Forget the fact that Microsoft is being overshadowed by Google and that Google is looking like the 800lb gorilla beating down Microsoft. Microsoft has other plans they’ve been working on — plans that have been really coming together the past few weeks and that quite frankly, I’m sitting here in amazement.
Earlier this week, Microsoft’s Xbox 360 division announced partnerships with CBS, MTV Networks, Paramount Pictures, Turner Broadcasting, UFC and Warner Bros. Home Entertainment to “Digitally Deliver TV Shows and Movies to Gamers.” This is Microsoft’s first move into digital movie and TV show sales — and is also another move towards turning their Xbox gaming system into a full-fledged digital entertainment system (note: they want to become the center of your living room). These digital movie and TV show partnerships for their Xbox 360 unit, will likely turn into sales through their future digital media sales service Zune.com and playback on their upcoming handheld Zune device. Xbox 360 up until this announcement has only let users download select music videos and movie trailers. Last week, Microsoft sent a major update to Xbox 360 consoles that now allows users to now stream video from a PC or portable device (note: their handheld Zune device has wireless capabilities built-in) — previously, only users with Windows XP Media Center Edition installed could stream video to the Xbox 360.
Last week, Microsoft launched the website for their handheld digital music/video player Zune, which comes out next week (November 14) — Microsoft is taking on Apple’s iPod with their Zune device. And less than 2 weeks ago, Microsoft launched the latest version of their Windows Media Player (WMP), version 11, which takes over for Windows Media Connect and allows users to manage connections for sharing media (between PC, Xbox 360, Zune) within the new WMP player. One shocker is that Zune is not using Microsoft’s own “PlaysForSure” framework that other digital music etailers and manufacturers embraced (Napster, Musicmatch, Wal-Mart, URGE, MSN, FYE, etc) since Apple has not let etailers sell to iPod owners (due to Apple’s proprietary DRM, which DVD Jon recently cracked) and Apple has not let other manufacturers make devices that can work with iTunes-purchased media. Zune will be proprietary as well (like the iPod) and won’t be allowing etailers to get their media on it — Zune will not support PlaysForSure.
Since September, Apple has been selling movies online via iTunes, which iTunes at the time had 40-60 million copies of their software installed on user machines. Less than a week after launch, Apple announced $1mm in digital movie sales (125k purchases).
What does all of this mean? Microsoft has a serious strategy to dominate digital entertainment. Microsoft already has a very successful gaming console (Xbox 360) that allows users to play games, watch movies, buy movies, buy TV shows, stream video from their computer, stream music from their computer, and I’m sure buying music from URGE is in the gameplan — not to mention the social networking features that allow Xbox 360 users (and maybe Zune users, considering the wi-fi built-in?) to chat with each other in games, send messages to each other, add users to their friends list, etc.
The other device that has entered millions of homes over the years is the DVR. Microsoft has already been using DVR-related technology in their Windows XP Media Center Edition 2005 operating system (OS). In fact, if you own this OS, you can login to Microsoft’s online TV listing guide and setup their MSN Remote Record service, which then allows you to browse TV listings from any computer and click a button that will set a TV program to record to your home PC. I’d guess that in the future, there will be an accessory for my Xbox 360 that plugs into one of the Xbox 360 USB ports, hooking my cable TV into my Xbox 360, and allowing me to easily record TV shows to my Xbox 360 (note to self: short TIVO).
Apple may have millions of users using iTunes and millions of owners of iPods, but they lack a gaming console (which PriceWaterhouseCoopers predicts the gaming market will be $54.6 billion by 2009), they lack a DVR unit, and they won’t let manufacturers and etailers sell to their users. Currently, Apple’s strategy for getting into your living room is the anticipated iTV, which is rumored to be a set-top box for your TV and will allow you to stream movies, TV shows, and music from your iTunes software. Apple is also planning to sell basic games through iTunes, which iPod owners will be able to play. Could there be a gaming console (Nintendo WII? Sony Playstation 3?) purchase or partnership in the future for Apple? Could there be an Apple purchase of TiVo? (note to self: long TIVO)
This strategy by Microsoft is impressive and we’ll begin seeing how it all plays out over the next couple months of the holiday season — as buyers put up their money for an Apple iPod or a Microsoft Zune and/or Xbox 360.
