22 February 2011

Can Amazon push Netflix out of limelight?

Amazon CEO Jeff Bezos
(Credit: CBS)

For years, Amazon appeared to be a big pushover when it came to delivering Web entertainment.

During the early part of the Internet Age, Amazon shipped CDs and DVDs to customers who ordered them via the Web and CEO Jeff Bezos' company was synonymous with Web music and movies. Then Apple's iTunes, and Netflix, laid waste to physical discs by delivering digital downloads or streaming video and Amazon seemed to quietly drift to the back of the pack.

But today Amazon flexed some muscle of its own by announcing it would stream movies for free to people who subscribe to the e-tailer's Prime service. Amazon Prime subscribers will be able to log on to the Web from Internet-connected devices to instantly access a pool of 5,000 films and TV shows. For $79 a year, Amazon Prime subscribers receive unlimited free two-day shipping without being required to meet any minimum-purchase requirements.

Plenty of commentators in the blogosphere are noting that Amazon's video service isn't a Netflix killer yet, and they're right--but this is just the merchant's first volley as it prepares to take on Netflix, Apple, and others in the growing streaming media sector.

The imagination runs wild when one considers what Amazon could do if the Web store throws its considerable retailing and financial girth into marketing a streaming-video service. Consider that Amazon must pay the film studios and TV networks for the rights to offer the streaming video, but so what? Amazon has loads of cash. The company reported $3.7 billion of cash and cash equivalents for the 12 months ended December 31, 2010. With a snap of their fingers, the Amazonians now offer an unbeatable subscription price.
Amazon can keep ads in front of the 65 million online shoppers that visit the company's site each month. The video service could be promoted and bundled with all kinds of other product offerings. Dan Rayburn, an analyst covering Web video for consulting firm Frost and Sullivan, said Amazon could conceivably sweeten its offer by selling deeply discounted set-top boxes that enable Prime subscribers to watch streaming video on their living-room TV sets.

Heck, Amazon's deep pockets might allow the company to give those boxes away.

Another advantage Amazon has over Netflix is that the company has the horsepower to stream its own video to Prime members without having to pay a third party. Netflix can't say this. On the contrary, the company overseeing that chore for Netflix is Amazon's Web Services (AWS). That's right, Netflix is dependent on a rival for some of its back-end operations. But as full of potential intrigue as that sounds, it's doubtful Amazon would ever undermine AWS' reputation by torpedoing Netflix that way.

Wall Street apparently believes Amazon could cause Netflix some hurt. Netflix's stock tumbled more than $13, or 5 percent, in afternoon trading. Netflix shares have risen steadily over the past year and the stock posted an all-time high last week when it topped $247.

Investors should factor in that Amazon is not likely to unseat Netflix anytime in the near future. Netflix has more than 20 million subscribers, a far larger selection of films and TV shows than Amazon, and has already shown that it can outmaneuver larger players. Experts once thought Blockbuster, the brick-and-mortar video-rental chain, would smash Netflix. The opposite happened. While Blockbuster was still charging late fees and engendering a deep well of consumer bitterness, Netflix was delivering videos to customers' doors via the U.S. Postal Service--creating an entirely new delivery model--and telling users to hang on to the DVDs as long as they liked without charge.

"A growing market attracts competitors," said Netflix representative Steve Swasey.

While Amazon has several businesses to distract management's attention, Netflix thinks exclusively about delivering movies and TV shows. The company has posted a team of dealmakers in Hollywood so they can insert the company into the studios' future plans. Netflix has deals with such content suppliers as Warner Bros. Pictures, Relativity, Starz, and Epix, and just today it added TV shows from CBS, parent company of CNET.
And consumers are already streaming video from Netflix via more than 200 different kinds of Internet-connected devices, such as video-game consoles and Web-enabled TVs, which are compatible with the service. Even if Amazon did offer a Roku-like box for free, it would likely take the company a while to cut enough of the deals to make itself as widely available as Netflix.

The real loser could be Hulu, the joint venture operated by Disney, NBC Universal, and News Corp. that has recently suffered from internal strife. Hulu offers some content for free but the service requires users to pay $7.99 to access a growing number of shows. In addition, Hulu's pay service also forces viewers to watch ads. Amazon's new video service is ad free.

Regardless of which company takes over, with all the price cutting and scrambling to add programming, the real winner--for the time being at least--will be consumers.

20 February 2011

Internet 'kill switch' bill gets a makeover

A Senate proposal that has become known as the Internet "kill switch" bill was reintroduced this week, with a tweak its backers say eliminates the possibility of an Egypt-style disconnection happening in the United States.
As CNET reported last month, the 221-page bill hands Homeland Security the power to issue decrees to certain privately owned computer systems after the president declares a "national cyberemergency." A section in the new bill notes that does not include "the authority to shut down the Internet," and the name of the bill has been changed to include the phrase "Internet freedom."

"The emergency measures in our bill apply in a precise and targeted way only to our most critical infrastructure," Sen. Susan Collins (R-Maine) said yesterday about the legislation she is sponsoring with Sen. Joe Lieberman (I-Conn). "We cannot afford to wait for a cyber 9/11 before our government finally realizes the importance of protecting our digital resources."

But the revised wording (PDF) continues to alarm civil liberties groups and other critics of the bill, who say the language would allow the government to shut down portions of the Internet or restrict access to certain Web sites or types of content. Even former Egyptian President Hosni Mubarak didn't actually "shut down" the Internet: at least at first, a trickle of connections continued.

"It still gives the president incredible authority to interfere with Internet communications," ACLU legislative counsel Michelle Richardson said today. If the Department of Homeland Security wants to pull the plug on Web sites or networks, she said, "the government needs to go to court and get a court order."

That concern was punctuated by a report yesterday that Homeland Security erroneously seized 84,000 Web domains and took them offline. Former congressman Bob Barr, now an NRA board member and newspaper columnist, wrote that the mistake shows that "no government--no matter how benign or well-meaning--should be empowered to control the Internet."

The Electronic Frontier Foundation said today that it continues to have concerns about the Lieberman-Collins bill. "The president would have essentially unchecked power to determine what services can be connected to the Internet or even what content can pass over the Internet in a cybersecurity emergency," said EFF Senior Staff Attorney Kevin Bankston. "Our concerns have not changed."

