Over the last couple of weeks, I’ve looked at availability of movies and TV shows that came out in the past year. But what about movies that came two years ago? Are those more available today than they were a year ago? Let’s look at the data.

2010: Box Office Winners availability

A year ago, I went through the list of box office winners and looked at their availability online. I pulled the information again in January 2012, a full year after the initial data set. The 2012 data looked like this:

Aggregate Rental data

When you tally it up, the rental only chart (excluding movies you can purchase) looks as follows:

The data seems to show that hits from over a year ago are still difficult to get. Netflix fares best, capturing 26% of the titles but pay-per-view services like Amazon, iTunes, and Vudu turn in a paltry offering with only 15% of the 2010 box office winners being available for rent on these services.

So, having run the data for 2 years in a row, are we seeing improvements in the market?

The picture here actually shows something fairly disastrous to people who hope that things are improving in terms of availability of movies along the long tail. While Netflix turns in a stronger performance, more than doubling availabilities of 2010 box office winners from 10 to 26, all other online services are seeing availability drop by 31% or more. This means that almost one third fewer 2010 box office winners are available this year as rentals as compared to last year. The strategy here seems to call in question the existence of a long tail in terms of media availability as far as rentals are concerned.

While the cost of storing a movie is a marginal one, it appears studios prefer to not make titles available as rentals online. There is some humor in the fact that whatever corner DVD rental place is still in existence near your home probably has a higher selection of available titles from 2010 than could be found last year because ALL 2010 box office winners are now available on DVD.

Aggregate Rental and Sales data

So, with a strong suspicion that sales numbers may be better, let’s see what happens if we had movies that may not be available for rent but can be purchase (ie. are more expensive to get)

The first one notices here is that the number of titles legally available online is still relatively low a full year after all the titles have been released. While DVDs have come out, legal online streaming services online offer a bit over half of the 2010 box office winners, with Amazon having the most extensive catalog. The availability of legal movie streams, when compared to DVD, is still a challenge.

But have things improved since last year? To figure that out, let’s look at the availability of the same titles over the last couple of years:

My initial hunch was that we would have seen improvements in the sales of legal streams from one year to the next, just as we would would have seen for DVDs because of availability.

But the picture is actually surprising as the availability of legal streams for 2010 box office winners has dropped in the last 12 months. On their face, one might expect sales of legal online streams to see patterns similar to sales of DVDs, even if they would trail the plastic medium. But what’s surprising here is that it appears studios have decided to pull their movie catalogs back offline.

There is still a long way before legal online streaming matches DVD sales as it appears movie studios are still addicted to selling pieces of plastic than they are to selling movies in any form available.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Streaming held back. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Last week, I looked at the availability of 2011 movie box office winners as legal internet streams. The results seem to incense Netflix supporters, who pointed out that the comparison was unfair because Netflix was more focused on TV fares. This week, I turn my attention to availability of popular TV shows as internet on-demand streams.

Approach

As I did a year ago, I pulled the data from Deadline.com’s Broadcast series ranker and cleaned it up. I took out every live and reality TV shows as the archival value of such show is limited since they are primarily marketed as “events” and, as such, loose most of their value to the viewer after the initial broadcast.

Where part of one of the seasons was available, I gave the service a partial availability. Where seasons prior to the 2010–2011 years were available, I did not give credit if the 2010–2011 season had no availability because I was focusing the effort on availability of last year’s shows.

From a service standpoint, I focused on services that allowed for streaming to most internet-enabled television. This meant that Netflix and Hulu were the main subscription based offerings and Amazon on-demand and iTunes were listed as pay-per-view services.

The list

With­out fur­ther ado, here’s the list of top 2011 TV shows avail­able for stream­ing on the internet:

While it is fun to check if your favorite show is available or not, the real interesting trending data only comes when you re-group the information. For this purpose, I looked at two different sets of data: first, I looked at whether all the episodes of the 2010–2011 season were available for a given series. Then I re-ran my research, giving full credit to the service for having “some” episodes from that season.

The results were as follows:

As one would expect, the pay-per-view services are doing better than the subscription based ones but what is surprising is how little content is actually available on the subscription-based services: Hulu only offers some episodes of half of the most popular shows, while Netflix barely has any offerings, clocking in with just above a third of the shows having some kind of stream.

When trying to access full seasons, the data is even worse, as Netflix offers full seasons on only 9 (or 18%) of the top 50 shows, while Hulu gives you access to the 2010–2011 season for 18 shows (or 36%). The amusing thing is that Hulu appears to give you access to as many full seasons as Netflix has as partial ones. The data shows that if you want access to popular TV shows via subscription, you’re better off going with Hulu than you are going with Netflix.

What seems to be hurting those services is the fact that CBS, one of the large TV networks has decided to go it alone when it comes to their own shows and show them on their own sites instead of making them available to stream aggregators.

Another interesting thing is that Netflix seems to pick up cancelled shows more readily than any other service. In my research, I found that if a show had been cancelled over the last year, it was more likely to be available on Netflix than on any of the other services.

On the pay-per-view side, Amazon and iTunes have now reached parity, as both service offer 43 (or 86%) of the shows on either per-episode or per-season fees. Their pricing seems to be roughly the same, with shows average between $.99 and $3.99 per episodes and full TV seasons passes going for $20.99 to $40.99. I would not be surprised if next year, we saw those services having the full set of shows available for instant streaming.

Breaking it down

Looking at the distribution, one might wonder how each of the services fares on sub-sets of the overall group. Furthermore, in terms of getting a better sense of trends, if is useful to overlay this with last year’s data and see whether progress has been made:

Overall, it looks like top 10 shows are less available onall-you-can-eat  subscription-based services this year than they were last year, while there is an increase in availability on pay-per-view services.

Netflix continues to trail other services in terms of making full seasons available and it seems it is a gap that will not narrow any time soon as Hulu, Amazon, and iTunes continue to aggressively grow their catalogs. In fact, the big story in this graph may be the big push Amazon is making in adding new titles to its streaming library. It has now matched Apple’s iTunes store in terms of offering, closing the gap it had last year.

When looking at partial availability, we are still seeing some differences:

Here, Netflix appears to have actually list some ground when it comes to the top 10 list, while all the other players have made substantial progress. This may point to another weakness for Netflix moving forward. Also of note is that while Apple used to be the go-to source for all TV series, Amazon has closed the gap in the last year, establishing itself as a strong second player in the market.

Conclusion

Many people look to online TV streams as the key to increasing the number of people cutting the cord from their cable companies and moving to internet-only offerings. This year’s data seems to indicate that it is now possible to do so but that the costs associated with such a strategy may not necessarily represent a huge saving for people who consume a lot of TV content.

The greatest amount of available content in terms of legal online streams can be found on pay-per-view services and subscription-based services like Netflix and Hulu still have some ways to go before providing a TV-like selection (this may explain why both of them are starting to turn further in the direction of producing their own content). However, viewers who watch only a few select show may be able to get this content from services like Amazon and Apple iTunes for a fee.

People watching this space should pay closer attention to Amazon’s aggressive push in this arena. As the company continues to expand its digital offerings, it seems to have earmarked video as one of the areas in which it is willing to go big and it has quietly grown its catalog over the last year.

Meanwhile, while Hollywood is trying to push for laws against online piracy (things like SOPA and PIPA), creating frictions with the tech community in the process, maybe it should focus on making content available through legal channels first, before complaining that people are stealing content. One of the reason people may be drive to piracy is the lack of availability of the content through legal means. Fill that gap, and you will see substantially less piracy of content happening on the internet.

Next week, I’ll take you through last year’s box office winners and how available those are. There are more surprises there, I promise; so stay tuned.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Legal streams for 2011 TV hits. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A year ago, I looked at the availability of recent blockbuster hits in online stream and discovered some interesting patterns in online stream offerings. This year, I’m doing the same with the 2011 list of box office hits. The great news is that we appear to see some progress.

2011: Box Office Win­ners availability

For each movie of the top 100 movies at the box office, I pulled data on for streaming info on Netflix, Amazon on Demand, iTunes, and Vudu. I also pulled up availability of DVDs to use as a yardstick in terms of overall movie availability. The final chart looked like this:

But the information, in a raw form, doesn’t really tell us much. To get a better sense of where we are, we need to re-aggregate the info.