11.09.2006
Verizon, YouTube Deal
Verizon, YouTube Aim
To Bring Web Videos
To Cellphones, TV
By AMOL SHARMA and KEVIN J. DELANEY
November 7, 2006; Page A1
Verizon Communications Inc. is in advanced talks with YouTube Inc. to bring the popular Web site's videos to cellphones and television sets, in what would be a landmark link-up between telecom and Internet video.
An agreement would allow Verizon's customers to view some of the most avidly watched entertainment on the Internet. That could advance the long-expected convergence of video and cellphones. It could also, at least temporarily, give Verizon a marketing edge over its rivals in the wireless and cable industries, furthering the company's efforts to expand into Internet and entertainment services.
Under the terms being discussed, customers of Verizon Wireless -- Verizon's joint venture with Vodafone Group PLC -- would be able to view some YouTube videos on their cellphones through the carrier's premium V Cast service, people familiar with the matter said. Verizon Wireless, like other cellular providers, has been adding video and data services to offset declining revenue from its calling plans.
Verizon also would offer YouTube videos as an on-demand feature of a TV service it is launching throughout the nation. The company paved the way for the launch with a massive upgrade of its network that is expected to cost $18 billion through 2010.
A deal with YouTube, which could be finalized within weeks, would give Verizon the chance to showcase its new network, which runs on fiber-optic lines all the way to subscribers' homes and has more capacity than the networks of competing cable operators. It could also give Verizon the exclusive right to carry YouTube videos for a limited period of time, one person with knowledge of the discussions said. The talks, however, could still fall through.
Though many cellphones provide Internet access, it is difficult for cellphone users to watch video on the Web, in part because it typically isn't formatted for cellphone screens. But cellular operators such as Verizon Wireless have the technology to bring video, music and other entertainment options to those screens. And their millions of subscribers make them attractive to digital-entertainment companies like YouTube, which are looking to extend their reach beyond personal computers.
YouTube, which has agreed to be acquired by Internet giant Google Inc. for $1.65 billion, is expected to seek similar deals with other big cellular operators -- such as Sprint Nextel Corp. and Cingular Wireless, a joint venture of AT&T Inc. and BellSouth Corp. -- to get the widest possible distribution for its content.
A spokeswoman for YouTube declined to comment on whether the company is in discussions with telecommunications carriers.
YouTube rose to Internet stardom by offering a wide variety of videos submitted by its users. They range from home videos to clips recorded from TV, such as music videos and soccer highlights. Users watch videos more than 100 million times daily on the site.
It remains to be seen whether YouTube's online success can translate to TV sets and cellphones. For one thing, the quality of the many homemade videos it carries is generally lower than what viewers expect on their TV sets. And consumers have yet to take to video on cellphones in large numbers.
Chad Hurley, YouTube's chief executive and co-founder, told an advertising conference last week that he sees a huge market in mobile services. The company has already launched a service that allows cellphone users to upload videos from some handsets to the YouTube site, but the clips can be watched only on a PC. The proposed Verizon deal would give cellphone customers an easy way to access YouTube videos while on the move.
The talks between Verizon and YouTube come at a time when a wide range of media and advertising companies are racing to figure out how to cash in on the skyrocketing popularity of Internet entertainment. Comcast Corp., the nation's largest cable operator, also has had talks with YouTube but has opted instead to create its own video-sharing site that will have ties to its video-on-demand service on TV.
Verizon Wireless, like other cellular carriers, is marketing new data services such as ringtones, songs, games and videos as its revenues from voice services decline. YouTube videos could give Verizon's business a boost by encouraging more subscribers to sign up for its V Cast service, which costs an additional $15 a month.
Verizon already offers video clips from major media companies and networks such as MTV, ESPN, and ABC News, but a YouTube deal would be its first with a company whose videos appear only on the Internet. Among the many clips Verizon was offering yesterday was a short CBS News piece on President Bush's last-minute campaigning before today's midterm elections. Rivals Sprint and Cingular have even broader offerings, including live TV.
