Let’s first take a look at the data points from recent weeks:

1. RockStar Games releases “Grand Theft Auto 4″, picking up US$500 million in its first week of release.
2. Barack Obama uses younger demographics to win democratic nomination.
3. Primetime no longer so prime as younger viewers shift time and place of shows.
4. Some VCs look to demographics as an opportunity space.

All those data points seem to highlight a major shift in the demographics of influence. For most of my lifetime, the core influencers have been the baby boom generation (aka. my parents’ generation) and their hold on politics and consumer behavior from the late 1960s on has been uncontested up until now.

But that may be changing.

Media

Up until recently, media consumption was divided between TV, radio, and print when it came to news and movie theaters, recorded media (VCR in the 80s and DVD now), TV, and live performance (and I’m grouping both live music and theater in that category) for entertainment.

In the 90s, we successfully established the Internet as a source of delivery for news but most efforts to do turn the net into an entertainment channel failed due to network and CPU constraints. Those constraints disappeared since the turn of the century and the net started to take a stronger place as an entertainment channel in the last few years.

While the net is slowly eating up the traditional media budget, another market is started to eat into the pie and that is videogames: it first started within a small subset of the overall population (males under 35) but is slowly starting to spread to a wider population as can be seen with the success of the Nintendo Wii and of certain virtual worlds (like Club Penguin or WebKinz, aimed at kids).

Similarly, it appears that traditional media is suffering from a slump in their own advertising revenue as a result of not only decreasing audience but also decreasing amounts of support from advertisers due largely to the fact that most non-digital assets are not easy to track in terms of response rates (an issue I’ve addressed in the past in several different posts.)

So the question now is where the value will reside moving forward. Many of the smarter media companies are now starting to understand that their product is not necessarily in the delivery medium (for the longest time, print publishers have assumed that their goal is to deliver paper-based products; music publishers were tied to whatever format, be it record, 8 tracks, tapes, or CD, they packaged their product in; TV producers have looked to their channel as the center) but that the value they add is in the packaging and financing of interesting offerings in a cross-media fashion. This is the driver behind efforts like the recent acquisition offering of CNET by CBS and Ars Technica by Conde Nast.

What we will see here is a progressive move to anytime, anyplace as far as any entertainment or news package is concerned. Mass media is not really dead, it’s just made up of an aggregated model now. This is a model that some stars like Madonna understand and have adapted to, according to the New York Times (emphasis mine):

Madonna’s show, to promote her new album, “Hard Candy,” was also part of a technologically sophisticated, 21st-century product rollout that involved multiple media tie-ins. It was broadcast live on the Internet by MSN and on cell phones worldwide by Verizon and Vodafone. In addition to the 750 spots given to fans on the line — that’s on a line, not online — about 1,000 were given to radio contest winners, and 200 to members of Madonna’s fan club, which now has a social-networking component.

The secret here is to appeal to the audience on its own terms and where it is. Some less savvy executives may think this is a temporary blip but I suspect that, as far as media is concerned, it’s only the tip of the iceberg. Talk to teenagers today and they have little understanding or patience for media that does not fit their needs.

This, however, does not mean that everything needs to be free. Many new media advocates will claim that, in the new world, copyright is dead and value from media can only be extracted indirectly. For example, they see rock concerts as the way to extract value from music tracks that are distributed for free. While those types of economics are fine, they seem to leave some money on the table. For example, it is true that teenagers look to the value of an MP3 track as low or even 0. However, the same teenagers buy music from the itunes store or download and pay for ringtones. And let’s not forget last year’s experiment by Radionhead, which put all of its album online for free in a “pay what you wish” model: if people will always opt to go for the free option on a good, then Radiohead’s US$10 million first week sale for their CD doesn’t make sense. Once again, this goes back to the new fundamental rule that, as long as you offer your goods across a wide array of media, you will maximize your offerings.

Politics

In the intro, I also talked about Barack Obama and how he appears to defy the prognostication made by many commentators. I would venture to say that the reason for his continued success in the face of any existing model is also based on the realization that he, as a candidate, can make himself available in any media form. A measure of the online success in multiple media shows the story (thanks to Techpresident, we can easily see that data as it relates to MySpace, Facebook,  YouTube, Technorati, eventful, meetup,  and traffic data accoring to Compete and Hitwise.) When looked through the traditional lens of comparing election cycles to earlier ones, as most TV commentators appear to do, the Obama campaign can’t survive. But the problem is that such lens does not include the data above.

For all my lifetime, the storyline of American media consumption and of politics has been largely formed around one single demographics class: baby boomers. My generation, Generation X, was considered a wasted one as Baby boomers looked at it as poitically apathetic, and generally seen as a bunch of slackers with no interest in corporate lives. There might have been some element of truth to the story line as members of Generation X came of age in a cynical world where they were told that the corporate life was no longer a guarantee of lifetime employement and where they were consistently reminded that social security would fail and they would pay for the system but not benefit from it. As a result, many turned away from traditional institutions and started building alternatives.

The most visible alternative model is the rise of the Internet economy which was largely built by 20 and 30 something and funded by older people who understood some of the value being created. But along the line, many other things changed: first, the work-hard/play-hard ethic moved, as people got a bit older, to a need for a better work/life balance. This was a byproduct of dropping the boundaries between office and home. As the two merged, a new set of boundaries needed to be created.

As more of those boundaries changed, some social mores were also affected. In a way, one could argue that the boomer’s self-obsession created a counter effort that led to more collaborative and more society-centric views. Because they had been beaten down by their elders, GenXers tried to build a system that swung the pendulum on the other side: one where age/culture/race/sex/etc… were de-emphasized through the electronically mediated space of the Internet. This is not to say that all the problems associated with those categories went away but I suspect that a study of demographics would show younger people to be more tolerant and generally more on the left side of the political spectrum than older people (maybe a representation of Churchill’s “Show me a young conservative and I’ll show you a man without a heart. Show me an old liberal and I’ll show you a man without a brain”)

Enters Obama, a candidate who, by most measure can be considered further to the left than Hillary Clinton. When he talks, he highlights partnership, and generally looks to a more “European” approach to society. This seems to be a rebuke of much of the individualist type of policies highlighted since the Republican era. And that’s where the pundits start having trouble. Is the 2008 presidential cycle like 2004? 2000? 1996? 1992?

The truth of the matter is that the 2008 election cycle is unlike the other ones because of a substantial demographic change. Obama’s voters tend to be people who have not previously been very involved in the political process. Some are from particular racial background but I suspect that a bigger part of the story is the demographic clash that’s coming our way.

The interesting thing is also the type of opportunity this can present from a political messaging standpoint and an issue standpoint. Some of the issues that were considered as dangerous to approach in previous election might now be safer due to the different outlook (for example, I have read somewhere (and don’t remember where, which is why I’m not linking to it) that younger Americans tend to be more willing to pay higher taxes in exchange for a bigger social net).

I suspect that the Obama campaign is currently surprising pundits for three main reasons:

1. It understands that media and politics are intertwined and works hard to run itself as a media organization.
2. The campaign understands that media is now participatory, and ought to be consumed across multiple channels when the consumer wants to.
3. The campaign understands that it can find voters where no other campaign has gone to get them. That means bigger registration drives and an increase in the number of new people signed up on the voter’s rolls, something that could have a very important impact not only in this election but in a lot of future ones too.

Conclusion

I am sure that I’m only scratching the surface of a pretty important phenomenon with this entry but I have to admit a fair amount of surprise as to why this doesn’t seem to be more noticed. I also wonder whether my assumption here are wrong and what the larger impact of such a demographic shift could be. I’d appreciate comments from others as to what they think it ought to be.

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

It seems every time Apple or Google introduces a new product, the buzz is high. For example, Apple recently introduced a $350 speaker and, while the reaction was more tepid than it has been for other Apple products, no one seem to point that the emperor was looking very very naked. Yet, Microsoft keeps throwing out new products and few people seem to be very interested (no matter how Scoble tries to browbeat us into thinking of Microsoft as cool).