Some of the companies and industry groups listed as supporting last June's version of the bill, before the protests in Egypt, the FBI's push on Internet wiretapping, and the Justice Department's campaign for Internet data retention, stopped short of endorsing the revised version.

Larry Clinton, president of the Internet Security Alliance, pointed to his letter to the Senate committee last year saying the legislation "is in need of additional refinement." Clinton said in an e-mail today that "much more needed to be done before we could support enactment."

Microsoft said it did not have a position on the legislation. "The bill language just came out, and so we really need to review it before we can provide further comment," a representative said today.
From "Protecting Cyberspace" to "Internet Freedom"

Many portions of the revised bill, also sponsored by Sen. Tom Carper (D-Del.), are generally uncontroversial, dealing with topics such as boosting the federal government's information security, recruiting federal "cybersecurity personnel," and funding research into secure versions of Internet protocols. (The bill previously was called the Protecting Cyberspace as a National Asset Act; as part of its makeover it's been renamed the "Cybersecurity and Internet Freedom Act.")

But all of the recent attention has been focused on the sections handing the president emergency powers. The new version follows the same process as the old one: President Obama would be given the power to "issue a declaration of a national cyberemergency." Once that happens, Homeland Security would receive sweeping new authorities, including the power to require that so-called critical companies "shall immediately comply with any emergency measure or action" decreed.

No "notice" needs to be given "before mandating any emergency measure or actions." That means a company could be added to the "critical" infrastructure list one moment, and ordered by Homeland Security to "immediately comply" with its directives the next.

The U.S. Senate's Homeland Security and Governmental Affairs Committee, which Lieberman chairs, appears to believe that it's not necessary to include explicit judicial review of the president's emergency authority once exercised, believing it's implicit. Any such lawsuit filed by a targeted company would likely focus on language saying the emergency decrees should be "the least disruptive means feasible."
The president may declare a "cyberemergency" for 30 days, and extend it for one 30-day period, unless Congress votes to approve further extensions.

Homeland Security will "establish and maintain a list of systems or assets that constitute covered critical infrastructure" and that will be subject to those emergency decrees.

Homeland Security is only supposed to place a computer system (which could include a server, Web site, router, and so on) on the list if certain requirements are met. First, the disruption of the system could cause "severe economic consequences" or worse. Second, the system is "a component of the national information infrastructure," such as the Internet, or relies on that infrastructure. Third, it can't be placed on the list "based solely" on any First Amendment-protected activities.

A committee report from December says that senators hope that Homeland Security will interpret that language to include a "combination" of factors, including mass casualties or evacuations, over $25 billion in damages, or "severe degradation" of national security. The suggestion, however, appears to be nonbinding and doesn't actually appear in the legislation.

One big change: Earlier versions of the bill barred companies from filing a lawsuit objecting to being placed on that list. The revised version explicitly permits judicial review as long as the lawsuit is filed in the District of Columbia.

"A state of public peril"
A 1934 law (PDF) creating the Federal Communications Commission says that in wartime, or if a "state of public peril or disaster or other national emergency" exists, the president may "authorize the use or control of any...station or device." That could sweep in the Internet, but it's not entirely clear it does. (The revised bill says that existing authority may not be used to "shut down the Internet," but does not otherwise limit it.)
In congressional testimony (PDF) last year, the Obama administration stopped short of endorsing the Lieberman-Collins bill. The 1934 law already addresses "presidential emergency authorities, and Congress and the administration should work together to identify any needed adjustments to the act," DHS Deputy Undersecretary Philip Reitinger said, "as opposed to developing overlapping legislation."

A draft Senate proposal that CNET obtained in August 2009 authorized the White House to "declare a cybersecurity emergency," and another from Sens. Jay Rockefeller (D-W.Va.) and Olympia Snowe (R-Maine) would have explicitly given the government the power to "order the disconnection" of certain networks or Web sites. House Democrats have taken a similar approach.
In a statement, Lieberman said there's no "kill switch" in this bill.

"It is impossible to turn off the Internet in this country," he said. "This legislation applies to the most critical infrastructures that Americans rely on in their daily lives--energy transmission, water supply, financial services, for example--to ensure that those assets are protected in case of a potentially crippling cyberattack."
The ACLU's Richardson believes the problem was never a "kill switch." She said: "The question is bigger than that. It's generally, can the government interfere with communications...The question is: Are there significant protections in there?"

Jim Harper, director of information policy studies at the free-market Cato Institute and a member of a Homeland Security advisory panel, says that supporters of the bill have yet to make the argument that such governmental emergency powers will do more good than harm.

"They recognize that a total Internet kill switch is totally unacceptable," Harper said today. "A smaller Internet kill switch, or a series of kill switches, is also unacceptable...How does this make cybersecurity better? They have no answer."

18 February 2011

Apple could be working on television

Is Apple working on turning Apple TV into an Apple-branded television from a tiny set-top box?
Is Apple working on turning Apple TV into an Apple-branded television from a tiny set-top box?

We know Apple already sells Apple TV. But it might be working on an another kind of Apple TV--as in an Apple-branded television, not a set-top box that hooks up to your TV.

Eagle-eyed bloggers at 9to5 Mac noticed a job listing today that Apple posted that leaves little doubt it's something the company is at least exploring.

The listing asks, rather benignly, for someone who wants to work on "new power management designs and technologies." But in what will Apple use this new power-management technology? The listing goes on to say that it will be used for "Apple's next-generation Macintosh platforms spanning from notebook computers, desktop computers, servers, standalone displays, and TV."

It's safe to say that if Apple were going to advertise a job listing to work on generic product types, it would use the term set-top box or something similar to describe Apple TV in its current incarnation, since "TV" in any other context refers to a display, not a box. But it specifically says "TV."

Making and selling a TV really wouldn't be that much of a stretch for Apple. Everyone has a television, so there's a built-in set of customers already. Apple makes some of the most well-regarded monitors on the market, and what are monitors but (basically) TVs without a TV antenna? Plus, Apple's got a growing video empire in iTunes, and though it likes to call it a hobby, with Apple TV it shows the company is interested in being in the living room, not just the office, car, coffee shop, or your backpack or purse.

You might wonder, rightly, who in their right mind would want to enter the television business these days. Rapid commodification, easily copied features, and being forced to find new ways to display content that make people buy a new TV every couple years (HD, 3D, Internet-connected TVs) all make it a rough industry to be in right now.