Aggregate rental data

Looking at the rental market, we can now see the aggregation providing us a clearer picture

The data shows that Netflix appears to be missing the Flix part of its name when it comes to streaming, as it offers only 5 of the top 100 box office winners of 2011. By comparison, pay-per-view seems to be doing a better job at making top hits available for streaming, with the numbers declining as you go deeper into the list. So top movies seem to be widely available this year (in fact, 64 percent of the top 25 movies were available for streaming only 9% short of what’s available on more traditional formats like DVD).

Another interesting thing to note here is that the data seems to be relatively consistent across online pay-per-view services with Amazon, iTunes, and Vudu apparently getting access to the same movies, leading one to think that there is little differentiation between those products (of note: Vudu has actually tried to differentiate on offering by providing 7.1 surround sound and 3D movies to available TV sets.) With prices across those services being roughly the same (movies are renting for $3.99 to $5.99 on average), there is a question as to how those services will be able to provide a differentiated experience in the future.

But the big advantage of doing this again this year is that we can compare the information against last year’s data and see if progress has been made:

The story here isn’t that pretty for Netflix, which has lost substantial ground from last year’s position, offering less than half of the hits it used to offer last year. If you think of their recent moves towards creating original content, it appears that Netflix is slowly moving away from its initial strategy of providing online streaming of movies on a subscription basis and moving more to a model more akin to that of a TV network.

Another interesting development here is that online streaming seems to be some losing ground compared to DVDs. One could assume that, as a new technology, online streaming would be gaining ground on DVDs but that doesn’t appear to be the case. Granted, we only have a couple of data points so next year’s data will provide us with a better understanding as to whether hollywood is trying to slow down the progress of online streaming.

Sales Data

If we are witnessing such a slow down, one of the reason may be that movie studios are looking to maximize revenue coming from sales.

The first interesting item to show up here is that we are now seeing remarkable consistency in availability of titles on streaming services. However, the availability of legal movie streams is still trailing the availability of movies on DVDs. This gap seems to be less pronounced when it comes to the top of the list than when ones goes further back into the box office records.

Once again, looking at how availability this year compared to last year’s availability provides some interesting information:

As opposed to online rentals, sales of streaming movies seem to be gaining on sales of DVDs, with an increasing parity in availability of movies as bits (streams) or plastic (DVDs). This appears to confirm the suspicion that movie studios are trying to protect their sales revenue at the expense of promoting pay-per-view.

Conclusion

The past year has seen an increasing alignment in the libraries of titles offered by online streamers in an on-demand basis. At the same time, we have seen Netflix apparently abandon its strategy of offering popular movies on a subscription basis. Next week, I will look at whether Netflix’s efforts are getting more focused on television streams or whether we are seeing them pull back across the board in terms of availability of more recent content.

We are also seeing Hollywood now treating online as more equivalent to DVD sales, offering titles for sale online at roughly the same rate as they do on DVD. Let’s hope that this trend continues to hold and that the industry sees the wisdom of providing online streams in an earlier release window. A few independent movies have done simultaneous releases online and in theaters this year and Hollywood has a potential to increase its revenues if it were to increasingly go in that direction.

Two sets of data only provide a small view into an overall trend but I promise I will continue growing the data set and revisit those numbers next year, giving us a better sense as to whether there is any changes in this segment of the media distribution puzzle.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming in 2011. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

With a new year kicking in, it’s time for a new batch of predictions.

Business

One of the easiest predictions to make is that Facebook will go public this year, and it will manage to do so in a very successful IPO. I suspect that this may actually be the high watermark for the current boom cycle as Facebook is the most successful of the companies that were born of the Web 2.0 cycle. In a fashion similar to what happened with the Netscape IPO in 1995, the Facebook IPO may create a small window of opportunity for many other companies to go public.

On the private end of the spectrum, I think we will see the following companies see some form of liquidity event via either acquisition or IPO: Twitter has a strong chance of being acquired by Apple, which will quickly merge the offering into all of its products; Another possibility is that Twitter and Tumblr merge to create a mico-blogging powerhouse spanning both ends of the country. Meanwhile, Foursquare will either IPO or be acquired by Facebook or GroupOn in a share-only deal. Meetup will go public, creating another great story for the New York technology scene.

When it comes to Google, we will see the company continue its integration of Google+ into everything it does, with the biggest impact being the move to migrate all Orkut users to the new service. This will create an outcry in countries like India and Brazil, where Orkut has been popular but will leave many in the American media to wonder what the big deal is as Us customers have mostly left already.

Meanwhile, a lot of the companies that went public in 2011 will meet some strong headwinds as the rigor of the public market make it much more difficult for them to maneuver. Expect some changes at GroupOn and Zynga, with many people questioning their business models and long term viability.

Media

For a couple of years, there’s been a slow ramp up to the integration of the Internet with television. The rise (and to some extent fall) of Netflix, along with the entrance of new players like Hulu and Amazon, have made video distribution on the big screen one of the areas where the Internet and television have already intersected.

However, other areas of interaction have, so far, not been quite as successful. Apple is still treating AppleTV as a hobby, Google has mostly failed so far with GoogleTV, and other players like Roku and Boxee have, to date, been only adopted on the fringe.

In 2012 all that changes as the TV screen takes center stage in a way that a new generation of smart phones arose after the 2007 iPhone announcement. First of all, we will see some increased standardization around how to deliver content to TV screens, with agreements from TV set manufacturers like Samsung, Panasonic, Sony, and Vizio agreeing to some level of standardization. Apple will also announce a large screen product it will position in the TV market: The set will have AppleTV’s technology built-in, be accessible over WiFi, and connect directly to the iTunes store as well as integrate with the iPhone and iPad and other Airplay compatible devices. The set will run iOS and will be managed by a remote that runs on iPod touch, iPhones and iPads.

Meanwhile, cable companies will start opening up their platforms with some software development kits allowing to access content on the set top boxes they use. Once the Motorola acquisition is completed, Google will start transitioning the Motorola set-top boxes, which are a large part of the cableTV market, to GoogleTV, increasing the footprint of the service in the marketplace. Along the way, we will also see GoogleTV become more streamlined and less ambitious, focusing on delivering Android apps to the big screen instead of trying to rebuild the whole TV industry.

The concept of cord-cutting will continue to gain support but will not yet jump into the mainstream consciousness. With shows now being available exclusively on the likes of Netflix, we might see some interesting positioning whereas some TV carrier will offer Netflix as a premium service.

Politics

Social media will dominate the political cycle in 2012, with Twitter, Facebook, YouTube, Tumblr, and Meetup becoming part of the political operative tool belt. However, traditional electoral models will continue to be disrupted by the rise of distributed networked organizations like Occupy Wall Street, Wikileaks, or Anonymous. Except those players and new ones built on a similar model to have a substantial impact in terms of registering new voters and getting those voters to the polls in elections in Europe, the Middle East, and the United States.

In the US, the 2012 electoral cycle will see Republicans select Mitt Romney, a candidate most of their electorate is not very excited about, to run against Barack Obama. With the unexpected support of Occupy Wall Street and its splinter organization, Obama will win re-election as issues around economic disparities and job creation continue to be big topics of discussion.

In Europe, expect to see incumbents toppled in many countries: with major elections coming up in France, Spain, Russia, and Finland, it is possible that we will see a major change in political alignments across most of Europe, along with an increase chance of protest in those different countries. In Russia, in particular, we may see the internet play a crucial role in organizing protest if there are questions regarding voting irregularities.

The continuing protests in the middle east region may also lead to substantial changes in governance in several countries including Bahrain, Syria, and Saudi Arabia. During the presidential elections in Iran, we will see increasing clampdowns on internet sites as the government tries to shut any means of communication available to large groups of protesters.

… and of course, the easiest prediction to make is that the media industry will continue to push for more restrictions on the Internet, leading to more activists pushing back.

Technology

2012 is going to be an explosive year for technology.

First of all, we will see HTML5 roaring back, as many companies realize that it is cheaper to build in HTML5 and that the gap between platform specific code and HTML5 is shrinking. The introduction of WebGL, and proper implementation of geolocation and caching within mobile devices will give developers the ability to develop applications in HTML5 that can rival some of the offerings of native code. This is a move that will be resisted by platform makers like Apple and Google as it will loosen their stranglehold on their respective platforms; however, the split side of this is that effort is that some large companies will look to free themselves from said control by creating HTML5 instances of their own products.