Similarly, today, Google introduced a finance section that mimicked much of what yahoo! finance has been doing for years. It has a couple of nice AJAX-based features but, all and all, it’s not enough of an improvement to be considered like something that could potentially dominate the tech news cycle. And yet, every major tech pub or mainstream publication has covered the release.

why?

Trying to divine the source of coolness

What Google and Apple seem to have understood is that there are ways to make oneself look cool. I’m going to try to lay out some of the things I’ve seen (and I hope that others will chime in in the comments):

Rumor Mill

First, let the rumors float or give the appearance that you don’t want rumors spreading. Google Finance has long been a rumored product (as is Google payment, for example) but no word ever came out of the company about their intentions. In fact, Google is relatively stingy in terms of providing advance information about their products. They have learned to let the rumors run wild, leaving their competitors tearing their hair out trying to divine what Google will do next.

Apple takes a different approach to this. In the past, the company has been relatively ruthless in its attempts to shut leaks down. However, it seems that, when leaks are presenting compelling products and the company doesn’t really have anything to announce, Apple is happy to let the rumor mill run wild. So, before the release of the iSpeaker, uh, iPod Hi-Fi, Apple did not crack down on rumors about a new video iPod.

The two approaches speak to two different traits: one is to be extremely secretive about your action and the other is to let rumors go wild as long as they paint a picture of your company that is far cheerier than its reality.

The one feature

When selling technology, there are two publics to serve: the early adopters, and the general public. The early adopters are a fickle bunch but they can have some influence on the general public. So giving the early adopters one feature that they will like is an important feature of creating good buzz. Similarly, when dealing with the general public, emphasize the one feature that makes your product different. It doesn’t have to be something that is actually innovative (many companies were making MP3 players years before the iPod; many companies have offered services (other than search) which did what Google did in categories like mail, web hosting, classified, news, etc..) but it has to be presented as such. The early adopters may groan but they are eventually drowned out by the masses.

Thus, Apple did not release a featureless MP3 players without a screen, they released the “Shuffle” which allowed people to get a little more randomness out of their music collection. Or Apple didn’t release a $350 speaker, they release a Hi-Fi system that will work with an iPod (iPod sold separately). Similarly, Google did not release a Geocities rethread, they released pages, a cool online web editor and page hosting service. They did not release a me-too version of finance: look at the cool graphs they have.

I may sound a little cynical in that last paragraph but I believe it is this kind of cynicism that infuses the marketing of cool products. They may not be the top technology in the market but they are different. And emphasizing that they are different gives a chance to the users to feel like they, too, are different.

Cool by association

The next item on the list, in terms of generating buzz is to create an appearance of exclusivity from the get-go. Thus Apple does not complain too much when the police report rise in theft of iPod, due to the high visibility of the white headphones (see, our product is so popular, people steal it). Similarly, Google did not offer a free web-mail service for all, you had to receive an invitation.

By creating a certain level of exclusivity or belonging to a certain tribe, Apple and Google have managed to go beyond the product. They’ve created an aura of cool in being associated with them. When a new product comes out, you have to check it out or you will be out of the loop. The trend folds on itself, ensuring that future product launches benefit from the buzz of previous product launches. Over times, the duds are forgotten, and the companies are seen as innovative.

Look! Feel!

One of the other things to consider, when creating some level of buzz is the fizz and whiz of look and feel. Apple is known for designing beautiful computers (in the mainstream PC world, only Sony puts as much thought into how their computers look). The energy they put into the design allows them to bypass some of the technology issues that other vendors would encounter.

Similarly, Google has become an expert at using AJAx for their interfaces. As a result, new products generally look more polished than the competition. In the case of Finance application, it was interesting to see comments by people in the financial space on the performance of the product in terms of delays giving stock quote prices, etc.. However, few users would drill in and discover that stock prices were about 20–25 behind, or that

What value does buzz have?

At the end of the day, though, much remains to be seen about the value of such buzz. While Apple generates a lot of buzz about its computers, it still only retains between 5 and 10 percent of the market. Similarly, while Google has generated much buzz for all its new products, its bread and butter is still revenue from advertising on the search engine. So the question that still needs to be considered is whether buzz has value beyond the introduction of a new product and what that value translates to in terms of real dollars.

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

Voice Over IP

The big surprise here was the acquisition game. When I made the predictions last year, i thought that the acquirers would be larger telcos. However, companies like Ebay and Yahoo! have been playing the acquisition game, looking at telecom space as a feature to add to their product set.

It does, however, show the rise of European players in the US telecom market. Skype was clearly a European player that was seen as a major player in the US market, which explains the acquisition by Ebay.

Asterisk also experienced a banner year with deployments increasing in the small and medium enterprise market. It has not yet broken into the large scale enterprise market so I get only half points for this prediction.

Entertainment Convergence

The convergence I predicted in the post is now in full swing. the introduction of the Xbox 360 as a convergence device and the rise of the video iPod as a way to move television into the arena of small consumer electronics has turbocharged the space.

While MP3 has not yet become the standard for mobile phone, it is starting to emerge. The disastrous release of the Motorola ROCKR has probably slowed progress in that area but I still content that it will happen in the future. Pass on this one.

Meanwhile, the prediction that the movie industry would start suing is starting to come true. They’ve started with a campaign trying to convince people of the evils of illegal downloading. However, the MPAA seems to have learned, to some extent, about the disastrous effect of suing one’s customers and is being careful to not follow in the footsteps of the RIAA.

Also as predicted, legal downloading of television shows is happening. It came from an unexpected source in the form of Apple, which is now taking the formula it applied to music into the rest of the space.

The decision by both XM and Sirius to offer a combined solution that includes both Internet streams and satellite feeds in the same package is following my prediction that radio is about to be upended.

The rise of user-created content is also one of the big stories of 2005 and I believe it will continue through 2006. While no star has broken out of the podcasting and videocasting world, I believe we’re on the cusp of seeing this happen. On the video end, I believe rocketboom will be the first star to break out. Their recent announcement of a partnership with Tivo is just the beginning. On the podcast end, the space is getting more complicated: the entry of the mainstream players into the market could act as a buffer, keeping new players away or at least protecting the status quo.

Business

Large mergers did indeed take the forefront in the 2005 year, however none of the mergers I predicted actually happened. A lot of money went into merger and acquisition budgets and has increased greatly in 2005.

Also impressive is the fact that many of the smaller players were the target of acquisition. It seems the new exit scenario for web 2.0 companies is not to go the IPO route but to find a larger company that will gobble you up.

Apple

This one is way off. Most of my predictions were off base: Apple did introduce a video player, to critical and consumer acclaim, and an iWork product suite, but they did not introduce any photo camera, a recording player, or a way to send images straight to printers. Their partnership with a phone company (Motorola and the ROKR) was fairly disastrous, showing the company still prefers going at it alone than trying to partner up.

Development

Service oriented architectures, trust and security did take to the forefront this year. Meanwhile weblogs and content management systems have not merged yet. However, more and more large companies are starting to take a look at weblog software, with RSS become a major distribution channel. This trend will continue to accelerate into the new year.

Personal

On the personal front, I made a commitment to blog more often. While it looks like this commitment will not come true (I didn’t create more entries), it comes with a substantial disclaimer. This year, I tried to focus on longer, more analytical types of pieces. My decision of doing it that way was largely due to a decision to try to add to the overall discussion instead of rehashing what other people have been saying. The interesting thing is that this approach has actually resulted in more readership. You don’t have to blog a lot to get people to read you; you just have to craft quality blog entries.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2005 Predictions: Keeping the Score. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

It all started when I emailed them, asking to start podcasting “Wait, Wait, Don’t Tell Me”, a very funny quiz show. The time at which the show was broadcast on my local station changed, making it more difficult to catch it. As a result, I decided that I should contact them about podcasting it. After all, the local station has been promoting podcasting heavily and I figured that adding one more show would not hurt.

Over the weekend, as I cleaning through the mountain of email I get, I found the following message (emphasis is mine):

We appreciate your interest in the podcasting of NPR programming.

