TechCrunch
December 13, 2006
Rumors about the possible acquisition of Facebook, usually with Yahoo as buyer, have been around for most of this year. Not that Yahoo or Facebook have asked for this attention, but the media is getting antsy. Robert Young put it best last week when he asked - Yahoo & Facebook: Deal or No Deal?. That is certainly the question of the fiscal quarter.
We know that Facebook has been pursued almost since the beginning of its existence. They narrowly avoided a $10 million acquisition by Friendster in mid 2004, just months before they took their first round of financing from Accel Partners. Former Friendster execs say that the deal was close to closing, but last minute negoations over control ultimately disrupted the deal. Since then, Facebook has certainly been approached by every major Internet company.
At Yahoo, the long running courtship has lasted at least as long as this year, and is internally referred to as “Project Fraternity.” Leaked documents in our possession state that an early offer was $37.5 million for 5% of the company (a $750 million valuation) back in Q1 2006. This was rejected by Facebook.
Things really heated up mid year. Yahoo proposed a $1 billion flat out acquisition price based on a model they created where they projected $608 million in Facebook revenue by 2009, growing to $969 million in 2010. By 2015 Yahoo projects that Facebook would generate nearly $1 billion in annual profit. The actual 2006 number appears to be around $50 million in revenue, or nearly $1 million per week.
These revenue projections are based on robust user growth. By 2010, Yahoo assumes Facebook would hit 48 million users, out of a total combined highschool and young adult population of 83 million.
Our sources say that Facebook flatly rejected the $1 billion offer, looking for far more. Yahoo was prepared to pay up to $1.62 billion, but negotiations broke off before the offer could be made.
These documents are now a couple of months old, and both Yahoo and Facebook may have changed their views on a possible deal substantially in that time.
Thursday, December 21, 2006
Wii beats PS3 but both suffer Ebay effect
FT.com
December 8 2006
Sony sold only 197,000 units of its PlayStation3 games console in the US last month, well below sales of Nintendo’s rival Wii, because of supply problems.
It had aimed to put 400,000 PS3s into the biggest market for video games for the release of its next-generation machine in November.
But the figures from researcher NPD Group show it achieved less than 200,000.
In contrast, Nintendo’s rival Wii console outsold the PS3 by more than two-to-one, selling 476,000 units in November.
The PS3 went on sale on November 17 and the Wii on November 19.
Both products quickly sold out and have been reaching prices well in excess of their respective $599 and $250 price tags on websites such as eBay.
This has been bad news for video game publishers, who have seen “attach rates” on average of only one game being sold along with every PS3 console and two for the Wii, rather than the three or four that would normally be expected.
Both companies could clearly sell far more units if they could get supplies into the market.
Sony suffered a manufacturing setback with the Blu-ray player incorporated in the PS3, but analysts now expect full production to lift available units in the US to 600,000-800,000 by the end of the year.
Nintendo said on Friday Wii sales reached 600,000 in the Americas region in its first eight days of availability.
It also said it had sold 55 per cent of all video game systems in November, with 920,000 units of its handheld Nintendo DS machine and 642,000 Game Boy Advance sales.
Microsoft’s Xbox 360 console also appeared to have benefited from the hype around the new launches and from the frustration of gamers unable to buy the new products.
It outsold both the PS3 and Wii with 511,000 units.
Mr Pachter said the 360 was not as much a beneficiary as he had expected, perhaps due to the $400 price tag for its premium version.
The real winner was the PlayStation2, he said, which sold 663,000 units after Sony dropped the price from $149 to $129.
December 8 2006
Sony sold only 197,000 units of its PlayStation3 games console in the US last month, well below sales of Nintendo’s rival Wii, because of supply problems.
It had aimed to put 400,000 PS3s into the biggest market for video games for the release of its next-generation machine in November.
But the figures from researcher NPD Group show it achieved less than 200,000.
In contrast, Nintendo’s rival Wii console outsold the PS3 by more than two-to-one, selling 476,000 units in November.
The PS3 went on sale on November 17 and the Wii on November 19.
Both products quickly sold out and have been reaching prices well in excess of their respective $599 and $250 price tags on websites such as eBay.
This has been bad news for video game publishers, who have seen “attach rates” on average of only one game being sold along with every PS3 console and two for the Wii, rather than the three or four that would normally be expected.
Both companies could clearly sell far more units if they could get supplies into the market.
Sony suffered a manufacturing setback with the Blu-ray player incorporated in the PS3, but analysts now expect full production to lift available units in the US to 600,000-800,000 by the end of the year.
Nintendo said on Friday Wii sales reached 600,000 in the Americas region in its first eight days of availability.
It also said it had sold 55 per cent of all video game systems in November, with 920,000 units of its handheld Nintendo DS machine and 642,000 Game Boy Advance sales.
Microsoft’s Xbox 360 console also appeared to have benefited from the hype around the new launches and from the frustration of gamers unable to buy the new products.
It outsold both the PS3 and Wii with 511,000 units.
Mr Pachter said the 360 was not as much a beneficiary as he had expected, perhaps due to the $400 price tag for its premium version.
The real winner was the PlayStation2, he said, which sold 663,000 units after Sony dropped the price from $149 to $129.
Video-Gaming Sales Set to Top $12.5 Billion
New Consoles, Strong November Could Power Industry to Best Year in Recent History
AdAge.com
December 14, 2006
So far almost $9 billion in hardware, software and accessories have been sold this year, led by a strong November that saw sales of hardware jump 69% over November 2005 and software and accessories rise 7% and 10%, respectively, according to a new report from NPD Group. NPD analyst Anita Frazier predicted total 2006 U.S. sales will top $12.5 billion, a boost of 16% over last year's $10.3 billion. Console sales lead upswingConsole sales led the November upswing, rocketing up 103% in sales over last year, thanks to the introduction of Nintendo's Wii and Sony's PlayStation 3 at the end of November -- despite widespread product shortages. "The demand for Wii and PS3 far outstripped the supply," Ms. Frazier said. "So the numbers there don't really speak to supply or sales as much as they speak to how much retailers had in stock." Nintendo sold 476,000 Wii consoles, while Sony sold 197,000 PS3s, according to NPD. Nintendo has said it has shipped 600,000 devices and plans several million by the end of the year. Sony continues to be beset by delays and has stopped commenting on the current season, but reiterated that it plans to have six million PS3s worldwide by the end of March 2007. The Wii was edged out in November sales, however, by the Xbox 360, by a slight margin of 36,000 units. Ms. Frazier attributed the Xbox surge to the November debut of the Xbox-only game "Gears of War," versus the idea that consumer bought 360s as a second choice when they couldn't find Wiis or PS3s. Highly anticipated titleThe highly anticipated "Gears of War" was the also top software title in November and posted sales of more than 1 million units, generating some $61.5 million. (The title was also Microsoft's first attempt to sell games at $60; it previously priced its next-generation games at $50.) "I'm a firm believer that content is what sells hardware, and Xbox 360 had a huge title out with 'Gears of War,'" Ms. Frazier said, adding that the game's high sales were "not a big surprise, but what a great performance." There were also a few older-generation surprises in the report, and some good news for Sony. Sales of Sony PS2 consoles and Nintendo Game Boy Advance handheld devices were strong, as were multiple software titles for both. Ms. Frazier pointed out those sales likely are price-based, since the older systems are much less expensive. But it may also indicate more first-time gamers entering the market as well. "The entire industry is really rallying around that mantra of expanding the gaming audience," Ms. Frazier said. The big questionBut the big question remains: When the holiday is over, who will be the big gaming winner? No one's ready to predict, and with the biggest sales month of December yet to be tallied, it could be too soon. However, Nintendo, and in particular its Wii system, looks to be a sure winner, if not the top winner, this season. In NPD's November data, the Nintendo DS sold 917,000 units to top the hardware rankings; the Wii game "Legend of Zelda: Twilight Princess" was third behind "Gears of War" and PS2's "Final Fantasy" in software sales; and the Wii remote led all accessory sales, with 270,000 sold. Still, if November sales are any indication, the whole industry will have something to celebrate in the new year.
AdAge.com
December 14, 2006
So far almost $9 billion in hardware, software and accessories have been sold this year, led by a strong November that saw sales of hardware jump 69% over November 2005 and software and accessories rise 7% and 10%, respectively, according to a new report from NPD Group. NPD analyst Anita Frazier predicted total 2006 U.S. sales will top $12.5 billion, a boost of 16% over last year's $10.3 billion. Console sales lead upswingConsole sales led the November upswing, rocketing up 103% in sales over last year, thanks to the introduction of Nintendo's Wii and Sony's PlayStation 3 at the end of November -- despite widespread product shortages. "The demand for Wii and PS3 far outstripped the supply," Ms. Frazier said. "So the numbers there don't really speak to supply or sales as much as they speak to how much retailers had in stock." Nintendo sold 476,000 Wii consoles, while Sony sold 197,000 PS3s, according to NPD. Nintendo has said it has shipped 600,000 devices and plans several million by the end of the year. Sony continues to be beset by delays and has stopped commenting on the current season, but reiterated that it plans to have six million PS3s worldwide by the end of March 2007. The Wii was edged out in November sales, however, by the Xbox 360, by a slight margin of 36,000 units. Ms. Frazier attributed the Xbox surge to the November debut of the Xbox-only game "Gears of War," versus the idea that consumer bought 360s as a second choice when they couldn't find Wiis or PS3s. Highly anticipated titleThe highly anticipated "Gears of War" was the also top software title in November and posted sales of more than 1 million units, generating some $61.5 million. (The title was also Microsoft's first attempt to sell games at $60; it previously priced its next-generation games at $50.) "I'm a firm believer that content is what sells hardware, and Xbox 360 had a huge title out with 'Gears of War,'" Ms. Frazier said, adding that the game's high sales were "not a big surprise, but what a great performance." There were also a few older-generation surprises in the report, and some good news for Sony. Sales of Sony PS2 consoles and Nintendo Game Boy Advance handheld devices were strong, as were multiple software titles for both. Ms. Frazier pointed out those sales likely are price-based, since the older systems are much less expensive. But it may also indicate more first-time gamers entering the market as well. "The entire industry is really rallying around that mantra of expanding the gaming audience," Ms. Frazier said. The big questionBut the big question remains: When the holiday is over, who will be the big gaming winner? No one's ready to predict, and with the biggest sales month of December yet to be tallied, it could be too soon. However, Nintendo, and in particular its Wii system, looks to be a sure winner, if not the top winner, this season. In NPD's November data, the Nintendo DS sold 917,000 units to top the hardware rankings; the Wii game "Legend of Zelda: Twilight Princess" was third behind "Gears of War" and PS2's "Final Fantasy" in software sales; and the Wii remote led all accessory sales, with 270,000 sold. Still, if November sales are any indication, the whole industry will have something to celebrate in the new year.
Sony to enter video download market
FT.com
December 17 2006
Sony is to gatecrash the fledgling market in handheld devices to play downloaded video content early next year when it launches a service for the PlayStation Portable.
The decision, which could threaten Apple Computer’s grip on the video download market, will allow PSP owners to download a film from the internet to a PC and then to transfer a single, legal version of the film to a Sony device.
Sony, which has sold more than 20m PSPs worldwide, expects to launch the service in the first quarter of 2007 after tying up deals with online video providers.
Crucially for Sony, the service will not require the launch of a new PSP or for consumers to buy new hardware.
The new PSP service has been developed by Sony Pictures Home Entertainment and will use the Japanese company’s memory stick technology to store the video content. Sony is distributing a 4Gb memory stick capable of storing 10 feature films.
Amazon.com and film download sites such as Movielink and CinemaNow are in talks with Sony about signing up to the service. But the PSP service will not be compatible with Apple’s iTunes store, the dominant film download platform. Only iPod devices can download content from iTunes.
Only Walt Disney has made its films available on iTunes. Hollywood’s other studios have been reluctant to join Disney because of concerns about piracy: unlimited numbers of iPods can download copies of films that have been bought on iTunes and then downloaded to a PC.
Mike Goodman, a digital entertainment programme manager with Yankee Group, the research firm, said Sony’s PSP decision would “open the [video download] market up” for Sony.
Although the video download market is still immature, the industry is forecast to grow at an exponential rate during the next five years.
Global revenue from online video sales will be $298m this year, says Strategic Analytics. The technology research firm expects the market to grow to $1.5bn in annual revenues by the end of 2007 and to $5.9bn by 2010.
With Sony Pictures Entertainment producing film content in Hollywood and DVD sales growth slowing industrywide, Sony is keen to establish a strong position in digital delivery of film content.
Sony has had a difficult year. Launch of the PlayStation 3 suffered hitches. The group sold fewer than 200,000 units in its first month. It had intended to sell 400,000.
The problems led Sir Howard Stringer, chairman and chief executive, to describe the company as facing “a perfect storm”.
December 17 2006
Sony is to gatecrash the fledgling market in handheld devices to play downloaded video content early next year when it launches a service for the PlayStation Portable.
The decision, which could threaten Apple Computer’s grip on the video download market, will allow PSP owners to download a film from the internet to a PC and then to transfer a single, legal version of the film to a Sony device.
Sony, which has sold more than 20m PSPs worldwide, expects to launch the service in the first quarter of 2007 after tying up deals with online video providers.
Crucially for Sony, the service will not require the launch of a new PSP or for consumers to buy new hardware.
The new PSP service has been developed by Sony Pictures Home Entertainment and will use the Japanese company’s memory stick technology to store the video content. Sony is distributing a 4Gb memory stick capable of storing 10 feature films.
Amazon.com and film download sites such as Movielink and CinemaNow are in talks with Sony about signing up to the service. But the PSP service will not be compatible with Apple’s iTunes store, the dominant film download platform. Only iPod devices can download content from iTunes.
Only Walt Disney has made its films available on iTunes. Hollywood’s other studios have been reluctant to join Disney because of concerns about piracy: unlimited numbers of iPods can download copies of films that have been bought on iTunes and then downloaded to a PC.
Mike Goodman, a digital entertainment programme manager with Yankee Group, the research firm, said Sony’s PSP decision would “open the [video download] market up” for Sony.
Although the video download market is still immature, the industry is forecast to grow at an exponential rate during the next five years.
Global revenue from online video sales will be $298m this year, says Strategic Analytics. The technology research firm expects the market to grow to $1.5bn in annual revenues by the end of 2007 and to $5.9bn by 2010.
With Sony Pictures Entertainment producing film content in Hollywood and DVD sales growth slowing industrywide, Sony is keen to establish a strong position in digital delivery of film content.
Sony has had a difficult year. Launch of the PlayStation 3 suffered hitches. The group sold fewer than 200,000 units in its first month. It had intended to sell 400,000.
The problems led Sir Howard Stringer, chairman and chief executive, to describe the company as facing “a perfect storm”.
10 Internet Acquisitions from 2006
AdAge.com
December 18, 2006
Bubble? What bubble? Check Out a Few of the Year's Major Media Transactions.
1 YouTube by Google , $1.65 billion The year's biggest valuation is also the most debated: Is YouTube going to be a steal at Google's purchase price once it becomes the future of TV, or a growing source of legal hassle as more networks request to have their content removed?
2 Massive by Microsoft, $200 million-$400 million The gaming industry's most active in-game advertiser was a wise investment for Microsoft, which was a minor player in the crowded market.
3 Atom Films by Viacom, $200 million A move criticized by some as a me-too acquisition by Viacom, which shelled out $200 million for the seven-year-old web company. But Viacom did get a global digital media officer out of the deal-Atom CEO Mika Salmi.
4 DMarc by Google, $102 million DMarc marked Google's entry into the radio-advertising business. The deal was valued at $102 million upfront but could be worth as much as $1.2 billion, depending on how dMarc performs over three years.
5 Xfire by Viacom, $102 million Xfire's social-networking, instant-messaging and gaming-information services so impressed Viacom it was willing to shell out upward of $100 million.
6 Platform by Comcast, $80 million The Platform is a cornerstone of Comcast's fledgling online-video play. The broadband-services provider cost the cable company in the neighborhood of a rumored $80 mil.
7 Grouper by Sony, $65 million Sony gave copyright-shirking YouTubers a run for their money by purchasing this legit video-sharing site. Should its main competitor ever go down in a sea of lawsuit-induced flames, expect Grouper to emerge as the next major player.
8 JotSpot by Google, $50 million Google's venture into the wiki world was a questionable move for a company that has been notoriously low on ad inventory. Offering JotSpot's previously paid services free to users also raised questions of monetizing possibilities.
9 Petfinder by Animal Planet, $35 million The year's biggest (and cutest) no-brainer was the announcement that Animal Planet would unite TV fans and pet owners to help locate long-lost animal friends. Petfinder could give a dog a bone or five thanks to the $35 million buyout.