On the mobile end, the Microsoft/Nokia will get some real traction with Windows Phone becoming a strong third player in the mobile market. Apple and Android will continue dominating the market with Microsoft still being a distant third. RIM’s position in the market will substantially worsen and will either be sold or go into bankruptcy.

Enterprise cloud strategies will continue to grow, leading to a growing divide between companies that can get efficiencies through the use of cloud computing and companies that are kept by different regulatory frameworks from being able to realize the financial gains offered by such model.

3D will be a hot buzzword, with the introduction of consumer-oriented 3D scanners and 3D printers that will push the idea of scanning and printing your own plastic parts. This will lead to some controversy around the concept of 3D objects piracy popping up in the media, with little actual evidence to back those fears. On the 3D projection end, we will see the rise of designer 3D glasses and the first glasses-free 3D television hitting the market, as we as a few consumer-grade 3D cameras. At the same time, we will see more and more technology to upscale 2D to 3D, in an attempt to develop a larger consumer market for 3D technology.

On the PC end, netbooks will disappear as a category and the hot new trend will be to offer thinbooks that mirror much of what Apple is offering with the Macbook Air product line.  Solid State Drive will aso increasingly become standard on new computers and we will see Apple actually announce they are getting rid of traditional hard-drive in all their product offerings. This will lead to their being able to announce that all their hardware can now run for at least 7 hours on a single charge.

Any which way, we will be revisiting those predictions at the end of the year and see how well (or badly) I did. I wish you, dear reader, a very happy new year and look forward to a continued dialogue in 2012.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2012 Crystal ball. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

This week, Amazon unveiled a new line of digital consumption devices under the Kindle moniker. Along the way, it may have provided us a view of the future of the book.

A short history of the book

At some point between 7000BC and 4000BC, writing appeared and, along with it came the idea of record keeping. Clay tablets then papyrus made such records more portable but required that each record be manually created. Meanwhile, printing popped up in China in 2000BC and South America around the same time (Chinese had a system to print on wood while meso-American cultures used some kind of loom to “print” using knots). Papyrus was replaced by parchment but still required manual transfers of text, making books a rare good that generally was only available to rich (and therefore educated) people.

At some point between the 2nd and 4th century, paper replaced parchment and monasteries starting generating bigger books, with scriptoriums appearing in many places. Because of their close ties to the church, the scriptorium mostly produced religious texts. The rise of paper over parchment however, made books cheaper, which meant that their diffusion became somewhat wider.

And then it was 1440!

That year, Johan Gutenberg was inspired to combine a wine screw (used to press grapes or olives) with paper and hot type to create the first priting press. Books could now be reproduced quickly and cheaply, allowing for substantially lower costs and more widespread distribution. The rotary printing press was introduced in the 19th century, speeding things further, but apart from that the printed book one gets today is basically produced in the same fashion as it was in 1440.

In the 1930s, the paperback book appeared, making printed goods a complete mass medium. The book world then became stratified with paperback at the bottom of the pile, aimed at mass distribution, hardcovers in the middle as somewhat better produced and more durable, and collectible books, produced in small quantity and created as art objects to be appreciated by collectors.

Then came e-readers!

The Kindle arrives

E-readers were initially a curiosity, offering new technology to read books but mostly without having any content on them. But in 2007 Amazon, which had already established a dominant position in selling printed matter, unveiled the Kindle, an e-reader that had access to a wider collection of new titles than any other. The company introduced a second version in 2009 and the low price of the device, combined with access to hundreds of thousands of books help fire up a new revolution for books, with readers getting more interested in the device.

Barnes & Noble, a large American book chain, introduced the Nook, a competing device that offered e-book reading in color, something Amazon did not have, as it chose e-ink, a technology that reproduces the printed page but is mostly available in black-and-white.

2011 the year the printed book changed

I think future generations will look at this year as the year the book radically changed. Already, the data seems to point to a decline in the sale of paperback books and trends seem to indicate that consumption of certain book types has moved to e-readers as the preferred form. I was recently chatting with a book seller for one of the largest publishers in the world and he remarked that thrillers and romance novels now sold more widely on e-readers than they did in print. Another person recently told me (and a quick check on the New York subway confirmed) that women are the prime users of e-readers right now, with the tablet market being more male dominated.

So if large segments of the population are moving to e-readers, what’s to become of the printed book? Is it the end of the road for something that has existed through most major technological changes? Will centuries of history go digital? Will future generations see the latest Harry Potter volume in museums, scratching their heads as to why someone would think of carrying something as heavy to read it?

Two paths for the book

What I see is something a little different. I think we’re about to see the book split down two paths and people will go down one or the other depending on how they feel about books.

Before I look at the two paths, I must highlight that there are two types of book readers:

• On one side are people who look at the book for its content, only concerned with what stories or facts are contained within the book. Those people don’t care about the distinction between paperback, hardback, or e-text. What they want is the words and sentences, not the other stuff that comes along with the book.  Those people tend to see books as information vessels to be discarded once the information has been consumed.

• On the other side are people who look at the book as a total experience, moving from the cover and its layout into the book, its size, its type, and finally its content. Those people look to book as complete objects that cannot always move to another form without changing. Those people tend to have larger libraries at home, attaching certain time periods and feelings to books.  They may pull a particularly worn tome from a shelf and be reminded of the time they acquired it, the time they read it, the people and locations they frequented with that book.

I am not assigning judgement to either category but I wanted to create a clear distinction because it has relevance to what happens next to the book. And let me get into that now:

• Death of the mass market printed book: I believe the vast majority of people fall in the first category I highlighted. Looking at the trends, it seems that price has generally been an issue with books and people who do consume them tend to consume them mostly as paperback. I’d venture that within a generation, paperback will disappear, and those texts will be moving to e-readers (I’m also assuming that e-readers will continue to drop in price until the point where they may be bundled with a first purchase of a book). This does not bode well for large chains that are selling books as they will see those revenue evaporate as more people move to e-books. In the US, we’ve already seen the death of Border’s bookstore and I suspect that it’s only a question of time before Barnes & Noble suffers the same fate (unless it adapts and finds a way to sell their nook for substantially less than Amazon does the Kindle).

• Survival of the book as object: However, the second group of readers will continue to exist and that group is about to go through interesting times as books become rarer but also more prized. The newfound rise of the book as object is more of a return to the pre-paperback days when libraries were as much status symbol as they were about learning. Books will be produced in substantially smaller quantities to appeal to this crowd, forcing their price up and their margins down. However, authors who are printed will be seen as more influential than authors who are only published digitally.

In the next entry, I will look at some of the impact those changes may have on society as a whole.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The future book. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The tablet market

Today, the clear leader in the tablet market is Apple, with its iPad. According to a study by iSuppli, the device costs Apple between $230 and $346 (depending on configuration) to manufacture and is sold between $499 and $829.

Meanwhile, HP came out with its touchpad and, thanks to another isuppli study, we learned that it costs between $306 and $328 (depending on configuration) to manufacture it. Currently, the company has put those device in fire-sale mode, retailing them for $99 and $149, leading many to highlight that the company is losing large amounts of money.

Comparing the two, based on roughly the same feature sets, we get the following (for the sake of comparison, I used the non-3G version of the iPad since HP has only sold WiFi enabled tablets and doesn’t have a 3G product out):

Looking at this chart, it is clear that Apple is substantially more efficient in its supply chain, being able to build a tablet for about a third less than HP. But what also becomes clear is that the Cupertino company has been pricing the device to maximize profit and there seems to be a lot of room for selling tablets at a lower price without losing one’s shirt.

But how much would people be willing to pay?

Listening to the market

One of the most fascinating things I’ve noticed recently is that the price of ebay auctions, on most goods, tends to be relatively consistent as the auction comes closer to its conclusion. Take any given good and you will find that there is relatively little difference in the bids on several auctions for the same thing ending within minutes of each other.

Another interesting artifact is that the price of a second hand device on craigslist tends to be close to the price of the same device at the end of an ebay auction.

Those two facts seem to point to a natural equilibrium when it comes to pricing goods, where a majority of sellers and buyers cluster around a price point that seems to be what the market is agreeing to as a price point.

On its face, it’s interesting to see that iPad2, as a product, does not seem to loose much value on the resell market, with second-hand versions reselling for roughly the same price as the retail one.

