Was Netlfix’s change (met with discontent by investors and many subscribers) music to Amazon’s ears? If rumors of a pending Amazon tablet are true (and given the Asian manufacturing pipeline is not known for secrecy), then Netflix will face some major competitive challenges especially after a slowdown in subscribers in Q2 and an expected continuation of the same in Q3. With a device in place—especially one that may come in priced well below the iPad—Amazon will have content (among its recent deals is one with CBS), devices (Amazon Prime and VOD are both on Roku and other boxes) and a global audience/database of customers who are prime (pun intended) to buy more Amazon goodies. With profits from its other businesses (cloud, for example) Amazon could afford to sell its tablet at a loss to build marketshare for its tablet and content services.

Netflix is determined to retain its place as the number one Over the Top content service. There are some who believe Netflix’s decoupling of its streaming and DVD services was a doomsday plan to eventually shut down its DVD service which costs more to operate that its streaming business. Netlfix is determined to upgrade its content library signing deals with Miramax and Dreamworks. Netflix also has an enviable position in the key distribution endpoints—HDTVS. The service is bundled into internet-connected TV from Vizio, Samsung, Sony and others. That position may be somewhat precarious when competitors (or the manufacturers themselves) come up with similar streaming content services. Walmart (the leading retailer of TVs) is likely to be a power there with its Vudu service and its announcement of a new streaming service.

One area Netflix should target is original content. One of the hottest made-for-multiplatform content producers is Vuguru, producers of “Back on Topps” and “Prom Queen.” The company’s most recent show, “The Booth at the End” is available on Hulu and causing a stir among TV watchers. There’s plenty of new original content in the pipeline; Netlfix would be wise to focus a bit more on new shows looking for a home rather than somewhat stale material looking to squeeze a few more dollars out of a protracted viewing life cycle.

So, what new in the Froyo upgrade? There’s now an app marketplace with Android-based apps built for the Nook Color using a Nook SDK. Apps, which predominantly sell for $2.99 or less, run the gamut from games (Angry Birds) to Pandora internet radio. There is also email with seamless account setup for most popular POP-based email accounts (Yahoo, Hotmail, Gmail). The device now will support Flash which means it will play Flash video and audio. On the deficit side, it lacks Bluetooth, has tiny audio quality through small speakers in the back of the unit and while it plays Flash, a great deal of Web video is not optimized for mobile.. The experience can be hit and miss: on The New York Times site, video worked well; on Hulu, not so great.

The best things about the new and improved Nook Color are all reading related. After all, isn’t this “the reader’s tablet”? The Nook Color is a strong device for kids’ books with more than 350 kids’ digital picture books which take advantage of the new Froyo features such as video and embedded games. Nook Color V1.2 (as it’s called) does a nice job of handling the emerging category of enhanced books which incorporate video, audio and interactive social features. B&N says it has 225 (and counting) multimedia books including “Knitting for Dummies,” Raising a Child” and Elle: Workout Yoga starring Brooklyn Decker.
Nook Color V 1.2 might provide some help for the Nook Newsstand. I am among those who believe replica or enhanced versions of existing print pages not only don’t work on a tablet device, they look especially weak on a seven-inch screen. At launch, the upgraded device will have the Pulse “social magazine” app which hopefully will encourage newspaper and magazine publishers to build apps that look less like copes of their print products and more like Pulse and Flipboard.
Saving one of the better features for last, there’s a beta version of Nook Friends, a social application that shows great promise for sharing, recommending and buying books in one integrated site. The site also makes the “Lend Me” feature for sharing B&N titles much simpler. There are really good sites to share what you are reading and some where you can compare what you are reading to various parts of the social graph, but none that combines those two elements with the ability to buy a digital copy once you’ve discovered a new title.

It’s a bit hazy to gauge the impact of the Nook Color V1.2 in the e-book marketplace/e-reader landscape. While it might seem logical for Amazon or Kobo to build an app for the new Nook Color app marketplace (as they have for other marketplaces), none is in the offing, says B&N and neither Amazon nor Kobo has requested a developer’s kit . The same goes for digital magazine marketplaces such as Zinio. Will B&N keep them out of their marketplace? Better yet, can B&N keep them out of their marketplace?