Under the terms being discussed, Verizon Wireless cellphone users would be able to access about 50 to 100 of the most popular videos on the YouTube Web site at any given time, people familiar with the matter said. Initially, Verizon cellphone users wouldn't be able to post material of their own to the V Cast service but, by the end of the year, they would probably be able to upload video shot with a Verizon camera phone, a person with knowledge of the plan says.
As part of the proposed deal, Verizon, starting next year, would allow users to view YouTube videos on demand through its new TV service. Users would likely be able to buy access to the top YouTube videos of the day for a small fee, with the revenue shared between the two companies.
Verizon is offering TV as part of its effort to compete with cable companies in selling consumers bundles of home phone, Internet and television services. At the end of the third quarter, Verizon said it had 522,000 customers for its fiber-based Internet service and 118,000 TV customers.
Up until now, Verizon's TV service hasn't varied significantly from digital cable service, offering roughly the same slate of the most popular channels as well as movies and video on demand. A deal with YouTube would give the phone giant an opportunity to distinguish itself from cable, especially with viewers in their teens and twenties who are YouTube's biggest fans.
Verizon rival Comcast has decided to go it alone with its own video Web site, ziddio.com, which became accessible to the public in a trial phase yesterday. Ziddio solicits videos from users which, if they are deemed good enough, will show up on Comcast's video-on-demand service or traditional cable networks. Today, for example, the site is promoting contests for videos about Jedi warriors and messy houses. The best videos will be available on demand when Ziddio is officially launched, probably before the end of the year. Comcast also hasn't ruled out the possibility of doing a deal with an Internet company like YouTube or Revver Inc.
The Verizon discussions with YouTube suggest there are some areas where it makes sense for the large telecom carriers and Internet companies to work together. Until now, the giant cellular providers sometimes have been reluctant to cooperate with companies like Google and Yahoo Inc. Providers such as Verizon, Cingular, and T-Mobile USA generally have opted to work with small start-ups like Medio Systems Inc. and JumpTap Inc. when integrating search features into their handsets, rather than work with the Internet powerhouses, who have demanded a larger share of revenue from mobile search-based advertising.
Landline phone companies, meanwhile, have chafed at the fact that they get no slice of the massive profits that Google and other Internet companies generate on the Internet, despite the fact that their lines provide the Internet connections customers need to use those services. Telecom industry observers have mused for several months about the possibility that AT&T and Verizon might begin charging Internet companies and online video providers a special fee to guarantee priority treatment of their traffic on the Internet, an arrangement opponents say would violate principles of "net neutrality."
The dynamic of the Verizon deal would be very different, however: The carrier would be harnessing YouTube's Internet brand to promote its own FiOS TV services, treating the Web site as a partner rather than a competitor. If any money changes hands in the deal, it is likely Verizon will be paying YouTube, a person familiar with the matter said.
Verizon was hesitant about doing a deal because of legal concerns surrounding YouTube's content. In some cases, users of the video-sharing site have uploaded copyrighted material without the permission of the music labels and media companies that own the rights. The company already faces a copyright-infringement suit filed in July in U.S. District Court by Los Angeles News Service owner Robert Tur over several videos he alleges appeared on the site without his permission. YouTube has said Mr. Tur's suit is "without merit."
YouTube says it removes copyrighted videos when requested by their owners, which it says protects it from liability. At least partly to help insulate itself from lawsuits, the Web site has signed content licensing agreements with some media and entertainment companies, including Vivendi SA's Universal Music Group, Warner Music Group Corp., Sony BMG and CBS Corp.
To Bring Web Videos
To Cellphones, TV
By AMOL SHARMA and KEVIN J. DELANEY
November 7, 2006; Page A1
Verizon Communications Inc. is in advanced talks with YouTube Inc. to bring the popular Web site's videos to cellphones and television sets, in what would be a landmark link-up between telecom and Internet video.
An agreement would allow Verizon's customers to view some of the most avidly watched entertainment on the Internet. That could advance the long-expected convergence of video and cellphones. It could also, at least temporarily, give Verizon a marketing edge over its rivals in the wireless and cable industries, furthering the company's efforts to expand into Internet and entertainment services.