However, there is an interesting phenomenon here with the HP Touchpad selling for over $100 more in the after-market than the suggested retail price. While this is partly due to scarcity, it is interesting to see that the price ceiling has actually sustained itself for the last couple of weeks, even as more supply has been made available.

The evidence seems to point to customers being interested in buying a 16Gb tablet for between $200 and $250 and paying up to $50 more for double the space. The challenge still remains that HP actually would continue losing money at those price points.

Looking at this, however, it seems the losses could get lower if HP priced the market closer to what the market currently seems to dictate. However, a loss is a loss and there would still be question as to how the company could actually make this a success.

Options for HP

Based on the above data, it looks like there could be a chance for HP to attack the marketplace and make WebOS the second most popular operating system in the tablet space, succeeding in establishing WebOS as an alternative to iOS and potentially besting Android in that arena. To do so, the company could look at a number of different approaches to subsidize the difference in price.

One of the first things HP might want to look at is the lifetime value of a customer. Is there a way they could recoup the $28 or $56 they are losing on that customers.

Could they, through the sales of apps, make that money back? Assuming a 30% cut, as most people seem to take these days, it would mean that they would need to sell $96 (for the 32Gb) or $186 (for the 16Gb) worth of app. Assuming apps are selling for $3 per app (which a cursory look at the recommended apps seem to point to as an average price point), they would need to sell an average of 32 apps per 32Gb Touchpad sold or 62 apps per 16Gb tablet sold.

What about movies? A downloadable app on the Touchpad is called the HP movie store. It appears movies rent for $3.99 and sell for $20. Assuming the same 30% split, they would make $6 on every movie sold or $1.20 on every movie rented. To recoup their cost, they would need to either sell 10 movies per 16Gb tablet or 5 movies for the 32Gb model. Alternately, they would need to rent 47 movies for the 16Gb model or 24 on the 32Gb one.

Assuming a two year life on the devices and its associated customers, it seems that recovery of cost could be realized.

But let’s not forget some of the other (potentially more lucrative options). As a successful alternative to iOS, the company could develop an ecosystem of components (keyboards, cases, etc…) that work with the device. They could charge a small fee for certification as “Made for HP Touchpad” and receive revenue from that source. Furthermore, with a strong position in the market for their offering, they could then potentially license out the operating system itself (as more and more devices enter the market, the chances that more developers will be attracted to the platform increase), generating enough revenue to more than subsidize the cost of the initial production run.

Looking at the production costs of Apple’s iPad, it also seems clear that there is much that can be done to optimize the supply chain and manufacturing of the Touchpad. HP could initially target their own internal efforts with a goal to get the Touchpad produced at a rate that was low enough that they could first offer them at cost and eventually make a small profit on the hardware itself.

As a long term play, though, it looks like the main goal of this slew of HP touchpad would be to establish WebOS (and thus HP) as a leader in the tablet market. To do so may allow the company to build some strong margins on OS licensing at some point in the future. However, it would require a willingness to take some short term losses (under 12 months) to establish a strong position in the market in the long term.

Options for tablet manufacturers

It seems the HP touchpad has given the industry an idea of what the market is willing to pay for a tablet not produced by Apple. While it is true that the WebOS operating system is very polished, I think that factored less in people’s interest in the device. The market wants an inexpensive tablet that works relatively decently and they’re willing to spend $250–300 for it.

There are now rumors that Amazon is considering entering the market with its own Android-flavored tablet, priced in that range. To do so, considering the fact that Amazon will generate revenue from alternate sources like the Kindle store, the app store, and streaming movies and TV shows, seems to be a natural evolution and it appears that a pricing strategy that would be the tablet in the sub-$300 range makes sense. If they do so, it will be interesting to see how their offering fares. A failure to take off could translate in trouble for Android as a lower price point Android offering ought to be successful and failure would mean a problem with the OS. If it takes off, Amazon could reignite the tablet market and cut off HP’s chances to establish their operating system as a strong contender in the tablet space.

Because technology costs continuously go down, it is clear that we will see a sub-$250 tablet within the next 24 months from someone other than Apple (Apple has a tendency to price rigidity and may drop some older generation iPad models to the $299 range but I doubt they would go much lower than that). Efficiencies in production and supply lines make that not just a possibility but pretty much a sure thing.

As to who will control the second most popular operating system (assuming Apple retains its lead) in the tablet business, it’s really up to HP to decide how it wants to play. It has a unique opportunity to take that spot right now but the window of opportunity may be closing extremely fast for them.

As a final note, realize that the observations I’m making above are only relating to the tablet market and do not affect the smartphone marketplace at this time: that ship has mostly sailed and it’s a two-player game at this time: iOS and Android.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Pricing a Tablet. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Methodology

One of the first thing in this effort was to get a decent list of sites. Unfortunately, it seems that it has become increasingly difficult to get a sense of which sites are the most popular when it comes to number of visits. I eventually settled down on Alexa’s Top Sites list because it featured most of the sites people think of when considering what large sites are and includes a few non-US sites.

I then used the W3C Validator against each of the top 25 sites. This allowed me to get 3 different pieces of information:

• Doctype: This is what the site declares as its HTML code version. In other words, how the site identifies what version of HTML it supports.
• Encoding: This is the language the site uses, which gives us a better understanding as to whether they are targeting a particular language or trying to offer a global site.
• Validation: This is how the site validated when tested for errors relating to the HTML version it purported to be offering. It gives us an idea as to how compliant with the standards the site truly is.

Surprisingly, a number of popular Web 2.0 sites were not in Alexa’s Top 25 so I created a separate list for them.

Top 25

Looking at the top 25, here are the results:

Looking at the data, the first thing that is interesting is how many sites have made the switch to HTML 5. Of the top 25 sites, 14 have made the switch to HTML 5. This means than in the last year, 56 percent of the largest sites on the internet have completely modified their code base to comply with a new standard. 6 sites are still left on the old HTML standard and 5 are sticking to the somewhat more recent XHTML standard.

However, it is also interesting to note that none of the sites which have made the transition comply with proper HTML standards. In fact, of the top 25 sites in the Alexa list, only MSN was found to provide completely valid code. Maybe Microsoft could point those people towards their other properties. Amazon was the worst offender, with 516 errors in their code, showing that disregard for standard compliance does not seem to have an impact on economic performance. However, Ebay and Yahoo came closely behind with hundreds of errors in their code, maybe highlighting Amazon as an exception.

Another interesting phenomenon is that most of the large sites have adopted UTF 8, the encoding type that support most languages, as their default language. Once again, over half (56%) of the sites have switched with Amazon and Google being among the rare exceptions. An interesting aside here is that the W3C validator may have issues when it comes to validating chinese sites as it was not able to finish the job.

Web 2.0 Companies

Looking at Web 2.0 companies, the data was surprising:

I captured the data for companies other than those in the top 25 and a few interesting trends seem to pop up. The first thing that came as a surprise is that there seems to be that a lower number of sites have made the transition to HTML 5, with only 5 sites out of 11 (or 45 percent) having completed the transition. There seems to still be a strong preference for XHTML as the way to encode pages.

Also of note is that all sides have plans for globalization, encoding their page in the UT-8 format that can support both western and non-western alphabets.

However, none of the sites successfully validate in any of their preferred standard. It looks like there is still much room for improvement in the world of HTML validation.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The state of HTML validation. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Evaluating options

By breaking apart the service into two offerings, Netflix is now forcing its users to think of the services not as a bundle but as two very specific different types of offerings.

On one side, we have the DVD service which can be compared, to some extent to the Redbox and Blockbuster direct services. From that standpoint, one has to consider whether he/she wants to rent DVDs of popular movies from those services or dig into Netflix’s more extensive options. The challenge, for Netflix, is that the DVD offering is not quite as cost efficient as the streaming one. For each DVD, Netflix has to not only have the movie on hand but also pay for shipping and return of the plastic DVD. I’ve heard that those costs are in the range of $.50 per segment or roughly $1 per DVD shipped. By comparison, streaming costs have been estimated to be in the range of $.10 to $.25 per stream, which is substantially lower.