As you might be aware, in 1999, NPR signed a podcasting agreement with Audible when that company was one of the few exploring ways to make audio downloadable and portable. Using Audible’s services at that time was the best way for NPR to explore this new distribution technology, deal with the emerging and complicated rights issues related to download and begin experimenting with how to best serve NPR listeners who are on the go.

In the six years since then, the landscape for content downloading and portability has changed dramatically. Beginning last year, we recognized that new technologies in the marketplace might enable us to better serve NPR listeners.

As we formulate a more comprehensive strategy, we chose not to renew our agreement with Audible when it recently expired.We are now developing a new strategy for making NPR content downloadable and portable. Once the plan is finalized, we will announce it publicly.

NPR is committed to exploring emerging platforms that will best serve listeners and our stations, in ways that will add more value to the NPR experience. This commitment includes a strong online presence with NPR.org, extensive involvement in satellite radio and leadership in the developing digital radio industry. We look forward to extending that philosophy with a new download and portability strategy.

The first thing of interest here is that NPR did not re-sign with Audible. Considering the rich library of programming NPR is offering, this will, no doubt, be a major blow to the proprietary approach Audible is taking. It may also be a major issue in terms of Audible’s business model: will they survive in the world of podcasting? What happens when Amazon and the iTunes music store start selling books in mp3 format? This is a pretty big set of questions that the Audible management will need to deal with.

The second part here is that NPR is working on a downloadable and portable strategy, which goes against the core of Doug Kaye’s argument that public radio is doomed. It will be interesting to see what comes out of that strategy and I, for one, expect to see great things come out of that new strategy.

Update:

Wait, Wait is now in the NPR podcast directory.

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

Freshness vs. Convenience vs. Value

When watching movies, I have several options. I can

• Go to the movie theater
• Wait for the movie to be available on video or DVD and rent it
• Wait for the movie to be available on video or DVD and buy it
• Wait for a movie to show up on pay-per-view and rent it
• Wait for the movie to be available online legally and download it
• Wait for the movie to show up on free TV and watch it or record it then
• Download it illegally

Those are basically all the options I have. Let’s examine what the drivers behind a particular choice my be:

• Freshness: I want access to the latest movie as soon as it’s viewable
• Convenience: I want to watch the movie where and when I decide
• Value: I want to pay a fair price for the entertainment value I get out of that movie

If we start mapping each of those against the currently available options, patterns emerge: In order to get freshness, I have to sacrifice convenience (since I have to go to the movie theater and watch the movie at a set time) and pay a value premium (since I have to pay the price of a movie ticket, which also gives me access to a larger screen, better sound, and a shared experience). In order to get convenience (download, rent, or buy), I have to give up freshness (as movies are released in theater first and available in other media later) and pay a little extra (price of rental or purchase) than I would if I waited for the movie to be free on television. Last but not least, if I want to watch the movie for free legally, I have to give up freshness (since movies are released to TV stations at the tail end of the release cycle), deal with less convenience (I either have to record the movie or watch it on the station’s time and date and, if I want the completely free option, I have to agree to watching some ads in the middle of the movie) . If I’m willing to break the law, I have to give up convenience (have to hunt down the movie on a peer to peer network, then make sure the download works properly, then check that no virus has been embedded. To add to the problem, the quality of “fresh” movies available over those free networks is generally bad, with sound and image generally being of low quality.

DRM can be good

Now imagine a system where I could get all three. A system that I would call “FairShare.” In a FairShare system, I get access to everything for the right price and with maximum convenience. If a new movie is released, I can pay a premium to have it immediately available in my house on the same day as it is available in the theater but here’s the catch: I have to pay for that extra convenience. So I may have to pay more for that movie than if I went out to see it in the theater but I get the convenience to play it at home on my own clock. How much would I pay for that convenience? Well, it depends. Part of the pricing here is the value equation: do I want to watch it alone at home or am I having a party with friends. Is this a movie I really want to see now or can it wait a week, a month, or longer. Can I haggle over the price?

That last part is important. Looking at the Ebay economy, we can now figure that there are certain price points for just about anything and that those price points, when left to the customer to decide, are generally within a standard deviation of the actual price of an item. What if there were marketplaces for movie download rights? Let’s take a highly anticipated release (the next Star Wars, for example). Some people would probably be willing to pay a high premium in order to see it at home with their friends? Just looking at the US box office returns for Episode 2, Attack of the Clones one clearly sees the importance of freshness: The movie made $110 million in its first week (bolstered by a first weekend take of $80 million), $90 million in its second week, and $31 million in its third week. That means people would have been willing to pay a premium to see the movie in week one and two but less of one in week 3.

Once the price has been set, it then only become a question of proper DRM licenses being available. For example, I use a service called Movielink. It’s got a collection of movies that can be downloaded for anywhere between 99 cents and 5 dollars. In that price range, the movies are about the cost of a video. However, I don’t have to worry about returning them and, while choice is currently limited, it’s pretty convenient. Granted, I’m not the regular user in that I already have a computer connected to my big screen television, but the convenience is worth the price.

I think I could technically make a copy of a movie I download and give it to a friend. What would happen when they run it? Well, the same thing that happened to me recently. I wanted to rewatch one of the movies I rented and had watched previously. When I went to start it, a screen popped up, asking me if I wanted to re-enable rights for 24 hours at a substantial discount (99 cents vs. the $4.99 I had previously pay for the rental). Had I rented that movie in the video store instead and wanted to go through the same experience, I would have paid for the price of a rental twice. Once I started using the service, I noticed it also altered my buying pattern. When I rented a movie I liked, I might buy it on DVD if I wanted to play it more than once. The cost of a DVD generally is between 10 and 20 dollars. However, when I started downloaded, the replay for 99 cents feature started to make the cost of buying a DVD look expensive by comparison. While I do replay movies I bought, I don’t replay them often enough to warrant a 20 dollar price point (that would be equivalent to replaying a moving I downloaded 15 times.)

What happens here is that the product is priced properly and even competitively, compared to other alternatives. In a FairShare model, those prices would vary and all movies, either still in theater or released decades ago, would be available at prices that would fluctuate based on demand. For example, movies from 1890 may not be very popular but I’m sure there are hundreds if not thousands of people around the world who might want to watch those. At a couple of dollars a piece (or local currency equivalent), that’s thousands of dollars left on the table. Multiply that by hundreds of thousands and you’re talking about potentially billions of dollars left on the table by business and potentially tens of thousands of gems that are currently unavailable to the public.

Shopping for legal music

Of course, all this works because I am dealing with a single device and a single model. However, DRM becomes evil when it is limiting and tries to tell me what to do and where I should do it (hence reducing my convenience). For this, I will bring up another example. I recently heard a music album that sounded good. Now, in the post napster, free-music-for-all, world we live in, I could have easily downloaded it from a P2P network and kept it at that. For my own enlightenment, I decided to actually look for the album (not a single track but the whole album) on one of the P2P networks, confirming a suspicion I had: Popular tracks do show up on those networks but less popular tracks from an album do not. As a result, it is impossible to get a good feeling for an artist’s work beyond the hits.

My curiosity satisfied, I decided I would go and try to buy the album from a downloadable service. Before I go any further, let me explain what I expect from tracks purchased online: I own several computers running several operating systems (OSX, several versions of Microsoft Windows, and Linux, primarily); I also own a Treo, which I use as my portable MP3 player. Why that device in particular? Because it combines my GSM phone, PDA, and MP3 player all in one and can hook up to the different operating systems I mentioned above. It’s the ultimate in choice and portability as I do not want to carry multiple single-use dedicated devices.

First stop was the iTunes music store, which frequent TNL.net readers will recognize as the target of many posts. Well, turns out that it might be a bit of an issue. Apple doesn’t seem very interested in selling music to play on non-iPod devices and as far as transferring a song to Linux, well… I guess I’ll have to wait for the Linux version of iTunes which should come out just around the same time as blizzards blowing through Hades.