10 Wired.com by Conde Nast, $25 million Better late than never. Nearly a decade after its initial purchase of the tech mag, Conde Nast finally put its hot print property under the same roof as its web counterpart.
December 18, 2006
Bubble? What bubble? Check Out a Few of the Year's Major Media Transactions.
1 YouTube by Google , $1.65 billion The year's biggest valuation is also the most debated: Is YouTube going to be a steal at Google's purchase price once it becomes the future of TV, or a growing source of legal hassle as more networks request to have their content removed?
2 Massive by Microsoft, $200 million-$400 million The gaming industry's most active in-game advertiser was a wise investment for Microsoft, which was a minor player in the crowded market.
3 Atom Films by Viacom, $200 million A move criticized by some as a me-too acquisition by Viacom, which shelled out $200 million for the seven-year-old web company. But Viacom did get a global digital media officer out of the deal-Atom CEO Mika Salmi.
4 DMarc by Google, $102 million DMarc marked Google's entry into the radio-advertising business. The deal was valued at $102 million upfront but could be worth as much as $1.2 billion, depending on how dMarc performs over three years.
5 Xfire by Viacom, $102 million Xfire's social-networking, instant-messaging and gaming-information services so impressed Viacom it was willing to shell out upward of $100 million.
6 Platform by Comcast, $80 million The Platform is a cornerstone of Comcast's fledgling online-video play. The broadband-services provider cost the cable company in the neighborhood of a rumored $80 mil.
7 Grouper by Sony, $65 million Sony gave copyright-shirking YouTubers a run for their money by purchasing this legit video-sharing site. Should its main competitor ever go down in a sea of lawsuit-induced flames, expect Grouper to emerge as the next major player.
8 JotSpot by Google, $50 million Google's venture into the wiki world was a questionable move for a company that has been notoriously low on ad inventory. Offering JotSpot's previously paid services free to users also raised questions of monetizing possibilities.
9 Petfinder by Animal Planet, $35 million The year's biggest (and cutest) no-brainer was the announcement that Animal Planet would unite TV fans and pet owners to help locate long-lost animal friends. Petfinder could give a dog a bone or five thanks to the $35 million buyout.
10 Wired.com by Conde Nast, $25 million Better late than never. Nearly a decade after its initial purchase of the tech mag, Conde Nast finally put its hot print property under the same roof as its web counterpart.
DVDs Beat VCRs In TV Households
IN THE RACE TO GET more TV households, DVD players surpass VCRs, according to Nielsen Media Research's Home Technology Report. DVD penetration is in 81.2% of TV households as of third-quarter 2006, versus last year. VCR penetration is in 76.5% of TV households.
Media Daily
Dec 20, 2006
Media Daily
Dec 20, 2006
AOL Chief Has a View, a Long One
If AOL were being dressed up for a sale, as has been rumored on and off for several years, Randy Falco is an odd choice to be the new chief executive.
As Mr. Falco notes, he is hardly a short-term guy. Before starting at Time Warner’s AOL unit this month, he spent every day of his career since college — 31 years — working for NBC Universal. And he has been married for the same number of years.
“I’m very devoted,” he said, having no trouble finding more ways to emphasize the point. “I’m very loyal. I’m not in here for a short ride. I’m not a one-off guy.”
Mr. Falco and his new deputy, Ron Grant, made their first moves yesterday to run AOL for the long haul by doing something its employees have become accustomed to in the six tumultuous years since the company merged with Time Warner: reorganizing the executive suite.
Mr. Falco will have eight people report directly to him, including Mr. Grant and AOL’s vice chairman, Ted Leonsis, as well as the top executives in areas like human resources, legal and finance, according to a memo sent yesterday to AOL employees. Mr. Grant, the president and chief operating officer, will oversee seven operating businesses, including products, platforms, programming, advertising sales, international, and the company’s large but declining business for selling Internet access.
This time, Mr. Falco says, the company is properly configured to capitalize on a strategy it began following in August: focusing on free services for broadband Internet users supported by advertising.
The new lineup will not only clarify who does what after the recent departure of several top executives, Mr. Falco said, it will also illustrate a clearer emphasis. (A few positions are still open, including new slots for chief marketing and “innovation” officers, he said).
The company, he said, will focus on attracting a bigger audience, selling more advertising and increasing the amount of time people spend on its Web pages and using services like instant messaging.
“At the center of all of this is product innovation,” he said. “It makes everything else work.”
Only three weeks ago, Mr. Falco was the president and chief operating officer of NBC Universal Television, the biggest division of the media conglomerate NBC Universal, which is majority-owned by General Electric. A tall New York native bearing a glancing physical resemblance to Howard Stringer, the Sony chairman, Mr. Falco was “the quiet giant” at NBC, said a longtime colleague, David M. Zaslav, now chief executive of Discovery Communications.
It was at NBC’s headquarters that Mr. Falco and some colleagues, including Bob Wright, the chairman of NBC Universal, met in August with Time Warner’s president, Jeffrey L. Bewkes, and Mr. Grant to discuss offering NBC’s programming on Time Warner’s cable systems on a video-on-demand basis.
Mr. Bewkes said he had been instantly impressed by Mr. Falco, whom he thought best understood the video plan and could be a champion for it within NBC and at other TV companies. At a couple of follow-up lunches, Mr. Bewkes began thinking of Mr. Falco for a senior role within Time Warner.
From Mr. Falco’s perspective, it had become clear that his immediate boss, Jeff Zucker, was the internal candidate most likely to succeed Mr. Wright, whose retirement loomed. Mr. Falco reasoned that at age 52, if he aspired to be chief executive, it would be easier for him to move to another company before Mr. Wright retired.
Mr. Bewkes, meanwhile, had been developing AOL’s strategy shift with Jonathan F. Miller, the chief executive, but the men did not see eye to eye. Among Mr. Bewkes’s concerns, he said, was that the company needed a strong operating executive to make the strategy work. With that in mind, he even recommended that Mr. Miller have a drink with Mr. Falco in November, and they did.
Mr. Falco was not interested in anything but a chief executive’s position — otherwise he would have happily stayed at NBC Universal — but he was surprised when Mr. Bewkes offered him the job of running AOL. With digital distribution and the Internet the current obsession of all media executives, Mr. Falco did not see his lack of direct management of a Web business as an impediment.
“I’m not sure that convergence is the issue anymore,” he said. “There is a shift going on, and it’s dramatic; the consumer is living on the Net and as a result, the advertisers are on the Net."
Mr. Bewkes said he did not look specifically for a so-called traditional media executive for AOL. "I just wanted the best executive I could get. If there was an Internet executive as qualified as Randy, I would have hired that person,” he said.
After Mr. Falco accepted the job, he told Mr. Bewkes that he wanted Mr. Grant as his deputy. Mr. Grant, 40, had worked as Mr. Bewkes’s chief adviser on digital strategy and operations for the last four years. Before that, he spent five years at AOL. He was one of only a handful of executives who remained from the company’s business affairs unit, which made deals that resulted in accounting scandals.
Mr. Bewkes — who as the head of Time Warner’s HBO division clashed with AOL’s leaders shortly after the merger — said Mr. Grant’s survival of that experience and subsequent success was evidence of his integrity and knowledge. Mr. Grant said, "I believed in AOL then as I do now.”
On seeing Mr. Grant in the halls at Time Warner headquarters, Mr. Falco turned to him and joked: “This is my computer.”
Having Mr. Grant’s familiar face back at AOL’s campus in Dulles, Va., has not dulled the shock of Mr. Miller’s sudden and unexpected firing last month, several executives at the company said. In carrying out the new strategy, the company also decided to eliminate 5,000 jobs.
But on his first day on the job, Dec. 4, Mr. Falco met as many employees as he could, and had lunch in one of the campus’s four cafeterias.
“The first message was: the change in strategy that we just announced was not in question,” he said. Taking his typically long view, Mr. Falco said that one of his main goals was to “develop a winning culture” at AOL, a company that pioneered the popularization of the Internet and is still one of its major participants but has been knocked around more than Rocky Balboa.
“I can’t imagine that Time Warner will want to sell or get out of AOL,” he said. “It is an integral part of Time Warner.”
NYT.com
As Mr. Falco notes, he is hardly a short-term guy. Before starting at Time Warner’s AOL unit this month, he spent every day of his career since college — 31 years — working for NBC Universal. And he has been married for the same number of years.
“I’m very devoted,” he said, having no trouble finding more ways to emphasize the point. “I’m very loyal. I’m not in here for a short ride. I’m not a one-off guy.”
Mr. Falco and his new deputy, Ron Grant, made their first moves yesterday to run AOL for the long haul by doing something its employees have become accustomed to in the six tumultuous years since the company merged with Time Warner: reorganizing the executive suite.
Mr. Falco will have eight people report directly to him, including Mr. Grant and AOL’s vice chairman, Ted Leonsis, as well as the top executives in areas like human resources, legal and finance, according to a memo sent yesterday to AOL employees. Mr. Grant, the president and chief operating officer, will oversee seven operating businesses, including products, platforms, programming, advertising sales, international, and the company’s large but declining business for selling Internet access.
This time, Mr. Falco says, the company is properly configured to capitalize on a strategy it began following in August: focusing on free services for broadband Internet users supported by advertising.
The new lineup will not only clarify who does what after the recent departure of several top executives, Mr. Falco said, it will also illustrate a clearer emphasis. (A few positions are still open, including new slots for chief marketing and “innovation” officers, he said).
The company, he said, will focus on attracting a bigger audience, selling more advertising and increasing the amount of time people spend on its Web pages and using services like instant messaging.
“At the center of all of this is product innovation,” he said. “It makes everything else work.”
Only three weeks ago, Mr. Falco was the president and chief operating officer of NBC Universal Television, the biggest division of the media conglomerate NBC Universal, which is majority-owned by General Electric. A tall New York native bearing a glancing physical resemblance to Howard Stringer, the Sony chairman, Mr. Falco was “the quiet giant” at NBC, said a longtime colleague, David M. Zaslav, now chief executive of Discovery Communications.
It was at NBC’s headquarters that Mr. Falco and some colleagues, including Bob Wright, the chairman of NBC Universal, met in August with Time Warner’s president, Jeffrey L. Bewkes, and Mr. Grant to discuss offering NBC’s programming on Time Warner’s cable systems on a video-on-demand basis.
Mr. Bewkes said he had been instantly impressed by Mr. Falco, whom he thought best understood the video plan and could be a champion for it within NBC and at other TV companies. At a couple of follow-up lunches, Mr. Bewkes began thinking of Mr. Falco for a senior role within Time Warner.
From Mr. Falco’s perspective, it had become clear that his immediate boss, Jeff Zucker, was the internal candidate most likely to succeed Mr. Wright, whose retirement loomed. Mr. Falco reasoned that at age 52, if he aspired to be chief executive, it would be easier for him to move to another company before Mr. Wright retired.
Mr. Bewkes, meanwhile, had been developing AOL’s strategy shift with Jonathan F. Miller, the chief executive, but the men did not see eye to eye. Among Mr. Bewkes’s concerns, he said, was that the company needed a strong operating executive to make the strategy work. With that in mind, he even recommended that Mr. Miller have a drink with Mr. Falco in November, and they did.
Mr. Falco was not interested in anything but a chief executive’s position — otherwise he would have happily stayed at NBC Universal — but he was surprised when Mr. Bewkes offered him the job of running AOL. With digital distribution and the Internet the current obsession of all media executives, Mr. Falco did not see his lack of direct management of a Web business as an impediment.
“I’m not sure that convergence is the issue anymore,” he said. “There is a shift going on, and it’s dramatic; the consumer is living on the Net and as a result, the advertisers are on the Net."
Mr. Bewkes said he did not look specifically for a so-called traditional media executive for AOL. "I just wanted the best executive I could get. If there was an Internet executive as qualified as Randy, I would have hired that person,” he said.
After Mr. Falco accepted the job, he told Mr. Bewkes that he wanted Mr. Grant as his deputy. Mr. Grant, 40, had worked as Mr. Bewkes’s chief adviser on digital strategy and operations for the last four years. Before that, he spent five years at AOL. He was one of only a handful of executives who remained from the company’s business affairs unit, which made deals that resulted in accounting scandals.
Mr. Bewkes — who as the head of Time Warner’s HBO division clashed with AOL’s leaders shortly after the merger — said Mr. Grant’s survival of that experience and subsequent success was evidence of his integrity and knowledge. Mr. Grant said, "I believed in AOL then as I do now.”
On seeing Mr. Grant in the halls at Time Warner headquarters, Mr. Falco turned to him and joked: “This is my computer.”
Having Mr. Grant’s familiar face back at AOL’s campus in Dulles, Va., has not dulled the shock of Mr. Miller’s sudden and unexpected firing last month, several executives at the company said. In carrying out the new strategy, the company also decided to eliminate 5,000 jobs.
But on his first day on the job, Dec. 4, Mr. Falco met as many employees as he could, and had lunch in one of the campus’s four cafeterias.
“The first message was: the change in strategy that we just announced was not in question,” he said. Taking his typically long view, Mr. Falco said that one of his main goals was to “develop a winning culture” at AOL, a company that pioneered the popularization of the Internet and is still one of its major participants but has been knocked around more than Rocky Balboa.
“I can’t imagine that Time Warner will want to sell or get out of AOL,” he said. “It is an integral part of Time Warner.”
NYT.com
DVD spells digital video decline
Persistent year-over-year declining sales of DVDs at Best Buy and Circuit City stores might portend trouble for the movie industry, according to a Wall Street analyst report released Wednesday.Pali Research analyst Richard Greenfield, who raised concerns about the home video industry in October with a report titled "DVD Party is Over" and again last week, said Wednesday that "2007 appears even more ominous for film studios."His latest beef comes courtesy of Circuit City Stores Inc., which reported a $16 million quarterly loss Tuesday, sending its shares tumbling 17.5% that day.While many Wall Street observers focused on falling prices for flat-panel television sets, Greenfield keyed in on DVD sales at Circuit City and at its archrival Best Buy, which reported better-than-expected quarterly results last week."Based on company reports over the past four quarters at each retailer, five of those eight reported quarters have experienced negative year-over-year DVD comps," Greenfield said.The analyst said that he is "increasingly confident that 2007 will be the first year that consumer spending on DVDs declines domestically."With that prediction, Greenfield is at odds with other researchers.PricewaterhouseCoopers predicts that the U.S. market for DVD sales and rentals, combined, will climb from $24.1 billion this year to $24.8 billion next year. When digital streaming and "other rentals" are added to the mix, the industry grows from $25.8 billion to $27 billion domestically.Greenfield is underwhelmed by the prospect of digital downloads, fearful that movie companies are embracing the concept too quickly and will end up cannibalizing their DVD sales."We are concerned about the long-term damage the industry could incur from expanding the rental market via digital downloads (that expire) and/or video-on-demand," the analyst wrote in his Wednesday report."While the studios need the VOD/rental industry to support failed movies, we do not believe a greater emphasis on VOD/rental (vs. retail) is the answer to the industry's problems heading into 2007," he wrote.The analyst is predicting good fourth-quarter results for movie companies "given a great DVD release schedule." It is 2007 and 2008 that worries him, and sales of next-generation DVDs, be they Blu-ray Disc, HD-DVD or both, won't help, either, at least not in the near term."Bottom line, keep an eye on 2007 film industry profits," he wrote. "We suspect the risk to expectations is increasingly to the downside, with downside risk growing into 2008 unless there is a notable acceleration in next-gen DVD sales and/or a more attractive business model emerges for digital movie distribution."
The Hollywood Reporter
Dec 21, 2006
The Hollywood Reporter
Dec 21, 2006
Universal Jumps on Trans-Fats Bandwagon
TRANS FATS CONTINUE TO STAY in the spotlight: The latest organization to ban the fats is Universal Studios, which operates theme parks in Orlando, Fla., and Hollywood, Calif. The company said the majority of its facilities will be trans-fats-free by the first of the year, with trans fats completely removed from menus by the end of 2007.
Universal is also adding fruit and side salads to menus; park maps will indicate which food service facilities offer healthful options. Universal said it's working on making nutrition information available to guests.
"Providing our guests healthier options and trans-fat-free cooking is the right thing to do," said Steven Jayson, Universal Parks & Resorts executive chef, in a statement. "We want our guests to feel good about the food they eat when they visit our theme parks."
The company said it has spent the last several months testing recipes and new ingredients and getting guest feedback on new foods. "We did not want to sacrifice taste or quality," Jayson said.
Universal's announcement suggests that pressure to ban trans fats shows no sign of slowing down. The major quick-service hamburger chains have either removed trans fats--which are found in fried foods and baked goods--from menus, or vowed to do so soon. Earlier this week, legislators in both Massachusetts and California introduced bills that would ban trans fats from menus, and New York City has passed legislation requiring all restaurants to remove trans fats from foods.
