Allen Weiner

Rumors being what they are, much of what Steve Jobs announced at the Ipad launch event didn’t come as a surprise to the overload crowd at the Yerba Buena Center in San Francisco. The iPad is a tweener that fits nicely between an iPhone/iTouch and netbook computer. With a 9.7-inch screen weighing in at 1.5 pounds, sporting battery life claims of 10 hours, the iPad could be ideal as a prototypical interactive content consumption device…but a few unanswered questions challenge its viability for media companies.

For book publishers, some of whom were waiting for signs of wide-scale acceptance of the universal e-publishing standard, ePub, the iPad came through…sort of. Although the device supports ePub, Apple is believed to be planning to implement its own DRM (Fairplay) to secure the ePub files, which could presumably then be distributed only through iTunes (that is, iBooks). If that is the case, Apple’s book efforts puts it in the same category as Amazon which utilizes a proprietary DRM that ties Kindle books Amazon.com. Hence any e-book purchased from Barnes & Noble, Sony or any of the countless e-book retailers will not work on the iPad. In addition, e-books from libraries, which are powered by Overdrive who uses Adobe’s DRM, also would not work on the iPad.

For both newspapers and magazines, the iPad remains a mystery. The demo of The New York Times, which was created in a compressed timeframe, is not much indication of what potential newspapers have on the iPad. Those are questions that can only be answered by developers who are busily downloading the new SDK and attempting to devise compelling paid or ad-supported content applications. The initial focus is on paid applications (and again, there is no evidence that consumers will pay for digital newspaper content) as there was no mention of advertising support from Apple, which many were expecting following Apple’s recent acquisition of Quattro, a mobile ad network. The same goes for magazine publishers who now have the color device they have asked for but will need to experiment with varied content applications and business models, while scrambling to source enough video to do justice to consumer expectations raised in demos.

The iPad launch will create ripples throughout the publishing industry: supply chain providers who digitize and format content as well as develop applications will thrive; standalone e-reader device manufacturers will have to re-price their devices now knowing that the WiFi-only 16G iPad can function as a high-end e-reader. Plastic Logic’s Que, the Alex and Entourage Edge may be forced to revisit their announced retail prices.

For video content such as TV and movies, a similar catch was apparent. While the iPad can clearly render beautiful hi-def full screen video, its lack of support for Flash was evident in the tiny blue cubes that appeared on web pages during the demos. This means that TV-friendly web distribution platforms like Hulu are unlikely to work on the iPad. (A Hulu app for the iPhone/Touch has been rumored for some time but has yet to materialize.) Here, too, Apple appears to have reserved the distribution of TV and movies for its device for iTunes, although YouTube remains a wildcard if it should release a sound model for content owners to monetize through rentals or sell-through. Also unexplored was the possible connection between the iPad and Apple TV, which have clearly enticing possibilities.

Then there’s the mysterious absence of any mention or demonstration of the device’s advertising potential, or Apple’s apparent newfound interest in participating in the business. With iTunes emerging as the sole channel for monetizing content of any kind on the iPad, advertising remains a critical source of revenue to publishers and video providers alike, and one on which Apple’s chief emerging rival, Google, is laser-focused with innovations like Google Goggles and QR barcodes readable by Android devices, and distributed to 100,000 businesses. Of course, these ideas require a camera, which the iPad lacks.

Still, Apple did not fail to push the envelope and generate enthusiasm for its latest creation. Now, with Apple setting the standard for content consumption devices, other manufacturers—most notably PC OEMs, will begin to launch their tablets and will look to Android and possibly Windows as device platform. In particular, Android will thrive with Google deploying its Google Editions and YouTube strategies to offer cloud-based delivery of all content to the universe of Android devices, with a well-proven advertising component.

And let’s not leave communications service providers out of the mix. Whether Apple’s choice of AT&T is one consumers find popular, it leaves Verizon and Sprint as ready partners for HP, Dell, and others whose tablets are in queue.

All that said, content companies of all kinds need to examine the iPad and the new version of the iPhone OS with a few things in mind. First, Steve Jobs is without peer in his ability to provide a vision of the future through the medium of the product he happens to be introducing at the time. In the case of the iPad, he described the magic of having the “…Internet in your hand.” True that, but for a lot of us, that came with the iPhone, the Touch and the AppStore. And as revolutionary as those products have proven themselves to be, the real magic has come from the integration of all those elements into a set of compelling content experiences.  Second, the iPad extends by one the form factors those kinds of experiences can be delivered through. Third, and this is really important, we’re still talking about the “Internet” as defined by Apple. The potential for game-changing killer apps to come for the iPad is not in question.  And the potential power of content experiences Apple can enable is not in question.  But the handle on that potential is being controlled by one entity.