Of course the same could be said about PCs and mobile phones, but Apple has demonstrated it knows how to reap profits in both those industries in ways its competitors haven't.

13 February 2011

Sony Ericsson finally unveils Xperia Play


BARCELONA, Spain--After months of rumors, a slew of leaks and one creepy commercial, Sony Ericsson's worst-kept secret is now a reality. On Sunday, the day before Mobile World Congress officially opens, Sony Ericsson finally took the wraps off of the Xperia Play.

Long billed as the "PlayStation Phone," the Xperia Play is very much the handset that Sony Ericsson highlighted last week during the Super Bowl. In the United States, it will arrive as a Verizon Wireless exclusive later this spring.

The four-inch (854x480 pixel resolution; 16.7 million colors) display is up to usual Sony Ericsson standards. Colors were bright and vibrant and graphics showed up well. From our brief hands-on experience, the display also appears to do the gaming features justice. Below the display are four physical controls for the usual Android functions (back, menu, home, and search). On the left spine you'll find a 3.5mm headset jack and a Micro-USB port, while the power control, a volume rocker, and shoulder gaming controls sit on the right spine.

Sony Ericsson Xperia Play
(Credit: Sony Ericsson)
 
Of course, what the phone can do is the real story. At the top level, the Xperia Play runs on Gingerbread (Android 2.3), so you'll get the new text selection tool, a Wi-Fi hot spot, and new options in the Settings menu. And like on the Xperia Arc, you can pinch your fingers to see all five home screens on one page. As we said when the earlier handset made its debut at CES, it's very much like HTC's Leap feature.

Slide up the face to reveal the gaming controls, which are very similar to those on a Sony PlayStation DualShock controller. Instead of joysticks, however, you'll find two round touch pads. And as mentioned, the handset has only one set of shoulder buttons.

Game downloads will be available from an online Sony Ericsson store. Once you purchase a game, individual icons for each title will sit in the phone's main menu.

The Xperia Play also has a 5.1-megapixel camera with autofocus, a flash, image stabilization, geotagging, and video recording. Other features include Bluetooth, Wi-Fi, a personal organizer, a speakerphone, Assisted-GPS, messaging and e-mail, 400MB of internal memory, Sony Ericsson's Timescape interface, a music player, and a full HTML browser with Flash Lite. It also supports the usual Google apps and you can download additional titles from the Android Market.

12 February 2011

Why Starting Justin.tv Was A Really Bad Idea, But I’m Glad We Did It Anyway




Editor’s note: The following guest post was written by Justin Kan, founder of Justin.tv

Right now I’m neck deep in product launch mode, putting the finishing touches on our new mobile video application—Socialcam. Of course, I’ve been here before . . .

Years ago when we launched the Justin.tv show we had no idea what we were doing. This much was obvious to anyone who watched. Outsiders attribute far more strategic thought to the venture than we gave it. Some think that we planned all along to start a live platform, and that the Justin.tv show itself was a way of promoting that platform. While this ended up happening, none of it had crossed our minds at the time.

Emmett Shear and I had been working on Kiko, the first Javascript web calendaring application in the Microsoft Outlook style. We prototyped the application in our final year at Yale, went on to raise money from Y Combinator, then continued working on it for over a year.

Then Google Calendar was released—boom—absorbing most of our nascent user base and capturing most of the early adopter mindshare. But to be perfectly honest, Kiko would have failed regardless. We were too easily distracted and hadn’t really thought through the strategic implications of owning a standalone calendaring property (hint: no one wants a calendar without email). A short time later we were burned out and spending most of our time playing Xbox with the Reddit guys in Davis Square—hardly a startup success story.

Emmett and I started thinking about possible ways to get out of the calendar business. At the same time, I was startup fatigued. We had spent over a year paying ourselves nothing. The seed and angel investment market conditions were the polar opposite of what they are today. It had been a struggle to even raise a paltry $70,000, and we had failed to build a product with real traction. I was starting to think about moving back to Seattle to try something new, maybe in a different industry.

Still, we learned a ton and it was fun to be part of the early Y Combinator startup community (then largely in Boston). We became friends with Matt Brezina and Adam Smith (of Xobni), Trip Adler, Tikhon Bernstam and Jared Friedman (of Scribd), and many others. It’s amazing to see how many of those friendships persist today, and even more amazing how well many of those companies are doing.

Coming back from one particular YC dinner, Emmett and I were discussing strategic ideas for Kiko, and I remember telling Emmett an idea that popped into my head: what if you could hear an audio feed on the web of our discussion? Wouldn’t that be interesting to other like-minded entrepreneurial types? We kept going, and eventually the idea morphed into a video feed. Then it became a live video feed. Then it became a continuous live video feed that followed someone around 24/7. Then it had chat, and a community built around watching this live show, which was now a new form of entertainment. I was hooked.

I couldn’t stop talking about the idea. I mentioned it at YC dinners and to other friends. I even came up with a perfect name for it: Justin.tv. On one trip to DC, I told my Dad and my college friend Michael Seibel what I was thinking. Eventually, in-between drinking sessions, we thought of a brilliant idea for divesting ourselves of Kiko, which is a story for another day. After that, Emmett and I were coming up with other startup ideas (I guess we got excited about staying in the industry after all). One particular favorite was the idea of a web app that would ingest your blog’s RSS feed and then allow you to layout and print physical magazines from it. Excitedly, we drove one afternoon to Paul Graham’s house to pitch it.

We explained the idea to Paul and Robert Morris, who just happened to be at the house visiting. I vaguely recall there also being a “this will kill academic publishing” angle, although I can’t figure out how that sensibly fits in now. Paul didn’t particularly like the idea: he didn’t think people would use it. “Well,” he said, “what else do you have?”

I said the only thing I could think of: “Justin.tv.”

Because it was something I was clearly passionate about, and because creating a new form of entertainment was clearly a big market (if you could invent one!), Paul was actually into it. Robert’s addition to the conversation was “I’ll fund that just to see you make a fool of yourself.” Emmett and I walked out of there with a check for $50,000.

Six months later, we’d recruited two other cofounders (Kyle Vogt, our hardware hacker, who we convinced to drop out of MIT on a temporary leave of absence, and Michael Seibel, my college friend from DC, who became our “producer”). We built a site with a video player and chat and two prototype cameras that captured, encoded and streamed live video over cell data networks, negotiated with a CDN to carry our live video traffic, and raised an additional couple hundred thousand dollars. Our plan? Launch the show and see what happens.