Full-service chains such as Olive Garden also have vowed to remove the fats, which health professionals say seriously raise the risk of heart disease, from their menus.
Media Post
Dec 21, 2006
Universal is also adding fruit and side salads to menus; park maps will indicate which food service facilities offer healthful options. Universal said it's working on making nutrition information available to guests.
"Providing our guests healthier options and trans-fat-free cooking is the right thing to do," said Steven Jayson, Universal Parks & Resorts executive chef, in a statement. "We want our guests to feel good about the food they eat when they visit our theme parks."
The company said it has spent the last several months testing recipes and new ingredients and getting guest feedback on new foods. "We did not want to sacrifice taste or quality," Jayson said.
Universal's announcement suggests that pressure to ban trans fats shows no sign of slowing down. The major quick-service hamburger chains have either removed trans fats--which are found in fried foods and baked goods--from menus, or vowed to do so soon. Earlier this week, legislators in both Massachusetts and California introduced bills that would ban trans fats from menus, and New York City has passed legislation requiring all restaurants to remove trans fats from foods.
Full-service chains such as Olive Garden also have vowed to remove the fats, which health professionals say seriously raise the risk of heart disease, from their menus.
Media Post
Dec 21, 2006
MTV Launches New Mobile Subscription Service
MTV HAS LAUNCHED A NEW subscription service for mobile content featuring ringtones and wallpapers tied to MTV shows and music. For $5.99 a month, subscribers to the "Bananas" service can get two ringtones and one wallpaper, or get four ringtones and two wallpapers for $9.99 monthly. The content includes material from MTV shows such as "Laguna Beach," "The Real World," and "Two-A-Days" as well as music from major labels including Universal Music Group and Warner Bros. Previously, MTV's mobile content was only available on an a la carte basis. MTV will promote Bananas through its programming. A pop-up box, for instance, will appear during a music video encouraging viewers to buy a ringtone of the song being performed. Bananas will have no video clips at launch but MTV plans to add video eventually. Mobile consumers will be able to sign up for the service by texting "MTV" to a shortcode or through the Bananas site going live today. MTV developed the new service with mobile content distributor Motricity. People can sign up starting next month.
Media Post
Dec 21, 2006
Media Post
Dec 21, 2006
Yahoo Scores Most Page Views Of Year
WITH APPROXIMATELY 354.5 BILLION PAGE views through Nov. 30, Yahoo was the most trafficked Web property of the year, according to new data released Wednesday by Nielsen//NetRatings.
Nielsen issued the data as part of a broader look at the most popular media of the year, including TV shows, books, movies, songs, and ringtones. MySpace garnered the second-highest number of page views (250.7 billion), while Google placed third (147.7 billion). (See chart below for complete list.)
With an online ad spend of approximately $659.1 million, the biggest display advertiser on the Web through Nov. 30 was GUS Plc--which until mid-October operated both the Argos Retail Group and credit reporting agency Experian; on Oct. 10, GUS Plc was split into two divisions. The second-biggest online display advertiser was VoIP company Vonage Holdings Corp ($294.9 million), followed by online movie rental company Netflix ($242.5 million). (See chart below for complete list.) The information about online ad spending was issued by Nielsen//NetRatings' AdRelevance unit.
The track to rack up the most downloads through Dec. 10 was "Bad Day," by Daniel Powter, with 1.89 million, according to Nielsen SoundScan. "Crazy" by Gnarls Barkely was second (1.52 million), followed by "Sean Paul's Temperature" (1.46 million).
Midia Post
Dec 21, 2006
Nielsen issued the data as part of a broader look at the most popular media of the year, including TV shows, books, movies, songs, and ringtones. MySpace garnered the second-highest number of page views (250.7 billion), while Google placed third (147.7 billion). (See chart below for complete list.)
With an online ad spend of approximately $659.1 million, the biggest display advertiser on the Web through Nov. 30 was GUS Plc--which until mid-October operated both the Argos Retail Group and credit reporting agency Experian; on Oct. 10, GUS Plc was split into two divisions. The second-biggest online display advertiser was VoIP company Vonage Holdings Corp ($294.9 million), followed by online movie rental company Netflix ($242.5 million). (See chart below for complete list.) The information about online ad spending was issued by Nielsen//NetRatings' AdRelevance unit.
The track to rack up the most downloads through Dec. 10 was "Bad Day," by Daniel Powter, with 1.89 million, according to Nielsen SoundScan. "Crazy" by Gnarls Barkely was second (1.52 million), followed by "Sean Paul's Temperature" (1.46 million).
Midia Post
Dec 21, 2006
Viacom Drops Out of Venture to Take On YouTube
Leaves NBC Universal and Fox to Continue Talks
Attempts by the media conglomerates to form a network-backed rival to YouTube suffered a set back yesterday after Viacom executives said they are no longer part of the project.
Viacom's decision to pull out of a video venture that would challenge YouTube is based partly on its own success at going it alone.
Yes, we're out of it," one executive confirmed. "We've got a lot of agendas right now. There was no need to do it and be a founding member. We can license our stuff to it. We don't have to be a participant." A Viacom spokesman declined to comment. Down to Fox, NBCThe charge to spearhead a rival to YouTube appears now to be left to Fox and NBC. CBS is not part of current discussions aimed at forming a rival to the Google-owned online video site, Ad Age has learned. CBS representatives would not comment on the talks at all, though other executives said that CBS is not part of current talks because of a pending deal with Google over its CBS Radio inventory and that it dropped out of talks in recent days. Another executive close to CBS suggested that while they are not part of current discussions, they may re-enter should the initiative progress. The talks are being led by Peter Levinsohn, the new president of Fox Interactive Media and by Beth Comstock, who is president NBC Universal digital media and market development. Time Warner and Walt Disney Co. also confirmed yesterday they had no interest in being part of the venture. Earlier this month, one person inside Viacom said it's difficult for the company to determine what kind of licensing deal it should negotiate with a Google-owned YouTube without first making its content as accessible as possible on its own and seeing what happens. Viacom owns video-clip destinations iFilm and Atom Entertainment and has one of the most popular online programming destinations in Comedy Central's Motherload. "We're the prettiest girl at the dance. We have content that's driving a lot of these sites and we own almost all of it. A lot of people are interested in reaching agreements with us. They don't have to be exclusive," this person said. Viacom is still negotiating with Google over how it will be compensated for copyrighted material that lands on YouTube.
Comedy Central's Motherload, part of Viacom, is a popular destination, thanks to clips from 'The Daily Show With Jon Stewart.' Still, even with Viacom's decision to exit, the core group is pressing on. One executive who is part of the talks explained that discussions are still ongoing over some central issues. "The business-model concept is to look at whether to license programming or be part of the asset that [delivers it]. That is the real question people are wrestling with." This executive added: "TV is an advertising-based business model that will continue to be under pressure. We have to get our product to a platform that is more compelling and that has inventory that is ROI-driven." Reports had suggested the group might be make a bid for a small video serving site called Metacafe, but this executive said numerous online video entities were trying to get in front of the group, and it hasn't even been decided if they will acquire a property. Putting pressure on Google "This whole thing is about screwing a better deal out of Google," another executive outside of the venture said. The major entertainment companies are in talks with Google about how they will be compensated for the use of their content on YouTube. The threat of a rival might give the entertainment companies more leverage in negotiating revenue splits with Google. The outside executive also added that the threat of an anti-trust lawsuit could also be a deterrent to the venture. The history of entertainment conglomerate-backed responses to entrepreneurial ideas that suddenly take off isn't exactly rosy. The music industry tried on-demand music venture Press Play in response to Napster, while the movie business tried Movielink, a Hollywood movie download service. But the question traditional networks have to ask themselves is whether they gain incremental viewers by banding together rather than promoting their own sites as places to view online content. The only way it would work, said someone involved in early talks, is if each network agreed to make the commitment to promote the joint video site over its own site -- and that's a sacrifice not all are prepared to make. Indeed, while it seemed attractive to collectively launch a YouTube-killer six months ago, networks that have since put their shows online have gotten a taste of the revenue that can come from that -- and are considering going it alone. One of the biggest challenges would be getting the various companies -- which are not only fierce competitors but also at various stages in their digital development -- to work together. "Would I want another network knowing how well my shows performed on the web?" said the executive who was privy to early discussions. Creating improved technology The reasons to do it would be for technology or marketing purposes, said Mike Vorhaus, managing director of Frank N. Magid Associates, and if the reason was to create a common technology for streaming, downloading and security, that makes sense. But he contends the networks don't need it for marketing purposes. "I don't think you need to have [the networks] in a common TV download website for people to know about NBC, Fox, ABC and CBS's having video online. YouTube's success is not that it's a brand that is well known, but that it's a social network of video consumers -- you've got all these people who go there to share video," he said. Plus, he added, his company has learned from observation in its usability studies that many people use traditional search engines to find video they're looking for. Soon it will matter less where the video resides as long as people can find it easily. "Do a search for video on Mt. Hood hikers," he said, referring to the ongoing story about the search for missing climbers on Oregon's Mt. Hood. "Sometimes a CNN link comes up, sometimes a YouTube link. I don't get the impression that the majority of average YouTube user is pouring a beer, taking their shoes off and going to YouTube and watching 20 minutes worth of video." Buyers remain skeptical if a joint venture would work, but say if it did and created a repository of quality video, they'd be interested in buying media through it. The challenge is the content "Conceptually it would make everything easier if you think of this consortium as one-stop shopping for all of this great content," said Sarah Kim Baehr, VP-media, Avenue A/Razorfish. Often the challenge in advertising on a user-generated content site or on YouTube is the user-generated content, she said. With the networks' offering, "you know it's part of a series and the marketer has probably bought into it at some other level." But she's skeptical the venture will become reality, given how the various competitive parties would have to work together. "They'd all have to be pretty altruistic and so focused on Google and YouTube as a rival and forego their own rivalries among each other to be successful," she said. And it would never be a replacement for YouTube, she said, but an "also" or a "nice to have" complementary site. "Part of the entertainment value of YouTube is having all this user-generated content and that it's a meeting place," she said. "It's not about watching the whole clip but about watching the part that's worth seeing. ... It's about what are the top five videos that the gazillion people who go to YouTube are watching. What's new that's bubbled up?" Will it be for the user? The reason YouTube grew so quickly, said Ian Schafer, CEO of Deep Focus, which has launched campaigns on the site, is that it's a functional website. "Chad Hurley will say this until he's blue in the face -- it's designed for the user with the conveniences, functionality, sharing," Mr. Frazier said. "If the networks put something together and do it right they would make it just as minimalist and democratic as YouTube." But, of course, that's not been the primary impetus driving the networks decisions. However, he suspects the networks' advantage in such a site is that they could best pull off a pre-roll online ad model -- albeit shorter, more irreverent ads -- without angering users. "I don't think they have to [come up with new ad model] but they can change the concept of the pre-roll to make it work," he said. "Pre-roll won't be the enemy, especially if it's in front of professional content, where there's a quality guarantee." "Most interesting that they would even come together to talk about it," Ms. Baehr said. "That says a lot about how the whole digital world has put everyone upside down. It changes the whole paradigm -- there's no reason for these people to be in the same room or collaborate except for this enemy."
AdAge.com
December 20, 2006
Attempts by the media conglomerates to form a network-backed rival to YouTube suffered a set back yesterday after Viacom executives said they are no longer part of the project.
Viacom's decision to pull out of a video venture that would challenge YouTube is based partly on its own success at going it alone.
Yes, we're out of it," one executive confirmed. "We've got a lot of agendas right now. There was no need to do it and be a founding member. We can license our stuff to it. We don't have to be a participant." A Viacom spokesman declined to comment. Down to Fox, NBCThe charge to spearhead a rival to YouTube appears now to be left to Fox and NBC. CBS is not part of current discussions aimed at forming a rival to the Google-owned online video site, Ad Age has learned. CBS representatives would not comment on the talks at all, though other executives said that CBS is not part of current talks because of a pending deal with Google over its CBS Radio inventory and that it dropped out of talks in recent days. Another executive close to CBS suggested that while they are not part of current discussions, they may re-enter should the initiative progress. The talks are being led by Peter Levinsohn, the new president of Fox Interactive Media and by Beth Comstock, who is president NBC Universal digital media and market development. Time Warner and Walt Disney Co. also confirmed yesterday they had no interest in being part of the venture. Earlier this month, one person inside Viacom said it's difficult for the company to determine what kind of licensing deal it should negotiate with a Google-owned YouTube without first making its content as accessible as possible on its own and seeing what happens. Viacom owns video-clip destinations iFilm and Atom Entertainment and has one of the most popular online programming destinations in Comedy Central's Motherload. "We're the prettiest girl at the dance. We have content that's driving a lot of these sites and we own almost all of it. A lot of people are interested in reaching agreements with us. They don't have to be exclusive," this person said. Viacom is still negotiating with Google over how it will be compensated for copyrighted material that lands on YouTube.
Comedy Central's Motherload, part of Viacom, is a popular destination, thanks to clips from 'The Daily Show With Jon Stewart.' Still, even with Viacom's decision to exit, the core group is pressing on. One executive who is part of the talks explained that discussions are still ongoing over some central issues. "The business-model concept is to look at whether to license programming or be part of the asset that [delivers it]. That is the real question people are wrestling with." This executive added: "TV is an advertising-based business model that will continue to be under pressure. We have to get our product to a platform that is more compelling and that has inventory that is ROI-driven." Reports had suggested the group might be make a bid for a small video serving site called Metacafe, but this executive said numerous online video entities were trying to get in front of the group, and it hasn't even been decided if they will acquire a property. Putting pressure on Google "This whole thing is about screwing a better deal out of Google," another executive outside of the venture said. The major entertainment companies are in talks with Google about how they will be compensated for the use of their content on YouTube. The threat of a rival might give the entertainment companies more leverage in negotiating revenue splits with Google. The outside executive also added that the threat of an anti-trust lawsuit could also be a deterrent to the venture. The history of entertainment conglomerate-backed responses to entrepreneurial ideas that suddenly take off isn't exactly rosy. The music industry tried on-demand music venture Press Play in response to Napster, while the movie business tried Movielink, a Hollywood movie download service. But the question traditional networks have to ask themselves is whether they gain incremental viewers by banding together rather than promoting their own sites as places to view online content. The only way it would work, said someone involved in early talks, is if each network agreed to make the commitment to promote the joint video site over its own site -- and that's a sacrifice not all are prepared to make. Indeed, while it seemed attractive to collectively launch a YouTube-killer six months ago, networks that have since put their shows online have gotten a taste of the revenue that can come from that -- and are considering going it alone. One of the biggest challenges would be getting the various companies -- which are not only fierce competitors but also at various stages in their digital development -- to work together. "Would I want another network knowing how well my shows performed on the web?" said the executive who was privy to early discussions. Creating improved technology The reasons to do it would be for technology or marketing purposes, said Mike Vorhaus, managing director of Frank N. Magid Associates, and if the reason was to create a common technology for streaming, downloading and security, that makes sense. But he contends the networks don't need it for marketing purposes. "I don't think you need to have [the networks] in a common TV download website for people to know about NBC, Fox, ABC and CBS's having video online. YouTube's success is not that it's a brand that is well known, but that it's a social network of video consumers -- you've got all these people who go there to share video," he said. Plus, he added, his company has learned from observation in its usability studies that many people use traditional search engines to find video they're looking for. Soon it will matter less where the video resides as long as people can find it easily. "Do a search for video on Mt. Hood hikers," he said, referring to the ongoing story about the search for missing climbers on Oregon's Mt. Hood. "Sometimes a CNN link comes up, sometimes a YouTube link. I don't get the impression that the majority of average YouTube user is pouring a beer, taking their shoes off and going to YouTube and watching 20 minutes worth of video." Buyers remain skeptical if a joint venture would work, but say if it did and created a repository of quality video, they'd be interested in buying media through it. The challenge is the content "Conceptually it would make everything easier if you think of this consortium as one-stop shopping for all of this great content," said Sarah Kim Baehr, VP-media, Avenue A/Razorfish. Often the challenge in advertising on a user-generated content site or on YouTube is the user-generated content, she said. With the networks' offering, "you know it's part of a series and the marketer has probably bought into it at some other level." But she's skeptical the venture will become reality, given how the various competitive parties would have to work together. "They'd all have to be pretty altruistic and so focused on Google and YouTube as a rival and forego their own rivalries among each other to be successful," she said. And it would never be a replacement for YouTube, she said, but an "also" or a "nice to have" complementary site. "Part of the entertainment value of YouTube is having all this user-generated content and that it's a meeting place," she said. "It's not about watching the whole clip but about watching the part that's worth seeing. ... It's about what are the top five videos that the gazillion people who go to YouTube are watching. What's new that's bubbled up?" Will it be for the user? The reason YouTube grew so quickly, said Ian Schafer, CEO of Deep Focus, which has launched campaigns on the site, is that it's a functional website. "Chad Hurley will say this until he's blue in the face -- it's designed for the user with the conveniences, functionality, sharing," Mr. Frazier said. "If the networks put something together and do it right they would make it just as minimalist and democratic as YouTube." But, of course, that's not been the primary impetus driving the networks decisions. However, he suspects the networks' advantage in such a site is that they could best pull off a pre-roll online ad model -- albeit shorter, more irreverent ads -- without angering users. "I don't think they have to [come up with new ad model] but they can change the concept of the pre-roll to make it work," he said. "Pre-roll won't be the enemy, especially if it's in front of professional content, where there's a quality guarantee." "Most interesting that they would even come together to talk about it," Ms. Baehr said. "That says a lot about how the whole digital world has put everyone upside down. It changes the whole paradigm -- there's no reason for these people to be in the same room or collaborate except for this enemy."