Next stop, Real. After all, they made a big stink a while back about fighting Apple and protecting openness. They’ll help me, right? Looked like the Treo would work but I was annoyed to learn that you had to use the RealPlayer to play the tracks. Where was the freedom of choice in that? Why would I be forced to install their player in order to play the tracks? What if they went under and their player were no longer compatible with my operating system? In one felt swoop, they eliminated a whole bunch of stores to visit: basically, the ones that force me into using the Real player in order to play music I bought legally.

Warily, I approached, the remaining giant in the space: Microsoft. The good news was that they had a program called “Plays for Sure”. Finally, someone willing to go with a real guarantee that my music will play anywhere! The tag line, right there on the homepage said it all:

Choose your music. Choose your device. Know it’s going to work.

That sounded really great: finally my music, my Treo, my different operating systems would all work harmoniously… except for the fact that PlaysForSure is another marketing name for Windows Media Player. Basically, it’s the same deal as Real: if you use their player, and their player works on the device you want to use, it’s OK. Otherwise, you’re on your own.

I gave up on the online download sites and bought the CD, which I then ripped to MP3 tracks myself.

DRM can be evil

What happened in that case was a case of what I would consider evil DRM, where the consumer is treated as a criminal by default. Because it is assumed that I will abuse my right, the system forces me to work within a walled garden. I can either get my content from Apple on Apple devices, from Microsoft (and partners) on Microsoft powered devices, or from Real (and partners) on devices that run the RealPlayer. This is not choice, it’s entrapment. If I were to follow the same logic to the extreme, I would have to have a different television in order to watch different TV channels. In other words, the case of music downloads shows that DRM can be mis-directed. Why? Simply because of companies trying to maintain certain monopolies and force the users to do their bidding.

DRM dependencies

Looking at the two scenarios above, you might start noticing some interesting trends. First of all, DRM is situational. A single DRM strategy does not fit all offerings. Why is that?

I would venture that the reason is one of expectation. The expectation that I have of a music track are different that the expectation that I have of a movie or TV show and it is largely related to the interaction with each media type. In the case of a music track, I want something that will be portable and can move relatively quickly from one device to another; this is largely due to the fact that music is consumed on the run, and more often than not, it is consumed while doing some other activity. Movie or TV watching, however, is something that requires more involvement; it’s hard to read a book, drive, or run while watching a movie or TV show! As a result, mobility is not as essential and the need for a movie to run on multiple device is not as high. if it runs on my TV, maybe on a laptop too and can be transferred to a secondary TV, it’s OK. The universe of devices on which it needs to run is smaller and generally more tied into the net anyway, which makes the DRM interaction more seamless.

What I am trying to highlight is that while proponents and opponents of DRM solutions both see the world in black and white, they may want to start a dialogue and realize that there’s a lot of gray areas out there.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title DRM is not binary. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Size matters

My first thought, when I read the specs, was about the size of the device. My Shuttle computer, is 6 inches high by 8 inches wide and 12 inches long (yes, I had to pull out the ruler on that one). By comparison, the Mac mini comes in at 6.5 inches square and 2 inches high. Something tells me that there is more to the dimensions that pure aesthetic design. For comparison’s sake, I decided to take a quick look at my entertainment center: 2 inches happens to be about the height of my VCR (yes, I still have one) and my DVD player is taller than that.

I then decided to look around the web. Tivo 2 boxes come in at over 3 inches in height; The smallest Windows Media Center edition machine (from Hush Technology) comes in at 3.9 inches in height. In fact, I could find very few items that would come in at the same size. Somehow, I don’t think it’s a total coincidence or has much to do with design.

It seems to me that the play here is for the living room and not just the living room but right there under the TV. I would not be surprised if a future version comes in slightly larger but with things like a TV tuner built in or what not.

But the entertainment center is just the first place where a Mac mini would fit. It seems perfect for a car too. Apple has been courting a lot of car companies about integration with the iPod. What if the play is larger than that? Somehow I don’t think BMW, Mini Cooper, Mercedes-Benz, Volvo, Nissan, Alfa Romeo and Ferrari are only interested in the iPod. What if Apple has showed them something more? Something like a Mac mini as in-car entertainment center. The power input seems to be external to the mini itself, something that not only save space but is also unnecessary if you already have a power converter (as cars do).

Since Apple is currently playing the consumer card (hence the iPod strategy), why not take it all the way. The size seems to point to more than just the desk (so we can already assume the entertainment center). The car partnerships have one thing in common: generally higher end (luxury) cars. These are the types of cars that usually sport in-car entertainment centers (DVD player, television, GPS navigation, integration with cell-phone, etc…) so it seems that it’s a solid high end consumer market.

Price point

Which makes the price point all the more interesting. It’s a small computer so you’d expect to pay a premium but no. Apple has decided that this is their new entry point price, selling the machine at under $500. Why? Well, for starters, it makes it easy to go after the switcher market (they have monitors, keyboards, mouse, etc… already) so Apple plans to capture people that have bought iPods (or lust after one) and get them to check out the Mac. Cool… and obvious.

Less obvious, however, is the price to retailers. If you think that the average price on an in-car multimedia is around $500–800, then it starts to makes sense. About $400 for the machine, throw in another $150–200 for LCD screens and GPS navigation and you’ve got a good car system. All it needs is an interface.

The Interface Conundrum

So the iPod is nice but its interface is very text-centric, a bad thing if you’re sitting across a room. However, it’s simple and Apple has learned a lot about how consumer use electronic devices in the process. They are now learning about the mobile phone market, observing through their partnership with Motorola. With all this experience, they’re refining. I remember talking to the WebTV management team when they were getting started. One thing that always stuck with me was that they had all worked for Apple at one time and that they had all worked on set-top boxes. It means that, for almost a decade now, Apple has been playing around with the concept of entertainment centers.

The simplicity of the iPod interface was largely due to the fact that it was designed outside of Apple. However, the simplicity lesson may be one they learned. Look at the Shuffle and realize that they have seen how to “simplify” interfaces to the point where they become ubiquitous.

Ubiquitous computing or Apple as consumer electronic giant

Ubiquitous computing has long been a dream but Apple may be working on it. Notice how they tend to look at the PC world: ugly boxes, bad design, etc… The only company that seems to scare them a little is Sony. Why Sony?

Well, because Sony is a consumer electronic giant and that’s where Apple wants to play. At the end of the day, Steve Jobs realizes that the days of Apple as a computer company are numbered. However, the company can reinvent itself as a consumer electronics giant.

This is where the mini goes. It’s not really a computer but it may be the second front in the battle for consumer electronic supremacy.

I can already hear nay-sayers going “But Steve always says that there is no play for Video…”

If that’s truly the case, explain the work on Quicktime? Explain why the company continues to invest in products like iLife and Final Cut (and its express version)?

The truth is that up until last week, Steve Jobs was on the record poo-pooing the flash MP3 player market (that is, until he introduced an Apple branded one.)

At the end of the day, what he’s building with the mini is a platform, not just offering a new product.

Apple vs. Microsoft

When talking about Apple, the elephant in the room is always Microsoft. This is where it gets interesting. Apple and Microsoft are going after the same market but looking at it from different standpoint. In a way, Apple is the revolutionary storming the castle, offering a view of the world that is shaped around creating and sharing digital content (hence the iLife products and their higher end counterparts). Microsoft is about receiving content that has been created by others (hence the Windows environment, where the focus is on being able to record television, buy music, etc…) That’s the commonly expressed view, anyway.

However, upon closer inspection, Apple is trying to lock more down. Their strategy is an end-to-end one: we have the software, the music store, and the devices to play the music on. Microsoft is more egalitarian in its approach: we build the environment, what people do with it is up to them and we hope some good software will help us sell more.

Both companies offer DRM but with a difference. Apple keeps its DRM to itself. Microsoft sees their DRM offerings as respecting boundaries. I’m not sure I fully buy into the Microsoft argument or the Apple one but I know that I will be writing more on all this soon.