Now, let me just tell you why this was a bad idea:
  • We didn’t have a plan. We loosely figured if the show became popular we could sell sponsorships or advertising, but we didn’t have a plan to scale the number of shows, nor did we understand what our marginal costs on streaming, customer acquisition, or actually selling ads were.
  • We didn’t understand the industry. We didn’t know what kinds of content advertisers would pay for. We didn’t have good insight into what kind of content people wanted to watch, either.
  • We relied on proprietary hardware that we were going to mass-produce ourselves. Smart angels told us to drop the hardware and figure out how to do it with commodity equipment, but we wouldn’t listen because we thought hardware would be easy (or at least, doable). Ironically, months after we were told this we switched to using a laptop.
  • We were trying to build a “hits” based business without any experience making hits. We knew a lot about websites, but little about content creation. Smart VCs (who took our calls because Paul referred us) told us as much: nobody really likes investing in hits based businesses, because it requires the continual generation of new hits to be successful (instead of, say, building a platform like eBay or Google whose success is built on masses of regular users).
How did we get as far as we did?
  • We were passionate. We honestly believed we could create a new form of reality entertainment. Put to the side that we had no experience with creating video (or any kind of content), by God, we were going to make this work.
  • Early stage investing is often about the people, not the idea. Paul has said as much about what he looks for. As two-time YC founders he knew that we worked well together and even if we were working on something totally inane we were going to stick it out with the company and iterate until we found a business model.
  • We sold the shit out of it. Everyone we knew was excited for Justin.tv. Why? Because our excitement was infectious. That’s how we got Kyle to drop out of school. That’s how we got Michael to quit his job and move across the country.
Ultimately, the show failed. But all told, I’m thankful every day that things went the way they did. Why?
  • We built a strong team. The four of us started, and the four of us all still have leadership roles in the company. Along the way we recruited the smartest engineers and best product designers we could find.
  • We were willing to learn, and to pivot. After quickly realizing the initial show wasn’t a sustainable model, we decided to go the platform route, and built the world’s largest live video platform (both on the web and in our mobile apps, which have millions of downloads).
  • It got us started. Some people wait until the stars are aligned before they jump in. Maybe that’s the right move, but plenty of businesses get started with something that seems implausible, stupid, or not-a-real-business but turn into something of value (think Groupon). If we hadn’t started then, would we have later?
Today, I’m more excited about Justin.tv than I’ve been at any time since we launched the initial platform. Why? We’re taking everything we’ve gathered and learned over the past four and half years building the largest live video platform on the Web (17 million monthly unique visitors in Dec according to comScore’s MediaMetrix), and applying it to tackle a new generation of problems in mobile video. Our world class web and mobile engineering team, all of our product development knowledge, our substantial, scaled video infrastructure, and everything we’ve learned about building engineering teams has all been put to work on a new app that we think is going to change everything.

Our new app is called Socialcam, but that’s another story.

11 February 2011

Is the Nokia-Microsoft deal a prelude to a merger?

Nokia is touting its Microsoft alliance on its Web page.
Nokia is touting its Microsoft alliance on its Web page.
(Credit: Nokia)
 
Nokia and Microsoft have inextricably hitched their wagons to each other in the mobile market. Could this be a precursor to a mega technology merger?

Rumors of a Nokia-Microsoft merger first percolated last year, even before former Microsoft executive Stephen Elop took the reins at the troubled cell phone giant. And while many expected the company to at least be in discussions with Microsoft over a potential partnership, few had predicted the tight relationship announced in London this morning.

During a press conference at its annual investor meeting, the Nokia CEO and Microsoft's Steve Ballmer announced that Nokia will ditch its Symbian and Meego operating systems for Microsoft Windows Phone 7. Going forward Windows Phone 7 will be the predominate operating system for Nokia smartphones. The strategy is a bold one meant to combat the growing momentum by mobile competitors Google Android and Apple.

"We think this will make a three-horse race," Elop said during a press conference. "It's for Nokia and it's good for Microsoft. It allows us to move far faster than we could otherwise."

Nokia CEO Stephen Elop, let, and Microsoft CEO Steve Ballmer explained their company's new tight alliance for mobile phones at an analyst and strategy meeting in London.
Nokia CEO Stephen Elop, let, and Microsoft CEO Steve Ballmer explained their company's new tight alliance for mobile phones at an analyst and strategy meeting in London.
(Credit: screenshot by Stephen Shankland/CNET)
 
The partnership between the two companies goes much deeper than just an agreement to install Microsoft's OS on Nokia's phones. The companies plan to build products and services together as well as share strategic plans. The vision is to create a "third ecosystem" that can compete directly against Apple's iOS and Google's Android platforms.

The partnership described by the executives is so close that it doesn't take much to wonder why the companies didn't decide to simply merge. Perhaps they are testing the waters much like a couple moving in together before they take the plunge into marriage.

Regardless of whether they ever consummate their relationship with a merger, it's clear that Nokia's and Microsoft's fates will soon be inextricably linked. If either company fails in its execution of strategy, it will hurt the other, something that will likely irk investors.

The deal

Unlike other reseller deals, Microsoft and Nokia plan to combine assets and collaborate on joint marketing initiatives, as well as share development plans and build products together.

From Microsoft's perspective, the company will bring broader integration of software from all its different products as well as its Bing search capabilities and advertising platform, which Nokia can leverage on its devices. Meanwhile, Nokia, the world's largest handset maker, will bring its hardware expertise, its vast manufacturing and distribution scale, operator billing relationships, and its Navteq maps and navigation business.

Through this collaboration the companies expect that they will be able to drive more revenue into each other's pockets through mobile applications, services, social-networking integration and gaming via the Xbox product line.

Microsoft has forged many partnerships in the past. The company's core software business is predicated on strong relationships with key partners, such as Dell and Hewlett-Packard. And it's attempted to partner with other handset makers in the past to get a stronger foothold in the mobile market.

The mobile market, however, is very different from the PC market. And it's clear that Microsoft sees the value in Apple's model of owning both the hardware and software of a mobile device. Microsoft has already demonstrated its willingness to move into the hardware business with the Xbox. And it has built a successful ecosystem around the product.


