The Value of Binging

Ever since Netflix began producing its own series, traditional network TV executives have driven themselves to distraction over its refusal to disclose viewership numbers, or to cooperate with outside measurement companies like Nieslen. Steeped as they are in the world of ratings and advertising CPMs, TV executives have never quite groked that Netflix reckons the value of content differently.

Their obsession has sometimes led to odd spectacles, such as NBC research president Alan Wurtzel’s recent big reveal of purported Netflix “ratings” derived by the network-backed ratings system Symphony, which passively measures Netflix viewing using audio recognition technology, Manchester_by_the_Seaand which Wurtzel seemed to think proved something, although what that was was not entirely clear.

Netflix does not monetize content, as traditional media companies do. It monetizes viewers. How many people watch a particular episode of a particular series within a certain time window, therefore, really isn’t relevant to its value to Netflix. What matters is whether the people who are watching the series continue to do so, and whether that continued viewing enables Netflix’s recommendation engine to surface other series they’ll go on to view. People who continue to watch a series will, presumably, continue to pay their monthly subscription fee.

As discussed here before, Netflix’s different calculus puts a premium on producing and acquiring a broad range of programming, rather than on trying to pick shows that will have a broad appeal and therefore generate high ratings. That, in turn, is attracting a growing roster of A-list talent to Netflix, Amazon and other subscription services, drawn by the opportunity to break out of the creative constraints of ratings-driven television. Read More »

The Future of TV: Platform or Service?

Amazon on Tuesday unveiled its expanded Prime Instant Video service and it seems to be more or less as advertised. Prime subscribers will now be able to add subscriptions to other over-the-top streaming services, including Showtime, Starz and an array of niche channel for prices ranging from $3 a month to $8.99 a month for Showtime, on top of the $99 annual price ($8.25 per month) for Prime.

Amazon SDDChannels can be ordered a la carte, and subscribers can change their line ups each month. Prime subscribers can also user their Amazon credentials to log in to any of the standalone apps for their add-on channels on other streaming platform, which means Prime subscribers can watch Showtime on Apple TV despite the absence of Prime on the Apple set-top box.

For the participating networks, the expanded Prime means forgoing a direct relationship with subscribers, as Amazon will handle all billing and customer service functions, presumably in exchange for a cut of the add-on subscription fees, while gaining the leverage of Amazon’s reach and merchandising strength. Read More »

Amazon’s On-Demand MVPD

At a congressional oversight hearing last month, FCC chairman Tom Wheeler indicated that his earlier proposal to classify certain over-the-top video services as “multichannel video programming distributors” (MVPDs), a regulatory term of art that applies to cable and satellite providers, was on more or less indefinite hold.

“The purpose of rulemaking is to learn,” Wheeler told the committee. “We learned that [a] vast number of things are developing very rapidly, and we have not moved forward on that notice of proposed rulemaking and don’t see, until situations change, we would.”

Among those “vast number of things,” no doubt, were Amazon’s confidential plans to bundle third-party OTT services in with Amazon Prime, monitor_globeallowing Prime Instant Video users to put together a package of OTT channels through a single subscription. As first reported by BloombergBusiness, Amazon Prime customers “will have the option of adding other online subscriptions to their accounts, including major, well-known movie and TV channels, and Amazon will also sell prepackaged bundles of its own creation…[T]he new feature may go live as soon as next month.”

The offering would “resemble something between a cable-TV subscription, though without live programming, and the online array of video offered through devices from Roku Inc., Apple TV or Amazon’s own Fire TV,” according to Bloomberg. Read More »

For Amazon, Live OTT Comes With A Twitch

At his Streaming Media blog, Frost & Sullivan analyst Dan Rayburn adds a new wrinkle to the ongoing debate over why Amazon kicked Apple TV and Chromecast products out of its online store. According to Rayburn’s sources, Amazon has been chatting up content owners about offering a live, over-the-top video service of some kind.

Rayburn speculates that such a plan could help explain why Amazon recently acquired the cloud-based live streaming platform provider Elemental Technologies at an unusually high valuation:

cable_TV_not1Insiders say Elemental is on a run rate to do close to $100M in 2016. So if the rumors of Amazon valuing Elemental at $500M are correct, Elemental is getting about 5x projected 2016 revenue, a rather high valuation, unless Amazon is also placing value on them for other reasons, like the ability to power their own live OTT service.