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 Mac Mini platform. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Voice Over IP

VoIP experienced tremendous growth in 2004 but it was just the beginning. This year, much more will happen in that space.

Cable providers will start deploying VoIP services on their networks and phone companies will start bundling VoIP services with their DSL offering as a way to compete. By year end, all major broadband providers, whether they are offering services over cable or DSL lines, will have a VoIP service bundled with their access service.

Unable to compete with the larger telcos, some smaller players in the market will merge on order to lower their cost per subscriber by bringing their infrastructures together. Also, independent VoIP companies will sign peering agreement with each other in order to bypass traditional telcos and lower the cost of connectivity from one independent VoIP company to another.

Further pressure will be put on all players on the American market as overseas companies will start targeting U.S. customers. Before year-end, at least one company will offer an unlimited calling to several countries plan. Other plans will provide unlimited calling to each continent. This will start putting pressure on established government monopolies in several countries, especially in Europe.

VoIP will also experience strong growth within the enterprise, with companies looking to open-source solutions like Asterisk to replace their PBX infrastructure with a lower cost alternative.

As all this happens, equipment will not only become cheaper but will also become much easier to use and install. Along with it, new sets will come out, with cordless VoIP offerings becoming much more common. Competition in this space will be on features available in new handsets.

With substantial portions of the phone network switching to VoIP, video telephony will start taking hold. However, the price of equipment will still be too high for those services to experience the kind of growth other sectors in the VoIP market will experience.

Entertainment Convergence

The convergence of the computer and other entertainment forms (television, radio, gaming, mobile phones) will continue, further blurring the lines in the convergence world.

With broadband now being the major way to access the Internet in the United States, Internet usage for new forms of entertainment will grow. Along with it, however, will be a continuing challenge to the established media order.

The challenges faced by the music industry with the introduction of Napster will now be the new reality for the movie and television industry. Five years ago, I started seeing the phenomenon emerge and believe the four step process of the digital asset dance will be full blown for the MPAA this year. The MPAA will spend part of the year suing companies and users for downloading movies. However, they are also better prepared that the music industry in that they are already offering legal download services like MovieLink.

While litigation will be one of the ways convergence appears on the front page, many providers will find a way to mine this new world for new dollars. Expect some companies to start offering legal download of television programs for a fee. As the Internet becomes the standard telecommunication infrastructure, content will start getting carried more heavily. Phone companies will start using this to offer bundle TV services with their DSL offering as a way to compete with the cable TV companies that have invaded the telecom turf. Before year end, at least one traditional telco will offer TV over IP. All that content will be protected by DRM systems, getting people more and more used to having less and less rights over the content they receive.

Meanwhile, on the wireless end, the introduction of more powerful mobile phones and the introduction of faster mobile phone networks will also play out in the favor of content producers. As voice traffic revenues continue to decrease, expect mobile phone companies to push data services such as downloadable movies and downloadable music more heavily. By year, MP3 will be the standard format for cellphones and Apple will offer a mobile phone version of the iTunes music store, allowing users to download music from the store and customize their phone with the latest hits.

On the non-Internet end of things, video on demand will continue the strong growth it experienced in 2004 and more programming will be offered in HDTV format, prompting an increase in sales of televisions and tuners that can receive those signals. Meanwhile, radio will follow the path taken by cable television in the early 80s. As satellite radio takes hold as the new “edgier” alternative to traditional radio, people will get more used to the idea of paying for radio. However, they will also require that those services be offered over the Internet as well as over the proprietary networks like XM and Sirius.

But not all content will be coming from big corporations. The grassroots will also play a key role in the distribution of online media in 2005. While podcasting has been the domain of a few geeks in 2004, easier to use tool will bring the phenomenon to the forefront and expect more audio services to be available from regular users. Following on the tail of this phenomenon will be an increase in videocasting from individuals. Much of it will be disappointing but a few gems will emerge, creating new stars who will emerge from the Internet and move on to more traditional media, based on the fame of their online offerings.

Business

Mergers and acquisitions will dominate the software world this year, as more companies realize that the only way into the enterprise is through a complete set of offerings. Expect several multi-billion dollar mergers and/or acquisition. In my mind, McAfee will be acquired or merge with either Symantec or CA; SAP will be acquired by Microsoft; Business Objects will be acquired by Oracle. As holds true for such precise predictions, none of this will actually happen the way I predicted it.

In late 2004, IBM left the personal computer business, selling its unit to Lenovo, a Chinese manufacturer. Expect the same to happen to at least one other PC vendor this year as the margins on personal computers continue to decrease, turning them into commodities.

Apple

Apple, which to date has resisted the price pressures other computer manufacturers have experienced, will introduce a cheaper version of their Macintosh. This, however, will not stem the continuing loss of market share they are experiencing. As Linux continues to grow, the Apple story in the computer business becomes more and more difficult and the company will increasingly rely on the consumer device business as its savior, building a new economy around the success of the iPod and iTunes music store.

The company will not, however, release a video player this year. Among some of the new features I would envision coming from Apple are:

• A flash-based iPod, which will be even smaller than the iPod mini and will be in the $100-$150 price range
• A partnership with a phone company to create a phone that will be able to download music from a special version of the iTunes music store and play MP3 ringtones
• An iPod with audio recording built-in
• A portable camera with iPod-like features
• A new way to send pictures from the iPod directly to printer via Airport express

While it focuses on the music business, Apple will not spend much time updating its laptop business. Adoption will drop in that part of the business as PC vendors start selling sub-$500 laptop PCs, making the iBook look expensive by comparison. Apple will try to enter the low cost market but not with a laptop: they will introduce a mac without monitor for under $500, offering integration with the iPod, and plugs to attach the computer to a television as its major features.

On the software end, the company will introduce a Word Processor and Spreadsheet program. They will release them, along with Keynote, as a complete package named iWork which will be aimed at students and small businesses. The package will be available for free on new computers.

Development

Blogs and RSS will continue their growth and will move strongly within the enterprise space. Adoption of RSS will continue its explosive growth but crest in 2005 as users start trying to find ways to cope with the information overload. New components in RSS readers will attempt to help organize RSS feeds but those basic efforts will initially fail and discussions will be set towards the end of the year as to the effective way to organize large amounts of data.

Weblogs and content management systems will start covering some of the same ground and enterprise will start using weblogs internally at the departmental level. Meanwhile, external employee weblogs will start becoming the focus of more litigations as corporation try to retain their intellectual property and fight the kind of transparency that comes from having employees talk openly on the web. Internal rules and regulations will be set in how employees can use blogs.

Meanwhile, in the development world, Service Oriented Architectures will continue being the approach to delivering next generation services. SOA will grow largely internally but some companies will start exposing some web services via XML to their partners. A new set of interesting new applications will come out as a result of those exposures.

Security and trust will continue to be big subjects and I suspect that trust will become an even bigger one with new standards emerging around the concept but no general agreement as to the best implementation.

Open source software will continue its strong growth, getting into more and more specialized fields. With the delays in delivery of Microsoft’s next operating system, Linux will continue to grow but complaints about price will start to arise. While the open source movement has offered free software, there will continue to be an increase in the price of supported version of the software.

Personal

I’ll promise to update the blog more often, will do OK for a little while and will then fall back into my regular pattern of a couple of updates a week. Or not… Either way, only the new year will tell.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2005 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

First of all, a correction to the previous entry: In that entry, I said that LightScribe was a silk screening technology. Steve Loughran, who worked on the technology, points out that

It has been likened silk screening, but it is definitely not: it is laser printing at v. high resolution onto discs.

This is an important distinction that I missed out on.

Another alert reader pointed out to me that LightScribe now has its own site. From there, one can learn more about the technology and licensing information.

More details:

• At the current time, LightScribe will work with Windows 2000 and Windows XP but support for additional operating systems will come in the future.
• The new technology will not have much of an impact on prices, adding only a few pennies to the price of disc media and a few dollars to the price of a computer.
• LightScribe-enabled disc drives will also be available as peripherals
• Basic printing will take about a minute to complete but more complex images can take up to 15 minutes to print.