But the Zune, Microsoft's attempt to challenge Apple's iPod, have not been as successful, showing that building hardware from scratch is not always the best strategy. Even acquiring hardware hasn't been an easily achievable path for Microsoft, as demonstrated by the acquisition of Sidekick maker Danger in 2008. The fruits of that acquisition was the Kin cell phone, which was only on the market a few short months before Microsoft killed the effort and focused on Windows Mobile 7.

Even as it pursued its own hardware strategy, Microsoft has continue to seek partnerships with other mobile-hardware makers. In 2003 it partnered with Motorola to develop smartphones, which culminated in the BlackBerry Curve, a supposed BlackBerry killer. More recently, in 2009 Microsoft partnered with LG, which also planned to use the now defunct Windows Mobile platform as its primary platform.

While Microsoft has clearly been down this path before with other cell phone makers, Ballmer said the relationship with Nokia is "unique." Elop agreed and explained that executives from Nokia and Microsoft were already working together to align strategy.

Elop admitted that Nokia had considered using Google Android as its primary software for smartphones. But he said the company decided against it because, he and his team feared that they'd not have enough control over the development of the ecosystem. He said he didn't think that Nokia's assets would be valued enough and that eventually it would turn Nokia's products into commodities.

"The Google option is a valid option," he said. "But at the end of the day it felt a little bit like giving up and not enough like fighting back."

Ostensibly, Nokia could face a similar problem in a partnership with Microsoft. Windows Phone 7 will not be exclusive to Nokia, which means that Nokia's rivals Samsung, LG, Motorola, and HTC will be able to use the platform as well.

But Elop believes that being beholden to Microsoft is less dangerous in terms of commoditizing Nokia's core attributes than a partnership with Google. He emphasized that Nokia has structured its deal with Microsoft so that it would have some control in the development of Windows Phone 7, much more control than other hardware companies also using the software. In this way, he believes Nokia will be able to differentiate its product from competitors' products.

"Another concern is there is some degree of loss of control or being locked in," he said."In terms of what we established, it's very clear we have taken steps [to ensure] these risks are not a significant factor. We're not disclosing terms, but our critical assessment was we had flexibility, a degree of control, in a way that allowed us to take advantage of our differentiation going forward. This is not your mother's OEM deal."

Elop said that any advances that Nokia makes in developing the Windows Phone 7 platform or in the ecosystem will be shared among all hardware partners so that Nokia's efforts will also benefit its competitors.
Of course, this raises an important question: How comfortable will Nokia's competitors be in participating in an ecosystem where the largest player in the market has more influence than they do?

Perhaps, HTC, Motorola, Sony Ericsson, LG Electronics, and Samsung, will double down their bets on Android. In that respect, Nokia could end up differentiating itself with Microsoft, because no one else will be willing to use the software. It could also pave the way for Nokia and Microsoft to merge into a single company.

Merger no easy road either

But mega mergers are never easy. Just getting the deals completed can be a challenge, as was the case with Microsoft's unrequited bid to acquire Yahoo. At least with Nokia and its new management team led by Elop, there is a friendly and possibly welcoming leader at the top.

But culturally Nokia and Microsoft are very different. Nokia is the pride of Finland. One former executive said that it was very telling that the company chose a Canadian instead of an American as its first non-Finnish CEO in its 150-year history. Being acquired by an American giant, such as Microsoft could be a hard pill to swallow for many at the company whose blood they say runs Nokia blue.

Then there is the question of Nokia's valuation. The company has a market capitalization of nearly $40 billion. Investors reacted negatively to the partnership announcement, which might indicate that a merger would be even less appealing to Wall Street. It didn't help that Nokia also announced lukewarm financial guidance as a result of the partnership for the coming year. Nokia said in a press release this morning that it "expects 2011 and 2012 to be transition years, as the company invests to build the planned winning ecosystem with Microsoft." After that the company's predictions for future growth are vague at best.

As a result after the deal was announced this morning, Nokia's stock in Helsinki, Finland, fell by almost 12 percent. The company's stock has been trading in heavy volumes in the U.S. all morning and shares are down.
Analysts had been hoping that Nokia would give up on its efforts to be a software maker and concentrate on building cool phones. But they likely would have preferred a relationship with Android, a strategy that has been successful for other handset makers.

Then of course there is history to contend with. While Elop and Ballmer claim that their product offerings complement one another, many people simply see Nokia and Microsoft as two slow-moving dinosaurs that have each tried but have been unable to crack the smartphone market on their own. Their common problem has been an inability to execute in a rapidly evolving market.

So it's hard to imagine that a combined version of the company--whether it be a strategic partnership or a merged company--would create a more nimble competitor to Google and Apple.

10 February 2011

Some eHarmony user information stolen

Online dating site eHarmony is advising some of its customers to change their passwords after being informed of a security breach.

A hacker employed an SQL injection vulnerability in an ancillary site eHarmony operates for content management to obtain a file that included user names, e-mail addresses, and hashed passwords, eHarmony said. The breach--first reported today on the Krebs on Security blog--affected an informational site called eHarmony Advice, which includes message boards that require eHarmony user names and passwords to access.

The dating service's main site uses separate databases and Web servers, and "at no point during this attack did the hacker successfully get inside our eHarmony network," the company said in a blog post.

eHarmony said it had repaired the vulnerability and was notifying customers who may have been affected. Although the site did not reveal how many customers were affected, it did say it was less than 0.05 percent of its user base. eHarmony says it has had 33 million users since its inception.

Krebs said an Argentinian hacker told him late last year that he'd discovered a vulnerability in the online dating site that allowed him to view customer passwords. Krebs said that a week later, he discovered a listing for eHarmony user names and passwords on Carder.biz, an online marketplace for hacked data and accounts, botnet hosting, and stolen credit card and consumer data. The eHarmony data was being offered for sale by a user identified as "Provider" at prices ranging from $3,000 to $5,000, Krebs said.

The hacker also reportedly approached eHarmony with an offer to sell his security services to the site to fix the flaw--an offer the dating site said it declined.

SQL injection attacks occur when a small, malicious script is inserted into a database that feeds information to the Web site.

IE9 RC debuts with 'do not track'

SAN FRANCISCO--The next generation of Internet Explorer is nearly ready for the public at large, as Microsoft announces the release candidate of Internet Explorer 9 at the Hang Art Gallery in San Francisco's Union Square this morning.