Under the terms being discussed, customers of Verizon Wireless -- Verizon's joint venture with Vodafone Group PLC -- would be able to view some YouTube videos on their cellphones through the carrier's premium V Cast service, people familiar with the matter said. Verizon Wireless, like other cellular providers, has been adding video and data services to offset declining revenue from its calling plans.
Verizon also would offer YouTube videos as an on-demand feature of a TV service it is launching throughout the nation. The company paved the way for the launch with a massive upgrade of its network that is expected to cost $18 billion through 2010.
A deal with YouTube, which could be finalized within weeks, would give Verizon the chance to showcase its new network, which runs on fiber-optic lines all the way to subscribers' homes and has more capacity than the networks of competing cable operators. It could also give Verizon the exclusive right to carry YouTube videos for a limited period of time, one person with knowledge of the discussions said. The talks, however, could still fall through.
Though many cellphones provide Internet access, it is difficult for cellphone users to watch video on the Web, in part because it typically isn't formatted for cellphone screens. But cellular operators such as Verizon Wireless have the technology to bring video, music and other entertainment options to those screens. And their millions of subscribers make them attractive to digital-entertainment companies like YouTube, which are looking to extend their reach beyond personal computers.
YouTube, which has agreed to be acquired by Internet giant Google Inc. for $1.65 billion, is expected to seek similar deals with other big cellular operators -- such as Sprint Nextel Corp. and Cingular Wireless, a joint venture of AT&T Inc. and BellSouth Corp. -- to get the widest possible distribution for its content.
A spokeswoman for YouTube declined to comment on whether the company is in discussions with telecommunications carriers.
YouTube rose to Internet stardom by offering a wide variety of videos submitted by its users. They range from home videos to clips recorded from TV, such as music videos and soccer highlights. Users watch videos more than 100 million times daily on the site.
It remains to be seen whether YouTube's online success can translate to TV sets and cellphones. For one thing, the quality of the many homemade videos it carries is generally lower than what viewers expect on their TV sets. And consumers have yet to take to video on cellphones in large numbers.
Chad Hurley, YouTube's chief executive and co-founder, told an advertising conference last week that he sees a huge market in mobile services. The company has already launched a service that allows cellphone users to upload videos from some handsets to the YouTube site, but the clips can be watched only on a PC. The proposed Verizon deal would give cellphone customers an easy way to access YouTube videos while on the move.
The talks between Verizon and YouTube come at a time when a wide range of media and advertising companies are racing to figure out how to cash in on the skyrocketing popularity of Internet entertainment. Comcast Corp., the nation's largest cable operator, also has had talks with YouTube but has opted instead to create its own video-sharing site that will have ties to its video-on-demand service on TV.
Verizon Wireless, like other cellular carriers, is marketing new data services such as ringtones, songs, games and videos as its revenues from voice services decline. YouTube videos could give Verizon's business a boost by encouraging more subscribers to sign up for its V Cast service, which costs an additional $15 a month.
Verizon already offers video clips from major media companies and networks such as MTV, ESPN, and ABC News, but a YouTube deal would be its first with a company whose videos appear only on the Internet. Among the many clips Verizon was offering yesterday was a short CBS News piece on President Bush's last-minute campaigning before today's midterm elections. Rivals Sprint and Cingular have even broader offerings, including live TV.
Under the terms being discussed, Verizon Wireless cellphone users would be able to access about 50 to 100 of the most popular videos on the YouTube Web site at any given time, people familiar with the matter said. Initially, Verizon cellphone users wouldn't be able to post material of their own to the V Cast service but, by the end of the year, they would probably be able to upload video shot with a Verizon camera phone, a person with knowledge of the plan says.
As part of the proposed deal, Verizon, starting next year, would allow users to view YouTube videos on demand through its new TV service. Users would likely be able to buy access to the top YouTube videos of the day for a small fee, with the revenue shared between the two companies.
Verizon is offering TV as part of its effort to compete with cable companies in selling consumers bundles of home phone, Internet and television services. At the end of the third quarter, Verizon said it had 522,000 customers for its fiber-based Internet service and 118,000 TV customers.
Up until now, Verizon's TV service hasn't varied significantly from digital cable service, offering roughly the same slate of the most popular channels as well as movies and video on demand. A deal with YouTube would give the phone giant an opportunity to distinguish itself from cable, especially with viewers in their teens and twenties who are YouTube's biggest fans.