I do believe that LightScribe has the potential of being a very disruptive technology for the media industry and, unfortunately, a boon to piracy, as it will lower the bar on creating professional looking CDs and DVDs. For example, what happens when someone downloads a whole album in MP3 format from a peer to peer network, copies those tracks to a disk, and then prints the disk’s label with LightScribe. How will one then know the difference between the original and a counterfeit?

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

The issue here is that if kids are perceiving file sharing as something that should be legal, they will probably not grow out of it. Half of the teens that were polled had downloaded free music and gave an interesting set of reasons:

Those who download music but have never paid for a download say they download because: They only like one or two songs on a CD (59%); They want to get music quickly (48%); They believe that music is too expensive to buy (46%); They want to get music for free (44%); They want songs that are not available for sale (40%); And they believe that music should be shared (38%).

There is hope though. If you look at those stats, stores like the Apple iTunes Music Store or the new Napster can satisfy over 50 percent of the public. The third point, however, shows issues relating to pricing. Obviously, the Internet has had an impact here as kids are probably more aware than their parents about the cost of music production. They are realizing that prices are artificially inflated to outrageous levels. What is needed here, however, is some level of education. While 46% saw music as too expensive, 44% thought it should be free. This is a huge warning sign for the music industry as it is seen as an industry creating no value. If I were working in that industry, I would worry.

At issue here too is the fact that some music is not available for sale. This is an interesting stat. What are those kids looking for? Any smart music marketer should investigate this one and make sure they start offering this content online. Could be a good way to unleash some extra value.

Last but not least is the fact that more than one third (38%) think music should be shared. Let’s not forget that this kids are the next generation which will come into the workforce in the future. If two thirds of them believe that lawsuits for file sharing are wrong and over a third of them believe that music should be shared, the RIAA will loose the public relations fight in the long run.

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

That’s a lot of things, if you think about it, for a single device but it points to a variety of possibilities. For starters, it makes it pretty clear that gaming consoles are growing up. With this device, Sony is signaling its intent to take its leadership in the gaming world and extend into a more widespread all/media space, serving as a home server for any bits that gets into the house.

The broadband connection, combined with DVD burner, hard drive, and an interface that includes video seems to point to the possibility of their offering a video on demand service in the future, as well as music on demand or something similar. The presence of the memory stick slot increases that chance as people could buy music online, burn it on the memory stick and play it in their Sony Clie or other Sony MP3 player. Alternately, this slot could be used to upload pictures from cameras that have a memory slot (and those cameras are made by… Sony)

The demonstration on the interface video seems to also point to the possibility of integrating video and music. Could it be the beginning of an integrated suite that would allow people who bought a Sony video camera to quickly edit their films, add some music from the Sony music store, and then burn it to a DVD or ship the movie over a broadband connection?

The presence of a TV tuner and hard drive should definitely send shivers down Tivo’s back, as it points to a built-in digital video recorder being pretty much a sure thing with this. With the DVD burner, one could easily then copy the shows to a DVD too!

There seems to be so many possibilities. Considering the fact that Sony owns movie studios, music studios, and gaming companies, it will be interesting to see how they shape their business model around this. Furthermore, it’s going to be interesting to see what Microsoft will try to do as a counter-move.

One question remains though, why is Sony coming out with such a device in late 2003-early 2004, when it is supposed to come out with the PS3 in 2005. Is there a chip in there (or maybe there’s something in the software) that would eventually allow for an automatic upgrade to the PS3 engine? Or could it be that the PS3 will be delayed to late 2005-early 2006, leaving this box as a stopgap measure before Microsoft comes out with Xbox 2?

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Sony to Introduce Media-centric Gaming Box. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

AAC seems like an interesting format. Thanks to the many people who have pointed me to Audiocoding, which provides a free GNU-licensed AAC codec. I would like to rescind my statement about it being a closed format.

However, still missing from the discussion is more openness on the part of Apple when it comes to explaining what they are doing with their DRM system when it comes to music. For example, why is it not made clearer on their site about the music store that you are only allowed to use a song on up to three different computers? What happens when I change computer? What if I want to use it on more than three computers? Of course, they recommend backups because if I don’t have them, I’ll have to buy the music again (couldn’t they keep track of what I purchased on the server and give me access to it? They already have my credit card info and my account info if I bought something there, right? And what if it just won’t play? How many Apple users actually know how to do this? I am a fairly geeky guy and that would be no problem for me but I somehow doubt that people who are buying macs for their ease of use would find this acceptable.

What I would like to see is a little openness from Apple. If you’re going to lock down my tracks, fine… as long as you tell me! Why is Apple locking up files on my computers without asking me first?

The next question surrounds the computer authorization scheme. Do I really want Apple to know what’s on my computer? After all, what information is given to them when I authorize a computer? We already know what information they gather when you create a user ID and their privacy policy states that Apple may occasionally share your personal contact information with carefully selected technology companies. So, after I register a computer, not only do they know who I am, but they also know about my computer (where is the privacy policy for what information they gather about my computer?) The track registration scheme that Apple is putting in place seems suspiciously similar to Microsoft Passport.

The difference, many will say, is that Apple is not Microsoft. Well, considering how carefully, they protect their trade secrets, I am worried about what they could do with information about me. Call me paranoid if you want but it seems to me that Apple is becoming a parody of itself. In 1984, with their famous mac ad, they showed themselves as fighting big brother. Wouldn’t it be ironic if they were to become what they were fighting?

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 1984 Redux. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The problem that I have is not with Apple in particular but with the approach they are taking. At the current time, MP3 is the closest thing there is to a standard for sound on the Internet. To offer something that deviates is no a problem as long as that something is an open standard that can be implemented on other platforms by other people.

With the choice of AAC as the new standard, Apple is going the proprietary route and that’s what I disagree with. There are other standards out there that offer better compression than MP3 (Ogg Vorbis, for example, seems to be a good alternative and happens to be an open format. So while Apple is selling the “better compression, smaller size” gospel, its only interest in AAC is that it allows for them to lock things down for now as AAC is only supported in Quicktime and iTunes, two products offered by Apple.

Also not touted in yesterday’s announcement was any mention of Apple’s new DRM solution. According to an article on Sunspot.net, Apple was not that concerned about compression when it decided on AAC. The article mentions that Apple would forsake the familiar MP3 format, which lacks the ability to embed DRM, in favor of a DRM– capable format called Advanced Audio Coding (AAC). Whatever the extent of Apple’s DRM, it must be firm enough to quell the record companies’ fear of piracy. How come that part was left out of yesterday’s announcements?

The reason I am suspicious of the offering is that there is little mention anywhere as to why the music industry would license its music to Apple and give such a hard time to anyone else. My suspicion is that there are some agreements between Apple and the music industry that we are not made aware of. After all, why else would Hillary Rosen, head of the RIAA, call the service a fresh start in the whole online music scene?

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 Are the Digital Rights?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A quick search on the Apple site reveals that AAC stands for Advanced Audio Coding and that’s a format that works on well, it works on the mac and on the iPod. If you want to carry that anywhere else, you can’t.

OK, well, I’m a programmer and that’s a new sound format, maybe I can write a decoder. So where’s the format. Oh, here it is. What, I have to pay to read the standard? What if I wanted to develop a free decoder? Oh, right, I would have to pay for that too!

Oh well, back to my regular MP3 collection then. At least I can use it either on my PC, mac, and existing MP3 player. I don’t have to be locked into a particular OS, use a particular player or a particular computer. Until someone offers that, there won’t be a viable music service out there and I’ll be forced to keep buying CDs, burn them to MP3 for easy travel and storage (a single disk filled with MP3s can contain several albums!)

Hello, music industry, here I am! I want to pay for tracks but I want them to be MP3 because I already have an investment in hardware and software around that. I a willing to pay (*waving credit card*) but please give me what I want. Apple has the right idea (99 cents a track, nothing else required) but the wrong format (I do NOT want to be locked in!)