Internet Explorer 9's ActiveX filter in action.
(Credit: Screenshot by Seth Rosenblatt/CNET)
 
A massive list of improvements debuted in the new RC, available for 32-bit Windows 7; 64-bit Windows 7; 32-bit Windows Vista; and 64-bit Windows Vista. Among the most notable enhancements are the new ActiveX filter, expanded support for HTML5 and "future-tech" standards, and advertiser tracking protection, which also was introduced this week into a prerelease version of Firefox 4.

The feature changes from the first beta are focused largely, yet not exclusively, on security. Like the Firefox 4 feature, the new "do not track" feature will prevent Web advertisers from tracking your behavior using a header-based solution. Unlike Mozilla's implementation of the protection, IE9 uses both the header and customizable blacklists, Internet Explorer business and marketing senior director Ryan Gavin said in an interview yesterday. "Using only the header is too narrow a solution," he said, noting that Internet Explorer also allows users to create a whitelist for sites that people actively want to track online surfing behavior.
If you go to the Gear menu and then the Safety submenu, there's an option for tracking protection. Clicking it opens the Manage Add-ons window and defaults to the new Tracking Protection tab, from which you can add sites that you want to block. Once the feature has been enabled, simply start browsing. If you go back to the list after checking out a few sites, you ought to see that the list has auto-populated. The configurable number below the main list allows you to set your tolerance for being tracked. If you set it to three, for example, the tracking protection will wait until it sees a tracker on three or more sites before blocking it.
Also new is an ActiveX filter, which you can use to block all ActiveX content and then selectively activate it on a per-site basis. For people unfamiliar with why ActiveX technology is potentially dangerous, to function it requires full access to the operating system that the browser is running in. The new ActiveX filter gives you the ability to restrict ActiveX on a per-site basis, with a toggle in the location bar. If you go to the Gear menu and then the Safety sub-menu, you can block all ActiveX content with one click. Then on the right-side of the location bar, click the circle with a line through it to allow ActiveX content to load on a per-site basis.
Performance gains have been dramatic in the IE9 beta with Microsoft's new JavaScript engine Chakra, and the release candidate continues that trajectory. IE9 RC now places right in the same ballpark for speed as Firefox, Chrome, Safari, and Opera, its four primary competitors. And according to Microsoft, IE9 actually placed fastest on WebKit's SunSpider test.

Also new in the release candidate is expanded support for HTML5 and other "future-Web" technologies. These include support for the geolocation feature, HTML5 semantic tags, CSS3 2D transforms, and support for the WebM video codec. These features are largely present in other browsers, so that they're finally coming to Internet Explorer must be a comfort to developers.

Internet Explorer 9 will come with advertiser tracking protection to make it easier for you to opt out of targeted Web ads.
(Credit: Microsoft)
 
Quite a few minor improvements have been made since the last beta was released, too. The default maximum temporary Internet file size has been increased to 250MB from 50MB, which means that while your cache will be significantly bigger on disk, IE can store more data locally and make it that much quicker to load Web content. Pinned sites have been extended to the trackless private browsing, and you can now set tabs to show on a row below the location bar, which gives them the width of the browser to be displayed. Background tabs have received a Close button, which appears on mouse-over, and Microsoft has tweaked the interface itself to cede more space back to the Web page being displayed. In other words, IE9 RC is thinner than IE9 beta.

While testing the release candidate yesterday, I was pleased to discover that the instability that had plagued the first beta was gone. The release candidate didn't crash once over a six-hour period of use, although it did hang for a few seconds several times. Sites loaded quickly, and most importantly the browser not only felt ready for daily use, but felt like it could stand comfortably next to other modern browsers.

08 February 2011

Dell unveils 10-inch Windows 7 tablet


Dell expanded its foray into tablets today with a new 10-inch Windows 7-based device designed, the company said, for users "who need greater mobility, as well as IT organizations that demand control, security, manageability, and integration with existing infrastructure investments."

The Windows 7 Business Tablet, which will run on an Intel processor, could be available by the middle of the year (note that the tablet in the above photo is a nonworking mock-up of the machine).

The tablet was among 39 new products unveiled at the company's Dell Means Business event in San Francisco this morning. They include laptops, desktops, workstations, and a convertible tablet, the Latitude XT3 (a follow-up to the laptop/tablet hybrid XT2).

XT3
The Latitude XT3 is a follow-up to the laptop/tablet hybrid XT2 (click to enlarge).
(Credit: James Martin/CNET)
 
But the news out of the event likely to grab the most attention is the Win tablet, even though details on specs remain scant and we don't yet have a price or a release date beyond sometime later this year.

Businesses want Windows because it fits into the IT management scheme, Steven Lalla, vice president and general manager of Dell's commercial client product group, said at the event. Not to say Android doesn't, he added, but he maintained that a bigger chunk of the business sector wants to go the Microsoft route.

The new touch-screen tablet, however, will also come in a 10-inch Android version, apparently named the "10-inch Android Tablet," at least for now. That means neither version will fall under the Streak banner.

The Latitude-E series of laptops, meanwhile, has gotten a refresh. The new Latitude E5000 laptops, starting at $859, come in 12-, 13-, and 14-inch models that feature Intel second-generation core processors, new graphics and memory, and backlit keyboard options.

As expected from a business laptop, they have hard-drive accelerometers and remote IT features, including remote data deletion. The keyboard is also the same across the entire line, which the company says will make it easier for business workers to switch devices.

But while IDC estimates that one third of the world's workforce will be mobile by 2013, and Dell took great pains to emphasize that segment, the company also focused on its three new OptiPlex desktops, a new small form factor all-in-one design, and an update to its Precision workstation line.

"We have 30 years in which the PC has proven to be able to adapt itself to the environment," said Rick J. Echevarria, vice president of Intel's Architecture Group, adding that "rumors of the death of the PC have been greatly exaggerated."

The new Optiplex desktops start at $650. They have the new Intel vPro processors, planned compatibility with the desktop virtualization lineup, and tool-free access to system components (meaning the back just pops off). Dell also said that since none of these systems is scheduled to ship in the next 30 to 45 days, they should go out with the updated version of Intel's Cougar Point Sandy Bridge-compatible chipset, which does not contain the recently discovered Cougar Point SATA flaw.

Dell says it interviewed 7,000-plus Gen-Y customers, IT managers, and other business segment customers to figure out what people want out of Dell's business products.