Verizon rival Comcast has decided to go it alone with its own video Web site, ziddio.com, which became accessible to the public in a trial phase yesterday. Ziddio solicits videos from users which, if they are deemed good enough, will show up on Comcast's video-on-demand service or traditional cable networks. Today, for example, the site is promoting contests for videos about Jedi warriors and messy houses. The best videos will be available on demand when Ziddio is officially launched, probably before the end of the year. Comcast also hasn't ruled out the possibility of doing a deal with an Internet company like YouTube or Revver Inc.
The Verizon discussions with YouTube suggest there are some areas where it makes sense for the large telecom carriers and Internet companies to work together. Until now, the giant cellular providers sometimes have been reluctant to cooperate with companies like Google and Yahoo Inc. Providers such as Verizon, Cingular, and T-Mobile USA generally have opted to work with small start-ups like Medio Systems Inc. and JumpTap Inc. when integrating search features into their handsets, rather than work with the Internet powerhouses, who have demanded a larger share of revenue from mobile search-based advertising.
Landline phone companies, meanwhile, have chafed at the fact that they get no slice of the massive profits that Google and other Internet companies generate on the Internet, despite the fact that their lines provide the Internet connections customers need to use those services. Telecom industry observers have mused for several months about the possibility that AT&T and Verizon might begin charging Internet companies and online video providers a special fee to guarantee priority treatment of their traffic on the Internet, an arrangement opponents say would violate principles of "net neutrality."
The dynamic of the Verizon deal would be very different, however: The carrier would be harnessing YouTube's Internet brand to promote its own FiOS TV services, treating the Web site as a partner rather than a competitor. If any money changes hands in the deal, it is likely Verizon will be paying YouTube, a person familiar with the matter said.
Verizon was hesitant about doing a deal because of legal concerns surrounding YouTube's content. In some cases, users of the video-sharing site have uploaded copyrighted material without the permission of the music labels and media companies that own the rights. The company already faces a copyright-infringement suit filed in July in U.S. District Court by Los Angeles News Service owner Robert Tur over several videos he alleges appeared on the site without his permission. YouTube has said Mr. Tur's suit is "without merit."
YouTube says it removes copyrighted videos when requested by their owners, which it says protects it from liability. At least partly to help insulate itself from lawsuits, the Web site has signed content licensing agreements with some media and entertainment companies, including Vivendi SA's Universal Music Group, Warner Music Group Corp., Sony BMG and CBS Corp.
Microsoft, Universal Music Strike Licensing Deal for Zune Service
Microsoft, Universal Music Strike
Licensing Deal for Zune Service
Associated Press
November 9, 2006 10:35 a.m.
LOS ANGELES -- Microsoft Corp. and Universal Music Group say they have struck a licensing deal for the software company's new Zune portable music player and digital music store that calls for the recording company to get paid a cut of the sales of the device.
Executives at both companies declined to disclose the financial terms of the deal, which is expected to be officially announced early Thursday.
Redmond-based Microsoft is pursuing similar agreements with other major record labels, Chris Stephenson, general manager of global marketing for Microsoft Entertainment, said late Wednesday.
MOSSBERG REVIEWS THE ZUNE
Walt Mossberg says Zune, the upcoming MP3 player from Microsoft, has some attractive features but overall doesn't outshine Apple's iPod.
• Microsoft's Zune Challenges iPod
Zune, which is scheduled to be released Nov. 14, is Microsoft's attempt to compete with Apple Computer Inc.'s market-leading iPod player and iTunes music service. The device, which will sell for $249.99, lets people share songs, playlists or pictures over a wireless connection with nearby Zune users.
By paying record labels a portion of Zune player sales, Microsoft hopes to have more freedom to allow song-sharing or other promotions, Mr. Stephenson said. "There's certain marketing elements that we're looking at going forward, all based around the sharing and wireless scenarios," he said. He declined to provide specifics.
But in an interview late Wednesday, Universal Music Group Chairman and CEO Doug Morris said that the wireless song-sharing feature of the Zune player wasn't a major factor behind the company seeking a revenue sharing deal on the player.
