks?

An eBook company targeting the college textbook business called Kno (formerly Kakai) went out of stealth mode today at the D8 Conference. Kno is a Silicon Valley startup that spun off from Chegg (one of Kno's co-founders was a co-founder of Chegg.). The company has been funded by Andreessen Horowitz, First Round Capital, Maples and Ron Conway, and it's looking for another round of funding this summer. Kno's idea is to rent textbooks to college students, and let them use them on a purpose-built, dual-screen tablet that's designed to be 100% the size of most common college textbooks. The result is a a big (dual 14.1" screens) and heavy (5.5 pounds) device that runs Linux. Everything works inside a web browser on the device. People at the conference who got to see the demo and play with the device said that it's slow and buggy, but the Kno team acknowledges the problems and says that it's working on them.

Kno hasn't set a formal price for the device, but it's saying that it will be less than $1,000. It has book rental distribution agreements with Cengage Learning, McGraw-Hill, Pearson and Wiley for a beta program to start this fall, but it didn't provide any details as to what titles or percentages of the companies' collections will be included.

It's too early to say how students will react to a big, heavy, expensive eBook reader that looks, to be honest, dorky. It's also too early to tell whether Kno will be able to retain its beta test publishing partners when it begins charging for readers and eBooks. Frankly, the Kno reader sounds much better in conception than in execution.

Apple TV won't be another set-top box, it'll be your ONLY set-top box

Steve Jobs was interviewed by Walt Mossberg and Kara Swisher yesterday at the D8 Conference. He was asked about Apple's plans for TV by someone from Hillcrest Labs, and here's what Jobs said (from Engadget's liveblog):

"The problem with innovation in the TV industry is the go to market strategy. The TV industry has a subsidized model that gives everyone a set top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us... ask Google in a few months. So all you can do is ADD a box to the TV. You just end up with a table full of remotes, a cluster of boxes... and that's what we have today. The only way that's going to change is if you tear up the set top box, give it a new UI, and get it in front of consumers in a way they're going to want it. The TV is going to lose in our eyes until there is a better go to market strategy... otherwise you're just making another TiVo."

That quote has been read by some people as a refutation of last week's story that Apple is working on a $99 next-generation Apple TV based on the iPhone OS, but I think that it in fact supports it. Word has been spreading for some time that Apple has been negotiating with broadcast and cable networks to get VOD rights to all their programs (or as many as they have rights to supply.) Apple already sells episodes of many programs in the iTunes store and makes other video content available for free. The twist that has been talked about for this new initiative is that Apple would offer monthly subscriptions in addition to selling individual episodes.

Now, put this together with the $99 Apple TV rumor and what Jobs said about TV last night. Here's what you get: Apple's idea is not to become another set-top box, but to become the only set-top box. With the new Apple TV, you'd cancel your cable TV or satellite subscription because you can get all the shows you want, whenever you want, from Apple. If you're leasing a HD set-top box from your cable operator, you could pay for the Apple TV in less than a year from the savings alone. If you want live events and local news, sports, etc., you can get them over the air or via the Safari browser in the new Apple TV.

I don't think that Apple will announce the new Apple TV until it has all the content partnerships in place to make Jobs' vision workable. He'd rather forgo the set-top box business than launch an add-on device. The next Apple TV might be launched with 80% of the necessary partnerships, on the assumption that customer takeup with drive the remaining 20% of content providers to sign up, but it won't launch if it doesn't have an attractive lineup of content from day one.

Capstan Channel Syndication: A format for syndicating time-based video

A few months ago, when I had an unexpected amount of time to myself, I began looking at what it would take to put video content on the set-top boxes from companies like Boxee, Roku and Popbox. It became clear very quickly that it would take a lot more than simply posting a bunch of videos to the web. Each one of these platforms has its own API, its own content description format and its own developer program. Some platforms give the set-top box vendor the power to control which content is made available to its customers. It presents a Tower of Babel for content suppliers.

On the other hand, you've got RSS, which is as close to a universal content syndication format on the Internet as you can find. RSS works extremely well for static content; what I mean by static in this context is that everything in an RSS feed is available right now, not at some point in the future. Video on demand (VOD) works fine with RSS; when you upload a new video, you update your RSS feed and either push the information to clients or let them pull the information from your server.

Broadcast and cable television work in a different way. They use schedules: Certain episodes of certain series are scheduled at specific times on specific days. Those episodes (and the program segments that comprise them) may or may not be made available on a VOD basis at a future time. RSS isn't designed for that--an RSS feed can tell you what's available right now, but not what's going to be available a week from Tuesday at 0800 UTC. It doesn't give client developers enough information to build a unified interface to live, scheduled and on-demand programming, all at the same time.