Don’t tell me the new format is better. I don’t really care. I didn’t care when Microsoft made the same argument with Windows Media Player so why should I listen to the same argument when Apple makes it. What I want, plain and simple, is a service that will allow me to download, for 99 cents per track (hey, cheaper if possible), a real MP3 that can work on my mac, on my PC, on my MP3 player, on my DVD player… well, you get the idea. Once a format is ubiquitous, why try to change it?

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

As many of you already know, the game station is a small box that attaches to your TV and on which you can play video games. However, the firepower of new generation boxes now on the market is now equivalent or higher than that of most computers. The main logic behind this was that gamers wanted a more realistic experience and crunching 3D representation in an ever-changing environment required more and more processing power.

Playstation 2 opens the gate

Last year, Sony introduced the Sony Playstation 2, a new gaming system that included a built-in DVD player and a 3D graphic engine that made computer video card look ridiculously outdated. At that time, Sony admitted that their goal was to go beyond games and control the digital living room. Recent partnerships with Macromedia, AOL, and Real Networks seem to show that Sony has established a clear roadmap as to how it would get into the online market. And with a growing installed base of (8 million so far, and an expected 34 million by 2004), Sony could become a major online player.

Microsoft unveils the Xbox

Having survived the browser wars with Netscape (Internet Explorer now controls 80% of the market), Microsoft is starting to worry. If one could download music and exchange videos via a gaming station, as well as play video games, where would the home PC go? And where would that leave Microsoft’s ambitious .net strategy?

As a result, Microsoft had to play in that field and to do so, it went to game developers. After much discussion, the result is here for everyone to test: it’s called the Xbox, and is essentially a PC packaged as a gaming station. If you read the documentation, the Xbox becomes more difficult to classify as simply a gaming box. For starters, there is a DVD player, which was added just to match Sony’s Playstation 2 DVD player. But Microsoft goes further by building a Dolby decoder within the system as well as adding parental controls to the box.

The second thing they added to the box is the ability to put in a CD, play it, and burn it onto the built-in hard drive (through what they call a music manager). All of a sudden, the Xbox becomes a music stereo box.

Going further is the matter of the Ethernet port and the mysterious broadband network touted by Microsoft. Early inside reports point to the first broadband gaming network that might go beyond gaming. At the current time, there are rumors of a network that would also allow for Internet browsing, email, and instant messaging, as well as gaming.

The messaging portion is an interesting one since it would include and optional plug-in for the box called the communicator, a headphones and microphone device people would use to communicate either via IM, or while playing online games. The unit includes a wireless headset with microphone, which could easily be used to make phone calls if Microsoft uses some of the technology it is currently building into the Microsoft Messenger. Long term, the Xbox could become another entry point into MSN, and into the web as a whole.

Moving forward: the Playstation 3

Sony, however, is not resting on its laurels. Now that Microsoft is entering its turf, the company is seeing its dominance on the digital living room being challenged.

With the PS3, originally slated for mid 2003 but possibly being released earlier, Sony plans to integrate offerings from its music and movie divisions into the system.

Considering the fact that the company already offers a suite of MP3 players, it is easy to see that the company will build that functionality into the next box.

Rumors are that the company will build a large hard drive within the box, which would make it a perfect storage area for an MP3 collection.

But going beyond music, the company is also looking at packaging a digital TV recorder within the unit, turning it into a device that would compete with Tivo and Replay in the market for customized television.

Also built into the box would be a TV tuner, and rumors has it that the system would also include a satellite TV decoder. In order to counter the online capabilities of the Xbox, Sony will release an online pack for the PS2 but will build that functionality directly into the PS3 box.

The unit would be offered in two different version: a light version, which would focus on gaming and be sold for around $250-$300 and a more expensive full featured convergence version which would retail for $400-$500.

Games Only: The Game Cube

Meanwhile, Nintendo believes that games and only games is what consumers want out of their boxes. As a result, the GameCube is a smaller, less pricey gaming box. However, this does not mean that it is offering less performance. It’s just that it’s a different take on the world. As far as Nintendo seems to see the world, gamers will want to pay no more than $200 for a gaming box but may be willing to pay extra for new features.

In a concession to Microsoft and Sony, the box will soon sport two different modem adapters: a 56k module for people who use a phone line and a faster broadband module for people who have a network at home. Rumor has it that Nintendo is preparing a membership network with services like online video game, full Internet access, and the distribution of music data. Since the GameBoy advance can interface with the GameCube, it seems that Nintendo is working on a hardware strategy that will make the gamecube a connecting station into the home, while the GameBoy will become a roaming device that can get updates from that box.

Convergence is here

Based on those recent developments, it seems pretty clear that hybrid boxes are now starting to pop up and that we will soon see more applications (initially in the gaming world but eventually in other areas) become the norm. I would strongly recommend that TNL.net readers who are involved in developing online consumer applications pay attention to the gaming space as it is the next arena for which we might have to format our outputs. Based on early showing, I would say that Playstation 2 will keep its predominant position for the next year or so but may be getting some competition from the new underdog in this arena: Microsoft.

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 Convergence Game. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Ogg Vorbis is a fully open, non-proprietary, patent-and-royalty-free, general-purpose compressed audio format for high quality (44.1–48.0kHz, 16+ bit, polyphonic) audio and music at fixed and variable bitrates from 16 to 128 kbps per channel

according to a statement on the official Ogg Vorbis site.

MP3 was designed by committees so it ended up with a bunch of useless junk in it says Jack Moffitt, project manager on Ogg Vorbis. Because we designed Vorbis from the ground up, we have streamlined a lot of the technology and created better algorithms for encoding and decoding.

The new format, which uses the extension .OGG, was developed as an alternative to MP3 and already has a long history. Seven years ago, Chris Montgomery, now one of the leaders on the Ogg Vorbis project, wanted to burn his CD collection to his computer. However, the hard drive he had at the time was too small to carry a lot of files. Montgomery started to write some audio compression software libraries to fit more files on his hard drive. He ended up developing a complete CD ripping package called CD Paranoia. A couple of years ago, Moffitt called Montgomery and asked him if he wanted to join ICast, a CMGI backed start-up that was to revolutionize the music industry.

Meanwhile, MP3 was developed at the Fraunhofer Institute in Erlangen, Germany, under the leadership of Dieter Seitzer and Heinz Gerhauser. Fraunhofer did not seek to collect royalties on decoders or from companies using MP3 to stream music. However, Fraunhofer announced last September that it would begin to seek royalties. Under the new MP3 license, software producers and hardware manufacturers would have to pay five dollars per copy of their software or hardware sold. Furthermore, MP3 sites would have to pay one percent of their revenues or one cent per download to distribute MP3 encoded files. Fraunhofer Institute has licensed its rights to Thomson Multimedia, which collects the growing patent royalties.

While ICast ended up closing its doors, as many other dotcoms did in 2000, the project continued. When word spread that MP3 could become a fairly expensive solution, Ogg Vorbis started getting more attention from software manufacturers, hardware makers, and the general music community.

Among the features that Ogg Vorbis developers tout as an advantage over MP3 are better sounds, smaller footprint and better recovery when streaming a file. “MP3 uses filter banks to encode the signal and MDCP to decode it, which results in a loss of quality,” said Moffitt. “Vorbis skips the filter bank and relies solely on MDCP, which means that we end up with smaller files for the same quality or larger files with better sound”.

Another reason for the better sound Vorbis offers is that it supports multiple channel encoding. Initially, MP3 only encoded a left and a right channel, to direct the sound to a two speaker set and create a stereo effect. However, new technologies and an increase in the average number of speakers in audiophiles’ household means that some harmonics are lost in the process. Vorbis allows a person to encode their sound file across multiple channels, which gives the sound greater depth. While Vorbis developers claim that it is the only codec to support multiple channels, some have their doubts. “I think all state of the art codecs today have capability for multiple channels encoding” said Gary Greenbaum, codec group manager for Real Networks. “If you don’t support multiple channel encoding these days, you’re not even in the game.”