AdAge.com
December 20, 2006
Web-wise, expect '07 to get even rosier
Forecasters see another year of strong growth.
Looking ahead to 2007, two things will distinguish internet advertising. First, it will outpace all other media in terms of forecasted growth, and second, it will most likely outpace those forecasts as well.
If typically in media spending seems to fall short of forecasts, when it comes to the internet spending typically grows faster than even the rosiest predictions. That most likely will happen again in 2007, when spending is expected to grow as much as 30 percent.
“Internet advertising has been growing ahead of expectations just about everywhere, despite the fact that the expectations are very high,” observes Jonathan Barnard, head of publications at ZenithOptimedia.
Case in point: 2006 internet spending growth projections varied but were in the range of 20 percent. With the first three quarters now in, spending, including search, actually paced at 49 percent, according to Nielsen Monitor-Plus. While that's an extreme gap, it illustrates just how far off forecasts can be.
Just why the gap between forecasts and actual growth is interesting. One reason is that with so much hoopla over web spending growth, forecasters are inclined to err on the side of caution, lest they appear caught up in the frenzy.
But the bigger factor is that forecasters are forever behind the curve, projecting growth based on the sectors that showed the most growth that year, at a time when marketers are busy coming up with new ways to advertise on the internet. New opportunities for advertisers spring up faster than forecasters can factor them into their forecasting equations.
Tied into that is a natural momentum of growth stemming from the disequilibrium between how much consumers use the internet and the share of media dollars that are spent on it, explains Peter Petrusky, director of the entertainment, media and communications practice at PricewaterhouseCoopers.
Media consumption patterns are changing faster than predicted, explains Petrusky, and spending is shooting ahead as advertisers are pushed to move online faster than expected to reach their target audiences as their internet use surges.
There's still a lot of catching up to do. The internet's share of media consumption is now between 15 to 20 percent, Petrusky explains, while its share of ad spending is between 4 percent and 5 percent.
The question looking into 2007 is whether this pattern will repeat itself. Some forecasters think the pace of internet advertising growth may actually slow slightly.
Group M forecasts that U.S. internet advertising will grow 14 percent in 2007, down from an expected 21 percent this year.
Why the lower growth rate? A number of reasons, including mild deterioration in U.S. consumer confidence, says Adam Smith, futures director at Group M.
Looking at other forecasts, Universal McCann’s Robert Coen, considered the dean of media forecasters, expects 15 percent growth for internet advertising, while eMarketer forecasts growth of 18.9 percent, to $19.5 billion, in 2007.
For its part, ZenithOptimedia forecasts internet advertising will grow faster in 2007 than it has in 2006. It predicts 29 percent growth in 2007, up from a forecast of 25 percent for 2006. The reason for the added acceleration is, in part, the expected surge of online video advertising.
If 2007 follows recent years, however, all these figures will likely be revised by mid-year, and most likely upward.
Meanwhile, in online ratings for the week ended Dec. 10, the top five parent companies were Microsoft, Yahoo, Google, Time Warner and eBay. The top five brands were Yahoo, Google, MSN/Windows Live, Microsoft and AOL.
Gus Plc was the top advertiser with 10.7 million impressions, followed by NexTag at 4.85 million, Verizon at 1.75 million, HSBC Holdings at 1.74 million and Bank of America at 1.60 million impressions.
Sessions per person remained steady at 16, while domains visited per person were down 2.5 percent to 39. PC time per person was up 0.18 percent to 16 hours, 46 minutes and 9 seconds.
Media Life
Dec 19, 2006
Looking ahead to 2007, two things will distinguish internet advertising. First, it will outpace all other media in terms of forecasted growth, and second, it will most likely outpace those forecasts as well.
If typically in media spending seems to fall short of forecasts, when it comes to the internet spending typically grows faster than even the rosiest predictions. That most likely will happen again in 2007, when spending is expected to grow as much as 30 percent.
“Internet advertising has been growing ahead of expectations just about everywhere, despite the fact that the expectations are very high,” observes Jonathan Barnard, head of publications at ZenithOptimedia.
Case in point: 2006 internet spending growth projections varied but were in the range of 20 percent. With the first three quarters now in, spending, including search, actually paced at 49 percent, according to Nielsen Monitor-Plus. While that's an extreme gap, it illustrates just how far off forecasts can be.
Just why the gap between forecasts and actual growth is interesting. One reason is that with so much hoopla over web spending growth, forecasters are inclined to err on the side of caution, lest they appear caught up in the frenzy.
But the bigger factor is that forecasters are forever behind the curve, projecting growth based on the sectors that showed the most growth that year, at a time when marketers are busy coming up with new ways to advertise on the internet. New opportunities for advertisers spring up faster than forecasters can factor them into their forecasting equations.
Tied into that is a natural momentum of growth stemming from the disequilibrium between how much consumers use the internet and the share of media dollars that are spent on it, explains Peter Petrusky, director of the entertainment, media and communications practice at PricewaterhouseCoopers.
Media consumption patterns are changing faster than predicted, explains Petrusky, and spending is shooting ahead as advertisers are pushed to move online faster than expected to reach their target audiences as their internet use surges.
There's still a lot of catching up to do. The internet's share of media consumption is now between 15 to 20 percent, Petrusky explains, while its share of ad spending is between 4 percent and 5 percent.
The question looking into 2007 is whether this pattern will repeat itself. Some forecasters think the pace of internet advertising growth may actually slow slightly.
Group M forecasts that U.S. internet advertising will grow 14 percent in 2007, down from an expected 21 percent this year.
Why the lower growth rate? A number of reasons, including mild deterioration in U.S. consumer confidence, says Adam Smith, futures director at Group M.
Looking at other forecasts, Universal McCann’s Robert Coen, considered the dean of media forecasters, expects 15 percent growth for internet advertising, while eMarketer forecasts growth of 18.9 percent, to $19.5 billion, in 2007.
For its part, ZenithOptimedia forecasts internet advertising will grow faster in 2007 than it has in 2006. It predicts 29 percent growth in 2007, up from a forecast of 25 percent for 2006. The reason for the added acceleration is, in part, the expected surge of online video advertising.
If 2007 follows recent years, however, all these figures will likely be revised by mid-year, and most likely upward.
Meanwhile, in online ratings for the week ended Dec. 10, the top five parent companies were Microsoft, Yahoo, Google, Time Warner and eBay. The top five brands were Yahoo, Google, MSN/Windows Live, Microsoft and AOL.
Gus Plc was the top advertiser with 10.7 million impressions, followed by NexTag at 4.85 million, Verizon at 1.75 million, HSBC Holdings at 1.74 million and Bank of America at 1.60 million impressions.
Sessions per person remained steady at 16, while domains visited per person were down 2.5 percent to 39. PC time per person was up 0.18 percent to 16 hours, 46 minutes and 9 seconds.
Media Life
Dec 19, 2006
Value Menus Latest Weapon in Fast-Feeders' Battle
McDonald's, Burger King Test New Tactic in Market Valued at Up to $34 Billion
The burger wars have moved to a pre-dawn duel, with value menus the weapons of choice.
McDonald's began running TV spots in October to promote its Breakfast Dollar Menu and More. As rivals wake up to a breakfast business valued as high as $34 billion, McDonald's has begun to test morning items on its Dollar Menu, along with a Dollar Menu and More offering, in as many as 20 markets nationwide, including Chicago; Pittsburgh; Baltimore; Washington; Columbus, Ohio; Raleigh-Durham, N.C.; Austin, Texas; and Grand Rapids, Mich. 'A lot of latitude'"There's a lot of latitude in each of the markets to determine what offerings will work best with the strategy," a McDonald's spokesman said. McDonald's began running TV spots via Arnold, Boston, in October to promote its Breakfast Dollar Menu and More. The spots show toasters, blenders, coffee pots and mugs recycled after being rendered obsolete by the McDonald's menu. Items on the buck-or-less menu include the sausage biscuit, chicken biscuit, sausage burrito, fruit and yogurt parfait, two hash browns, 16-ounce soft drink, and 12-ounce coffee. The buck-and-up menu includes the sausage McGriddle, egg-and-cheese biscuit, CinnaMelt, and fruit and walnut snack salad. Separately, McDonald's is testing a 24-hour breakfast menu in Romeoville, Ill., outside of Chicago. BK's morning menuBurger King, meanwhile, is testing its own morning value menu in New York in hopes of becoming the first chain to launch nationally, management said in its November first-quarter earnings call. This spring, the Home of the Whopper plans to roll out a menu that likely will offer six items for a buck or less and a few more items at $1.39 or less, according to a knowledgeable executive. The centerpiece of the menu will be a Hamlette sandwich with shaved ham, scrambled eggs and a honey butter sauce. BK also will feature a $1 sausage biscuit on the menu, now being tested in markets including New York; Salinas, Calif.; and Indianapolis, according to the executive. Others attempt to cash inMcDonald's most likely feels its rivals are attempting to cash in on its primo position in the hottest daypart in fast food with mash-ups of two big trends: value menus and breakfast. Estimates vary, but with more than $30 billion in annual sales, fast-food breakfast is as big as the entire pizza category. One in every seven fast-food visits is for the morning meal, and breakfast accounts for up to 15% of total revenue, depending on who is doing the tallying. It's not surprising, then, that execs at the major fast-feeders not yet open for breakfast are salivating over potential sales. In a Dec. 5 analyst presentation, Taco Bell President Greg Creed estimated the breakfast market at $34 billion, with McDonald's controlling 27% and Burger King 17%. He said nearly three-fourths of Taco Bell customers (72%) surveyed in the past month said they purchase fast-food breakfasts. The chain will begin testing breakfast in three undisclosed markets in early 2007, with breakfast adding a possible $208,000 per restaurant. Wendy's breakfast plansWendy's, in its October analyst meeting, estimated that McDonald's and Taco Bell spend one-fourth to one-third of their total marketing dollars promoting value offerings. Laying out its breakfast plans, Wendy's cited NPD Crest and Technomic data to demonstrate why it needed to invest in the hours before 11 a.m. At least one of the top five fast-food chains is still on the fence, however. "Breakfast in our system is a restaurant-by-restaurant decision," said Mark Roden, chairman of the Subway Franchisee Advertising Fund Trust, adding that it would be a corporate decision by Subway owner Doctor's Associates to make breakfast a national mandate. Several franchisees in Chicago sell breakfast. "If they decided to make breakfast a national mandate, we would consider whether or not to market it."
AdAge.com
December 20, 2006
The burger wars have moved to a pre-dawn duel, with value menus the weapons of choice.
McDonald's began running TV spots in October to promote its Breakfast Dollar Menu and More. As rivals wake up to a breakfast business valued as high as $34 billion, McDonald's has begun to test morning items on its Dollar Menu, along with a Dollar Menu and More offering, in as many as 20 markets nationwide, including Chicago; Pittsburgh; Baltimore; Washington; Columbus, Ohio; Raleigh-Durham, N.C.; Austin, Texas; and Grand Rapids, Mich. 'A lot of latitude'"There's a lot of latitude in each of the markets to determine what offerings will work best with the strategy," a McDonald's spokesman said. McDonald's began running TV spots via Arnold, Boston, in October to promote its Breakfast Dollar Menu and More. The spots show toasters, blenders, coffee pots and mugs recycled after being rendered obsolete by the McDonald's menu. Items on the buck-or-less menu include the sausage biscuit, chicken biscuit, sausage burrito, fruit and yogurt parfait, two hash browns, 16-ounce soft drink, and 12-ounce coffee. The buck-and-up menu includes the sausage McGriddle, egg-and-cheese biscuit, CinnaMelt, and fruit and walnut snack salad. Separately, McDonald's is testing a 24-hour breakfast menu in Romeoville, Ill., outside of Chicago. BK's morning menuBurger King, meanwhile, is testing its own morning value menu in New York in hopes of becoming the first chain to launch nationally, management said in its November first-quarter earnings call. This spring, the Home of the Whopper plans to roll out a menu that likely will offer six items for a buck or less and a few more items at $1.39 or less, according to a knowledgeable executive. The centerpiece of the menu will be a Hamlette sandwich with shaved ham, scrambled eggs and a honey butter sauce. BK also will feature a $1 sausage biscuit on the menu, now being tested in markets including New York; Salinas, Calif.; and Indianapolis, according to the executive. Others attempt to cash inMcDonald's most likely feels its rivals are attempting to cash in on its primo position in the hottest daypart in fast food with mash-ups of two big trends: value menus and breakfast. Estimates vary, but with more than $30 billion in annual sales, fast-food breakfast is as big as the entire pizza category. One in every seven fast-food visits is for the morning meal, and breakfast accounts for up to 15% of total revenue, depending on who is doing the tallying. It's not surprising, then, that execs at the major fast-feeders not yet open for breakfast are salivating over potential sales. In a Dec. 5 analyst presentation, Taco Bell President Greg Creed estimated the breakfast market at $34 billion, with McDonald's controlling 27% and Burger King 17%. He said nearly three-fourths of Taco Bell customers (72%) surveyed in the past month said they purchase fast-food breakfasts. The chain will begin testing breakfast in three undisclosed markets in early 2007, with breakfast adding a possible $208,000 per restaurant. Wendy's breakfast plansWendy's, in its October analyst meeting, estimated that McDonald's and Taco Bell spend one-fourth to one-third of their total marketing dollars promoting value offerings. Laying out its breakfast plans, Wendy's cited NPD Crest and Technomic data to demonstrate why it needed to invest in the hours before 11 a.m. At least one of the top five fast-food chains is still on the fence, however. "Breakfast in our system is a restaurant-by-restaurant decision," said Mark Roden, chairman of the Subway Franchisee Advertising Fund Trust, adding that it would be a corporate decision by Subway owner Doctor's Associates to make breakfast a national mandate. Several franchisees in Chicago sell breakfast. "If they decided to make breakfast a national mandate, we would consider whether or not to market it."
AdAge.com
December 20, 2006
Why McDonald's Hasn't Cut the Fat
Fast-Food Leader Fears Negative Reactions Among Fry Fans
When McDonald's corp. announced it would move to a trans-fat-free oil, the impact was immediate as consumers flooded the fast feeder with complaints that its fries didn't taste as good. But in actuality the taste was the same -- the company hadn't yet switched oils -- and some four years later it still hasn't.
2002 promiseNow the share leader is still struggling to make good on its 2002 vow as the pressure mounts from rivals such as Wendy's and KFC, which have cut trans fats from their menus and Burger King, which will start testing new oil within 90 days. McDonald's, meanwhile, has yet to put an end date on its super-secret tests. It's understandable that McDonald's would be ambivalent about changing its signature fried potatoes, which helped shape the Golden Arches. Fries rank second only to beverages as the chain's margin-leading item and are the undisputed leader in quality and taste among McDonald's peers, said executives close to the marketer. Fries key to brand"In a category where there are low quality ratings of food, the fries are always rated high, and they are inexorably linked to the brand, perhaps more than any other product," said one executive, comparing McDonald's trans-fat conundrum to New Coke. "That would be the one thing you wouldn't want to mess with if you didn't have to."
