Understanding iTunes LP and iTunes Extras

For the near future, Apple’s dominance in the mobile entertainment market will remain uncontested. Entering its 8th year, the iPod has successfully morphed from an interesting new player in a small category into an all-purpose platform spanning the breadth of the audio consumer electronic landscape, portions of the mobile phone business, and while its AppleTV business is still lagging, the introduction of iTunes LP can easily be seen as part of a revamp for that platform.

The company talked a fair amount about the ability to add extra content to music tracks, forming an experience that is much more akin to that of a music LP. But let’s stop for a second and think of what a stereotypical Apple customer might look like? Somehow, the immediate image that pops in my mind is not someone who was born prior to the late 70s.

Sure, now that the iPod line has established itself as the dominant line in the portable entertainment consumer electronics world, one can see a lot of people over 40 sporting the devices but truth be told, most of Apple customers are probably younger and, to them, LPs are either something that belongs in a museum or falls in the category of music snobs. The sit-back experience and add-ons that came with most LPs is not how they have ever experienced music and it is highly probable that they will not change their behavior because Apple believes that retro is cool.

The music experience is more of an ambient one, where the track itself is the thing and where even music videos have mostly fallen by the wayside (YouTube killed the video star?) In today’s short attention span world, extra attachments to media exists in two places: on DVD and on BluRay disks, technologies best experienced when dealing with a TV screen.

In fact, when delving into the details of the iTunes LP specification,developer Jay Robinson discovered the following:

The LP frame seems to have a width and height of 1280×720. This is nice, but means I get ugly scrollbars all over my 13″ MacBook screen.

The resolution seemed interesting as I remembered it from somewhere but had to think about it for a few minutes (I’ll get into that in a the next paragraph) but it was fascinating to me that one would experience ugly scrollbars on a MacBook. Say what you want about Apple products, ugly is not something that generally comes to mind. In find, the fact that things were ugly on a computer monitor immediately gives us clues into where Apple may be going next. Since we can safely assume that Apple would not push something ugly out the door, we can also assume that the 1280x720 resolution is no fluke. And since it looks ugly on a MacBook, we may think of where else this type of media can be consumed.

720p?

1280 x 720 is the kind of 16:9 ratio that is found in a 720p high definition video mode. That mode has become more or less the default low end mode for high definition and is how most television broadcasts in the US and Western Europe are handled. It is also a format that most plasma or LCD TV can handle. But also of note is that it is the highest resolution format offered in terms of movies and TV shows sold through the iTunes store, and the highest resolution HD video resolution now supported by AppleTV players.

So we now have a clear sign that the iTunes LP content seems specifically formatted to be best experienced on a TV screen and it seems that Apple’s recommendation would be to use an AppleTV to do so.

And then, this week, Apple retired its low-end AppleTV and dropped the price of its mid-range (now entry level) offering by one third. Such a move is not just based on the idea of moving units but appears to represent a potential need for disk space and anyone who looked at the size of a DVD or Blu-Ray disk can attest to the fact that such video offerings can chew up space relatively quickly. And extras tend to add a fair amount too, which seems to increase the need for space if you are intent on renting or selling DVD or Blu-Ray like content via the Internet.

Add to this the general reluctance Apple has had to supporting Blu-Ray in their computer hardware platform (the main advantage of Blu-Ray, according to its advocates, is the ability to display video at a higher resolution format than 720p) and it seems Apple is gearing up for an assault on that category (especially since the problem of extras is now solved by iTunes Extras).

720p Recording

Meanwhile, on the Mac, the new operating system came out with a version of Quicktime that removed ability to support plugins for extensibility. While Apple is already a strong player in the video editing world, offering both professional (Final Cut Pro) and consumer (iMovie) tools, it is also interesting to note that they are starting to introduce light editing video capabilities directly into the operating system.

We already know that the iPhone 3G S can record video, a key feature of the offering, and we’ve just witnessed the introduction of video recording capabilities within the iPod Nano (and we can assume that it’s only a matter of time before the iPod Touch gets its own video recording capabilities) but here’s where it gets interesting: the iPhone 3G S could theoretically shoot 720p video as all the hardware to do so is there.

The rise of YouTube and the success of Flip cameras have shown Apple that a portion of the consumer market is interested in recording and viewing video. While the YouTube offerings tend to be generally of a lower video quality, the introduction of 720p as a default recording chipset in Apple’s offerings appears consistent with the company’s attempt to cater to a higher end whatever market it enters.