So, bottom line, is the Nook Color a tablet? Well, it always was a tablet—a reader’s tablet—which is a device whose form factor and functions facilitate an enjoyable reading experience across books, newspapers and magazines. Now, it strengthens its position in that space and offers enough gaming, entertainment and productivity apps to keep consumers not so much from buying an iPad, but more from buying whatever Amazon or Sony might come up with for readers “who want more.”
The Nook Color with its new Froyo upgrade is not an iPad—not even close. But those who are looking for a great cross-media reading device with some nice new multimedia bells and whistles, it remains a go-to device.

1. Adobe unveiled the Digital Publishing Suite at MAX, its annual worldwide developer/industry conference. The product/service, built on Adobe Creative Suite and Adobe InDesign CS5, adds cross platform distribution for magazine publishers as well as a hosted service that facilitates a new work flow/collaboration scheme for resource-constrained publishers.
2. As reported in my blog post on Oct. 27: Barnes & Noble, the nation’s largest physical book retailer, is following up its November 2009 release of the Nook, an e-ink e-reader, with the NOOKcolor, a device that uses a 7-inch LCD/LED screen to display books, newspapers, magazines and a few additional services such as Pandora. The device is scheduled to be available on November 19th and will retail for $249. NOOKcolor uses WiFi to harvest content. It will be built on the Android 2.1 platform which means it will not be able to run Flash, but as the device’s OS is updated, Flash support is likely. The device will not have access to the Android Marketplace at launch. NOOKcolor will support Adobe’s DRM which means it’s likely to continue to allow download of e-books from public libraries.
3. Even before Windows 7 Phone has hit the mass market, Amazon has announced a Kindle App for the smart phone, giving it yet another platform for readers who purchase e-boos from Amazon.

I couple these formal announcements with two key take-aways from panels I moderated at MAX.

1. Magazines are still in their earliest days of understanding the digital opportunity as it relates to reading devices such as the iPad. Two fatal flaws that seem to be a common occurrence are taking published magazine content and created what I’d call “enhanced replicas.” Some are even proud that there’s minor incremental content cost by re-purposing print content for the tablet.
2. The more erudite book design world agrees that interactivity for the sake of interactivity is lost on most consumers as it only causes confusion. Publishers view interactivity as a “bright shiny object” (my words) and have yet to find its proper place in their respective internal hype cycles.
Piecing together these data points, consider the following:

1. Magazines may have a powerful trajectory ahead, but liftoff will not take place until they redefine the term periodical (why publish weekly when new efficiencies allows you to publish in real time if need be) as well as view the digital channel and device capability as a new publishing paradigm as opposed to a channel for somewhat dressed-up recycled. It will be a pity if publishers don’t view services such as Adobe’s hosted publishing suite as a mean to build collaborative efforts with new visionaries.
2. Magazines cannot get by much longer by ignoring or stating that the lack of advertising solutions for new digital channels is “uncharted.” It’s understandable that warring stakeholders in the device world stand in the way of scalable open solutions, but it’s time for publishers to demand open platforms to capitalize on bringing new, measurable ad experiences to the tablet and other similar devices.
3. Being a Libra gives me the excuse of looking at multiple sides of any issue. I now believe Amazon may not rush into the tablet market because it believes the digital magazine and newspaper opportunity isn’t close enough to build a hardware solution for an unproven market. As the world’s largest bookseller, why not continue to do what you do best.

The U.S. Department of Justice has given its approval to the Microsoft-Yahoo search deal which will add search results from Microsoft’s Bing to Yahoo search result pages. The deal also includes Yahoo’s ability to sell premium search advertising for both companies. Yahoo has indicated it intends to use the Bing results as an element in its search results pages but will have other elements that will clearly define the page as being unique to the Yahoo brand.

The deal is said to be a threat to Google, but it’s difficult to imagine the search giant losing a lot of sleep over the Microsoft-Yahoo alliance. Even the combined market share of Bing and Yahoo doesn’t come remotely close to Google’s 66% and growing market share (according to Comscore). This is not to say that Google won’t take notice if its share slips a point or two, but in many ways the battle lines between Google, Yahoo and Microsoft have shifted to include areas such as mobile and the media cloud business. Google has no intention of letting up on search innovation (Google Goggles, as an example) adding to its brand which has taken on global iconic status.