Yet McDonald's has to, unless it wants to go toe-to-toe with municipalities mandating that it has to go trans fat free. And that raises the specter of a public-relations nightmare -- no matter what McDonald's does. If it changes its oil, the company will likely encounter the same kind of consumer push back it felt in 2002. If it keeps trans-fat oil, the chain could get lambasted by health advocates. "Which is the lesser of the two evils?" asked an executive in McDonald's circle. "What is the inflection point?" Testing other oils"We've tested more than a dozen different oils and we're very encouraged by what we have seen in test," said a McDonald's spokesman. Market researchers support that McDonald's has a legitimate reason to be gun-shy about changing its formula. Since the 2002 fry flap, new research on the placebo effect reinforces that there's more to taste than flavor and more to smell than aroma. Even McDonald's critics see the dilemma. While Stephen Joseph -- the president-CEO of BanTransFats.com -- disagrees that zero-trans-fat oils significantly change taste or texture, he admits that the placebo effect creates a major PR issue. By talking about the change, instead of people shoveling in the fries like usual, they "start tasting them slow like tasting fine wine," he said. "If they never said anything [consumers] wouldn't have noticed." Flavors and emotionHow a company handles communications around the trans-fat issue can affect the taste of the food, according to Baba Shiv, associate professor-marketing at Stanford University's graduate school of business, and a leading researcher on marketing placebos. He said flavor comes from a combination of the flavors picked up by your taste buds along with a host of factors including the emotions a person has toward the brand. Therefore, he disagrees with the strategy of quietly changing products and then telling consumers about the alteration after the fact. A better way "is to frame the change positively rather than allowing the public and media to frame it for them," he said. Likewise, while KFC hasn't committed to advertising its trans-fat-free food, it may want to consider doing so. Mr. Shiv cited Miller Brewing's "Tastes Great, Less Filling" that positively positioned its reduced-calorie Miller Light. Rather than seeing the calorie cut as a negative, Miller framed it as better tasting and healthier.
AdAge.com
When McDonald's corp. announced it would move to a trans-fat-free oil, the impact was immediate as consumers flooded the fast feeder with complaints that its fries didn't taste as good. But in actuality the taste was the same -- the company hadn't yet switched oils -- and some four years later it still hasn't.
2002 promiseNow the share leader is still struggling to make good on its 2002 vow as the pressure mounts from rivals such as Wendy's and KFC, which have cut trans fats from their menus and Burger King, which will start testing new oil within 90 days. McDonald's, meanwhile, has yet to put an end date on its super-secret tests. It's understandable that McDonald's would be ambivalent about changing its signature fried potatoes, which helped shape the Golden Arches. Fries rank second only to beverages as the chain's margin-leading item and are the undisputed leader in quality and taste among McDonald's peers, said executives close to the marketer. Fries key to brand"In a category where there are low quality ratings of food, the fries are always rated high, and they are inexorably linked to the brand, perhaps more than any other product," said one executive, comparing McDonald's trans-fat conundrum to New Coke. "That would be the one thing you wouldn't want to mess with if you didn't have to."
Yet McDonald's has to, unless it wants to go toe-to-toe with municipalities mandating that it has to go trans fat free. And that raises the specter of a public-relations nightmare -- no matter what McDonald's does. If it changes its oil, the company will likely encounter the same kind of consumer push back it felt in 2002. If it keeps trans-fat oil, the chain could get lambasted by health advocates. "Which is the lesser of the two evils?" asked an executive in McDonald's circle. "What is the inflection point?" Testing other oils"We've tested more than a dozen different oils and we're very encouraged by what we have seen in test," said a McDonald's spokesman. Market researchers support that McDonald's has a legitimate reason to be gun-shy about changing its formula. Since the 2002 fry flap, new research on the placebo effect reinforces that there's more to taste than flavor and more to smell than aroma. Even McDonald's critics see the dilemma. While Stephen Joseph -- the president-CEO of BanTransFats.com -- disagrees that zero-trans-fat oils significantly change taste or texture, he admits that the placebo effect creates a major PR issue. By talking about the change, instead of people shoveling in the fries like usual, they "start tasting them slow like tasting fine wine," he said. "If they never said anything [consumers] wouldn't have noticed." Flavors and emotionHow a company handles communications around the trans-fat issue can affect the taste of the food, according to Baba Shiv, associate professor-marketing at Stanford University's graduate school of business, and a leading researcher on marketing placebos. He said flavor comes from a combination of the flavors picked up by your taste buds along with a host of factors including the emotions a person has toward the brand. Therefore, he disagrees with the strategy of quietly changing products and then telling consumers about the alteration after the fact. A better way "is to frame the change positively rather than allowing the public and media to frame it for them," he said. Likewise, while KFC hasn't committed to advertising its trans-fat-free food, it may want to consider doing so. Mr. Shiv cited Miller Brewing's "Tastes Great, Less Filling" that positively positioned its reduced-calorie Miller Light. Rather than seeing the calorie cut as a negative, Miller framed it as better tasting and healthier.
AdAge.com
GoogTube and Yah-book
MarketWatch
When Yahoo and Google reveal their financial results and hold their perfunctory conference calls with investors this week, there will be two questions that investors will likely want to ask.
For Google, the question is: "How do you avoid lawsuits from big media partners?"
For Yahoo, the question is: "Are you going to be aggressive enough to snap up Facebook?"
Yahoo! Inc.reports after the close on Tuesday. Currently, investors expect Yahoo to earn 11 cents a share on sales of $1.1 billion in the third quarter. For the full year, investors anticipate Yahoo will earn 47 cents on share on sales of $4.6 billion.
Yahoo has already showed its interest in Facebook by offering $1 billion this summer. The talks are dropped at this point because Facebook thinks it's worth more than $1 billion, according to a source close to the social network site.
Communities, or social networks, are among the fastest-growing sites on the Web. Some skeptics may call such networks fads, but the traffic numbers speak for themselves. It's not a surprise really. Social networks are the fabric of our lives. It makes sense that such properties would be the places where people connect, hang out and importantly contribute or share content. That type of personal contribution has been the type of information that media companies have been trying to get for years. Well, social networks haven't figured it all out just yet, but the social network context seems to be the best way to extract personal information.
Clearly, not only did Google recognize the power of social networks, but it was willing to aggressively go after the properties. Now that Google has YouTube -- essentially, a social network centered around video -- Yahoo should have a plan in place for 2007.
Analysts expect Google to earn $2.42 a share, up 60% from last year, on sales of $1.8 billion, up 73% from a year ago. For the full year, analysts expect Google to earn $9.97 a share, up 75% from the year-ago period, on sales of $7.16 billion, up 77%.
Now that Google has snapped up YouTube, the question is whether it will have to dip into its $10 billion in cash to settle with media companies.
Three of the largest media companies, News Corp , Viacom and General Electric's NBC, have formed a group to explore legal implications for the unauthorized content that appears on YouTube.
Based on my discussions with attorneys on both sides of the aisle, it appears that big media doesn't have much of a chance to extract billions out of GoogTube.
Annette Hurst, a copyright attorney at Heller Ehrman, believes the media companies will have a tough go of it. Hurst represented Shawn Fanning, who founded the notorious file-sharing site Napster, which was shut down by a court order. The current Napster service is a legitimate business.
Hurst believes that media companies might have a difficult time proving YouTube willfully infringed because the copyright owners themselves have been feeding YouTube and other video-sharing networks to promote their content. "The media companies can't feed the network, and then complain," she said, adding that if it's technically feasible to identify copyright material, it's probably technically feasible to identify who's uploading the copyright material.
OK. Good point. But I'd have to say that if media companies were feeding the copyrighted content to YouTube, and they knew it, they'll likely not bring up a case at all.
So, the question is if the media companies do bring up a lawsuit, what proof do they need against YouTube to have a strong case?
Media companies would have to prove that YouTube is marketing itself as a distributor of copyrighted material and that the major use of YouTube is the viewing of copyrighted material.
In this case, YouTube is certainly not marketing itself as an illegal file-sharing site. "Grokster's marketing and promotion of their software and their business plan was premised on other people engaging in infringement," she said. "Grokster was only about mainstream MP3 music. If you look at YouTube, and other video-sharing sites, there is a lot of user-generated video. From the get-go, these sites have had a different profile."
But the jury is still out on just how much copyrighted content is driving activity on YouTube? Is it 70%? It is 90%?
In the case of file-sharing site Grokster, there was evidence showing that 99% of the content was pirated, according to Mark Litvak, partner at Manatt, Phelps & Phillips, who led Hollywood's legal battles against piracy. Moreover, Grokster marketed itself as the next Napster. Grokster was shut down in 2005 for contributory infringement.
If the media companies can prove that YouTube willfully infringed or is intentionally causing people to infringe copyrights, they may be able to ask a judge for an award up to $150,000, according to Fred von Lohmann, Senior Intellectual Property Attorney, at the Electronic Frontier Foundation, who cited section 504 of the Copyright Act.
So, is it worth it for big media to sue? After all, I can go onto YouTube and find 500 video clips of Seinfeld? Clearly, YouTube can be more proactive in taking copyrighted material down. But those segments are 1-minute, 5-minute and as long as 10-minute segments. Are these segments technically infringements?
According to Litvak, yes they are infringements, but no media company will likely sue for video tidbits. "I haven't seen Hollywood sue on the basis of a 1-minute or 2-minute use," he said.
Why? I asked.
"I doubt any court would give them [big media] $150,000 for 1-minute clips," said Litvak.
Now, that's from a guy who championed Hollywood's rights against piracy.
Sound off: Do you think big media has a case against Google-YouTube?
MarketWatch
When Yahoo and Google reveal their financial results and hold their perfunctory conference calls with investors this week, there will be two questions that investors will likely want to ask.
For Google, the question is: "How do you avoid lawsuits from big media partners?"
For Yahoo, the question is: "Are you going to be aggressive enough to snap up Facebook?"
Yahoo! Inc.reports after the close on Tuesday. Currently, investors expect Yahoo to earn 11 cents a share on sales of $1.1 billion in the third quarter. For the full year, investors anticipate Yahoo will earn 47 cents on share on sales of $4.6 billion.
Yahoo has already showed its interest in Facebook by offering $1 billion this summer. The talks are dropped at this point because Facebook thinks it's worth more than $1 billion, according to a source close to the social network site.
Communities, or social networks, are among the fastest-growing sites on the Web. Some skeptics may call such networks fads, but the traffic numbers speak for themselves. It's not a surprise really. Social networks are the fabric of our lives. It makes sense that such properties would be the places where people connect, hang out and importantly contribute or share content. That type of personal contribution has been the type of information that media companies have been trying to get for years. Well, social networks haven't figured it all out just yet, but the social network context seems to be the best way to extract personal information.
Clearly, not only did Google recognize the power of social networks, but it was willing to aggressively go after the properties. Now that Google has YouTube -- essentially, a social network centered around video -- Yahoo should have a plan in place for 2007.
Analysts expect Google to earn $2.42 a share, up 60% from last year, on sales of $1.8 billion, up 73% from a year ago. For the full year, analysts expect Google to earn $9.97 a share, up 75% from the year-ago period, on sales of $7.16 billion, up 77%.
Now that Google has snapped up YouTube, the question is whether it will have to dip into its $10 billion in cash to settle with media companies.
Three of the largest media companies, News Corp , Viacom and General Electric's NBC, have formed a group to explore legal implications for the unauthorized content that appears on YouTube.
Based on my discussions with attorneys on both sides of the aisle, it appears that big media doesn't have much of a chance to extract billions out of GoogTube.
Annette Hurst, a copyright attorney at Heller Ehrman, believes the media companies will have a tough go of it. Hurst represented Shawn Fanning, who founded the notorious file-sharing site Napster, which was shut down by a court order. The current Napster service is a legitimate business.
Hurst believes that media companies might have a difficult time proving YouTube willfully infringed because the copyright owners themselves have been feeding YouTube and other video-sharing networks to promote their content. "The media companies can't feed the network, and then complain," she said, adding that if it's technically feasible to identify copyright material, it's probably technically feasible to identify who's uploading the copyright material.
OK. Good point. But I'd have to say that if media companies were feeding the copyrighted content to YouTube, and they knew it, they'll likely not bring up a case at all.
So, the question is if the media companies do bring up a lawsuit, what proof do they need against YouTube to have a strong case?
Media companies would have to prove that YouTube is marketing itself as a distributor of copyrighted material and that the major use of YouTube is the viewing of copyrighted material.
In this case, YouTube is certainly not marketing itself as an illegal file-sharing site. "Grokster's marketing and promotion of their software and their business plan was premised on other people engaging in infringement," she said. "Grokster was only about mainstream MP3 music. If you look at YouTube, and other video-sharing sites, there is a lot of user-generated video. From the get-go, these sites have had a different profile."
But the jury is still out on just how much copyrighted content is driving activity on YouTube? Is it 70%? It is 90%?
In the case of file-sharing site Grokster, there was evidence showing that 99% of the content was pirated, according to Mark Litvak, partner at Manatt, Phelps & Phillips, who led Hollywood's legal battles against piracy. Moreover, Grokster marketed itself as the next Napster. Grokster was shut down in 2005 for contributory infringement.
If the media companies can prove that YouTube willfully infringed or is intentionally causing people to infringe copyrights, they may be able to ask a judge for an award up to $150,000, according to Fred von Lohmann, Senior Intellectual Property Attorney, at the Electronic Frontier Foundation, who cited section 504 of the Copyright Act.
So, is it worth it for big media to sue? After all, I can go onto YouTube and find 500 video clips of Seinfeld? Clearly, YouTube can be more proactive in taking copyrighted material down. But those segments are 1-minute, 5-minute and as long as 10-minute segments. Are these segments technically infringements?
According to Litvak, yes they are infringements, but no media company will likely sue for video tidbits. "I haven't seen Hollywood sue on the basis of a 1-minute or 2-minute use," he said.
Why? I asked.
"I doubt any court would give them [big media] $150,000 for 1-minute clips," said Litvak.
Now, that's from a guy who championed Hollywood's rights against piracy.
Sound off: Do you think big media has a case against Google-YouTube?
MarketWatch
Yahoo Wrestles With How to Grow While Pleasing Investors
Needs to Find Its 2.0 Mojo; Online Display Won't Cut It Today
Though it's built a $5 billion-plus business with incredible reach, a diverse stable of services and strong revenue-growth rates by most media-company standards, Yahoo took a drubbing from investors following a drop in third-quarter profit and a warning that the fourth quarter would be weak too. CEO Terry Semel blamed a delay in the rollout of its Panama search platform and soft spots in the online display-ad business.
But the truth is that display-type ads are unlikely to strengthen in the future, and the real reason Wall Street is falling out of love with this former darling has more to do with its failure to keep up with the hottest properties in next-generation online advertising: social-networking sites and online-video providers. "It's about increased competition in their space," said David Cohen, exec VP-digital media at Universal McCann. "Instead of the mass play that was Yahoo, MSN and AOL, there's now a whole host of new opportunities." More customization being offeredAnother way of looking at it is that planners and buyers are warming up to more pitches from more diverse offerings, and marketers' increasing but still finite online dollars are being spread more thinly as a result. Jeff Malmad, MediaCom's director-digital media, said the smaller, more entrepreneurial-minded web publishers tend to offer more customization. "In today's world agencies are pitching ideas as opposed to ... saying to Yahoo: 'We want to reach men 18-34 on Yahoo. What do you have?"' Indeed, display advertising, an area in which Yahoo has long touted its leadership, is seeing growth taper off. It was up only 13% in 2005 after two years of rising at near 20%, according to TNS Media Intelligence. "They have to retool the way they think about advertising," said Ryan Magnussen, CEO of RipeTV, a creator of online on-demand content. "Advertisers are less interested in banner ads and more interested in clickable targeted search and the innovations in video on demand." Yahoo has invested in some social-networking sites -- Flickr and Del.icio.us are the two most high-profile -- but with public companies, perception is everything, and perhaps more important are those that got away. So while Yahoo executives are quick to sing the praises of their social-networking initiatives, the company is seen by many to be lagging in this key area. Losing out to rival Google for YouTube and its inability to close a deal with social upstart Facebook hasn't helped. "Yahoo missed the boat on social networking," Stadia Capital analyst Christopher Connor told Advertising Age a week before the company's earnings announcement. No one is yet calling for heads, but some have questioned whether there is visionary leadership at Yahoo. One internet-advertising executive close to Yahoo said the company had set unrealistic internal sales goals of 40%-plus year-over-year increases -- but upper management didn't want to hear it. Yahoo had no comment on its sales goals. Bold steps neededThe message Yahoo is giving to employees is that it's confident in the talent it has in place, the jobs they're doing, and the company's assets and direction. One Yahoo insider, however, echoed the sentiments of several online executives outside the company: that bold steps need to be taken to turn around the perception of a company on the ropes. Universal McCann's Mr. Cohen said the 2007 battleground will be original programming. Of course, it was only recently that Yahoo put the brakes on its ambitious plans to create Hollywood online, led by former Disney TV executive Lloyd Braun. "There's a difference between 'Do we spend $100 million on a studio or crawl, walk and then run?"' Mr. Cohen said. "And it's about timing. What was not OK a year ago is OK today." And then there's search, which will play an important role in proving Yahoo can compete with Google. Incidentally, Yahoo's stock peaked in first quarter 2000 -- the same quarter in which Google sold its first ad. Still hopeGoogle's platform is more efficient for big brands, said Bryan Weiner, president-chief operating officer of search-marketing firm 360i. "Given the surge this year in search spending by these big brands, the lion's share of the revenue is going straight to Google," he said. "As Panama starts rolling out to large brand advertisers early next year, we expect that to help Yahoo a lot." Despite Yahoo's pummeled stock and battered reputation, there are still those holding out hope. "The market reacted to earnings," said Jonathan Rosen, former head of search strategy at AOL. "What [Yahoo is] doing right now makes sense."