Dell laptop
To design its new business laptops, Dell hosted focus groups over 18 months.
(Credit: James Martin/CNET)

07 February 2011

Fixed Intel chip to ship in mid-February

Intel said today it would begin shipments of fixed Sandy Bridge chipsets in mid-February.

The chipmaker announced a week ago that it had stopped shipments of the "Cougar Point"--aka, the Intel 6 series--chipset that accompanies its second-generation Intel Core ("Sandy Bridge") processor owing to a flaw that can affect, in a small percentage of systems, access to a hard-disk drive, optical drive, or other device that connects to a computer using SATA technology.

"Intel has started manufacturing on a new version of this support chip. Intel now expects to begin shipping the new parts in mid-February," Intel said today.

The chipmaker also said that after "extensive discussions with computer makers...Intel is resuming shipments of the Intel 6 Series Chipset for use only in PC system configurations that are not impacted by the design issue."

"Several customers [PC makers] still wanted to buy the current [not fixed] version of the Cougar Point chipset to continue Sandy Bridge sales. They will work closely with Intel to ensure 'known good' configs," an Intel spokesman said in an e-mail.

The issue affects SATA ports 2 through 5, not ports 0 and 1. Therefore, some laptops, which use only those two "good" ports, for example, would not be affected, according to Intel. In more technical terms, the affected ports 2 through 5 are 3 gigabit-per-second (Gbps) SATA 2 ports. The "good" (0 and 1) ports are 6Gbps SATA 3 ports. In a small percentage of systems performance degradation may occur on the "bad" ports.

The glitch caught the PC industry and retail channel by surprise. PC makers and retailers, who were just beginning to transition their laptop and desktop lineups to systems based on the Sandy Bridge processor, had to bring sales to an abrupt halt last week.

Retailers like Best Buy had been literally pulling Sandy Bridge systems off the shelves, while PC makers such as Hewlett-Packard had pushed out shipment dates for the first Sandy Bridge laptops until March.

PC makers are eager to ship systems with the latest Intel processor because it offers improved power efficiency and better performance. In particular, it speeds up gaming graphics and multimedia tasks at virtually no extra cost because the graphics silicon is built directly onto the main processor--a first for an Intel mainstream chip.

And a highly-anticipated Sandy Bridge update for Apple's MacBook line is also due. A prolonged delay due to the glitch had the potential for thwarting Apple's plans.

But with Intel's updated schedule of mid-February for fixed chipset shipments, consumers can rest easy that delays will be relatively brief and painless, according to Intel.

Luckily, Sandy Bridge is a new processor line and Intel was able to catch the glitch in the chipset early. And on another serendipitous note, most of the systems with the flawed chipset had been shipping in relatively small numbers, as they were not mass-market but rather pricey, high-end PCs that relatively few people would buy.

Mobile gaming company MoboSpace eyes up MySpace deal

MySpace could be snapped up by a giant US-based mobile gaming startup.

According to the New York Times this weekend MocoSpace, a mass market mobile social networking and gaming company, has issued a statement expressing interest in purchasing the struggling social media site from News Corp. It is believed the two companies are already in talks to reach a deal.

MocoSpace has been gaining ground fast in the mobile gaming industry. It started out as a mobile web social networking tool, and has since moved into producing casual games and smartphone apps, targeting youth audience from around 14 years of age.

One analyst predicted that MocoSpace was the fourth most visited mobile online website, serving up 3 billion mobile web pages each month. It has already raised $6.5m (£4m) in venture capital.

The price that MoboSpace would be prepared to pay for MySpace has not been disclosed. News Corp paid $327m (£203m) five years ago, but considering the site’s struggle against the migration of its core audience to Facebook and Twitter, it would likely be sold for considerably less.

The move is interesting because if a deal is done, MySpace could potentially be repositioned as a mobile network for listening to music on.

News Corp told Myspace employees last month that it was considering selling the site, and has already culled half of its 1000 employees.

04 February 2011

Netflix rises as studios' DVD money plunges

Not long ago, ambitious young executives at the six major Hollywood film studios maneuvered to get into the home entertainment divisions.

Nowadays, getting assigned to home entertainment is like being sent to the Eastern front. Better to work in theatrical distribution, international, or maybe studio facilities. Recently, I spoke with an executive from one of the big studios who, while discussing the challenges of working in the film industry, noted there was one silver lining: "At least I don't work in home entertainment."

The home-entertainment divisions at the studios typically oversee sales of DVDs and Blu-ray discs as well as Internet distribution. But the DVD has long been synonymous with these units for the simple reason that the discs account for the vast majority of revenues. This week, Sony, Time Warner, Viacom and News Corp., reported earnings and their film divisions continue to see falling DVD sales.

For the quarter ended December 31, Paramount Pictures saw a 44 percent decline in home video revenue from the same period a year ago, according to Viacom, Paramount's parent company (don't people give DVDs as holiday gifts anymore?).

Bad films or dying format?
Time Warner, which owns Warner Bros. Pictures, generated $923 million in revenue from home video and electronic delivery of feature films. That was a 23.5 percent tumble from the $1.23 billion made during the prior-year quarter. Sony and News Corp., which operates 20th Century Fox, don't break out their home video numbers, but they both signaled that DVD sales were ailing. Sony reported that Sony Pictures suffered a 20 percent overall decline in "sales and operating revenue" in the quarter partly due to "lower home entertainment revenues from catalog product."

For two decades, DVDs and before it, VHS tapes, were a huge source of profit for the studios. DVD sales outpaced box office sales between 2002 and 2009. Barry McCarthy, Netflix's former chief financial officer, noted a couple years ago that the DVD was the most successful consumer product launch in history measured by penetration into U.S. households. He said five years after debuting, DVDs could be found in half of all U.S. households. But the garden years appear to be over, as consumers continue to show less and less interest in physical media and turn to the Web for entertainment.

In their earnings report, the studios blamed the poor quarterly performances in home entertainment on the high number of hit films they had during the prior year. The way the studios tell it, they produced a higher number of popular films in 2009 than they did in 2010 and that resulted in lower DVD sales. This explanation, however, doesn't jibe with box-office figures.