In that regard, we remain puzzled at the continued estrangement between the iPhone OS-based product line – iPhone, Touch and now iPad – and Adobe Flash. Do the power-management issues cited by Apple as reasons for the iPhone’s persistent lack of Flash support? We think lack of Flash support still causes many, many media and content companies, and their developers, a great deal of strategic angst.

The iPad is not the iPod for publishing. Music was a ready and waiting asset that needed little “post-production” work to be suited for a portable device, and, when the iPod arrived, the industry had already been badly disrupted. Hence the iTunes store was quickly filled with both quantity and quality. But other forms of content are not so enthusiastic to commit to a closed channel platform that controls both device and distribution, and the next 60 days will be crucial as Apple hopes to load its electronic storefront with a selection of content that will encourage consumers beyond the “fanboy” crowd to be iPad lovers.

(This post was co-authored by Mike McGuire and Andrew Frank)

Good news for Yahoo watchers: the company’s search-advertising and display-advertising businesses each improved from the company’s third quarter, but were down compared with the fourth quarter of 2008. Yahoo’s search-ad revenue declined 15% from a year ago, compared with a 19% drop in the third quarter. Its display-advertising revenue fell 1% from a year ago, an improvement from the 8% drop in its third quarter. Any signs of an up tick—a Q3 to Q4 bump—is welcome for the iconic brand looking to re-invent itself under Carol Bartz’s steady hand. Bartz has a year under her belt and now has a nice gold star to put on her resume, although Yahoo’s Q4 success says more about the overall economy than any explicit effort from the company.

Far more interesting, and certainly more bloggable, is the topic of the pending Yahoo shopping spree. The company has in excess of four billion in cash and securities and knows it is well advised to spend some of its war chest to bolster some weaker areas as well as move in new directions.

Alas, the kid in the candy store. Bartz said the focus in acquisitions will be in three key areas: small to medium sized companies in which Yahoo buys technology and talent; companies with assets in the content and community space and companies that add to or strengthen Yahoo’s geographic footprint. There certainly will be a show of hands of companies looking to be acquired, but here are some thoughts on judicious sending of that four billion.

Mobile: Despite its claims, Yahoo lags in mobile. Yes, its content is available on a variety of Smartphones, but that’s not something to add to the brag book. Yahoo needs to get far closer to the device/hardware manufacturers where it offers the same sort of platform (Connected TV) it offers TV manufacturers. On this front, it may be too little too late, so caution is urged.

Content: Yahoo is a leader is many content verticals, but it could learn a lesson from AOL (Yes, I said AOL) in exploring some larger niche areas. Yahoo should acquire the assets of content providers who specialize in serving the African-American, Hispanic and Gay/Lesbian communities. Yahoo may also want to consider an acquisition of a virtual studio similar to AOL’s recent acquisition of StudioNow. Such a buy would give Yahoo content czar Jimmy Pitaro the infrastructure he needs to produce more monetizable video.

Miscellaneous: Note to Hilary Schneider: I have no good name for this, but I would love to see Yahoo really step up its game in working with newspaper publishers. The consortium is a nice start but the effort is sorely lacking in firepower. Why not take on the role of content management for newspapers acting as their “cloud,” hence offloading some of the costly IT and distribution costs, allowing publishers to focus on editorial products. The window to excel in this space is limited; Google has this one figured out with Google Editions but may lack the goodwill to convince newspapers of its good intentions. Yahoo, on the other hand, already has demonstrated its desire to assist newspaper thus giving it a leg up on the competition.

Well, far be it for me to tell someone how to spend his money, but a few good buys and Yahoo may be less reliant on external forces to succeed and far more self reliant.

Apparently, as Newsday found out, only 35 people signed up to pay $5 a week for full access to Newsday.com. So, if Apple and other tableteers are not prepared to offer ad platforms for their content marketplaces, we could hear a loud thud in the digital publishing space.

I must admit, as a former digital newspaper executive, I was caught up in the frenzy and promise that forthcoming tablet devices, from Apple, HP, etc.. would help print publishers and other “old media” sorts get off life support and into the black. While this is a topic we will examine in greater detail in forthcoming reports, let me offer a few points to consider before jumping on the bandwagon.

