The Next Net

Amazon Might Take the DRM Out of Music Downloads

  DRM Elimination Crew Suit 
  Originally uploaded by GregoryH.

Is Amazon planning a music download store after all?  According to Hypebot blog, it is in discusions with music labels to license their albums for a launch early next year and is insisting on DRM-free songs in the MP3 format.

That would allow Amazon's prospective music download customers to avoid lock-in to either the iPod or the Zune.  Of course, you can already get DRM-free MP3s at eMusic.  Amazon is going to have to do better than simply offer a ten-year-old music format to win over customers from iTunes.  But offering more freedom and fewer restrictions would be a good start.

Zillow's Latest Trick

  No visible means of support 
  Originally uploaded by Brendan Lynch.

Earlier this week, real estate site Zillow announced some new realtor-friendly tools and a "Make Me Move" feature that lets homeowners test the waters with a non-binding price on their homes to solicit real bids.  It's a cute feature, but does not go as far as Reply.com's option to actually make an unsolicited offer for any property in America.

But Zillow had to do something.  The site's main draw, its"Zestimates" on any home's value, is notoriously wrong, and realtors hate the site.  As my colleague Paul Kaihla quotes one realtor on the Real Estate Economy:

I will not be sharing any listings with Zillow.  They are so contrary to our industry because they've essentially said that the agent can be replaced by a mathematical equation.

Pricing a property is a key to selling it, and Zillow's Zestimate doesn't take into account nuances like whether a house is on the sunny side of the street so their prices are just plain wrong. Agents now have to spend hours explaining to clients why the Zestimate for their house is off, and not a valid guide.

Hell hath no fury as a realtor scorned.

The Perfect Recommendation Engine

  みんな～見て！達人推薦するCD 
  Originally uploaded by Bright's Flickr.

Fortune has a great story about the rising importance of recommendation engines and the search for the perfect one.  Excerpt:

The Web is leaving the era of search and entering one of discovery. What's the difference? Search is what you do when you're looking for something. Discovery is when something wonderful that you didn't know existed, or didn't know how to ask for, finds you. When it comes to search, there's a clear winner - a $145 billion company called Google (Charts).

But there is no go-to discovery engine - yet. Building a personalized discovery mechanism will mean tapping into all the manners of expression, categorization, and opinions that exist on the Web today. It's no easy feat, but if a company can pull it off and make the formula portable so it works on your mobile phone - well, such a tool could change not just marketing, but all of commerce.

It has in-depth examples from Pandora, Slide, and Whattorent.com.  It also offers this bit of speculation about Google's plans to get into the recommendation game:

Steve Johnson, CEO of Boston-based recommender system ChoiceStream, which provides the collaborative filtering engine behind AOL.com, Blockbuster.com, iTunes and Directv.com, says he's been talking to Google about building a system for YouTube.

As usual, TechDirt is not impressed.

Social Shopping Gets Noticed

The NYT profiles ThisNext (a startup which I wrote about here) in a piece about social shopping sites.  It also mentions Kaboodle.  The product playlists that users of these services put together could become a prime target for marketers. 

I wonder when we'll see the first coupons or discounts tied directly to these sorts of recommendations—"Advertise our product on your shopping list and get 20% off your next purchase."

Amazon Opens Up Its Video Unbox

Perhaps in an attempt to steal the thunder from  Apple's expected launch of an iTunes movie store next week, Amazon has launched its own movie download service, dubbed Unbox.  I covered Unbox earlier here.  Most of the details are the same.  As Mike at Techdirt puts it:

Unfortunately, the offering is about as "me too" as you can imagine. It's got all the problems of just about every other video download offering out there. It only works on Windows. Copy protection galore. Limited usage. Relatively high prices compared to alternatives.

"Me too" or not, being Amazon the service should get some more traction than CinemaNow or Movielink just because Amazon already has millions of customers coming to its site every day to buy and browse for other stuff.  The reason this is dissapointing is because Amazon had an opportunity to redefine the movie download experience by creating something that catered more to customers needs than to Hollywood's fears.