On the streaming side, however, the Netflix offering is now something that can be compared to Hulu+ or Amazon Prime, two services that offer unlimited streaming. The Hulu+ offering is priced at $7.99, a price that Netflix is apparently looking to match with its streaming service. Amazon Prime is $79 per year (or $6.58 per month if you break the price down) and include streaming and free shipping for goods bought from Amazon. In both of the streaming options, the products are different: For example, if one’s interest lies more in TV offering, then maybe the Hulu+ service works better. However, what becomes apparent from looking at the different unlimited streaming services is that the offerings are still relatively slim, compared to what one might get from regular or cable television.

The 2-DVD option

There is, however, a path that Netflix has left open for those who are interested in doing a little hacking. Imagine a plan that would cost $12.98 and provide you unlimited streaming with a small backstop for DVDs. Only one concession needs to be made: the willingness to only receive 2 DVDs per month instead of the theoretical 8 one could get under the unlimited DVD plan.

Netflix offers a 2 DVD per month plan for $4.99. The trick to getting it is that Netflix does not allow to sign-up for it online. You must sign-up for a streaming plan (which it now defaults to) and then call their support number. Once you have called the support number, ask them to allow you to switch to the $4.99 plan. The person on the phone will first try to sell you either the unlimited DVD deal or the bundled option. Turn those down and insist on getting the $4.99 option. Once you’ve accomplished this, you will have a DVD plan that allows you to get access to the extensive DVD collection Netflix has. This can serve as a convenient backstop to the online streaming option.

One needs to then either create a separate account on Netflix to get access to online streaming or get a Hulu+ account. In either case, it would be $7.99 .

A question remains as to how long Netflix will maintain that loophole but for now, it may be a better option than paying 60% more than you previously did and it brings to mind questions as to whether Netflix is really a solid alternative to cable or other TV-related options.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Netflix Options. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Rumored numbers were off

I, like many other people writing about internet companies, have been guilty of spreading the rumor that Groupon 2010 revenue were nearing $2 billion. The reality is much starker as the company has generated revenues of $713 million for that year with net losses of over 456 million for that year.

According the S1, they also had 50.6 million users at the end of 2010, which was higher than the 30 million that had been widely reported. So if I were to revise the chart I had created in late 2010 based on the rumored numbers, it would look like this:

My first reaction, when looking at this is that we are dealing with a company with massive losses here and that’s a first red flag. Many have compared those losses to Amazon, a company that went public even though it had big losses so I decided to go all the way back to 1997 and pick up the Amazon S1 to see how it compared.

GroupOn vs. Amazon

Based on those numbers, the first thing that seems out of whack to me is the level of risk one is asked to take based on the potential revenue per user. Maybe a $200-$500 million valuation would make more sense for GroupOn at this stage, if we truly want to compare it to Amazon back then.

The other thing is that the valuation per user seems extremely high. In a world where Amazon gets $189 per user, we are led to believe that Groupon could do more than twice that number, making it almost as successful as Apple in terms of monetizing users. Color me cynical but I have serious doubt that’s achievable on the current business model.

GroupOn vs. LinkedIn

A couple of weeks ago, I ran comparisons between LinkedIn IPO and a few other tech companies that went public. Let’s superimpose the groupon numbers and the LinkedIn numbers to see how different those offerings are:

The other big thing is that revenues per users are actually on the low side compared to other technology companies. For example, Groupon makes less revenue than Ebay ($39) or Google ($24), two companies that have demonstrated long-running businesses. Furthermore, the company’s losses are staggering, even for a company in growth mode.

Bubble numbers

I’ve long warned people about tossing the bubble number around. In fact, I was probably one of the biggest debunker of bubble thinking but, if a company like GroupOn is allowed to go out at the valuation it has set forth, I am afraid that we will be making the same mistakes we have made over a decade ago. I am sorry to disappoint GroupOn shareholders but, in this case, I believe that to let such a company go public would be to endanger the whole startup ecosystem that has been flourishing over the past years.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The bubble is (group)on. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

As a reminder, this is what the 2010 aggregate data looked like:

But one question that was left unanswered was whether there was a bias in the data selection as it presented data that was specific to a single year. So in order to assess the strength of the different services, I decided to look at the data for the 5 previous years, hoping to discern a pattern. However, because it’s a lot of data to crunch, I decided to limit my research to top 10 over that time (in data point, this means a universe of 60 titles or 240 data points.).

2009

So let’s start with the  2009 data:

And here, something interesting happening. Not only did Netflix not fare that much better but all of the other rental services fared much much worth.

I was now very intrigued. Was 2009 an unusual year or was there a pattern here? Were older title getting less available as time went on?

In order to answer those question, I decided to pull a lot more data, going all the way back to 2005 so I could have 5 year’s worth of data to look at.

2008

2008 seems to be marked by a departure from the concept of renting movies online, with only 1 title (the Dark Knight) being available across all the services. Netflix does not even have access to that one, ending the year with no box office topper in its offering. Apple has a clear advantage over its competitors in the selling of titles.

2007

The amount of titles available for rent on non-Netflix services increases a little for the 2007 catalog (Netflix continues to be a non starter) and the number of titles for sales seems to be pretty consistent across all services.

2006

iTunes and Vudu have back-catalogs that allow for 90 percent coverage when it comes to purchasing the titles. Amazon brings up the rear with a respectable 7 titles. What’s interesting here is that there seems to be a clear divide between sales and rental availability.

2005

2005 appears to be another equalizing year for non-netflix VOD services. However, it doesn’t mean that they are great, in that only 6 out of 10 titles are actually available.

Conclusion

With all that data in place, we can get a clearer picture of what’s available:

As far as Netflix is concerned, the trend doesn’t get better as you head back in time. In fact, the data suggests that their streaming catalog gets worse as time goes on. While it is true that the company has only recently started getting into the streaming business, they will need to do a lot of work in order to catch up to their competitors. The fact that their business model is radically different (Netflix takes a membership/all-you-can-eat approach while its competitors allow for a-la-carte purchases, more in line with traditional TV-based video on demand services) may also make life more difficult for them.

On the bright side, it appears that 2009 was a strange year as far as the other services are concerned and there are more titles available for rent as you go back in time, with the possible exception of the Apple iTunes store, which tends to favor selling over renting. All the players will need to do more work, however, if they want to broaden their appeal as none of them could deliver half of the available box office winners over a 6 year period.

Another interesting trend is the relative consistency in terms of availability: Amazon, Apple, and Vudu all appear to have access to the same times and, for the most part, they also all seemed to be denied access to the same titles. I’m not sure whether this points to fairness in the market or some kind of manipulation in the movie industry but it’s an interesting phenomenon worth noting.

All and all, if video on demand is to serve as a core component of the cord-cutting phenomenon (the idea that people are abandoning cable TV for online streams only), there is still much work that needs to be done.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming — historical view. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Last week, I looked at which legal streams were available for movie box office winners . This week, I investigate how internet VOD services are faring when it comes to offering top rated TV shows.

Approach

The first part of my investigation was to find data that presented the top TV series on television in the United States in 2010. Surprisingly, that data was not that easy to get but Deadline.com had a list of the top shows that could be used.

Because news shows, variety shows, sport shows, and reality TV shows seem to lose their freshness once aired, I decided to remove them from the list as I assumed the demand for such show on VOD would probably be limited over time. All this cleaning up allowed me to format a list of the top TV series which I could then use for research.

Because TV seasons change in the middle of the year, I’ve looked to include seasons that ended in 2010 and seasons that started in 2010. If only one set is available, this is noted in the table. If both seasons are available, I put in Yes.

I picked Netflix and Hulu as the first two services to look at because they have positioned themselves as alternative ways to watch the shows. I also included data from Amazon VOD, and iTunes as both of them are trying to sell either season pass or per show purchasing to their users. I did not include the individual station’s websites sites (eg. ABC.com, NBC.com, CBS.com, Fox.com, etc…) because most of them are only accessible via computers and a high number of them have started blocking devices which were trying to offer access to their content from a TV screen. For the same reason, I focused on Hulu Plus content instead of the web-based one only.
It is important to note that TV episodes on Amazon and iTunes are available in different formats, either on a season-pass basis, per episode rental, or per episode purchase.

I’ve capped the list at 50 titles because, from a trend standpoint, the data seem to be roughly the same at top 50 and top 75.