So it would seem to be a normal progression for Apple to eventually move its product lines to producing 720p content that can then be redistributed.

Today, that exporting can happen via synchronizing one’s iPhone’s GS or exporting content to iTunes, YouTube, or MobileMe from Quicktime X. MobileMe and YouTube appeared to make sense but why export to iTunes?

A user generated marketplace

The success of the iPhone as a development platform has surprised many, myself included. In the short span of a few years, Apple has created a marketplace that is rumored to be selling US$200 million a month’s worth of application software in increments of about a dollar. If you’re making 30 percent of that revenue by hosting the apps and handling the distribution, you might notice.

I would venture that there are now a number of discussions around Apple as to how to reproduce this phenomenon across other categories. With the rise of YouTube, Last.fm, MySpace, and other, Apple is now also witnessing the rise of the independent and while the company has had some success in bringing video content to the iTunes store, it has not been able to get the rich margins it is getting from the music industry (something the music industry now appears to regret) and from iPhone developers (who, for the most part, are not large companies) from TV and movie producers.

True, the company now offers rentals and sales of video content but what if it could open up a marketplace where every independent content creator could distribute content? What if independent movie-makers or musicians could sell directly through the iTunes store and provide content on all the apple platforms (TV, iPod, phone, computer) with a single click. I suspect that many would be willing to give up 30 percent of their revenue in order to get to that public.

The components all seem to be there and it seems to me that it won’t be long before Apple starts pushing the idea that we are all content producers (an old idea at Apple, which was at the source of their creating the iLife suite) and we can all make some money at producing that content. Having done so, Apple would not only have control of the music industry but could also assert itself in the TV and movie space.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple Storms Hollywood. 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.

Apple

Scored well on the introduction of the Apple mini, which represents Apple’s entry into the lower end market. However, no video iPod this year, only a photo one, leaving Apple far, far, away from the movie downloading world.

On the computer end, Apple did not introduce a G5 portable. Wishful thinking on my part, true, and still a wish I hope to see fulfilled in 2005.

Convergence: Music Stores

As expected, Apple has solidified its relationship with AOL, offering the iTunes store under an AOL login. However, the store is not fully integrated within the AOL service.

As predicted, the world of online music is now divided into two camps: AAC and Windows Media. However, the surprising move was from Real Networks, which was the first company beyond Apple to adopt the AAC format.

Convergence: Voice Over IP

As predicted, voice over IP has had tremendous growth in 2004. AT&T’s exit from the consumer market can be seen as a move to reorganize around land-line offerings. Also of significance this year was the introduction of VoIP services from most of the big telco player.

Regulatory discussions are now exploding, with telcos pushing for deregulation as “a way to compete” against the new players in the field. At the same time, the same traditional companies are pushing for regulation of VoIP businesses.

Wireless: Wi-Fi phones

Dead wrong on that one. Maybe next year!

While WiFi continues to progress at high speed, the introduction of phone services using such service is limited.

Business: Revenge of the Internet companies

Google did its IPO as expected and that went very well. Other Internet companies also went public this year but one can hardly talk of coattail effect.

On the bright side for investors, my predictions about the decline in stock prices for the big players did not pan out. However, I still maintain that the stock prices of companies like Ebay, yahoo, and amazon are too high.

Business; Sun in Trouble

As expected, SUN continues to have trouble financially but I have to admit I was wrong in terms of what I expected them to do. They are still in the SPARC business and are still pushing Solaris as their main OS.

Development: Standards at the forefront

This one was an easy one. As sites like ESPN and Wired moved to new standard formats, more and more people and companies are getting interested in more standard compliant code. Not a headline grabber but definitely a strong move.

Society: Social Networks at the core

Wrong, wrong, wrong. Social networks were slowly moving but not really getting more important this year. Their integration with search could, however, yield great potentials.

Politics: Internet comes of age

The Internet did come of age in this election cycle but Howard Dean did not win the democratic candidacy. However he, and other groups, managed to use the Internet to mobilize millions of people. The Republicans, on the other side, used the power of conservative bloggers to attack candidates (for example, the Swiftboat veterans for truth) and then take on the establishment (Dan Rather and Memogate).

Coming Soon: My predictions for 2005!

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2004 predictions: Recap. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Much has been made recently of the battle between Apple and Real Networks. After their attempt to partner up with Apple were rebuffed, Real Networks introduced a new product called Harmony, which allowed songs bought in the RealPlayer music store to be played on an iPod. Of course, Apple was shocked and threatened lawsuit.