There are several other issues: The same episode of a program can shift from scheduled, to live, to on demand, over time. Content providers may want to make video available on a pay-per-view or subscription basis, so they need ways of authenticating viewers, protecting their content and processing transactions, and they would much rather not support different systems for every set-top box and client vendor.

I looked hard at making RSS do all of this, and yes, it can be done with Namespaces, but it would be like cutting the back end off of a sedan, welding on a truck bed and calling it a pickup truck. It's much better to develop a new XML Schema that's purpose-built for the application. And so, that's what I did.

I call the result Capstan Channel Syndication, or CCS. Why Capstan? Capstans are the metal spindles that guide magnetic tape through audio and video tape recorders, and I thought that "capstan" would give a retro feel to a format that's designed specifically for Internet video in the 21st Century. Rather than go into the details of CCS, there's a more detailed description of what it's for here, and a downloadable copy of the specification here.

I've made CCS available as open source under Apache License 2.0, the least restrictive widely used open source license I could find. Neither I nor my consulting firm have a horse in this race--I'm not working on, promoting or investing in any video client, set-top box or Online Video Provider companies. If you want to participate in the process of defining CCS, I invite you to do so at the ccs-format Google Code site.

I'm hoping that CCS will be adopted by client and set-top box developers to enable them to get access to much more content without having to write and market their own APIs, and by content providers who will be able to write one CCS specification instead of a different application for every client and set-top box. Adopting CCS doesn't preclude anyone from writing and promoting their own APIs, so client and set-top box developers can still encourage content providers to take advantage of special capabilities of their platforms. However, my hope is that CCS will become the "baseline" for making time-based video available on the web.

MPEG LA rattles sabers at WebM, but are they empty threats?

CNET News is reporting that MPEG LA continues to suggest that it holds (or will hold) patents that WebM users will have to license. It's the "will hold" part of that sentence that's most interesting. In mid-May, Nero AG, the German publisher of digital media software, filed a antitrust lawsuit against MPEG LA in U.S. Federal court in Los Angeles. I won't go into all of Nero's claims (you can download the entire complaint as a PDF file here), but there are a few claims in the complaint that, if substantiated by the courts, could drive a stake through MPEG LA's entire strategy.

According to Nero's complaint, the U.S. Department of Justice agreed not to take antitrust action against MPEG LA, so long as that organization have an independent expert review its patents and cull out any that are non-essential, and that it license patents on a fair, reasonable and nondiscriminatory basis. However, Nero points out that the "independent expert" assigned by MPEG LA to review and cull its patents was once listed as MPEG LA's general counsel, has been intimately involved with the organization's activities, and may have a financial interest in the business.

Part of Nero's evidence is that in 1997, MPEG LA told the U.S Justice Department that the 27 patents that it held at that time on the 1993 MPEG-2 represented "most" of the essential patents, which meant that there were at most 53 essential patents. However, it subsequently added some 800 newer patents to MPEG-2 over the life of its license, all of which it claimed were essential, in order to extend the life of the MPEG-2 license. Now, if there were only at most 53 relevant patents in 1997, how could there possibly be more than 800 relevant patents today? Nero claims that this "everything is relevant" philosophy infected MPEG LA's MPEG-4 Visual patent pool, with more than 1,000 patents, and its AVC pool, with more than 1,300 patents.

Nero's argument is that many, if not most, of these patents are not essential, but were added to the pool only to extend the amount of time for which MPEG LA could extract license payments. It would be like a pharmaceutical company acquiring completely unrelated patents and then claiming that those patents were essential to a drug that's about to lose patent protection, thus maintaining patent protection for the drug until all the unrelated patents expire.

Keep in mind that these are arguments, not the findings of a court, but they raise the question of how many of the MPEG-4 and AVC patents are actually essential. Five percent? Ten percent? Specifically which ones are essential? MPEG LA's "independent" expert has apparently been anything but independent or impartial.

This may be the enormous chink in MPEG LA's armor. Most companies that license technology from MPEG LA don't have a strong reason to fight them, because they've included some of their patents in MPEG LA's pools and stand to profit from their activities. Google, on the other hand, doesn't appear to participate in MPEG LA and has no reason to protect the organization or look the other way. If MPEG LA files suit, Google is undoubtedly going to push the court to review every patent that MPEG LA claims as essential, and many of those patents may be invalidated or deemed non-essential, which will mean that the companies who own those patents will be extremely unhappy. Unhappy companies are unlikely to stay in MPEG LA, and it will no longer be able to represent itself as a "one-stop" licensing agency. Also, the U.S. Justice Department could get involved, either on an antitrust basis or on the basis of patent fraud.

So, MPEG LA may be in a much weaker position than it and Apple would have the general public believe. Google knows this. It'll be very interesting to see if MPEG LA ever moves from saber rattling to actually filing suit about WebM.