It's hard to blame Amazon entirely for all the shortcomings of its movie service.  It has to work with the rules that the movie studios impose upon their content.   Hollywood needs to lighten up on the restrictions on its content if it ever wants to create a meaningful new revenue stream from downloads.  (For starters, it needs to allow DVD burning so that people can watch these movies on their TVs instead of on their PCs).  But you'd think that Amazon would have had more negotiating clout to force the studios out of their fear-of-the-future ways. 

It will be interesting to see if Apple can do any better next week.

Have the Online Video Price Wars Already Started?

  WORD?! 
  Originally uploaded by Brendan Lynch.

Amazon's Unbox Video Service is not even out of the gate yet (see the previous scoop, which got picked up by CNNMoney.com), and neither is Apple's expected iTunes movie service, yet signs of a price war  over video downloads are already emerging.  Om reports that Guba is about to reduce prices on catalog movies to $4.99 and TV shows to $0.49.  Now, that's the kind of pricing that would make me want to cut up all of my video cards.

But the larger question here is this: Does the Internet reduce everything that runs over it to a commodity?  Forget illegal P2P file-sharing for a moment.  Even with these emerging legal services, there may be parallels here between the telco world and what will happen to media. 

The price of a phone call in many instances is already zero for anyone who uses pure VoIP telephony like Skype.  The same inexorable march to zero that we've seen in the telecom world over the past decade could be a prelude of things to come in the entertainment  industry.  After all, a phone call sent over an IP network is just bits of data.  So is a movie, a TV show, or a song.

Scoop: More Details On Amazon's Unbox Video Service

We have some more details about Amazon's expected upcoming video service, dubbed Unbox.  Kevin Kelleher, a frequent contributor to Business 2.0 was able to actually download the Unbox software when it was up briefly on the Web.  Although he wasn't able to try it out because Amazon's server was not responding, he was able to copy the software's terms of service, which he e-mailed to me.  I've posted the terms in full after the break.  But here are the key takeaways:

—The Unbox Video Service will allow consumers to both rent or buy digital videos (movies, TV shows, sports events, etc.), which will be transferred to their computers.  In the case of buying, they will be able to keep the videos. In the case of renting, the videos will expire.

—You must download the videos within 24 hours of purchasing them.

—It appears that the Unbox Video Service will be based on Microsoft's Windows Media Player, along with monitoring and DRM software.  Specifically:

*The Software may automatically delete Rental Digital Content that have expired* (i.e., Rental Digital Content that are either beyond the specified access or viewing period) from your Authorized Device, and you consent to such automatic deletion.

However, on the DRM front Kelleher's reading is slightly different. He wrotes in his e-mail to me:

What i thought was especially interesting was the amount of control unbox gives amazon over everyone's pc. deleting files whenever they think it's a good idea. pumping ads and movie promos whether wanted or not.  my guess it's all intended as an alternative to drm and all its problems.

(Perhaps Amazon's implementation gets around some of the technical issues presented by DRM, but to me it amounts to the same thing—the ability to delete fiels on your computer or limit how many devices teh videos can be copied to. Anyone who knows more about DRM is free to weigh in on comments below)

—Rented videos can only be viewed on one device (like an authorized laptop). From the terms of service:

You may not copy or move Rental Digital Content from their originally stored location(s) on your Authorized Device. There can only be 1 (one) account for the Service on an Authorized Device. *

— Purchased videos have more leeway.  They can be watched on up to four devices (two computers, and two portable devices):

You may exercise these rights on up to 2 (two) non-portable Authorized Devices (e.g. laptop or desktop computers) and two (2) portable Authorized Devices as specifically designated by Amazon from time to time.

—Conusmers will also be able to burn purchased videos onto a DVD, but it looks like it will only play on newer DRM-compliant DVD players:

 iii. You may make a back-up copy of the Purchased Digital Content on removable media (e.g. recordable DVD) in the same format as the original downloaded file to play on your permitted Authorized Devices. Any back-up copy of the Purchased Digital Content on a DVD will not be playable on a traditional DVD player.

—The service will only be available in the U.S at launch.

It is important to note that these terms do not appear to be a final version.  For instance, one clause about Amazon's right to send promotional content to your computer or other "authorized device" whether you ask for it or not is followed by an asterisked question in brackets:

5. PROMOTIONAL CONTENT.
*From time to time, Amazon will automatically deliver promotional video content (e.g., movie trailers, celebrity interviews, reviews, etc.) to your Authorized Device. Amazon may automatically delete such promotional video content from your Authorized Device without notice to you. [Are we going to provide an opt-out from promotional content?] *

IMHO, the opt-out sounds like the most consumer-friendly way to go. Read the full terms of service after the break.