In a way, the reaction by Apple was to be expected as they were trying to create a new bundle around the online music business. Their model is not one of album sales but one of an integrated media package that includes both a device (the iPod) and a service (the iTunes music store). This contention is encapsulated in the way they present their offering on the Apple site. The tab at the top of their pages clearly states “iPod + iTunes” and the company sees them as part of the same offering.

By introducing a different way to buy and manage music on the iPod, Real Networks attacked the heart of Apple music strategy, unbundling the device from the service. While Apple may win a lawsuit against Real, the damage is now done as people now realize that Apple is working on creating a lock-in around the iPod but it is possible to undo it. Virgin has already filed a lawsuit about the impact of that effort so it looks like Apple will have to relax its control in order to win in the long term.

So what should Apple do in order to ensure that they are not taken down by this issue. First of all, they should realize that fighting the issue is a loosing battle. In a way, their reaction is similar to the reaction other digital assets handlers have had: Ignore the problem, panic, litigate, and accept. By ignoring advances from Real, they created the problem. Then, with Real announcing Harmony, they panicked and threatened to litigate. The only way they can win is to accept that the business fundamentals have changed and look for a better approach. In their case, the question is whether they want to win in the short term (keeping their stance and letting another vendor eventually offer something better) or play a somewhat less dominating role in the future (agree to a Fair Play market where others can sell music to go on the iPod and keep sales of the device strong while innovating to stay competitive on the music store end).

To borrow a turn of phrase from Oscar Wilde, the only way to get rid of a modular by design issue is to yield to 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 Modular by Design — Digital Music Downloads. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Apple

Apple will come out with a new lower-powered, lower-cost version of the iPod. The idea here is that they want to extend their lead in the digital music space and use the iTunes music store as a leverage for selling more iPods. From there, I suspect they will introduce a new low-end iPod which will follow the existing iPod line and offer less hard drive space at a lower price. In conjunction with this announcement, they will introduce a new line of iPods that offer support for both audio and video. From there, we might see a tentative move into the digital video space, with the possibility of their extending the offering on the iTunes music store to include downloadable music videos. Later on in the year, rumors will go uncofirmed as to whether Apple plans to introduce a downloadable movies service.

Apple will also announce the release of a new class of laptops powered by the G5 chip but offering lower speeds than their desktop counterparts, due to issues relating with chip cooling.

Convergence: Music Stores

As more music store follow Apple’s lead, we will see at least one other site (probably Wal-Mart’s) offering downloadable AAC files and follow Apple’s lead. On the other side, Apple will announce that it is solidifying its relationship with AOL and offering the iTunes music store as a component of AOL.

The recognition that the online music business is a low margin one will force many players to reassess their strategy, with consolidation ensuing in that market and solidifying across two standards: Windows Media Player files and AAC files.

Convergence: Voice over IP

2004 will be a big year for Voice over IP with many companies offering Internet telephony products in both the small and medium business arena and the consumer one. As major telephone companies unroll their offering in that arena, thoughts will go to redefining what a telecommunication company is about and new consolidation and splits will see phone companies reorganizing around two business models, either as utility providers, providing the infrastructure (the hardwired lines that go into a house or office), or as service corporations, providing services that run over those lines (the voice telephone will begin to be thought of as a service instead of a utility).

By year end, there will be a lot of discussion as to what those companies are about and calls to reshape the regulatory dialogue on what a telecommunication infrastructure is about. The other discussion on regulation will go towards figuring out how to deal with pricing models on communication services as the new services will destroy the concept of local and long distance.

Wireless: WiFi phones and integration everywhere

A big surprise will be the rise of mobile phones that use Wireless Internet connectivity (Wi-Fi) and voice over IP to allow users to place calls using the Internet infrastructure.

Data services will become more prominent in mobile phones, led by camera-phones, which will increasingly be used for multimedia messaging, and the introduction of some videophone services. As mobile phone companies see more pressure on their voice services, due to the introduction of WiFi phones and continued pressure relating to number portability, they will look to data services as a new source of income.

Business: Revenge of the Internet companies

Internet business will be in the headlines again as Internet companies show they have built successful business models based on profit instead of promise. As a result, investor confidence in Internet stock will return with an increase on stocks of companies that show they can use technology to lower costs and increase productivity.