AdAge.com
Though it's built a $5 billion-plus business with incredible reach, a diverse stable of services and strong revenue-growth rates by most media-company standards, Yahoo took a drubbing from investors following a drop in third-quarter profit and a warning that the fourth quarter would be weak too. CEO Terry Semel blamed a delay in the rollout of its Panama search platform and soft spots in the online display-ad business.
But the truth is that display-type ads are unlikely to strengthen in the future, and the real reason Wall Street is falling out of love with this former darling has more to do with its failure to keep up with the hottest properties in next-generation online advertising: social-networking sites and online-video providers. "It's about increased competition in their space," said David Cohen, exec VP-digital media at Universal McCann. "Instead of the mass play that was Yahoo, MSN and AOL, there's now a whole host of new opportunities." More customization being offeredAnother way of looking at it is that planners and buyers are warming up to more pitches from more diverse offerings, and marketers' increasing but still finite online dollars are being spread more thinly as a result. Jeff Malmad, MediaCom's director-digital media, said the smaller, more entrepreneurial-minded web publishers tend to offer more customization. "In today's world agencies are pitching ideas as opposed to ... saying to Yahoo: 'We want to reach men 18-34 on Yahoo. What do you have?"' Indeed, display advertising, an area in which Yahoo has long touted its leadership, is seeing growth taper off. It was up only 13% in 2005 after two years of rising at near 20%, according to TNS Media Intelligence. "They have to retool the way they think about advertising," said Ryan Magnussen, CEO of RipeTV, a creator of online on-demand content. "Advertisers are less interested in banner ads and more interested in clickable targeted search and the innovations in video on demand." Yahoo has invested in some social-networking sites -- Flickr and Del.icio.us are the two most high-profile -- but with public companies, perception is everything, and perhaps more important are those that got away. So while Yahoo executives are quick to sing the praises of their social-networking initiatives, the company is seen by many to be lagging in this key area. Losing out to rival Google for YouTube and its inability to close a deal with social upstart Facebook hasn't helped. "Yahoo missed the boat on social networking," Stadia Capital analyst Christopher Connor told Advertising Age a week before the company's earnings announcement. No one is yet calling for heads, but some have questioned whether there is visionary leadership at Yahoo. One internet-advertising executive close to Yahoo said the company had set unrealistic internal sales goals of 40%-plus year-over-year increases -- but upper management didn't want to hear it. Yahoo had no comment on its sales goals. Bold steps neededThe message Yahoo is giving to employees is that it's confident in the talent it has in place, the jobs they're doing, and the company's assets and direction. One Yahoo insider, however, echoed the sentiments of several online executives outside the company: that bold steps need to be taken to turn around the perception of a company on the ropes. Universal McCann's Mr. Cohen said the 2007 battleground will be original programming. Of course, it was only recently that Yahoo put the brakes on its ambitious plans to create Hollywood online, led by former Disney TV executive Lloyd Braun. "There's a difference between 'Do we spend $100 million on a studio or crawl, walk and then run?"' Mr. Cohen said. "And it's about timing. What was not OK a year ago is OK today." And then there's search, which will play an important role in proving Yahoo can compete with Google. Incidentally, Yahoo's stock peaked in first quarter 2000 -- the same quarter in which Google sold its first ad. Still hopeGoogle's platform is more efficient for big brands, said Bryan Weiner, president-chief operating officer of search-marketing firm 360i. "Given the surge this year in search spending by these big brands, the lion's share of the revenue is going straight to Google," he said. "As Panama starts rolling out to large brand advertisers early next year, we expect that to help Yahoo a lot." Despite Yahoo's pummeled stock and battered reputation, there are still those holding out hope. "The market reacted to earnings," said Jonathan Rosen, former head of search strategy at AOL. "What [Yahoo is] doing right now makes sense."
AdAge.com
KFC: Oils Will Now Have Zero Trans Fats
Change Applies to All 5,500 Domestic Stores; Consumer Group Drops Lawsuit
KFC's secret recipe soon will include zero trans fats.
As KFC announces a switch to a trans-fat-free cooking oil, New York is holding debates on a proposed ban on trans fats and revised menu labeling in restaurants. The Yum Brands fried-chicken chain today said it will phase in a zero trans fat cooking oil at all of its 5,500 domestic restaurants by April, prompting the Center for Science in the Public Interest to withdraw a lawsuit against KFC. KFC timed the announcement to coincide with a city hearing today in New York to debate a proposed ban on trans fats and revised menu labeling in restaurants. Once complete, the conversion to the new oil will be made to more than 65 products on KFC's menu, or about 80% of all selections, Gregg Dedrick, president of KFC Corp., said in a media briefing this morning. Two years of tests Following two years of testing, conversions that already have begun will include all company-owned and franchisee restaurants. While no significant flavor from the oil was obvious in chicken provided at the media briefing, the chicken tasted slightly bland. A chicken breast or three chicken strips that typically contain 4.5 grams of trans fat per order will have zero. The switch doesn't apply to mostly prepared-food items, such as the Chicken Pot Pie, which has a whopping 14 grams of trans fat. Nor will some other products change, including biscuits, mashed potatoes and gravy, and the Ultimate Cheese Snacker. With KFC's announcement, CSPI withdrew its suit against KFC, even though trans fats remain in some items. But the center also put some chains that haven't gotten rid of trans fats on notice. "What are McDonald's and Burger King waiting for now?" Michael F. Jacobson, CSPI executive director, said in a statement. "If KFC, which deep-fries almost everything, can get the artificial trans fat out of its frying oil, anyone can. Colonel Sanders deserves a bucket full of praise." 'Major victory' A spokesman for CSPI called today's announcement "a major victory for us." Meanwhile, KFC said it is considering advertising about the shift, but hasn't decided whether it will create campaigns around it. Last week, franchisees told Advertising Age that the chain recently announced internally that its domestic units were moving imminently from a solid shortening to a liquid format that would cut trans fats by at least half. One of those franchisees, John R. Neal, KFC's third-largest franchise owner, said he converted to the liquid format a few years ago in most of his restaurants and completed the switch in all of his units within the past two months. Franchisee leadership were informed of the zero trans fat conversion late Oct. 27 in an emergency conference call, Mr. Neal said. Other fast-food chains In June, No. 3 chain Wendy's switched to trans-fat-free fries and chicken, and McDonald's and Burger King are said to be testing trans-fat-free oils. Other chains, including Ruby Tuesday, Chili's and Legal Sea Food also have cut trans fats. Mr. Jacobson will testify to the New York City Board of Health supporting its trans fat proposals. KFC has been working on finding an alternative to partially hydrogenated fats for two years. It has been testing food cooked in this new oil, a low-linolenic soybean oil, at restaurants in multiple markets, including New York, Atlanta, Chicago and the area around its Louisville, Ky., headquarters. One of the challenges in making a change to from the partially hydrogenated soybean oil now in use at KFC restaurants, Mr. Dedrick said, is finding ample supply of the new oil. KFC is working with several suppliers, including Monsanto Corp., which are working suppliers growing the beans. The cost of converting to the new oil, called a "slight investment" by Mr. Dedrick, who did not specify further, has already been factored into the company's operating costs and pricing will not change. The shifts are currently planned only in the U.S. market and are being considered for sibling chains. "I can tell you other members of Yum Brands are working on similar transitions," Mr. Dedrick said.
AdAge.com
KFC's secret recipe soon will include zero trans fats.
As KFC announces a switch to a trans-fat-free cooking oil, New York is holding debates on a proposed ban on trans fats and revised menu labeling in restaurants. The Yum Brands fried-chicken chain today said it will phase in a zero trans fat cooking oil at all of its 5,500 domestic restaurants by April, prompting the Center for Science in the Public Interest to withdraw a lawsuit against KFC. KFC timed the announcement to coincide with a city hearing today in New York to debate a proposed ban on trans fats and revised menu labeling in restaurants. Once complete, the conversion to the new oil will be made to more than 65 products on KFC's menu, or about 80% of all selections, Gregg Dedrick, president of KFC Corp., said in a media briefing this morning. Two years of tests Following two years of testing, conversions that already have begun will include all company-owned and franchisee restaurants. While no significant flavor from the oil was obvious in chicken provided at the media briefing, the chicken tasted slightly bland. A chicken breast or three chicken strips that typically contain 4.5 grams of trans fat per order will have zero. The switch doesn't apply to mostly prepared-food items, such as the Chicken Pot Pie, which has a whopping 14 grams of trans fat. Nor will some other products change, including biscuits, mashed potatoes and gravy, and the Ultimate Cheese Snacker. With KFC's announcement, CSPI withdrew its suit against KFC, even though trans fats remain in some items. But the center also put some chains that haven't gotten rid of trans fats on notice. "What are McDonald's and Burger King waiting for now?" Michael F. Jacobson, CSPI executive director, said in a statement. "If KFC, which deep-fries almost everything, can get the artificial trans fat out of its frying oil, anyone can. Colonel Sanders deserves a bucket full of praise." 'Major victory' A spokesman for CSPI called today's announcement "a major victory for us." Meanwhile, KFC said it is considering advertising about the shift, but hasn't decided whether it will create campaigns around it. Last week, franchisees told Advertising Age that the chain recently announced internally that its domestic units were moving imminently from a solid shortening to a liquid format that would cut trans fats by at least half. One of those franchisees, John R. Neal, KFC's third-largest franchise owner, said he converted to the liquid format a few years ago in most of his restaurants and completed the switch in all of his units within the past two months. Franchisee leadership were informed of the zero trans fat conversion late Oct. 27 in an emergency conference call, Mr. Neal said. Other fast-food chains In June, No. 3 chain Wendy's switched to trans-fat-free fries and chicken, and McDonald's and Burger King are said to be testing trans-fat-free oils. Other chains, including Ruby Tuesday, Chili's and Legal Sea Food also have cut trans fats. Mr. Jacobson will testify to the New York City Board of Health supporting its trans fat proposals. KFC has been working on finding an alternative to partially hydrogenated fats for two years. It has been testing food cooked in this new oil, a low-linolenic soybean oil, at restaurants in multiple markets, including New York, Atlanta, Chicago and the area around its Louisville, Ky., headquarters. One of the challenges in making a change to from the partially hydrogenated soybean oil now in use at KFC restaurants, Mr. Dedrick said, is finding ample supply of the new oil. KFC is working with several suppliers, including Monsanto Corp., which are working suppliers growing the beans. The cost of converting to the new oil, called a "slight investment" by Mr. Dedrick, who did not specify further, has already been factored into the company's operating costs and pricing will not change. The shifts are currently planned only in the U.S. market and are being considered for sibling chains. "I can tell you other members of Yum Brands are working on similar transitions," Mr. Dedrick said.
AdAge.com
Yahoo's dilemma: Deal or no deal?
Overshadowed by Google, CEO Terry Semel needs to make a move. Now he's flirting with AOL, Fortune reports.
Yahoo must have a new appreciation of how Burger King feels about McDonald's: Constantly looking up at No. 1 gets vexing. So it should come as no surprise that Yahoo's chairman and CEO Terry Semel is mulling a number of moves that would impress Wall Street and steal the spotlight from the Google behemoth.
FORTUNE has learned from multiple sources that Yahoo (Charts) recently approached Time Warner (Charts) (parent of FORTUNE's publisher) about buying America Online - essentially trying to jump-start talks that broke down a year ago. A source close to Yahoo disputes that Yahoo approached Time Warner and says that there are no active conversations between the two companies. Regardless of which version is correct, a Yahoo-AOL merger would be a face-saver for Semel: Last year Google (Charts) outflanked Yahoo and swooped in to become AOL's exclusive Internet search provider, picking up a 5% stake in AOL for $1 billion as part of the deal.
If AOL rebuffs him, Semel has other dealmaking options. The 63-year-old former co-chairman and co-CEO of Warner Bros. has a considerable checkbook available for acquisitions. (Yahoo's market value is $35 billion, and it has about $3 billion in cash and securities.) A Yahoo purchase of youth-oriented Facebook for as much as $1 billion has been rumored for weeks. Semel could also sell his company. Microsoft and others would love to own the web's biggest single audience. So, too, would Google - if only to keep Yahoo away from Microsoft (Charts).
Yahoo: profit down but new search up
What's killing Yahoo is the status quo. Google's dominance in search gives it a commanding lead in Internet advertising. And after inking a string of deals that turned Yahoo around in the post-bubble days, Semel has missed out on recent Internet land grabs, including MySpace (bought by News Corp. (Charts)) and YouTube (bought by Google). That lack of deal momentum - exacerbated by the delay of Yahoo's search-advertising system, code-named Panama - and decelerating revenue growth have pounded Yahoo's stock, which is down 35% on the year.
Here, as we see it, are Yahoo's likeliest moves:
• Buy AOL. Swallowing AOL won't transform Yahoo, but would give it increased traffic and a shot in the arm for its search-advertising business. The real question is whether Time Warner wants to sell. "Time Warner has a new strategy for AOL and is not contemplating any deals," says a company spokesman. Citigroup analyst Jason Bazinet estimates AOL is worth about $13 billion. Of course, Time Warner might demand more.
• Sell to Microsoft. If Semel can't buy AOL, the best move for his shareholders may be to sell the company. Both Yahoo and Microsoft's MSN have struggled against Google to cash in on search advertising. Integrating Microsoft's codehead culture with Yahoo's Internet vibe would be problematic. But buying Yahoo would be a triumph for Microsoft, giving it a major beachhead in Silicon Valley. If such a merger were to occur, the combined Yahoo and MSN would have 2006 net revenues nearly equal to Google's expected $7 billion.
• Merge with eBay. The two sites occupy different corners of the web, so they'd be complementary. Indeed, eBay (Charts) and Yahoo already are stitching together a comprehensive cross-selling initiative in the U.S., and each is wary of Google. The two have discussed mergers over the years, so there's a long history there. But however appealing it may be, an eBay-Yahoo merger appears unlikely, say people close to the two companies, precisely because of their vastly different focuses.
• Stay the course. This is Yahoo's party line. Semel says that if Yahoo can do better at monetizing search ads and exploit new areas like ads on cellphones, videos, and social-networking sites, it will do just fine. "With the landscape changing, I am very, very excited about the opportunities for Yahoo," he told investors in mid-October, when Yahoo reported its disappointing third-quarter results. Let's see if Yahoo's board is as patient as Semel.
Fortune
Yahoo must have a new appreciation of how Burger King feels about McDonald's: Constantly looking up at No. 1 gets vexing. So it should come as no surprise that Yahoo's chairman and CEO Terry Semel is mulling a number of moves that would impress Wall Street and steal the spotlight from the Google behemoth.
FORTUNE has learned from multiple sources that Yahoo (Charts) recently approached Time Warner (Charts) (parent of FORTUNE's publisher) about buying America Online - essentially trying to jump-start talks that broke down a year ago. A source close to Yahoo disputes that Yahoo approached Time Warner and says that there are no active conversations between the two companies. Regardless of which version is correct, a Yahoo-AOL merger would be a face-saver for Semel: Last year Google (Charts) outflanked Yahoo and swooped in to become AOL's exclusive Internet search provider, picking up a 5% stake in AOL for $1 billion as part of the deal.
If AOL rebuffs him, Semel has other dealmaking options. The 63-year-old former co-chairman and co-CEO of Warner Bros. has a considerable checkbook available for acquisitions. (Yahoo's market value is $35 billion, and it has about $3 billion in cash and securities.) A Yahoo purchase of youth-oriented Facebook for as much as $1 billion has been rumored for weeks. Semel could also sell his company. Microsoft and others would love to own the web's biggest single audience. So, too, would Google - if only to keep Yahoo away from Microsoft (Charts).
Yahoo: profit down but new search up
What's killing Yahoo is the status quo. Google's dominance in search gives it a commanding lead in Internet advertising. And after inking a string of deals that turned Yahoo around in the post-bubble days, Semel has missed out on recent Internet land grabs, including MySpace (bought by News Corp. (Charts)) and YouTube (bought by Google). That lack of deal momentum - exacerbated by the delay of Yahoo's search-advertising system, code-named Panama - and decelerating revenue growth have pounded Yahoo's stock, which is down 35% on the year.