I’ll add another data point in support of the notion: Twitch, which Amazon acquired last year for close to $1 billion. As noted in a post here last week, Twitch is rolling out a new set of tools to help its broadcasters linear-ize their channels, by mixing live and on-demand content and creating playlists that turn the channel into a 24/7 experience. Read More »

Amazon Opens Fire On Apple TV And Chromecast

Amazon this week has left little doubt as to the scale of its ambitions in over-the-top video. Just days after Amazon-owned Twitch announced plans to roll out new tools for uploading on-demand content to the platform to better compete with YouTube, the e-commerce giant declared war on Apple and Google for supremacy on the set-top.

In a memo to Amazon Marketplace merchants, first reported by BloombergBusiness, Amazon said it would stop selling the Apple TV set-top box and Google’s Chromecast streaming dongle, both of which compete with Amazon’s own Fire TV STB and Fire Stick dongle. No new listings for Apple TV and Chromecast will be Amazon_Fire_TVaccepted the memo said, and listings for existing inventories would be removed as of Oct. 29th.

According to the memo, the items are being removed because they are not fully compatible with  Amazon’s Prime Video streaming service.

“Over the last three years, Prime Video has become an important part of Prime,” the memo said. “It’s important that the streaming media players we sell interact well with Prime Video in order to avoid customer confusion.”

Translation: We can’t get our fully enabled Prime Video app onto iOS devices or supported by Chromecast because we refuse to fork over the 30 percent cut of in-app purchases demanded by Apple and Google. Read More »

Twitch goes to the movies

We missed this amid the hubbub of CES, but apropos our Wednesday post Twitch has begun experimenting with live movie screenings on its platform through a partnership with Devolver Digital. Each Friday through February 20th Twitch will host a screening of a game-related movie, along with a live chat with the filmmaker on its main channel.

twitch_logo3The series kicked off January 9th with an airing of “Stream Dream,” a documentary about the growing impact of game streamers like Pew Die Pie, Smosh and Angry Joe. Today’s feature, at 2:15 PST, will be “Pixel Poetry,” a documentary on the artistry of games. Read More »

Publishers throw the e-book business out the window

Book publishers have been crowing this week over having wrested control over e-book prices from Amazon. After a brief showdown with Macmillan Publishing, in which Amazon pulled all Macmillan hardcover and paperback titles from its physical-book store, the Kindle maker blinked and agreed to the publisher’s demand to raise the price of its e-books in the Kindle store from $9.99 each to $12.99-$14.99. Other leading publishers, led by Hachette Book Group and News Corp.’s HarperCollins unit, quickly said they would demand the same deal.

The publishers, of course, have long been concerned over Amazon’s strategy of pricing most new release e-books at $9.99 to spur sales of Kindle devices. Though publishers earn the same $12-$14 wholesale price from Kindle editions as they earn from hardcovers, they fretted that low prices on e-books would undercut sales of hardcovers, which typically sell for $20-$25 at retail. Eventually, they feared, the reduction in retail revenue would result in lower wholesale revenue as well. So long as Kindle owners made up the largest slice of the e-book market, however, the publishers had little choice but to go along. Read More »

The coming battle over used e-books (Updated)

On Thursday, Google announced during the Frankfurt Book Fair that its long-planned e-commerce platform for digital books will launch by June 2010. Christened Google Editions, represents a major departure from most current e-book offerings in that it won’t be confined to any particular reading device or desktop viewing application. Instead, Google will cache users’ purchases in a “cloud library,” which can be accessed from anywhere using any device with a Web browser

“It will be a browser-based access,” Google Books’  Tom Turvey said.  “The way the e-book market will evolve is by accessing the book from anywhere, from an access point of view and also from a geographical point of view.”

home-bookstoreUsers will be able to search for e-books on Google Editions (and presumably be served ads) and then buy them from Google, directly from the publisher or from one of dozens of partner retailers. Turvey said he expects the majority of Google Editions customers will go to retail partners, not to Google, to make purchases. “We are a wholesaler. A book distributor,” he said.