1. What works for The New York Times does not necessarily work for the vast majority of metro daily newspapers. The Times, along with the FT, USA Today and Wall Street Journal (maybe The Washington Post) has a national, and in some cases, an international readership. Even in slowdown mode, these newspapers have R&D staffs and have vendors waiting in line to assist their new media efforts. Adobe, for example, was instrumental in moving The Times from a Microsoft-based desktop news reader to an Air-based reader. Smaller newspapers do not have the resources to take on the development required to create “killer apps” for new devices. In addition, larger audience reach allows a national/international to approach a larger total market of device owners while a newspaper in Dallas can realistically only target tablet owners in its own market.
2. People may not pay for newspaper apps. Looking at the top 10 paid apps on the iTunes store shows games and entertainment but nothing resembling content. That said, few if any newspapers charge for their Smartphone apps Even if developers devise compelling apps for newspapers on tablets, there is still no evidence consumers will pay. If the apps merely take what exists today for Smartphone (which is little more than mobile-screen versions of Web content), newspapers will fail to seize this opportunity
3. Consumers will not pay for a device, apps and a data fee. The latest word points to Verizon partnering with Apple for its tablet and we’re likely to see other wireless carriers partner with other tablet manufacturers. Unlike books, which IMHO don’t require wireless access, newspapers require ongoing connectivity to refresh content. Given the fact that WiFi coverage is not persistent, 3G access is needed to fully enable newspaper experiences. With carrier subsidies, consumers will have to pay wireless data plans which, in some cases, may either duplicate service plans or add another provider to a consumer’s monthly mix. It’s also doubtful I can use my wireless 3G adapter with some of the proposed tablets, making the wireless scenarios not very consumer friendly.

The list goes on, but let’s wait until hype turns into reality to see whether the opportunity for newspapers is true riches or fool’s gold.

As YouTube evolves from its roots as the mega community for all video comers to a profitable business, the company is announcing a video rental program which launches in conjunction with the Sundance Film Festival (January 21-31, 2010). Against the backdrop of Sundance, YouTube rentals will launch with five Sundance films—two from last year’s competition (The Cove, Children of Invention) and three from this year’s “Next “program. Film pricing and rental terms are to be established by the filmmaker with the filmmaker retaining all distribution rights. Films will be $3.99 payable through Google Checkout; four of the films will have a 48-hour rental window and one will have a 24-hour window. All films, from Sundance and future partners/content creators, will be streamed to a consumer’s browser and will initially be secured using Adobe RTMPe to encrypt streams in transit. HD content will not be featured at launch but is expected to be part of the service.

Film rentals are a natural progression for YouTube and hardly a major surprise, given the number of competitors that range from Netflix to Apple TV, and clearly not part of a first-mover strategy. The areas of filmmaker control over pricing, rights and rental windows is a market differentiator but is it enough to evoke more than a tremor in the consumer media marketplace?

The answer requires a broader view of Google’s media cloud strategy. Simply put, it is Google’s intention to become the leading distributor of consumer-oriented content—books, newspapers, magazines TV, movies and (perhaps) music. All content will be stored in Google’s cloud and distributed—primarily through a browser interface—to any device associated to a individual consumer ranging from Smartphone to tablet to televisions via a set top box. Google will provide the tools for varied monetization schemes in a revenue sharing model as well as seamless integration into the leading search engine.

The key consumer-facing components of this cloud strategy are YouTube (all things TV, film and video) and Google Editions (all things print). As YouTube rentals unfold, you will be able to see a set of attributes that show elements of this cloud strategy: the rental service will likely expand to include distribution to mobile platforms and OTT TV platforms on which YouTube already have a presence (i.e. Apple TV, Boxee, Wii, PS3) with such features as enhanced search and discovery via closed captioning/auto speech recognition.

Google’s media strategy is geared to take dead aim at Apple. Both companies (along, perhaps with Amazon) will likely become the future archetypes for successful media titans with an emphasis on friction-free, content agnostic, multiplatform monetization. At this point, it’s an interesting blueprint; the devil will be in the details.

Amazon has plans to change its royalty schedule for publishers beginning this summer, doing a 180 on its 70-30 split. There are rules a’plenty, but it’s a clear pre-emptive move in the face of Apple’s possible launch of a tablet-based device. Apple is said to be willing to offer publishers a split that more resembles a 70-30 split than the original Amazon model. Amazon’s next move? Maybe some change in supporting Adobe DRM? Anything is possible.

Let’s get this on the table: even with talk of a deal between Harper Collins and Apple, the Apple Tablet will not be about e-books. Well, at least not the sorts of e-books we’ve seen on the Kindle, Nook and Sony Readers. I am now testing Sony’s Daily Edition and its reading experience is excellent, and I’d be hard pressed to imagine Apple offering something better for popular fiction titles. Apple’s sights have to be on three key areas: non-fiction, newspapers and magazines.

Non-fiction offers myriad options in terms of “value-added” bonus content. A cookbook that includes cooking videos, a textbook that showcases lectures from the author, a travel guide with daily updates on local events…that’s a revenue path publishers hope the Apple Tablet (as well as tablets from others) takes them. Tablets will be about displaying newspapers that look less like static RSS feeds (as we see on the current crop of single-purpose e-readers) and more like interactive, non-linear information hubs. Magazines don’t look like shadowy black and white ghosts of their physical brands and take advantage of the resplendent graphics, images and video.