Here, as we see it, are Yahoo's likeliest moves:
• Buy AOL. Swallowing AOL won't transform Yahoo, but would give it increased traffic and a shot in the arm for its search-advertising business. The real question is whether Time Warner wants to sell. "Time Warner has a new strategy for AOL and is not contemplating any deals," says a company spokesman. Citigroup analyst Jason Bazinet estimates AOL is worth about $13 billion. Of course, Time Warner might demand more.
• Sell to Microsoft. If Semel can't buy AOL, the best move for his shareholders may be to sell the company. Both Yahoo and Microsoft's MSN have struggled against Google to cash in on search advertising. Integrating Microsoft's codehead culture with Yahoo's Internet vibe would be problematic. But buying Yahoo would be a triumph for Microsoft, giving it a major beachhead in Silicon Valley. If such a merger were to occur, the combined Yahoo and MSN would have 2006 net revenues nearly equal to Google's expected $7 billion.
• Merge with eBay. The two sites occupy different corners of the web, so they'd be complementary. Indeed, eBay (Charts) and Yahoo already are stitching together a comprehensive cross-selling initiative in the U.S., and each is wary of Google. The two have discussed mergers over the years, so there's a long history there. But however appealing it may be, an eBay-Yahoo merger appears unlikely, say people close to the two companies, precisely because of their vastly different focuses.
• Stay the course. This is Yahoo's party line. Semel says that if Yahoo can do better at monetizing search ads and exploit new areas like ads on cellphones, videos, and social-networking sites, it will do just fine. "With the landscape changing, I am very, very excited about the opportunities for Yahoo," he told investors in mid-October, when Yahoo reported its disappointing third-quarter results. Let's see if Yahoo's board is as patient as Semel.
Fortune
Analyst: Microsoft Should Buy Yahoo
A Merrill Lynch analyst proposes a defensive play against Google
A Merrill Lynch analyst is rekindling an old Internet romance story.
Merrill analyst Justin Post brought back suggestions that Redmond software behemoth Microsoft should consider a Yahoo acquisition. He said the No. 2 search company would be a catch for either Microsoft or a large media company looking to boost its online presence.
"A Microsoft-Yahoo combination would be in a better position, in our view, to compete against Google," Mr. Post wrote in a research note Monday.
For Microsoft, a deal for Yahoo would reduce the pressure on it to increase the market share and profitability of its MSN business, the analyst noted. Microsoft’s year-to-year sales growth of 5 percent in Internet advertising was well below estimates for industry growth of 26 percent, Mr. Post noted.
"Microsoft’s AdCenter is just beginning to build its advertiser base," he wrote.
Then there’s Yahoo. Yahoo continues to slide further behind Google. From the $900-million deal Google scored with MySpace to the search king’s $1.65-billion acquisition of YouTube-Yahoo has been slow to buy relevant companies to add to its business.
The recent deals increase Google’s prospects for display ad growth and have given the Mountain View, California, search leader the throne for Internet video traffic. Deals aside, Google continues to post blockbuster earnings results on strong online ad revenue while Yahoo struggles to find growth. Yahoo has clearly entrenched itself in a distant second.
But Merrill Lynch’s analyst noted that Yahoo now has some underappreciated assets that position it for strong online ad growth. Among them, he noted, it claims the largest global user base and No. 2 positions in video streams and search queries.
Mr. Post also wrote in his report that overall online advertising revenues will double in the next five years. And he noted that Yahoo’s investment in new search advertising technology, dubbed Panama, will eventually start to bear fruit, helping it to compete against Google.
Still, Yahoo won’t come cheap. Even with Yahoo stock down nearly 40 percent from a 52-week high of $43.66, Yahoo has a market capitalization of more than $36 billion. Also, Google should continue to eat away at Yahoo’s affiliate position and should gain in ad inventories from social networking and other places.
Yahoo shares climbed $0.61, or 2.41 percent, to $25.95 in recent trading, while Microsoft shares gained $0.19 to $28.53.
WSJ.com
A Merrill Lynch analyst is rekindling an old Internet romance story.
Merrill analyst Justin Post brought back suggestions that Redmond software behemoth Microsoft should consider a Yahoo acquisition. He said the No. 2 search company would be a catch for either Microsoft or a large media company looking to boost its online presence.
"A Microsoft-Yahoo combination would be in a better position, in our view, to compete against Google," Mr. Post wrote in a research note Monday.
For Microsoft, a deal for Yahoo would reduce the pressure on it to increase the market share and profitability of its MSN business, the analyst noted. Microsoft’s year-to-year sales growth of 5 percent in Internet advertising was well below estimates for industry growth of 26 percent, Mr. Post noted.
"Microsoft’s AdCenter is just beginning to build its advertiser base," he wrote.
Then there’s Yahoo. Yahoo continues to slide further behind Google. From the $900-million deal Google scored with MySpace to the search king’s $1.65-billion acquisition of YouTube-Yahoo has been slow to buy relevant companies to add to its business.
The recent deals increase Google’s prospects for display ad growth and have given the Mountain View, California, search leader the throne for Internet video traffic. Deals aside, Google continues to post blockbuster earnings results on strong online ad revenue while Yahoo struggles to find growth. Yahoo has clearly entrenched itself in a distant second.
But Merrill Lynch’s analyst noted that Yahoo now has some underappreciated assets that position it for strong online ad growth. Among them, he noted, it claims the largest global user base and No. 2 positions in video streams and search queries.
Mr. Post also wrote in his report that overall online advertising revenues will double in the next five years. And he noted that Yahoo’s investment in new search advertising technology, dubbed Panama, will eventually start to bear fruit, helping it to compete against Google.
Still, Yahoo won’t come cheap. Even with Yahoo stock down nearly 40 percent from a 52-week high of $43.66, Yahoo has a market capitalization of more than $36 billion. Also, Google should continue to eat away at Yahoo’s affiliate position and should gain in ad inventories from social networking and other places.
Yahoo shares climbed $0.61, or 2.41 percent, to $25.95 in recent trading, while Microsoft shares gained $0.19 to $28.53.
WSJ.com
Blockbuster Takes Swipe At Netflix With New DVD Plan
TAKING DIRECT AIM AT COMPETITOR Netflix, Blockbuster yesterday launched a movie rental program giving online customers the option of returning their DVDs by mail or exchanging them at Blockbuster stores for free in-store movie rentals. Called Blockbuster Total Access, the program allows consumers to double the number of movies they get at the same price.
"Until today, no online rental service offered customers the option of returning their movies to the store and exchanging them for free movie rentals, and there is no other store-based retailer that offers customers the convenience and the selection of the more than 60,000 titles available through our online service," Blockbuster Chairman and CEO John Antioco said in a release announcing the program. "Customers shouldn't have to choose between renting online versus in-store, and they should never have to be without a movie."
The program extends to all Blockbuster offerings, including its $5.99 and $7.99 plans, thereby undercutting Netflix's pricing as well.
Media Post
"Until today, no online rental service offered customers the option of returning their movies to the store and exchanging them for free movie rentals, and there is no other store-based retailer that offers customers the convenience and the selection of the more than 60,000 titles available through our online service," Blockbuster Chairman and CEO John Antioco said in a release announcing the program. "Customers shouldn't have to choose between renting online versus in-store, and they should never have to be without a movie."
The program extends to all Blockbuster offerings, including its $5.99 and $7.99 plans, thereby undercutting Netflix's pricing as well.
Media Post
Disney Income More Than Doubles
POWERED BY STRONG BOX-OFFICE FILM results, growth in its amusement parks and big gains in its cable networks, Walt Disney Co.'s fourth-quarter net income more than doubled.
Net income jumped to $782 million, or 36 cents a share. This was better than analysts' expectations of 34 cents a share. Revenue was at $8.8 billion.
Media networks' net income climbed 18%, while revenue climbed 10%. Revenue from Disney's cable networks was 16% higher, while operating income from that unit increased 22%, thanks to a strong performance from its ESPN network.
In broadcasting, ABC posted a 1% gain in revenue, but a 40% decline in profitability. The high cost of rolling out Disney's branded mobile-phone services contributed to that result. The company said that average cost for programming in prime time was about even versus that of last year.
Broadcasting ad revenue continued to make gains, as the company said it had good results from the upfront and is seeing a robust spot market for its stations. Concerning some of Disney's digital activities, the company that since May, ABC had 19 million streams from six prime-time shows that stream through its ABC.com site. Some 36 advertisers have signed on.
Bob Iger, chairman of Walt Disney Co., says digital opportunities have been lucrative. "CPM rates are four to five times that of [network] prime time," said Iger. "Recall rates for those advertisers have been tremendous. As we build that out, we'll be able to grow advertising significantly."
Disney will spend $400 million to $500 million in overall capital expenditures next year, with roughly half going to theme parks for new attractions, and another chunk to new costs for programming at ESPN.
Disney's studio-entertainment group made the biggest strides--posting operating income of $214 million, compared to a loss of $313 million a year ago. Much came from a 33% jump in revenue, thanks to big box-office returns from "Pirates of the Caribbean: Dead Man's Chest," along with lower operating costs at its Miramax film unit.
AdAge.com
Net income jumped to $782 million, or 36 cents a share. This was better than analysts' expectations of 34 cents a share. Revenue was at $8.8 billion.
Media networks' net income climbed 18%, while revenue climbed 10%. Revenue from Disney's cable networks was 16% higher, while operating income from that unit increased 22%, thanks to a strong performance from its ESPN network.
In broadcasting, ABC posted a 1% gain in revenue, but a 40% decline in profitability. The high cost of rolling out Disney's branded mobile-phone services contributed to that result. The company said that average cost for programming in prime time was about even versus that of last year.
Broadcasting ad revenue continued to make gains, as the company said it had good results from the upfront and is seeing a robust spot market for its stations. Concerning some of Disney's digital activities, the company that since May, ABC had 19 million streams from six prime-time shows that stream through its ABC.com site. Some 36 advertisers have signed on.
Bob Iger, chairman of Walt Disney Co., says digital opportunities have been lucrative. "CPM rates are four to five times that of [network] prime time," said Iger. "Recall rates for those advertisers have been tremendous. As we build that out, we'll be able to grow advertising significantly."
Disney will spend $400 million to $500 million in overall capital expenditures next year, with roughly half going to theme parks for new attractions, and another chunk to new costs for programming at ESPN.
Disney's studio-entertainment group made the biggest strides--posting operating income of $214 million, compared to a loss of $313 million a year ago. Much came from a 33% jump in revenue, thanks to big box-office returns from "Pirates of the Caribbean: Dead Man's Chest," along with lower operating costs at its Miramax film unit.
AdAge.com
eMarketer comments on Google's latest acquisition
Midia Post
As has been well publicized, Google recently agreed to buy YouTube, the largest online video-watching and -sharing site in the world, for $1.65 billion worth of Google stock.
Eric Schmidt, CEO of Google, had this to say about the acquisition: "The YouTube team has built an exciting and powerful media platform that complements Google's mission to organize the world's information and make it universally accessible and useful."
Chad Hurley, CEO and co-founder of YouTube, had this to say: "Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners."
A few of eMarketer's analysts pitched in with comments about the deal. Here is a selection:
Ben Macklin - Senior Analyst
It seems to me that it is nothing more than an advertising company acquiring a captive audience. As user-generated content expands, and video advertising becomes more sophisticated, YouTube can provide a nice test ground for emerging advertising methods and models. The beauty now for copyright holders is that they have someone big to sue if there are any serious copyright breaches.
John Gauntt - Senior Analyst
Everyone knew YouTube was in play because its private investors would not be able to maintain its growth without a business model. Another reason for getting it now would be to prevent Murdoch, Viacom or another media player from getting it. Google Video was lagging badly and if they did not get YouTube, then Google would be stuck with it.... Now they can quietly dump what is not working and slot in what works into a better vehicle.
The lawsuit issue I think is overrated because A) Google has deep enough pockets to swat away suits by jokers for the next 1,000 years, and B) YouTube has already publicly kissed and made up with tier-one content providers like NBC. Any big media owner that wants to sue the thing out of existence, a la Napster, is too late and there is no way they could hold together a coalition like before.... The user-generated horse is out of the barn.
I still think that Google is getting YouTube cheap. Anyone who can build a good video search business will do a lot more than $1.65 billion in ad sales, and this comes on top of what can be drawn from the site itself. I do not think we should overly ventilate about the YouTube site itself.... Sure, it is a good brand and reputation for video upload that works...but it has been iconic only for the past year.
Furthermore:
A) Search is a volume business. Unless you have people executing searches (the ore), you can't tune your algorithms to produce better results, which raises your value to advertisers (the gold). That is the genius of a lot of these community-based business models: You outsource product testing and QA to the audience. But if you can get some traction out there, you can out-innovate any closed shop that is trying to perfect its algorithms in house.
B) Searching text-based Web content is basically done as far as Google is concerned. Not in the sense that it does not count or will not expand, but it will not drive the ad revenue growth Wall Street expects.
C) Video is the next big gnarly search problem where there is obvious mass demand by both people and potential advertisers.
D) YouTube by far has the greatest archive of video content (especially user-generated) out there.
E) If you are going to build a video search business, you had better have a huge store of ore that you can organize and get people to start using while you record the activity and bake it into your next rev of the video search algorithm. You can bet that Google's engineers are chomping at the bit to get access to YouTube's server archives of video searches. It is orders of magnitude bigger than what they have with Google Video.
David Hallerman - Senior Analyst
Overall this is a great deal for Google.
- Who other than Google has the technical infrastructure to carry the increasing bandwidth of video?
- In the media space, it is more profitable to be mainly a distributor with some content, as Google/YouTube is, than to be just an ad company or just a content company.
- As big as YouTube has grown, and as much as Google has paid, only about 60 people work at YouTube. That is not much different than the other small companies that Google has previously bought, so integration could be relatively easy. (Yes, I know that YouTube will be kept separate, in brand and office, but the papa company will surely influence.... Mr. Hurley already is talking about pre-roll ads.)
- The data over time on user behavior, on a site where people spend time and are registered users, give Google the competitive tools for future non-search advertising that Yahoo! and MSN already have.
- Some numbers I have seen indicate that YouTube was already profitable, mainly from the CPM ads running on its home page.
- As for copyright issues, one advantage of taking ownership is deflecting and dealing with problems YouTube has had with copyrighted materials. Google, by not being a media company, is better positioned to negotiate with media companies for usage and compensation for those materials. In addition, Google is experienced in defending its ability to index and profit from others' content. Google gives YouTube legitimacy.
Midia Post
As has been well publicized, Google recently agreed to buy YouTube, the largest online video-watching and -sharing site in the world, for $1.65 billion worth of Google stock.
Eric Schmidt, CEO of Google, had this to say about the acquisition: "The YouTube team has built an exciting and powerful media platform that complements Google's mission to organize the world's information and make it universally accessible and useful."
Chad Hurley, CEO and co-founder of YouTube, had this to say: "Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners."
A few of eMarketer's analysts pitched in with comments about the deal. Here is a selection:
Ben Macklin - Senior Analyst
It seems to me that it is nothing more than an advertising company acquiring a captive audience. As user-generated content expands, and video advertising becomes more sophisticated, YouTube can provide a nice test ground for emerging advertising methods and models. The beauty now for copyright holders is that they have someone big to sue if there are any serious copyright breaches.
John Gauntt - Senior Analyst
Everyone knew YouTube was in play because its private investors would not be able to maintain its growth without a business model. Another reason for getting it now would be to prevent Murdoch, Viacom or another media player from getting it. Google Video was lagging badly and if they did not get YouTube, then Google would be stuck with it.... Now they can quietly dump what is not working and slot in what works into a better vehicle.
The lawsuit issue I think is overrated because A) Google has deep enough pockets to swat away suits by jokers for the next 1,000 years, and B) YouTube has already publicly kissed and made up with tier-one content providers like NBC. Any big media owner that wants to sue the thing out of existence, a la Napster, is too late and there is no way they could hold together a coalition like before.... The user-generated horse is out of the barn.
I still think that Google is getting YouTube cheap. Anyone who can build a good video search business will do a lot more than $1.65 billion in ad sales, and this comes on top of what can be drawn from the site itself. I do not think we should overly ventilate about the YouTube site itself.... Sure, it is a good brand and reputation for video upload that works...but it has been iconic only for the past year.
Furthermore:
A) Search is a volume business. Unless you have people executing searches (the ore), you can't tune your algorithms to produce better results, which raises your value to advertisers (the gold). That is the genius of a lot of these community-based business models: You outsource product testing and QA to the audience. But if you can get some traction out there, you can out-innovate any closed shop that is trying to perfect its algorithms in house.
B) Searching text-based Web content is basically done as far as Google is concerned. Not in the sense that it does not count or will not expand, but it will not drive the ad revenue growth Wall Street expects.
C) Video is the next big gnarly search problem where there is obvious mass demand by both people and potential advertisers.