Overall ticket sales in 2010 were $10.5 billion, just shy of the record-setting $10.7 billion generated in 2009, according to Boxoffice.com, an online service that tracks theatrical revenue. There was plenty of popular films last year. What this suggests is that in a down economy, people continue to find enough money to go to the movies. What they're apparently cutting back on is DVDs.
Why own movies?
Now, contrast the studios' dismal quarterly numbers with Netflix's performance during the same period. The video-rental service, which mails DVDs to subscribers as well as streams films and TV shows over the Web, added 3 million subscribers in the quarter--largely on the growing popularity of its streaming service, the company said.

It's not an apples-to-apples comparison, but it shows significant numbers of consumers are moving to Netflix, a service that all but eliminates the need to own movies.

Netflix now has 20 million total subscribers, a 60 percent year-over-year increase. If Hollywood wants to know where the DVD money went, this would be a good place to start looking. It shouldn't be hard to figure out that Netflix is thriving because it provides consumers with what they want: convenience, control, and a good price. For $7.99 a month, a Netflix subscriber gets access to all of the service's streaming content. That's just a better deal, when a single DVD often costs twice that amount.

That Netflix offers an alternative to owning movies or paying for cable TV, may explain why Time Warner CEO Jeff Bewkes has criticized Netflix so much lately. Another reason could be that at this early stage, Web-video distribution doesn't appear to be the cash cow that DVD was in its heyday.

The good news is that not everybody at the studios sees Netflix and Web distribution as a threat. A group calling itself DECE--made up of film studios, software, and hardware makers and almost everybody else connected to film and TV--is trying to create a set of standards and specifications designed to make approved digital content playable on a wide range of certified devices. The standards are called UltraViolet.
Supporters say this could help mainstream consumers make the jump to streaming distribution. Critics say this is an attempt to wrest control of digital distribution away from users. Regardless of whether UltraViolet works, it's a sign that some at the studios see the end of the DVD coming and are preparing for that day.

03 February 2011

Verizon iPhone versus AT&T iPhone: CNET's data winner is... (video)

AT&T iPhone versus Verizon iPhone (Credit: CNET)
Faster, sexier, more reliable signal. That's the hype propping up the Apple iPhone 4 for Verizon at the expense of rival carrier AT&T. But is the iPhone really that much better on Verizon than on AT&T? The answer so far: absolutely.
To test the phones, CNET Senior Editor Kent German and I traipsed all over San Francisco to conduct our field testing showdown between the AT&T and Verizon iPhones. We compared signal strength, upload and download speeds, and load times between the iPhones on the two networks.
In addition to the results below, you can also check out more connectivity tests, and this roundup of all things Verizon iPhone.



The tests

We ran four tests each in four locations that have given us trouble in the past on multiple networks.
First, we checked the number of bars that appeared in the signal meter. We know that bars are an arbitrary measurement because they fluctuate so often and don't always translate into real-world connectivity. Still, for many people they are a key indicator of service.
Next, we used the Root Metrics iPhone App to measure signal strength and upload and download speeds. Third, we uploaded a photo to Facebook--the same picture for each round for both phones. Lastly, we loaded the GiantBomb.com Web site.

The locations

CNET's garage served as the first location, a natural fit since the above-ground parking lot is constructed from thick, signal-blocking concrete. Next we drove over to Treasure Island, a slug of man-shaped landfill mounds in the middle of the San Francisco Bay that's removed from clusters of cell towers. Next we stopped on a busy downtown street in the Financial District, where tall buildings and throngs of smartphone users add up to often iffy service. Finally, we climbed into the Twin Peaks neighborhood, a high roost that's home to a dead zone for multiple carriers that's confounded Kent time and again.

How they fared

And the winner is...
CNET GARAGE
TREASURE ISLAND
FINANCIAL DISTRICT
TWIN PEAKS
Download/Upload
Verizon
Verizon
Verizon
Verizon
Photo uploading
Verizon
Verizon
Verizon
AT&T
Load a Web site
Verizon
AT&T
Verizon
Verizon
*We omitted the "bars" test because that indicator doesn't reflect performance testing.
Verizon devotees scored big points as the iPhone on its network consistently outperformed the AT&T iPhone in all but two tests.
However, before you fly Big Red's banner, keep in mind that these results are indicative of our particular experience. Results in your area may differ, and they may also change over time. Although AT&T's HSPA 3G network is technically faster than Verizon's EV-DO, the results don't always align. Coverage depends heavily on your exact location and even the time of day.
Additionally, Verizon was supporting very few iPhones at the time we tested the phone--performance factors could very well change in San Francisco as well once the number of iPhone users grows on Verizon's network. Yes, there are other smartphones on both networks that impact data load, but Verizon could be gaining a much hiegher percentage of high-data users in the near future if new customers flock to the iPhone--either because they're switching from another network or because they're switching from a feature phone. Either way, we plan to revisit testing in several months when there are more Verizon iPhones on the market.


The detailed results

iPhone versus iPhone
CNET GARAGE
TREASURE ISLAND
FINANCIAL DISTRICT
TWIN PEAKS
Test 1: Number of bars
AT&T 4-5 4-5 5 1-5
Verizon 5 4-5 5 2-5
Test 2: Download/upload speeds*
AT&T Download: 40Kbps
Upload: 28 Kbps
Download: 189Kbps
Upload: 24 Kbps
Download: 116Kbps
Upload: 173 Kbps
Download: 120Kbps
Upload: 130 Kbps
Verizon Download: 518Kbps
Upload: 149 Kbps
Download: 440Kbps
Upload: 66 Kbps
Download: 651Kbps
Upload: 55 Kbps
Download: 543Kbps
Upload: 174 Kbps
Test 3: Photo uploading
AT&T 12 seconds 28 seconds 15 seconds 4 seconds
Verizon 8 seconds 9 seconds 8 seconds 5 seconds
Test 4: Loading a Web site
AT&T 33 seconds 28 seconds 17 seconds 12 seconds
Verizon 10 seconds 66 seconds 12 seconds 11 seconds
*Measurements taken from Root Metrics test. As we mentioned, AT&T bested Verizon in just two of our iPhone tests--loading a Web site faster at Treasure Island (the Verizon iPhone hung for over a minute) and uploading a photo to Facebook from our Twin Peaks test spot. In all other tests, Verizon came out ahead, but not always by much.
Verizon blazed through AT&T's upload and download speeds, according to the Root Metrics tool, with the largest performance chasm taking place in CNET's garage. But more important than the results of a diagnostic tool are the real-world upload and download speeds we conducted using Facebook and Giantbomb.com, and in these tests AT&T's iPhone fell less behind.