(Also, Yahoo is graciously hosting a cached version of Amazon's video download installation page here which clearly shows a "dvbeta.amazon.com" url as the original source lending credence that this is legit, and Cnet has more speculative coverage here).

 

Amazon "Unbox"?

The covers on Amazon's worst kept secret, its upcoming digital download service, may have just been lifted even further.  An enterprising blogger, Alan Taylor, claims to have stumbled upon some Amazon Webpages (now since taken down) that look like a test version of the upcoming service, dubbed Amazon Unbox.  If this is the real deal, it appears that Amazon will have its own browser-based media player that initially will work only with Windows computers.  TV shows will cost $1.99 and movies will range from $10 and up.  The service will support some non-PC devices such as Creative's Zen Vision but I'd be surprised if it supports a video iPod (Apple's iTunes, after all, will be Amazon's main competitor here).

Whether or not the Unbox name stays after launch, it is whimsically appropriate.  Digital distribution, rather than physical distribution, is Amazon's future.  The margins are better, there are no inventory costs, and bandwidth is cheaper than UPS.  All they need to do is sell a cheap device that lets people stream their downloaded movies from their PCs to their TVs wirelessly, and both Netflix and Apple could be in trouble. 

(Although, not supporting Macs at launch could be a mistake.  Sure, it's still a relatively small market, but it is made up of a disproportionate amount of those key early adopters that a service like this needs to get kickstarted).

Amazon Versus Apple in Coming Digital Video War

  Moxy With Popcorn 
  Originally uploaded by welovethedark.

It looks like Apple and Amazon are going to fight head-to-head in the digital movie realm.  Just as Apple is preparing to launch its rumored digital movie rental service, Amazon is putting the final touches on its own much-anticipated digital video service which is now expected to launch in August.  And it may be skipping a music download service altogether.  Reports AdAge:

A year in the works, the e-tailer's digital-video-download service is set for a mid-August launch and will feature a subscription service and a la carte movies and TV shows.

The service, which is referred to as Amazon Digital Video -- or Amazon "DV" -- has evolved over the past year from a music-themed offering to a video-centric one, according to production-studio and TV-network executives briefed on the plans. The reason? Apple, these executives said, already commands such a large share of digital-music sales that Amazon felt it would be too difficult to break into the market.

The question is: Will Amazon partner with a portable video player maker (or create its own) to compete against the video iPod, or will it be content to capture living room viewers watching on PCs and connected flat-screen TVs?

I think living-room and desktop devices will have the advantage when it comes to watching movie downloads, and since no great for-pay service has really taken off yet, this should be a good fight.  Apple can leverage the popularity of iTunes, while Amazon already does a brisk business in selling DVDs.  Assuming the price were the same, I'd buy a movie download from either one. 

Who do you think is better positioned to win this one and why?  (Comments are open).

eBay Earnings: Skype's Still Growing, But Where's the Profits?

  EMPTY 
  Originally uploaded by blueskygirl.

Is Skype laying golden eggs for eBay or empty plastic ones?

During eBay's conference call yesterday, Meg Whitman and her CFO made a big deal about the fact that Skype grew by 19 million registered users last quarter, to a total of 113 million (how many are active, is a different, unanswered question) and that they spent 7.1 billion minutes talking with each other over the Internet.  And what did all of this talking get eBay?  A mere $44 million in revenues, up 26 percent from last quarter but a drop in the bucket compared to eBay's total quartely revenues of 1.4 billion.

Even if Skype hits its target revenues of $200 million for the full year, it is not clear if eBay is even turning a profit from this operation.  All of which brings back the nagging question of why did eBay spend $2.6 billion for Skype, especially since it is not making any money off the calls, which increasingly both Skype and its rivals are offering for free.  For instance, Gizmo now lets active users of its competing VoIP software call both mobile and landline numbers for free in 60 countries.

Skype is certainly disruptive to the existing phone business, helping to drive the price of phone calls down to zero, but it's not yet clear that it can meaningfully replace that revenue with something else.