On the streaming end, Vorbis can also chop up just a few packets instead of going between streams. Broadcasters just need to encode their signal once and use the adjustable bit rate depending on bandwidth. “One of the nice thing in Vorbis is that it’s built to support bitrate scaling said Moffitt. As you go through the packet, you need less and less data. If the bandwidth drops, you’ll get a slight quality reduction but you will still get audio and because we can we can adjust the bitrate on the fly depending on a bandwidth. Real Networks’s SureStream on the other hand, just switches back and forth between different signals instead of adjusting the signal on the fly.

We’re going to the people producing music and the people producing software and ask them to convert, not to the users” he added, mentioning that Vorbis was already included in a few gaming development packages like F-MOD and Open AL.

Furthermore, the audio format is now supported by a number of music encoding software packages like the popular SIREN Jukebox 2.0 from Sonic Foundry and the PhatNoise Music Jukebox. “Our goal is not to kill MP3,” said Moffitt. “Digital music may always be called MP3 but I won’t necessarily be in the MP3 format.”

On the distribution end, Ogg Vorbis is currently supported in Freenet, Gnutella and Napster has announced that it will support the format in the 3.0 version of its client. “It’s been really amazing,” said Moffit, “all the players have been coming to us, telling us that they would use the technology in their packages. Michael Robertson of MP3.com was an early supporter of our technology and a lot of his developers are familiar with Vorbis.”

Beyond the MP3 licensing issues, one of the reason given for releasing a free open source codec was free speech. “If you are talking about paying royalties to a company, it can impede free speech by giving that company the possibility to decide who uses the technology and who doesn’t” said Moffitt, adding that Radio Free Serbia, which was instrumental in the democratization of Serbia, was running Ogg Vorbis through IceCast as their streaming technology. Another example of an organization using Ogg Vorbis for online protest was that of KPFA, an online radio station set up by fired employees of a San Francisco area public radio station as an alternative to the station they had all been fired from due to a format change. “Combine Ogg Vorbis with Freenet and all of a sudden no one can stop free speech,” said Moffit.

But while it is supported in the Sonique player and there is a plug-in available for the WinAmp player, few of the larger audio player companies have given much support to Ogg Vorbis. Anne Burkart, spokesperson for Winamp, said that native support of the Ogg Vorbis format would “depend on where things go in the market and industry,” stressing that “the philosophy behind winamp is to remain format agnostic.”

“We’ve done our due diligence on it and we don’t believe it’s state of the art,” said Greenbaum. “At the current time, Ogg Vorbis is a very weak signal we’re listening to. Furthermore, we’ve heard that there may be some intellectual property issues related to the Ogg Vorbis codec.”

Whether this is true, analysts say Thomson and the Fraunhofer Institute are likely to file patent lawsuits the moment Vorbis appears to be a viable market candidate. By creating a perception of uncertainty around Vorbis’ future, MP3’s parents could prevent conservative digital music companies from adopting it.

“The best solution around the IP issue is to have them write their own plug in,” said Greenbaum. Moffitt is already working on a RealPlayer plug-in for Ogg Vorbis, which he intends to release in February, after beta 4 of the encoder and decoder are released.

Microsoft has no plans to support Ogg Vorbis in the Windows Media Player, according to a Microsoft spokesperson, who also pointed out that the recently unveiled Version 8 Windows Media audio and video technology provides nearly 3 times the amount of near-CD quality music compared to MP3 technology. While Ogg Vorbis developers have looked at Microsoft’s technology, they are not developing a plug-in for the Windows Media Player. “Microsoft is destroying the efforts of other people because they don’t give you any SDK for making extensions or adding new formats in the Microsoft media player,” said Moffitt. “As a result, they are slowing down progress in the audio industry as a whole.”

But support from the industry may not be as easy as it appears. MP3 has ingrained itself as a de facto standard and the licensing issues may make it more appealing to the RIAA, which has been looking for a way for music companies to get remunerated for online music. Right now, we’re trying to focus on the audio technology, admits Moffit, adding that digital rights management companies can write wrappers that go around Ogg Vorbis to distribute the files but security is not our primary concern at this point. We just want to develop an audio format that is more open and sounds better than MP3.”

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Ogg Vorbis: MP3 Contender?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The genie is out of the bottle

Yet, I can’t help but believe that the shutdown of Napster will not do much in terms of limiting distribution of online music. People will now move to alternative services like Gnutella and Freenet. In other words, it’s time for the recording industry to face the music.

Shawn Fawning and his crew did, in the words of the judge,

create a monster

but I seriously believe that if the goal of the RIAA is to stop widespread distribution of digital music, this lawsuit is a moot point.

Back in March, I talked about Gnutella, a Napster-like client/server applications that escaped from AOL’s vaults. Since then, Gnutella use has increased, largely due to the fact that Napster was being sued and that Gnutella has no controlling authority. Since no one is officially in charge of Gnutella, no one can be sued. And since the service can’t be sued, it’s a much tougher one to deal with as far as the recording industry is concerned.

With the shutdown of Napster, I believe that people will look for alternatives. After all, 20 million people have gotten hooked on the chance of getting free music, why would they immediately stop? And Napster, the phenomenon, will live on, as more Napster-like tools start proliferating around the net.

So what should the music industry do? Should it go out and try to shut down every single such service that pops up? I seriously doubt that such an effort would succeed. What I believe they should do is look at ways to use those tools for promotional uses and try to create a new revenue scheme for online music.

New revenue models for online music

Subscription: One of the most popular model being floated around in terms of making money from online music is the concept of subscription-based all you can eat models. Emusic is a pioneer in that space, now offering a monthly $19.99 subscription giving users access to 125,000 MP3 tracks. I believe this model is correct but I am still having a hard time with the price. The basic question is one of price. Why would people pay as much for music as they do for connectivity? I believe that this model will work only if the price is lowered to around $10 per month.

However, I’d like to offer a couple of different models.

Music as premium

: In the United States, there are two kinds of cable TV service: basic and premium. The basic set allows you to have access to a large number of advertising-supported TV stations. The premium channels are available for about $10 each and are offered without any advertising. They usually offer movies and special programming not available anywhere else. I believe that an ISP could look at a similar model. Pay $19.99 for basic access and, for an extra dollar amount, $5 to $10 maybe, get access to a music collection. There might be some incentive for particularly new music sets. Or companies could offer certain songs for free, as a promo, and give access to the full album or collection for a few more dollars. That way, the music industry gets some revenues from the distribution of digital music and everyone’s happy.

Digital Jukebox

: This is a little more complicated technically as it requires some kind of micropayment mechanism. Basically, think of it as Napster with a pay system. Songs would be available in a model similar to Napster but, for each song, a price would be attached. This price would have to be equivalent or lower than the price the user would pay for a CD, and the user would receive a bill at the end of the month for the total amount of dollars they have to remit. Access to the service would still be free but some of the songs would cost money. As a result, the music companies would see the revenues they think they are losing and post some of the promotional material for free. However, the problem with that particular approach is that it does not cover replays. As a result, a user may download a particular song for � cent and not have to pay anything extra. A possible solution to this issue would be to take the cost of a CD, subtract the production costs, divide the remaining number by the number of tracks on the CD (let’s assume that, on average, the production costs for a CD, its case and its cover is around $3. If that CD sells for $12 and has 10 tracks on it, each track would cost 90 cents) However, in order to make this truly attractive, this would still be considered a high price. Drop it by a factor of 10 or more and it may start becoming low enough for people to consider it.

Pay-per-minute model

: This would be somewhat similar to phone service. Users would pay for minutes of airtime on a service. However, the price would have to be low enough to make it tempting for the users. Something along the lines of a portion of a cent might be reasonable.

Advertising-based model

: This would essentially have the music label distribute the music around the net but tack a front and a back bookend advertising message. They would charge advertisers a premium, as the message would be played every time a song is run. Even though I am suggesting this, I’m still dubious as to its effectiveness, as users might find a way around it.

I don’t believe that any of these are the sole answer but I am putting them out as as suggestions. If evolved properly, they could be the beginning of a new way to sell music.

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