In parallel, venture capitalists will start investing in new technology companies. Much of the money that has stayed dormant for the last few years will be invested in new companies that focus on services in the infrastructure, security, and interconnectivity arenas.

Of course, the big initial public offering of the year will be Google, which will generate enough excitement in the investment community to have a coattail effect on other Internet stocks.

On the downside of the investment picture, the stocks of Amazon, Ebay, and Yahoo will loose value as investors realize that their price/earning ratio are out of proportion compared to the rest of the market. Amazon will try stemming the losses in their share price by announcing that they are moving to a new strategy: offering a complete set of hosted services for retailers who want to lower their cost, instead of just being an online retailer on its own.

Business: Sun in trouble

Sun microsystems will see itself in a difficult situation as it finds itself squeezed on the lower end by Linux, which will continue to eat Solaris’ marketshares, and on the higher end by Linux, which will increasingly be seen as the way to go when it comes to large scale applications. Companies like IBM and HP will offer utility computing as a “better approach” for large scale applications, running them on mainframes instead of large numbers of blades.

On the educational end, Sun will lose marketshares to Apple, which will be pushing its G5 and OSX platform as a better alternative.

In a dramatic announcement to save the company, Scott McNealy will announce that Sun will abandon Solaris and move completely to Linux by the end of 2005. The company will also look to sell its SPARC processor business, with either HP or IBM picking it up, and announce that it is moving to a new hardware architecture, based on chips produced by another company.

Development: Standards at the forefront

Many large scale businesses will realize the value of building Internet applications on open standards like XML, XHTML, and CSS. As a result, the redesign of many major corporate sites will support those standards and an increasing amount of time will be devoted to making websites more accessible.

RSS will also experience a major growth curve as more and more people become aware of the power offered by such a subscription model. Much discussion will be paid to defining business models for delivery of RSS with media organizations trying to figure out how to distribute advertising in their RSS feeds. Initially, the Internet community will denounce the introduction of ads in RSS feeds but will come to admit it as a necessary evil later on in the year.

Society: Social Networks at the core

While services like Friendster, Tribe, Ryze, and pluggedin received a lot of coverage in the tech sector last year, many investments in the sector will fail as companies just look at social networking as yet another feature to add to their site. The existing players will either merge or be sold to companies like AOL, Yahoo, or Microsoft, which will add social networking as another component in their online product offerings.

Apple will be the surprise player in this new arena, using OSX as the basis for a new social networking platform that will merge their address book application with mail, calendaring and chat services to provide an end to end solution on user’s desktops and offer added services through their .mac platform.

Politics: Internet comes of age

Much of the US presidential campaign will be using the Internet as a political tool to organize supporters and raise funds. The early lead taken by Vermont Senator and democractic presidential candidate Howard Dean will help him win his party’s nomination. Using the same tools during the general election, Dean will try to ignite the general democratic base in a fight against George Bush. The Republican party will enter the election season with a similar set of tools and much of the campaign will be fought online with some potential scandal arising out of one of the candidate’s site being hacked. As a result of the Internet battle, record numbers of voters will show up at the polls in November.

Of course, TNL.net will continue reporting on all this and show how wrong all those predictions were at the end of year.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2004 Predictions. 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.

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

His pointing out the fact that changes in behavior show that most people will steal music and movie content on the Internet is largely due to the fact that there are no clear alternatives. Attempts to offer a crippled service like the new Napster or Pressplay are not enough (After all, if I pay for a service, why does the stuff I downloaded expire). Give us an all you can eat legal buffet at a price point that does not gouge us and we will come. Or start paying the artists and your case will be stronger when you tell us that we are starving them.

Right now, many people pay for cable TV. Basic price gives you some access but other channels (like HBO) cost extra. However, people can still record shows and movies once they paid. Why can’t the same be true of music? And why do I have to follow the path the media industry is setting to get my content (for example, why do I have to go to a movie theater to see a first run movie? Why can’t I get access to it either on DVD, pay-per-view or online download on the same day? Yes, this would completely change your business model (couldn’t sell as much soda, advertising, and tickets at the movie theater) but it might be what the customer wants.

A possible way to change this would be to keep charging the same price for movie theater (and enhance the movie experience by getting rid of those commercials before the movie), offer the DVD for premium rental only at an initial point (for example, I could get today’s release from the corner store for $25, hence avoiding the ticket line and watching the movie on MY schedule (if I want to see the movie at 7:30pm or 8pm or 7:54pm, I currently have to find a theater that matches my needs). In the same fashion, I could open up a video on demand feed either on my TV and/or computer and watch the movie at my leisure for a 24 hour period.