The list

So without further ado, here’s the list of top 2010 TV shows available for streaming on the internet:

Let’s total this up to see how the different services did:

One of the first interesting trends to notice is that Hulu Plus seems to offer more recent episodes when it does but Netflix seems to offer older ones that are not available on Hulu. Oftentimes, the two offer different selection on the same show, allowing users with subscriptions to both services to get wider coverage. Yet, Hulu only offers a bit over one third of all the big rating getters last year and Netflix offers only one out of five of those series on a partial basis.

Current seasons seem to be a strength area for Hulu Plus and a substantial weakness for Netflix. This may be of some significance as far as the cord-cutter trend is concerned. A question one could pose here is whether cord-cutters want fresh content or not. If the latter is the case, then Netflix may provide enough. On the other hand, if cord-cutter expect to be able to get relatively recent shows on their TV, they will either have to check the Hulu Plus listing or purchase the episodes on an individual basis.

Another interesting note is that while many episodes are available for rent on iTunes and for sale on Amazon, the price difference tends to be pretty substantial with Amazon selling rights to own for $.99 per episode while Apple charges the same amount for the right to rent (they tend to charge $2.99 per episode for the right to own).

Breaking it down

If you want some of the series (let’s say one season but not the other), here’s what the data looks like:

… but if you want full coverage (ie. both the 2009 season that ended in 2010 and the 2010 season that bleeds into 2011), the data looks as follows:

Conclusion

Looking at the total numbers, the subscription model offered by Netflix and Hulu Plus seem to offer a relatively slim selection. However, the costs associated with purchasing season pass for every show one follows could get prohibitive (in the research, it appeared that shows averaged between $30 and $60 for a season pass).

All told, the Video On Demand services appear to have room for improvement. While Apple has an early lead in terms of overall coverage, its iTunes store is also the more expensive one, giving Amazon an opportunity to expand its footprint by selling titles at a lower price. In terms of availability, however, Apple seems to hold a very solid lead over its competitors.

The subscription model offered by Hulu Plus and Netflix, however, still have a long way to go if they are aiming to truly be disruptors.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2010 state of Internet VOD: TV. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

There’s been a lot of discussion lately about how Netflix is in the process of moving from a DVD distribution company to primarily a streaming service. The question, though, is how close this future truly is.

In order to assess their progress, I decided to look at how many of the 2010 top box office earners were on the service. Figuring that we also needed a yardstick to compare Netflix offerings against, I took the top three online streaming services and got the data for each of them (generally speaking, rentals are around $3.99 to $4.99 and purchases seem to be around $14.99).

First, I pulled up the Box Office data and then put each title in the search engine for each of the services. I also looked up DVD availability from both Amazon and Netflix to ensure we had a yardstick we could measure against in terms of online vs. offline availability of titles. The assumption here was that some box office hit might not be available in either form due to the fact that they were recently released. I also made a decision to reject titles that are available on a pre-order basis as it is not yet possible to watch them. For future reference, all this data was pulled together the third week of January 2011.

2010: Box Office Winners availability

Once I did all this work I had a table for the  2010 box office numbers winners and it looked like this:

Aggregate Rental data

When you tally it up, the rental chart looks as follows:

The first thing one notices here is that Netflix seems to have a long way to go before having any claim to strength in that particular arena. With only 9 percent of the top 100 2010 movies, Netflix seems to come on the short end of the stick when it comes to making streams of box office winners online. In a future post, I will examine whether this is because their strength is more in older titles than in recent ones but, as far as the data currently show, the subscription model offered by Netflix would probably have a hard time fighting with a premium cable TV movie channel.

The story gets more interesting when one starts looking at the Video on Demand data for services like Amazon on demand, iTunes, and Vudu. My selection of those particular services was largely due to the fact that they are available in systems that can connect to your television. For example Amazon is available on the Roku box, iTunes is available on AppleTV, and Vudu is available on the Boxee box.

What I consider to be the most striking finding in this is the relative consistency of offerings across the board. None of the VoD players seem to have any particular advantage over the other. All of them batted in the 45–50 percent range, as far as the 2010 hits are concerned. By comparison, just under 75 percent of the movies were available on DVD at the time I did this research, giving DVDs a 1/3rd advantage over VoD at this time. One can only hope that the trend will go to that gap closing over the next few years.

Sales Data

Another interesting point is the closing of the gap between DVD and Vod when it comes to availability of titles on an ownership basis:

Here, the data seems to show increased availability of titles on an ownership basis as opposed to a rental one. The VoD services performed 10 percent better on availability, coming much closer to the number of titles offered over DVD.

Conclusion

While Netflix has been heralded as the leader in online streaming, the reality on the ground is much more complex. The Netflix model is predicated on an all you can eat model but if what you want to eat is a movie that was in the top 100 at the box office last year, viewers are left with only crumbs. The rental model offered by other internet based streaming companies is more in line with the traditional video on demand offerings available on cable television and the data seems to highlight that Hollywood is more comfortable with that model than it is with the Netflix one. This could present a strategic challenge for Netflix as it tries to negotiate more streaming contracts.

While DVD is still the king of the roost, the gap between DVD and online streams is slowly closing. The list I’ve created here can serve as a baseline against data next year to assess whether more titles will be made available. There also appears to be a preference in the film industry towards making titles available for sale instead of rent. I believe that this may be a short-sighted view as rental models can generate more income over the long run. It will be fascinating to see how all this develops.

Update: A more recent version of this post is now available.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Getting some context

To recap, wikileaks, a Swedish organization led by Julian Assange, an Australian citizen, got its hands on roughly 250,000 pages of communications between American diplomats and other government. The materials were acquired in the same illegal fashion as things like the Pentagon papers, information about Watergate, or Valerie Plame’s ties to the CIA, but the reaction could not have been more different.

In the case of the Pentagon papers, the US government went through the traditional legal channels to try to stop publication and lost. In the case of Watergate, Deep Throat, the government information was spilled the beans on the inner working of the White House, was left untouched. And in the Plame affair, the only indicted person found his sentence commuted by the President.

A strong reaction

However, in the case of Wikileaks, Julian Assange, an Australian citizen, has been called a US traitor despite the fact that he’s not a US citizen. He’s also landed on an Interpol list over allegation that he did not use a condom during sex, a violation of Swedish law.

Meanwhile, Amazon booted Wikileaks off its hosting services, Paypal stopped providing donation services to Wikileaks, and EveryDNS stopped providing web addressing services for wikileaks.org. Effectively, there seems to have been a concerted effort to keep Wikileaks offline by any means necessary. At the current time, the site has moved to a new address in Switzerland: wikileaks.ch

Examining the reaction

To be honest, I haven’t read any of the papers wikileaks. In fact, I wasn’t paying much attention to them even as the cables were released. I thought the leak was interesting but since it was based on documents that were old and not classified top secret, I figured that it probably was mostly gossip (as someone who travelled a fair amount, I ended up spending a fair amount of time around diplomatic folks and it seems that this type of gossip was always in the background).

And, based on most of the reporting, it turned out that yes, indeed, it was mostly gossip about powerful people. There were a few revelations about some of the cross-country negotiations (eg. Saudi pushing the US to bomb Iran) but, for the most part, nothing there that anyone in diplomatic circle would not be aware off.

What was there, though, was the fact that such gossip exists and thus, it kind of pierced the appearance that diplomacy is based on complex assessments and studies. It destroyed the myth of the diplomat as someone who put their own opinion aside and based their decision on facts. And that, to most of the people diplomatic circle, was quite embarrassing.

In and of itself, that wasn’t enough to warrant my interest though. What changed my view, and the reason I decided to devote this week’s entry to Wikileaks is the fact that the internet industry, traditionally a space where libertarianism seem to foster, seemed to act differently this time.

Out of step with past reactions

While many digeratis have come out in the defense of hackers, copyright pirates, and other free speech hedge cases, the online reaction seemed to now be moving the other way. Amazon, for example, has been a supporter of the EFF in the past.

Meanwhile, David Ulevitch, the founder of DynDNS, was profiled by the New York Times in 2007 and the following was an interesting take-away from the article:

Mr. Ulevitch shies away from the idea that OpenDNS is part of the computer security market, which so far has grown to billions of dollars in revenue while doing little to stem the tide of malware that now pervades the Internet.

“I don’t want to be seen as a security company,” he said. “They live off the bad guys.”