Given Google’s general bent toward moving content and applications off the desktop (or device) and into the cloud, turning e-books into Web apps is a logical strategy (GigaOm Pro subscribers can read my take on Google’s overall e-book strategy here). But it’s one that represents more than simply competition for Amazon’s Kindle. Google Editions is going to raise a host of new questions about the nature of an e-book.

For instance: How long before Google or one of its partner retailers sets up a used e-book exchange on the platform?

Up to now, used e-books have not really been an issue. Kindle books, for instance, remain locked to device they were acquired on. If you want to give a copy of a Kindle book to a friend, you have to hand over the whole Kindle. Other services let you transfer your e-books to a limited number of devices but unless you had the foresight to register your friend’s computer as an authorized device you’re out of luck. Selling the e-book to a stranger would be even more problematic.

The issue is not limited to e-books, of course. Any piece of DRM-protected content faces the same limitation. And it has long been a source of some controversy. Under the so-called first sale doctrine (Section 109 of the Copyright Act), the owner of a physical book is entitled to do whatever she wants with that particular copy — short of making another copy — including giving it as a gift, loaning it to a friend or re-selling it to a stranger. Ditto a CD, or a DVD. In principle, the same is true of any “lawfully made copy,” including digital copies. As a practical technical matter, however, sending a digital copy to a friend involves making another copy of the file, something the first sale doctrine does not permit.

For years now, we’ve simply lived with the inherent tension between the first sale doctrine and the practical realities of digital reproduction, in part because its main commercial implications were largely limited to business–online resellers like iTunes, Amazon or CinemaNow–which could be manage-ably licensed by content owners. Individual consumers bent on sharing their digital files had plenty of unauthorized file-sharing networks to turn to.

Google Editions works on a very different principle from Kindle or iTunes, however. Instead of transferring a copy of a file at the time of purchase, Google Editions will cache the  copy on a server, which is then accessed remotely. “Giving” a copy to friend, therefore, or even selling it to a stranger, does not need to involve a subsequent file transfer and its concomitant reproduction. All that would need to happen is for the seller’s access to the cached copy be disabled and the buyer’s accessed enabled at the time of the transaction.

I can see the issue arising first within a licensed context such as a “gift exchange.” Some Google Editions retailer will create a system allowing users to purchase e-books as a gift for someone else. The buyer (gift-giver) would be able to use her account to give a friend access to an e-book via the recipient’s account.

Publishers will love the idea at first because it will increase sales of e-books. But at some point, someone will hit on the idea of an independent re-sale exchange. Users who have purchased and finished with an e-book would be able to make it available to other buyers based on the same simultaneous disable/enable mechanism as the gift exchange.

used-bookstorePublishers will like that a lot less because prices on the exchange will be lower than the prices set by publishers for the same title (it wouldn’t work otherwise). Readers will be drawn to lower prices on the exchange because digital files don’t degrade from wear and tear the way physical copies do: “used” copies are just as good and fresh as “new” copies. Sellers will see it as a way to recapture a portion of the original purchase price, having first extracted value from the e-book by reading it.

Publishers, of course, will respond that your original e-book “purchase” was not in fact an actual purchase of a copy; it was the purchase of a license to use the e-book in certain ways and not others. The terms of service you agreed to by clicking “I agree” will preclude any sort of unauthorized re-sale.

We’ll then have a neatly framed question, suitable for litigation: If a transaction walks like a purchase and quacks like a purchase, is it a purchase even if the vendor insists otherwise? It won’t be the first time the issue has come up (see Vernor v. Autodesk, among others). But a case involving e-books is likely to capture the imagination of the public more than cases involving computer software (where most of the previous  litigation has occurred) because of our deep cultural history with trade in used, rare and antiquarian books.

I give it six to 12 after the launch of Google Editions.

Update: Looks like 6-12 months may be too long a timetable. According to the NYTimes, the new Barnes & Noble Nook, “will permit readers to lend their digital books to friends and download books wirelessly.”