D) YouTube by far has the greatest archive of video content (especially user-generated) out there.
E) If you are going to build a video search business, you had better have a huge store of ore that you can organize and get people to start using while you record the activity and bake it into your next rev of the video search algorithm. You can bet that Google's engineers are chomping at the bit to get access to YouTube's server archives of video searches. It is orders of magnitude bigger than what they have with Google Video.
David Hallerman - Senior Analyst
Overall this is a great deal for Google.
- Who other than Google has the technical infrastructure to carry the increasing bandwidth of video?
- In the media space, it is more profitable to be mainly a distributor with some content, as Google/YouTube is, than to be just an ad company or just a content company.
- As big as YouTube has grown, and as much as Google has paid, only about 60 people work at YouTube. That is not much different than the other small companies that Google has previously bought, so integration could be relatively easy. (Yes, I know that YouTube will be kept separate, in brand and office, but the papa company will surely influence.... Mr. Hurley already is talking about pre-roll ads.)
- The data over time on user behavior, on a site where people spend time and are registered users, give Google the competitive tools for future non-search advertising that Yahoo! and MSN already have.
- Some numbers I have seen indicate that YouTube was already profitable, mainly from the CPM ads running on its home page.
- As for copyright issues, one advantage of taking ownership is deflecting and dealing with problems YouTube has had with copyrighted materials. Google, by not being a media company, is better positioned to negotiate with media companies for usage and compensation for those materials. In addition, Google is experienced in defending its ability to index and profit from others' content. Google gives YouTube legitimacy.
Midia Post
comScore: iTunes Sales Surge 84%
CHALK UP MORE RESEARCH SHOWING strong sales growth at iTunes. comScore Networks Thursday reported that sales at Apple's digital music store year-over-year have grown 84% during the first nine months of this year.
The comScore data comes the same week that Forrester Research ignited a controversy with a report stating that iTunes sales had fallen 65% the first six months of the year.
Apple fired back with a statement denying that sales had slowed, and claiming that iTunes accounts for nearly 6% of all the music sold in the United States, making Apple the fourth-largest music-retailer. Piper Jaffray chimed in with its own research Tuesday, indicating that the number of songs sold per week on iTunes had grown 78% during the first nine months of 2006 compared to the year-earlier period.
In addition to reporting that sales had nearly doubled, comScore also found that the number of unique visitors to the iTunes site reached 20.8 million last month--an 85% increase from last year.
"As Mark Twain might have said, the rumors of iTunes' death have been greatly exaggerated," said Gian Fulgoni, chairman of comScore Networks, in a prepared statement. comScore bases its iTunes sales estimate on its panel of 1.5 million U.S. consumers who allow comScore to capture their browsing and transaction behavior, including online and offline purchasing.
Separately, Nielsen SoundScan Thursday also reported that sales of individually downloaded digital tracks were up 67% for the first 49 weeks of this year compared to 2005.
In a blog post Wednesday addressing the iTunes contretemps, Forrester analyst Josh Bernoff blamed news reports for sensationalizing the 65% drop in sales during the first half of 2006. He noted that the sample of 2,700 U.S. credit and debit card transactions on which Forrester based its estimate wasn't large enough to conclude that iTunes sales were "collapsing"--a word used in some headlines about the report.
Rather, he argued that iTunes sales are simply leveling off. "It's the music industry that has to worry, since the $1 billion a year or so from iTunes, globally, doesn't nearly make up for even the drop in CD sales in the US, which are now down $2.5 billion from where they were," he wrote.
ComScore declined to comment on its iTunes data beyond its statement. But the year-over-year figures it provided appeared to be aimed at countering any seasonal sales shifts that might have been reflected in the Forrester data. In the report, Bernoff acknowledged that with only two years of full data it was "too soon to tell if this decline was seasonal or if buyers were reaching their saturation level for digital music."
Midia Post
The comScore data comes the same week that Forrester Research ignited a controversy with a report stating that iTunes sales had fallen 65% the first six months of the year.
Apple fired back with a statement denying that sales had slowed, and claiming that iTunes accounts for nearly 6% of all the music sold in the United States, making Apple the fourth-largest music-retailer. Piper Jaffray chimed in with its own research Tuesday, indicating that the number of songs sold per week on iTunes had grown 78% during the first nine months of 2006 compared to the year-earlier period.
In addition to reporting that sales had nearly doubled, comScore also found that the number of unique visitors to the iTunes site reached 20.8 million last month--an 85% increase from last year.
"As Mark Twain might have said, the rumors of iTunes' death have been greatly exaggerated," said Gian Fulgoni, chairman of comScore Networks, in a prepared statement. comScore bases its iTunes sales estimate on its panel of 1.5 million U.S. consumers who allow comScore to capture their browsing and transaction behavior, including online and offline purchasing.
Separately, Nielsen SoundScan Thursday also reported that sales of individually downloaded digital tracks were up 67% for the first 49 weeks of this year compared to 2005.
In a blog post Wednesday addressing the iTunes contretemps, Forrester analyst Josh Bernoff blamed news reports for sensationalizing the 65% drop in sales during the first half of 2006. He noted that the sample of 2,700 U.S. credit and debit card transactions on which Forrester based its estimate wasn't large enough to conclude that iTunes sales were "collapsing"--a word used in some headlines about the report.
Rather, he argued that iTunes sales are simply leveling off. "It's the music industry that has to worry, since the $1 billion a year or so from iTunes, globally, doesn't nearly make up for even the drop in CD sales in the US, which are now down $2.5 billion from where they were," he wrote.
ComScore declined to comment on its iTunes data beyond its statement. But the year-over-year figures it provided appeared to be aimed at countering any seasonal sales shifts that might have been reflected in the Forrester data. In the report, Bernoff acknowledged that with only two years of full data it was "too soon to tell if this decline was seasonal or if buyers were reaching their saturation level for digital music."
Midia Post
Digital envelopes may cost Netflix
The cost of creating a digitally delivered movie service and competition from Blockbuster Inc. could depress shares of Netflix Inc. during the next year, according to a Bank of America analyst who advised clients Thursday to steer clear of Netflix stock.In a 55-page report, analyst Brian Pitz initiated Netflix with a "sell" rating and $24 price target, 13.5% lower than where shares closed Thursday.He said the $40 million that Netflix intends to spend next year to develop a movie download service to rival Amazon's Unbox, Apple Computer's iTunes, CinemaNow and others, might not be enough. Pitz estimates, for example, that it cost Amazon $42 million-$64 million to develop Unbox.While Netflix CEO Reed Hastings predicts it will be as many as five years before digital downloads threatens the Netflix DVD subscription model, Pitz predicts meaningful competition from technologies a couple years earlier than that.Pitz also noted that Netflix will spend 23% of its revenue this year in marketing, up from 18% in 2003, due in part to competition from Blockbuster, which is marketing its rival DVD-by-mail service at its stores and giving free movies to Netflix subscribers in an effort to woo them to Blockbuster Total Access.
"Netflix has indicated that it will continue to invest aggressively in acquiring new subscribers, and we believe this could adversely impact margins," Pitz said.Shares of Netflix fell 2.3% on Thursday to $27.76, while shares of Blockbuster rose 2.5% to $5.41.The analyst, while acknowledging that Netflix thus far has been adding subscribers at a healthier clip than many on Wall Street anticipated, expressed doubts that the company will reach its stated goal of 20 million subs sometime between 2010-2012. At year's end, Netflix will have about 6.3 million subs compared with about 2 million by year's end for Blockbuster. The analyst also calls Netflix's Red Envelope Entertainment content division an "area of uncertainty." Through Red Envelope, Netflix has become the distributor for more than 100 independent movies, acquiring four new titles at January's Sundance Film Festival."While we recognize that growing its content library methodically can yield dividends in terms of average revenue per subscriber," Pitz said, "it is not clear that Netflix has a competitive advantage at picking films that will be winners."The analyst notes, however, that Netflix has had success with such films as "Nice Guys Sleep Alone" and "Born Into Brothels," the latter of which won the 2005 Oscar for best documentary.Pitz said Netflix's effort to produce some original movies "potentially puts it into direct competition with studios as well as cable TV players," a risky proposition that should "be watched carefully by investors."
AdAge.com
"Netflix has indicated that it will continue to invest aggressively in acquiring new subscribers, and we believe this could adversely impact margins," Pitz said.Shares of Netflix fell 2.3% on Thursday to $27.76, while shares of Blockbuster rose 2.5% to $5.41.The analyst, while acknowledging that Netflix thus far has been adding subscribers at a healthier clip than many on Wall Street anticipated, expressed doubts that the company will reach its stated goal of 20 million subs sometime between 2010-2012. At year's end, Netflix will have about 6.3 million subs compared with about 2 million by year's end for Blockbuster. The analyst also calls Netflix's Red Envelope Entertainment content division an "area of uncertainty." Through Red Envelope, Netflix has become the distributor for more than 100 independent movies, acquiring four new titles at January's Sundance Film Festival."While we recognize that growing its content library methodically can yield dividends in terms of average revenue per subscriber," Pitz said, "it is not clear that Netflix has a competitive advantage at picking films that will be winners."The analyst notes, however, that Netflix has had success with such films as "Nice Guys Sleep Alone" and "Born Into Brothels," the latter of which won the 2005 Oscar for best documentary.Pitz said Netflix's effort to produce some original movies "potentially puts it into direct competition with studios as well as cable TV players," a risky proposition that should "be watched carefully by investors."
AdAge.com
Wide-Screen, HDTV Fuel Home Party Trend
AMERICANS LIKE A GOOD PARTY, and more than ever, that party is taking place in front of big-screen TVs.
New research exclusive to Marketing Daily found that well over half of all Americans are staying home more than they did two years ago to enjoy high-tech entertainment between their own four walls. And nearly as many say new technology such as wide-screen TVs and HDTV has turned TV-watching into a social event.
It's time to flip on the gas logs and fire up the television.
And not just any television. "The party is built around the wide-screen TV," says Steve Levine, senior vice president for technology, telecom and consumer electronics at Synovate, which conducted the survey of 1,000 U.S. adults over age 18.
According to the Consumer Electronics Association, wide-screen TVs--those 40 inches or larger--accounted for 21 percent of all TVs shipped in the U.S. this year, up from 14 percent last year. As screens grow in size, the cost is plummeting, making the sets available to more people. Flat-panel LCD and plasma TV prices dropped 25 percent in the past year to roughly $1,500 this year, from $2,200 last year, says Sean Wargo, the association's director of industry analysis.
"We're experiencing a phenomenon of people migrating to larger TVs," he says. In fact, like many couch potatoes, TV sets have gained an inch a year for the past five years.
TVs used to hide behind huge entertainment consoles, but people are starting to take them out of the closet and hang them prominently above the mantel or on a living room wall. "They're a status symbol as well as en entertainment vehicle," says Wargo, which partly explains why people like to frame their social life around wide-screen TVs.
The Synovate study found that the young-middle-aged are the most likely group to party in front of the TV. Well over 300 of all respondents said they have HDTV, wide-screen or plasma TVs at home, and of this group, 47 percent said they're watching TV in a social setting more often because of these new technologies. But that figure shoots up to 67 percent for respondents ages 35 to 44.
Midwesterners also are more likely to socialize in front of the tube: 57 percent of those with high-tech TVs said they find themselves socializing at home in front of their sets more than two years ago. That compares to 46 percent of Northeasterners, 42 percent of Southerners and 45 percent of those on the West Coast. Could it be the weather?
Not surprisingly, younger age groups are less inclined to stay home because of high-tech entertainment systems. "Which makes sense," says Synovate's Levine. "They like to go out for fun."
The MarketingDaily/Synovate study unearthed some interesting stats about Americans' adoption of high-tech tools at home. Specifically, more people have high-tech stuff than not.
Among respondents:
69% have high-speed Internet
30% have wireless Internet
23% have wide-screen TV
20% have plasma TV
29% have on-demand movies from cable provider
39% have video game systems
15% are technologically deprived with none of the above
Marketing Daily
New research exclusive to Marketing Daily found that well over half of all Americans are staying home more than they did two years ago to enjoy high-tech entertainment between their own four walls. And nearly as many say new technology such as wide-screen TVs and HDTV has turned TV-watching into a social event.
It's time to flip on the gas logs and fire up the television.
And not just any television. "The party is built around the wide-screen TV," says Steve Levine, senior vice president for technology, telecom and consumer electronics at Synovate, which conducted the survey of 1,000 U.S. adults over age 18.
According to the Consumer Electronics Association, wide-screen TVs--those 40 inches or larger--accounted for 21 percent of all TVs shipped in the U.S. this year, up from 14 percent last year. As screens grow in size, the cost is plummeting, making the sets available to more people. Flat-panel LCD and plasma TV prices dropped 25 percent in the past year to roughly $1,500 this year, from $2,200 last year, says Sean Wargo, the association's director of industry analysis.
"We're experiencing a phenomenon of people migrating to larger TVs," he says. In fact, like many couch potatoes, TV sets have gained an inch a year for the past five years.
TVs used to hide behind huge entertainment consoles, but people are starting to take them out of the closet and hang them prominently above the mantel or on a living room wall. "They're a status symbol as well as en entertainment vehicle," says Wargo, which partly explains why people like to frame their social life around wide-screen TVs.
The Synovate study found that the young-middle-aged are the most likely group to party in front of the TV. Well over 300 of all respondents said they have HDTV, wide-screen or plasma TVs at home, and of this group, 47 percent said they're watching TV in a social setting more often because of these new technologies. But that figure shoots up to 67 percent for respondents ages 35 to 44.
Midwesterners also are more likely to socialize in front of the tube: 57 percent of those with high-tech TVs said they find themselves socializing at home in front of their sets more than two years ago. That compares to 46 percent of Northeasterners, 42 percent of Southerners and 45 percent of those on the West Coast. Could it be the weather?
Not surprisingly, younger age groups are less inclined to stay home because of high-tech entertainment systems. "Which makes sense," says Synovate's Levine. "They like to go out for fun."
The MarketingDaily/Synovate study unearthed some interesting stats about Americans' adoption of high-tech tools at home. Specifically, more people have high-tech stuff than not.
Among respondents:
69% have high-speed Internet
30% have wireless Internet
23% have wide-screen TV
20% have plasma TV
29% have on-demand movies from cable provider
39% have video game systems
15% are technologically deprived with none of the above
Marketing Daily
Grocers' private labels gain market share
Private-label grocery products, long shoved to the back of the shopping cart in favor of national brands like Kraft and Skippy, are gaining acceptance among shoppers as stores take new steps to beef up their own brands. Private labels, also called store brands, are made by the retailer or a third-party supplier to the retailer's specifications. Some used to be awful knock-offs of their name-brand competitors, leaving a sour taste in shoppers' mouths. That reputation is turning around as grocery chains improve the quality of their private-label products as a way to stand out in the increasingly competitive grocery market. "Food retailers are always looking to find a way to compete better in the marketplace and differentiate themselves," said John B. Lord, professor and chairman of the department of food marketing at St. Joseph's University in Philadelphia. "One of the key ways is [to create] store brands that no one else can sell. Other aspects [of a store's strategy] can be duplicated, but a store brand can't." "We're definitely seeing growth in the private-label demand," said Greg Ten Eyck, a spokesman for Safeway's eastern division. "More and more people are seeing that the private label is equal or greater than the quality of name brands." Safeway recently beefed up its "Safeway Select" brand, among its highest-quality private labels, with products such as creme brulee desserts, chai tea and artisan breads. It is also reorganizing its 70 different private-label lines into 10, including Safeway Select, Lucerne and O Organics. Giant Food recently introduced its "Simply Enjoy" line of products, stocked with items such as premium coffees, imported pastas and drink mixes. It's part of parent company Royal Ahold NV's recently announced plans to improve Giant's private-label line, which also includes Nature's Promise and CareOne. "We're promoting private label more so than ever before because we've seen an increased demand for it," said Giant spokesman Barry Scher. Private-label products are one of the ways a grocery chain can stand out when all of its competitors sell the same Coca-Cola, Crest and Charmin, Mr. Lord said. Plus, profit margins are higher on private-label goods because national brands need to include the cost of advertising in their prices; grocery stores' ad costs are distributed among everything in the store, not just the private-label products. Across the country, grocers' efforts to reverse private-label products' reputation appears to be working. About 41 percent of shoppers say they frequently buy private-label goods, up from 36 percent in 2001 and 12 percent 15 years ago, according to a study produced this month by the Private Label Manufacturers Association (PLMA), a New York-based trade group. "Customers have more experience with purchasing private-label products and are realizing it is [national brand] quality," Mr. Ten Eyck said. It's difficult to tell if that improved reputation is translating into more sales, however.
The Washington Times
The Washington Times
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