Then, there was also the case of Paypal, which was initially founded with a libertarian ethos and the goal to create an alternate currency not dominated by any government. A 2005 Reason magazine article lamented some of the departure and reminded people of the history:

Thiel and Levchin had hoped PayPal would grow to become an extra-governmental system of currency, something reminiscent of the world described in Neal Stephenson’s novel Cryptonomicon, in which programmers use encryption to create an offshore data haven free from government control.

But those all points to pre-existing situation that would justify why all those organization would support Wikileaks over the last 4 years (according to Wikipedia, it was founded in 2006). It also would explain why all those organizations supported Wikileaks when it published the Standard Operating Procedures for Guantanamo Bay in 2007, a set of documents it clearly didn’t own. And the same crowd also seemed OK with Wikileaks distributing screenshots from Sarah Palin’s email mailbox in 2008. When, in 2009, thousands of emails related to climate research were distributed again through Wikileaks, there didn’t seem to be an issue to host them. And when 500,000 private text messages sent and received during the 9/11 disaster were released through wikileaks, there wasn’t much controversy.

In fact, all those documents were released BEFORE wikileaks even joined Amazon as a host and wikileaks moved that content to the Amazon cloud because it was looking for a more hack-proof host provider (at the time, though, they did not move the illegally acquired Iraq war documents they were distributing to Amazon).

So the fact that Wikileak is a host of documents that they didn’t own is hardly news. It is, really, at the core of their existence and mission. The trove of data they had was move to Amazon and it made news in tech circles that they were moving that way. Yet Amazon didn’t do a thing about it until this week, when they finally gave them the boot, saying:

WS does not pre-screen its customers, but it does have terms of service that must be followed. WikiLeaks was not following them. There were several parts they were violating. For example, our terms of service state that “you represent and warrant that you own or otherwise control all of the rights to the content… that use of the content you supply does not violate this policy and will not cause injury to any person or entity.”

Under Amazon’s own terms, the documents that wikileaks was posting when it first came to Amazon could be construed as “causing injury to person and entity.” Leaks inherently do so and it has been a tenet of good journalism that leaks can cause injuries. I am sure that some of the documentaries Netflix is distributing over the Amazon platform do cause injury to a person or entity (as journalism, good documentary making can reveal truths that can be injurious to certain parties) and yet I am not seeing Amazon asking Netflix to move off its cloud.

So the question, for anyone with cloud-based offerings now is what to do. If you are a publisher of any content, do you run servers in the cloud and augment them with your own infrastructure so content that may be deemed too hot to handle can be moved to servers others than the cloud ones?

A perspective from the courts

Wikileaks, to a large extent, is a case that has been 13 years in the making. In 1997, with ACLU vs. Reno, The United States Supreme Court established the broadest right to free speech on the internet, by including the following text in their decision:

As a matter of constitutional tradition, in the absence of evidence to the contrary, we presume that governmental regulation of the content of speech is more likely to interfere with the free exchange of ideas than to encourage it. The interest in encouraging freedom of expression in a democratic society outweighs any theoretical but unproven benefit of censorship.

Opponents of wikileaks ought to consider those words. In that decision, the court basically extended first amendment support to content on the internet. For the unaware, the first amendment to the US constitution reads as follows (the emphasis is mine):

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

But in the brave new world of cloud computing and the modern internet, it doesn’t seem to be abuse by the government that we have to fear but rather abuse by private entities, who seem to set the bar at a much higher level. And that seems to be a very worrisome trend.

The news challenge

Good journalism sometimes puts entities and individuals at risk in order to ensure that our society as a whole is aware of what is being done in our name. However, it often makes us squirm because it exposes things that are often disagreeable. But often, the only way to correct mistakes by our government is to air them in public. In the august word of Louis Brandeis, “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman”. In a way, Wikileaks is walking in Brandeis footsteps and revealing to us all that there are no secrets, only information you don’t yet have and in the process, it forcing all of us to think hard about what we want journalism to look like in the 21st century.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Wikileaks tests internet freedom. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Kindle Lawsuit

In my last entry, I pointed to the case of Justin Gawronski, who was mentioned almost as an aside in the New York Times article about Amazon deleting legally purchased and downloaded content from their users’ Kindle devices. At the time, I suspected that the deletion of annotations could eventually lead to lawsuits:

Beyond the irony of Amazon throwing a book like Nineteen Eighty Four down the memory hole (a large incinerator in that book), Amazon’s action raise troubling questions as to the ability of online providers to remove content they have not created. I leave it to legal scholar to assess whether Amazon could actually be considered to have infringed on the intellectual property rights of people whose annotations were removed along with the books.

Today, news comes out that this student is one of the plaintiffs in a lawsuit against Amazon, making this the first legal case to test what a cloud-based provider can and cannot do with legitimately purchased content. The complaint uses language similar to what I talked about:

2. With an uncanny knack for irony, Amazon recently remotely deleted any traces of
certain electronic copies of George Orwell’s “1984” and “Animal Farm” from customers’
Kindles and iPhones, thereby sending these books down Orwell’s so-called “memory hole.”

[…]

16. On or about July 16 and 17, 2009, Amazon withdrew from sale certain e-books,
including George Orwell’s “1984” and “Animal Farm.” Amazon then remotely deleted these ebooks
from purchasers’ Kindles and iPhones. In doing so, Amazon not only deleted the e-books,
but also rendered useless any electronic notes and annotations that consumers had made within
these e-books because the notes were no longer tied to the referenced or highlighted text.

While I had initially thought that the content was deleted, it turns out that the annotations are still available on the device, albeit without any context to them, which is what the lawsuit is now testing:

54. Plaintiff Gawronski and the Big Brother Work-Product Subclass suffered
damages because they created content on their Kindles within the purchased content that
Amazon deleted.

Most surprising is that the lawsuit did not look at Amazon’s infringement of its customer’s rights under the first sale doctrine. The first sale doctrine, which has been in place since the beginning of the 20th century, basically states that purchases can transfer a lawfully acquired copy of a copyrighted work without requiring permission from the copyright holder. Many people interpret this to mean that:

the copyright holder’s rights to control the change of ownership of a particular copy end once that copy is sold, as long as no additional copies are made. This doctrine is also referred to as the “first sale rule” or “exhaustion rule.”

It could be argued that, by taking the book away from its users, Amazon has controlled the ownership of a particular copy that had already been sold, even though no additional copy was made. It was surprising to not see the lawsuit also incorporating this point as it is probably one of the larger legal infrigements Amazon could be charged with when it comes to that incident.

The Apple Store and iPhone community

Meanwhile, while there are no legal rumblings yet around Apple’s treatment of its development community. With every incident of an app being denied access, it appears that a few more developers decide that, while the platform is exciting to use, developing for the iPhone is not worth the trouble. If it were one case, that could be considered a disgruntled developer; if it were two, that could also be ignored; but with every new incident, it appears another developer or group of developer decides that they’d rather not develop for the platform.

When I was in journalism school, we were told that when there is a high similarity between three different events in a very short time, we ought to pay closer attention as it could be a trend. When that similarity pops over and over again, as in the case of the iPhone development community, it seems like a slow grumble is turning into something more potent.

But of course, one could argue that such grumbles are really nothing to worry about, as long as Apple can continue growing its user base. After all, the company makes more money selling devices that it does from the revenue generated by the app store.

True to some extent but that particular issue starts falling on its face when one considers two important facts:

1. Selling applications through the App Store is probably a more profitable business (as costs associated to the sale, as represented by a percentage of the revenue is probably lower than it would be on hardware).
2. Prominent users are starting to complain loudly.

Of course, none of this is going to single handedly stop the growth of the iPhone but what is increasingly appearing is that Apple is having a potential communication challenge on its hands. A single disgruntled developer or disgruntled user cannot bring the product down but a continuous stream of complaints starts creating the appearance of wrong-doing, potentially undermining the long term success of the offering.

Apple is still thought of by the majority of the people as a cool company (as Google and Microsoft once were), a shinning beacon highlighting the power of innovation and capitalism. As it grows marketshare, what was once considered OK as a way to help the company compete against larger players (the aforementioned Microsoft) is increasingly being considered as arrogant and evil.

What does it all mean?

Of course, at this point, if you’re still reading, you’re probably wondering how this is an example of a new hope. The new hope is arising out of the fact that a largely quiet population is now starting to fight back against the over-reach of large corporations into what level of controls such corporations will be able to excert. In the case of Amazon, the class action has the potential of redefining what a company can and cannot do with a purchase device. Such decision could also establish some precedents as to the use of kill-switches in electronic devices (or invertly, give large corporations more power and legally codify the level of control they have been afforded).