Asking the wrong questions on e-books

The New York Times published a story the other day asking,Will Books be Napsterized? It’s conclusion? Probably, now that e-book readers are going mainstream and file-hosting sites like RapidShare are making it easier than ever for people to post pirated e-books online (speaking on a network filtering panel at the Future of Music Coaltion Policy Summit in Washington on Monday, Daniel Klein of London-based cyber-security firm Detica Group gave it 12 months before RapidShare becomes the new Public Enemy No. 1 among copyright owners).

napster-logoWhile the article, written by Randall Stross, professor of business at San Jose State University, is never explicit as to what it means to be “Napsterized,” it’s pretty clear it is referring to the loss of legitimate e-book sales–and perhaps even hardcover sales–due to people downloading for free illicit electronic editions of books rather than paying for the licensed product–much as the recorded music industry has suffered a sharp decline in CD sales since the advent of Napster and other peer-to-peer file-sharing networks.

“We are seeing lots of online piracy activities across all kinds of books — pretty much every category is turning up,” said Ed McCoyd, an executive director at the [Association of American Publishers]. “What happens when 20 to 30 percent of book readers use digital as the primary mode of reading books? Piracy’s a big concern.”


We do know that people have been helping themselves to digital music without paying. When the music industry was “Napsterized” by free file-sharing, it suffered a blow from which it hasn’t recovered. Since music sales peaked in 1999, the value of the industry’s inflation-adjusted sales in the United States, even including sales from Apple’s highly successful iTunes Music Store, has dropped by more than half, according to the Recording Industry Association of America.

Read More »

Authors Guild doesn't like the sunrise, blames the rooster

The Authors Guild is not impressed with Amazon’s opposition to the Google Books settlement.

In a 49-page brief (pdf) filed with Judge Denny Chin on Tuesday, the Kindle-maker warned of the potentially anti-competitive effects both of the blanket license in the agreement for Google to scan and sell orphan works and of the price-fixing power of the proposed Book Rights Registry, which Amazon described as a “cartel of authors and publishers” operating with “virtually no restrictions on its actions.”

The Authors Guild fired back the next day in a statement on the group’s web site:

Amazon’s hypocrisy is breathtaking.  It dominates online bookselling and the fledgling e-book industry.  At this moment it’s trying to cement its control of the e-book industry by routinely selling e-books at a loss.  It won’t do that forever, of course.  Eventually, when enough readers are locked in to its Kindle, everyone in the industry expects Amazon to squeeze publishers and authors.  The results could be devastating for the economics of authorship.  

Amazon apparently fears that Google could upend its plans.  Amazon needn’t worry, really:  this agreement is about out-of-print books.  Its lock on the online distribution of in-print books, unfortunately, seems secure.

Well now.

While authors and publishers have ample reason to be wary of Amazon’s market power, as I’ve argued in previous posts, the Guild is drawing an apples and bananas comparison in this case. It’s not as if Amazon came by its market power through nefarious, or even non-transparent means. Read More »

Orphans in the storm

Pity Judge Denny Chin, the federal district court jurist in New York presiding over the Google Book Search case (The Authors Guild, et. al. v. Google, Inc.). Having steered the long, complex class action to within sight of the finish line he suddenly finds himself the object of an intense last-minute lobbying campaign from interests that were not party to the case and at the center of budding international incident.

google-books-imagen1In my previous post, I discussed the commercial interests that began lining up last week in support or opposition to the proposed settlement between Google and the class-action plaintiffs, including Amazon, Microsoft, Yahoo and Sony. Now, foreign nations, and perhaps whole continents, are throwing down markers.

On Tuesday, lawyers for the government of Germany filed a strongly worded brief (pdf) with the court declaring that the settlement, if approved, would “run afoul of the applicable German nationallaws,” “irrevocably alter the landscape of internationalal copyright law” and potentially violate U.S. treaty obligations.

Some European Union officials, meanwhile, have come out in favor of the settlement’s terms (if not its legal implications) and have suggested importing it to Europe. A meeting on the issue is scheduled for Sept. 14 in Brussels.

How did it come to this? Read More »

Choosing up sides over e-books

Quite an interesting battle is taking shape in the suddenly hot world of e-books.