Just a few random thoughts (and I just came up with those off the top of my head so there might be others out there): Start thinking of how your business will evolve or suffer the same fate as the dinosaurs.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Memo to Media Execs. 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.

At the item level

: This would allow us to specify a particular date for an item. I think it would be nice for those of us who have several days’ worth of content in their RDF channel.

At the channel level:

These could be encapsulated in to an section that would include all links to outside of the channel.

: Much like points to the page the channel is for could point to a page of information about this channel. this could link to a FAQ or more information about the channel.

: Points to a page where wireless devices can go.

: Points to a page where broadband devices can go.

: Points to a page where narrowband devices (browsers for blind people, text-only browsers, etc..) can go.

: Points to a P3P page to check the privacy rules.

: Points to either a VXML source file (which can be read by a VXML browser) or a sound file. For example, it could serve up a radio feed related to this story.

: Same as above with video or SMIL file.

That said, here’s what a source could look like (changes are bold and URLs are fictional (but I cut and pasted my .91 channel content for speed reasons)):

Suggested RSS .92 code starts here

NewDocTypeLinkGoesHere
>

92
">

foo@email.com
            Copyright 1999-present, Me.

            My channel description>/description>
            en-us

http://www.tnl.net/images/TNLpalmlogo.gif

            125
            44
            My channel description


http://www.tnl.net

http://www.tnl.net/about/

http://wap.tnl.net

http://www.tnl.net/100MBpage.html

http://www.tnl.net/under1kpage.html

http://www.tnl.net/p3p.xml

http://www.tnl.net/myvoicebasedchannel.vxml

http://www.tnl.net/myvideofeed.smil

http://www.tnl.net/newsletter/anewstory.html

            Story 1 is described

10/13/2000

http://www.tnl.net/newsletter/olderstory.html

            Happy New Year

01/01/2000

More Details

As part of the deal, I’d also move the original channel link and image link into the external field under a single link header (unless some people can tell me where they have a different link for the image and the channel.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Suggestions for RSS .92 spec. 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.

Unfortunately for them, it wasn’t quickly enough and tens of thousands of people got their hands on the software and started redistributing it. While it will most certainly be used for stealing copyrighted material, this category of software interested me at first because of the indexing technology that was built in them. One of the great thing they do is index the files on your system and make them available to everybody else who’s connected to the same server as you are (in Napster’s case) or to the network in general. This could be significant if you were to build a search engine.

Imagine search engine software that would be installed on every web server out there. Not only would it index the pages for the server administrator, but it could also report back to a mainstream search engine. Many studies have now come out about most of the large search engines (Inktomi, alltheweb, Google, etc…) only managing to index a fraction of the web. With a service a la Gnutella, you could have every web site call back the search engine directory to post the changes they had. This could happen throughout the day and might work better than the spider technology currently being used by most search engines.

The other potential use for tools like Gnutella is as a mass corporate cooperation tools. Right now, when you fire off Gnutella, it connects to Gnutellanet, or pretty much anyone who’s using Gnutella at the time. As I just checked on it, there are 700 people connected. There is no central source or server, which means that a tool like Gnutella could be used to share files without having to worry about a central server go down.

For years Sun has been claiming that the network is the computer. With a tool like GNUtella my hard drive can be become a portion of a larger hard drive. I could have a marketing hard drive, a finance hard drive, a HR hard drive of which only a portion would be sitting on my computer. Compare this to current corporate client-server systems where you have to deliberately save a file to the corporate server as well as to your hard drive if you are traveling… forget to save it to one or the other, and you’ll be stuck without your work or somebody else’s later revision. With a GNUtella like system, YOU would continually have the most updated versions of the files YOU author, without having to remember to separately save them.

At the same time, however, it seems to be lacking in a couple of critical areas: first of all, Gnutella could do with some sort of an authentication mechanism. That way, I would be able to create profiles and give access to certain files to certain people. For example, I would be able to mark a spreadsheet as accessible to the finance department while I would have a powerpoint presentation accessible to the marketing folks. The potentials are endless.

While Gnutella is considered a major threat to the music and movie industry, it is those corporate uses that interest me. I believe that, in the long run, those tools will make their way in corporate America and not just because someone wants to download the latest version of Santana’s new album or Julia Roberts’ new movie.

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