In the public arena, the push-back Apple is encountering from both its developer and early adopter communities could help establish new boundaries as to what is and isn’t accepted in terms of controlling access through online gateways (in the case of Apple, that gateway is the App store but one could argue that the social rules established around the App store could eventually extend to the kind of perception around what is and isn’t acceptable in terms of consumer ISPs blocking internet sites).

With each event, the online community is also establishing some precedent as to what will be considered acceptable in an environment where all data is stored not a user’s machine but on some remote corporate server.

In each of these individual cases, awareness is raised and with every other skirmish, more people become aware of the issues at stake. It is my belief that, as more people become aware, more people will require less corporate control and more individual control. And that gives me hope.

Update: The government is now looking into Apple’s removal of Google Voice related apps from their App store. This is getting interesting.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Cloud Wars — A New Hope. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Traditionally, the model or rent vs. own has been one that most consumers and companies have mostly considered when it came to real estate (and traditionally, people have looked at renting real estate as more normal than owning, with the possible exception of the last couple of decades, during which real estate ownership appeared more attractive). But today, that concept seems to be increasingly extending to other arenas.

Netflix

For example, Netflix has build a very solid model around renting movies over the Internet. True enough, many people will mention that rental of media dates back to the early days of the video store and were a substantial component in the rise of companies like Blockbuster (born Blockbuster Video). True also that said companies have been falling on hard times lately. But the substantial difference between what Netflix offers and the traditional rental model is focused on convenience: one could argue that Netflix’s original business model was largely centered around the distribution of physical media (the DVDs themselves) but I would argue that the true success of Netflix will be due largely to its digital distribution model, allowing for instant distribution of movies and TV shows with the click of a few buttons. The instant (and the emphasis here needs to be put on instant) access to a large media collection can easily call into question the concept of owning similar content in a physical form: What is the advantage of having a physical copy of a movie sitting on your shelf, collecting dust most of the time, when the same movie is available at the touch of a remote control button from the Internet?

However, the challenge in such concept is that once someone stops paying Netflix, the access to said collection disappears. An owned movie is paid for upfront and can be watched time and time again by a consumer but a rented one can only be watched as long as one keeps paying the owner renting party.

Apple

With Apple’s recent move to sell music tracks without any digital rights management features on it, one could safely assume that Apple is not in the rental business. Apple’s move was largely a response to Amazon’s own marketing around selling DRM-Free music but it is interesting to note that, while the restrictions on music went away, the same was not true of similar restrictions around music videos, movies, and TV shows. The lock-in that appears here is similar to that which exist with Netflix in that if you decide to end your relationship with Apple, the media you bought will stop working. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Similarly, Apple is renting out, in partnership with telecommunication vendors like AT&T, an ingenious device called the iPhone. The reason I would call it a rental model is that use of the device is limited by the partners to people who have paid the initial fee and continue to pay a fee to the telecommunication provider on a regular basis. It is a model that exists for most phone providers, as devices tend to be tied to a specific vendor. Once again, people will highlight that it is possible to get rid of that lock-in with software but I will counter that doing so is a violation of the contract terms of the device, voiding warranty and your agreement with Apple. To claim otherwise would be similar to saying that everyone has access to as much money as they want, as long as they are willing to rob banks. (In the interest of disclosure, I should highlight here that I own an iPhone which is not connected to the “authorized provider”.)

Going a little further, Apple gets to lock-in who can and cannot play on an iPhone, only allowing developers who submit themselves to Apple’s whim and offering what is sometimes only temporary access to the userbase as release of every update to a product still has to go through Apple’s review. In other words, Apple gives developers temporary access to the iPhone user base, an access it can choose to revoke at any time.

The Amazon Kindle

All this conversation bring us to Amazon and a couple of its products, starting with the Kindle, which serves as the incentive for writing this lenghthy post. The Kindle, much like the iPhone is a pretty impressive device, bringing several technologies (always on device, e-ink) out of the labs and into more mainstream consumption. And like the iPhone, it has both fans and detractors. And once again, the Kindle offers an interesting kind of lock-in, allowing you to read titles purchased on the kindle (or through the iPhone kindle software) but allowing you access for only as long as you keep a relationship with Amazon. Where the model moves to rental is around magazines and newspapers: you may purchase subscriptions but, should your Kindle be completely full as a result of your subscription, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kindle device. On the consumer end, Amazon now play in the same spaces as Apple and Netflix, renting out or selling digital versions of movies, TV shows, and music.

Renting at the Enterprise Level

In other example of the evolving trend moving from the consumer to the enterprise space, Amazon is now renting itself, or rather portions of its own operating capacity, to anyone willing to pay a fee. Its infrastructure (storage, computing, and databases ) are all available to organizations who are willing to put their application on top of Amazon’s own servers. Amazon offers similar solutions for payment services, and goes as far as providing space in their warehouses along with complete pick, pack and ship capabilities.

The infrastructure component is part of a trend in which enterprise vendors are now providing data center capabilities on a per data transaction costing model. For many Chief Technical or Chief Information Officer, it changes the basic questions around data center from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynamics of how a business can be built as a substantial portion of a company’s activities can now be outsourced to outside players (I’ll go into more details around the enterprise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a horrible thing.

I’m not.

What I am trying to highlight here is that the experience around internet driven goods is changing. As connectivity speeds increase, the ability to access any movie/TV show/video/ music clip/ books / magazines / etc is going to have a substantial impact on our relationship to said goods (in a fashion similar to the type of relationship kids now have to music, assuming that music on the Internet ought to be free of restrictions, while at the same time assuming that mobile phone ringtones are something one ought to pay for).

The change in our relationship to media forces us to reassess the value of the physical good. In the case of our household, we have made a leap of faith, assuming that the content of certain DVDs will always be available online from one rental provider or another. The reason for that approach is that the experience of watching such thing on our TV using an internet connected video player is not diminished by the lack of a physical medium. Living in a more constrained space (in Manhattan, space is always at a premium), the physicality of a DVD box is actually an impediment to the experience of the medium. As a result, the internet connectivity, and the rental model, appears to make much more sense than the physical ownership of DVD boxes.

In the same way, the value of a CD collection is in what’s on the CD rather than the plastic container it’s in. Much of the value of the physical container of music has decreased: in the past, LPs were designed and the wraping of the LP was almost has important to the experience as the music itself. However, as CDs reduced the size of the cases, and music production companies spend less time on designing custom boxes, physical CDs became more of a commodity, with the music on them being the only thing that truly distinguished one CD from another.

But what about books, magazines, and newspapers?

To a large extent, I would venture that the relationship we have with magazines or newspapers is different from that of a book. When I first saw the Kindle, I was not attracted to it because I could read books on it but rather because I might be able to subscribe to newspapers or magazines. The clear line falls in the arena of experience: with a few exceptions, magazines and newspapers are read and then discarded. The ephemeral nature of that experience archetype seems to make such relationship a prime candidate for digitization: Once again, the convenience of something like a Kindle seems to trump the experience of having to fold a newspaper in a crowded subway or the guilt associated with recycling large amount of newsprint or magazines on a regular basis: because the intrisic value of newspapers or magazines is as conveyors of temporal information that now appears to be archivable and retrieveable online, the need for ownership of that data appears to be lowered.

Books, on the other hand, are a different issue. Reference books may lend themselves to a good digitizable model (O’Reilly, for example, has had success with its Safari offering, as have encyclopedias like Brittanica and the OED) but fiction books may be in a different class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its content and rental of such good (though people will mention that books have been something you can borrow from a library for a long time) may take longer to break through as the advantage of reading such a book on a Kindle is not necessarily higher than that of a physical good. I may be romantic in my thinking, attaching to books not only the content and the packaging but its experience in a greater space, as each book I own has, in itself, a number of memories attached, in the form of sand from a beach where it was read, or wrinkles from being carried on a trip or fold marking and writings from a particular era. In those rare cases, the books serve as containers for more than the stories they held when first presented on a bookshelf or through the online presentation they had: they are containers of a full experience and that, at this point, is not yet something that any digital device (whether it is a kindle or other) has yet been able to reproduce.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Is Ownership Passé?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.