For many, of course, “e-books” are synonymous with Amazon and its Kindle device. But over the past few months, several would-be challengers to Amazon’s Kindle kingdom have emerged to do battle. In July, No. 1 brick-and-mortar bookseller Barnes & Noble unveiled a revamped online e-bookstore and announced a partnership with e-book reading device maker Plastic Logic, which plans to introduce a thinner, touch-screen version of an e-reader early next year.

kindle-newsweekA few weeks ago, Sony entered the fray with a pair of new e-book readers and its own revamped e-bookstore. (Technically speaking, Sony has been in the e-book business longer than Amazon has, but for reason known only to Sony it seemed to be trying to keep its involvement a secret until this month.) Last week, Sony announced a third e-reader, this one with wireless connectivity to allow Kindle-like direct-to-device downloads (no need to stop at the PC first for transfer to the handheld device).

The big news in Sony’s announcement, however, was its embrace of EPUB, a series of open technical standards for the file structure, packaging and publishing of e-books over digital networks developed by the International Digital Publishing Forum, an industry group, and supported by a number of major publishers. Last week, Sony’s embrace of EPUB was seconded by Google, which announced it would use the standards to distribute (at no cost) the nearly 1 million public domain works it has compiled in digital form as part of its Library of the Future project (many of the works were originally digitized by the non-profit Project Gutenberg).

As an open platform, EPUB poses a significant challenge to Amazon, which has followed an iTunes-like strategy of enclosing the Kindle and Kindle e-books within the walled-garden of a proprietary format and DRM–the better to set prices and control margins. Should the rest of the industry adopt EPUB–which Amazon has so-far shunned–Amazon’s current status as the 800-pound gorilla of the e-book market would be threatened. (Shameless plug: For more on Amazon’s strategy and the implications of the EPUB initiative, see my report, The Evolution of the E-book Marketat GigaOm Pro [subscription required].) Read More »

Sony's long-shot e-book strategy (and a shameless plug)

Sony formally unveiled two new e-book readers today, slightly ahead of schedule because details of the announcement began to leak on the web. The big news: one of the two models is priced at $199, a hundred bucks cheaper than the least-expensive Kindle (the fancier Sony device goes for $299). Clearly, Sony’s strategy is to position its Reader as a more mass-market friendly device by getting under the Kindle in price.

“They are not trying to beat Amazon at its own game—they are trying to redefine the terms of the game,” Forrester Research analyst Sarah Rotman Epps told the Wall Street Journal. “Where Amazon went bigger with the Kindle DX, they’re going smaller.”

sony readerFair enough, but trying to compete on price in the e-reader market is likely to prove a tough nut. First, Sony isn’t the only one trying to work the low-end side of the street. UK-based Interead introduced its Cool-er e-reader earlier this year is also playing the price game.

The bigger problem for Sony, though, is the cost of manufacturing e-book readers. It ain’t cheap.

As I detailed in a new report on the e-book market that was released yesterday byGigaOm Pro (subscription required), the essential technology in e-book readers is the electrophoretic electronic-paper display (EPD), which uses reflective electronic ink on a static background to produce the image, rather than electronic pixel elements on a backlit screen. That makes the experience of reading more like ordinary ink on paper and yields a huge savings in power consumption.

According to a tear-down analysis by iSuppli Corp., the EPD is by far the most expensive item in Amazon’s $177 bill-of-materials for its $299 Kindle (Amazon claims the BOM is much higher than $177), at $60, followed by the wireless broadband module at $40. Read More »

Pandora's memory hole

By now, even Amazon would acknowledge mishandling the remote deletion of George Orwell’s 1984 and Animal Farm from hundreds of unsuspecting Kindles last week in response to a dispute over the rights to the works in the U.S. Apart from the near criminal lack of irony required to send 1984 — of all books — down the memory hole, Amazon had never bothered to disclose in its terms of service that such a capability existed, or that it retained the right to use it without warning.

big-brotherBut as Glenn Fleishman points out in his excllent overview of the case for TidBITS, Amazon was trying to avoid any and all liability for distributing unauthorized copies of the two books, and thus took every step available to it to disassociate itself from the infringing copies — including un-distributing them — apparently without thinking through the PR implications of the move.

My question is: Why would Amazon want that capability in the first place?  The Media Wonk is not an attorney, so I may be wrong on any or all of these points (I would certainly welcome feedback from actual attorneys). But it seems to  me that Amazon is asking for a trouble on a number of possible fronts: Read More »