It sounds like the alleged launch of Apple’s tablet will usher in a renaissance in the publishing world, but that’s overly optimistic thinking. Apple can offer the device, the platform and store for publishers to sell their wares but because it’s uncharted territory, Apple cannot guide publishers and developers with how-tos in the fine art of compelling publishing applications. Having seen many beta versions of publishing applications, I assure you there will be much trial and error before we see killer apps emerge for books, newspapers and magazines.

The key window which will determine whether the Apple Tablet takes off as a savior to publishers will be in the period between the expected announcement on January 27 and the product launch. That will be the time in which publishers and developers race to build apps that maintain brand and product integrity yet offer consumers content experiences worth buying…in bulk.

Based on the number of pre-event press calls and steady stream of press releases, the E in CES 2010 stands for e-reading. Two days before I land in Las Vegas, I envision devices in every form factor each proclaiming to be the best thing to hit publishing since the AP Stylebook. I have now lost count: Alex (Spring Design), Que (Plastic Logic), enTourage eDGe and now something called the Skiff are all set to make their debut at CES. In addition, other devices such as smartphone, netbooks, smartbooks and other products that have a display and processor that defy categorization (at least at this point) will be touted as devices on which consumers can read books, newspapers and magazines.

For those of you whose New Year’s resolution was to forget 2009, I must reiterate a research position stated late last year: devices by themselves just don’t matter. Consumers will buy content and expect to consume that content across a set of devices based on usage scenarios. Sure I will have a ball pushing buttons and asking questions to the device folk this week; what will dictate winners from losers is what standards the device supports, what publishers it is working with to build enhanced content and what formats will be used on these devices to drive new content experiences. Having played with the Kindle, Nook and a few others, reading a book on a device is table stakes; show me what you have that will delight consumers and encourage publishers (and leading authors such as John Grisham) to go full bore into e-publishing.

I hope to see device companies and their partners (service providers, software publishers, developers) go far beyond book experiences to showcasing newspaper and magazine content on varied devices. To date, I have yet to see an e-reader implementation of such content that looks better than the glorified RSS feed popularized by Amazon’s Kindle.

Lastly, it’s expected that much of the e-reading talk will be about a company whose product isn’t even expected to be at CES—the Apple Tablet. Based on the “where there’s smoke” principles of journalism, a device from Apple is imminent (loosely defined) and may be among the first to offer a viable ecosystem (developer community, iPhone OS, device) that will present e-reading experiences to consumers that are based, at least in theory, on Apple’s iTunes LP (Extras) enhanced music downloads.

Stay tuned for on location updates on e-readers and other news from CES.

I am intrigued by Amazon’s latest news in which it announced that electronic versions of Stephen Covey’s bestselling books, “The 7 Habits of Highly Effective People” and “Principle-Centered Leadership,” will be available exclusively in the Amazon Kindle Store for $7.99. In addition, Amazon said “Kindle customers can expect to see more books by Covey available for download exclusively in the Kindle Store in the future, including the soon-to-be-released “Great Work, Great Career.””

My natural inclination is to point out that one highly effective habit to ensure a successful future in the e-reading marketplace is to support open standards. Given only one e-reader supports Amazon’s e-distribution DRM, Covey’s move seems downright bad business. Publishers are steadfast in believing that multiple, competing e-book DRMs will seriously stunt the e-book opportunity. The vast majority of the evolving digital publishing ecosystem is rallying behind ePub with Amazon the lone wolf in the proprietary wilderness.

Beyond the “VHS-Betamax battle” revisited, exclusive deals send out a bad message to the majority of publishers who are not on The New York Times bestseller list. In a recent interview, John Grisham stated that one reason he’s not making his content available for e-books is to wait for the market to stabilize and settle on standards. What made his remarks more compelling was that Grisham’s motivation is to protect all authors, not just the superstars whose books pre-sell in the millions. An exclusive distribution deal with Amazon only gives the Seattle-based company more power to control revenue splits with publishers and authors as well as ultimately control pricing to consumers.

Digging a little deeper in the announcement, Amazon may also be attempting to take some of the wind out of Plastic Logic’s planned CES unveiling of its new e-reader, the Que. Plastic Logic’s e-reader is larger in size and aimed at business users similar to the Kindle DX. Business books on business-oriented e-readers? One can only wonder if Amazon will drag out some old Zig Ziglar titles for exclusive Kindle consumption.

According to this report from Reuters, Yahoo is open to selling HotJobs fir the right price.

If this report is true, then I suspect Yahoo’s newspaper consortium will lose much of its momentum if not outright come to an end; there are more than 600 newspapers in the consortium and HotJobs is one of the key services Yahoo provides its partners. Based on Microsoft/Bing’s desire to work with newspapers (well, at least News Corp.) and Google’s recent efforts to attract newspaper publishers (Living Stories, search blocking), two companies are eager to take over what Yahoo started.