"The only factor was that we feel that there's a great deal of music that's [stored] on these devices that was never legitimately obtained, and we wanted to get some sort of compensation for what we thought we're losing," Mr. Morris said. "I want our artists to be paid for the music that makes these devices popular."
While sales of digital tracks have increased in recent years amid lagging sales of CDs, record labels lament that much of the music that winds up on iPods and other digital players comes from either CDs fans already own or tracks culled from online file-sharing services. Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes download store.
Earlier this year, Universal and other major recording companies settled a dispute with Sirius Satellite Radio Inc. over its Sirius S50 portable music player by reaching a deal that called for Sirius to pay the record companies a fee for every S50 it sells.
Universal sought a similar approach when Microsoft came calling the recording company to hash out a licensing deal for its Zune online music store. Absent a deal with Universal, Microsoft faced the prospect of unveiling Zune without content from the world's biggest recording company, home to artists such as U2, Eminem and Shania Twain.
Mr. Morris said the agreement with Microsoft marks a turning point in how the company will approach similar deals in the future. "I don't want any business built on our music without getting paid a part of the business," he said.
Mr. Morris declined to say what percentage of each Zune sold will be paid to Universal Music, but said "it's good." Under the terms of the deal, Universal will split the money it gets from Zune player sales with its artists. Mr. Morris declined to say how much artists will be paid.
Licensing Deal for Zune Service
Associated Press
November 9, 2006 10:35 a.m.
LOS ANGELES -- Microsoft Corp. and Universal Music Group say they have struck a licensing deal for the software company's new Zune portable music player and digital music store that calls for the recording company to get paid a cut of the sales of the device.
Executives at both companies declined to disclose the financial terms of the deal, which is expected to be officially announced early Thursday.
Redmond-based Microsoft is pursuing similar agreements with other major record labels, Chris Stephenson, general manager of global marketing for Microsoft Entertainment, said late Wednesday.
MOSSBERG REVIEWS THE ZUNE
Walt Mossberg says Zune, the upcoming MP3 player from Microsoft, has some attractive features but overall doesn't outshine Apple's iPod.
• Microsoft's Zune Challenges iPod
Zune, which is scheduled to be released Nov. 14, is Microsoft's attempt to compete with Apple Computer Inc.'s market-leading iPod player and iTunes music service. The device, which will sell for $249.99, lets people share songs, playlists or pictures over a wireless connection with nearby Zune users.
By paying record labels a portion of Zune player sales, Microsoft hopes to have more freedom to allow song-sharing or other promotions, Mr. Stephenson said. "There's certain marketing elements that we're looking at going forward, all based around the sharing and wireless scenarios," he said. He declined to provide specifics.
But in an interview late Wednesday, Universal Music Group Chairman and CEO Doug Morris said that the wireless song-sharing feature of the Zune player wasn't a major factor behind the company seeking a revenue sharing deal on the player.
"The only factor was that we feel that there's a great deal of music that's [stored] on these devices that was never legitimately obtained, and we wanted to get some sort of compensation for what we thought we're losing," Mr. Morris said. "I want our artists to be paid for the music that makes these devices popular."
While sales of digital tracks have increased in recent years amid lagging sales of CDs, record labels lament that much of the music that winds up on iPods and other digital players comes from either CDs fans already own or tracks culled from online file-sharing services. Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes download store.
Earlier this year, Universal and other major recording companies settled a dispute with Sirius Satellite Radio Inc. over its Sirius S50 portable music player by reaching a deal that called for Sirius to pay the record companies a fee for every S50 it sells.
Universal sought a similar approach when Microsoft came calling the recording company to hash out a licensing deal for its Zune online music store. Absent a deal with Universal, Microsoft faced the prospect of unveiling Zune without content from the world's biggest recording company, home to artists such as U2, Eminem and Shania Twain.
Mr. Morris said the agreement with Microsoft marks a turning point in how the company will approach similar deals in the future. "I don't want any business built on our music without getting paid a part of the business," he said.
Mr. Morris declined to say what percentage of each Zune sold will be paid to Universal Music, but said "it's good." Under the terms of the deal, Universal will split the money it gets from Zune player sales with its artists. Mr. Morris declined to say how much artists will be paid.
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