And it’s the brand that matters. Who here remembers the days when very few web portals had their own search technology? Prior to Yahoo’s purchase of Inktomi, the company used search results from third parties as did Microsoft. When proprietary IP began to take hold at Yahoo and Microsoft, the smart money says few consumers really knew the difference. If that’s true, the inclusion of Bing results on Yahoo search results pages will be relatively transparent to regular Yahoo users. The net result of the Bing-hoo deal could very well be lots of smoke but very little marketplace fire.

While Google may not be worried about Microsoft and Yahoo, the company has to be concerned over the ruling—or lack of ruling–by U.S. district Court Judge Denny Chin (the man who put Bernie Madoff away) over the Google Books settlement deal. The deal would allow Google to make orphaned books (books still in copyright but whose authors are not easily found) available without explicit consent from those authors. Google had reached a settlement with the Author’s Guild and American association of Publishers but governmental approval (both in the U.S. and European) has been a challenge. Given the massive number of filings in the case, Judge Chin said he needs more time to review the material before rendering a decision.

For Google, the window to be a major player in the e-publishing space will not stay open forever. The search giant would like nothing more to jump into the Apple-Amazon-Adobe e-book/device/platform fray and show its muscle. Perhaps it’s time for Google to be pragmatic and capitulate on some of its massive book scanning plans and launch its ambitious Google Edition plans. Scaling back, though, is not in Google’s DNA. Sometimes the best  outcome in a losing battle is to just walk away.

So why should you care? For starters, Living Stories amounts to a template or interface that fits nicely into a publisher’s content management system. With a move toward open source CMS, (i.e. Drupal) the area of third-party development of interactive templates that seamlessly work with existing workflow could be a godsend. It’s a safe bet that Google and other developers are able to take a more innovative approach to content presentation than either a newspaper or its CMS vendor. It’s also a safe bet that a CMS template designed by Google will be metadata friendly leading to easier SEO.

Bigger picture, think news on mobile devices. As Google rolls out its media cloud strategy (more on that in subsequent research reports), it’s easy to imagine it hosting a giant CMS in the cloud with templates built by eager developers. Logically, in a cloud world that is device agnostic, many of those templates will be well suited for mobile devices (no doubt developed with HTML 5).

What’s in it for Google? Well, there’s advertising as in each template comes complete with some ad avails easily populated with contextually aware ads. Also imagine Google charging for these CMS-ready templates, becoming the cloud app store for media companies.

All of this presupposes Google is able to convince newspapers that it’s a publisher’s friend and not a doer of evil to the news world. If Google’s media cloud plan works (and on paper, it looks frighteningly solid), the company is positioned well beyond the search space for the next several years

The deal is another chapter in the Yahoo-Microsoft-Google marketplace drama. Various permutations of deals between Yahoo! and Google and Yahoo! and Microsoft have been discussed since Microsoft made a public offer to acquire Yahoo! in 2008. This deal does not include any upfront cash to Yahoo! although, according to Yahoo!, this agreement will provide a benefit to annual GAAP operating income of approximately $500 million and capital expenditure savings of approximately $200 million. Yahoo! also estimates that this agreement will provide a benefit to annual operating cash flow of approximately $275 million.

For Microsoft, the deal is a positive indication that it’s investment in search and launch of Bing in June will pay off. While no solid marketshare numbers have surfaced, Microsoft has created positive momentum and it’s that traction that gave Yahoo! the indication it would need to invest heavily in search to remain competitive with Google and Microsoft. By making the pragmatic decision to cede its search technology to Microsoft, the company effects a potential $700 million swing and shows management is able to make tough decisions.

The fine print on the deal continues to be brought into greater relief, but some key questions have been raised:

Yahoo! has put a significant amount of time and energy into its open search strategy, namely BOSS and Search monkey. According to Microsoft, that platform will fall under its umbrella which leaves developers and publishers to question the future of both efforts as well as their desire to work with Microsoft.

While some contend regulatory issues may not be a major hurdle here, Microsoft is a lightning rod for attention from governing bodies in both the U.S. and Europe. Yahoo! and Microsoft represent the two largest consumer web portals in the world, and portals (as well as their toolbars) are starting points for consumer search queries.

How will Yahoo! sell its search deal to affiliates currently powered by Yahoo’s search engine once the deal in done?

How much time, effort and expense will Google put into throwing roadblocks that stall the deal? Google, the jilted groom in a proposed Yahoo! deal in 2008 has, according to reports, shown some anxiety of Microsoft’s newly found search momentum.

Publicly stating it will be going through a brand refresh in 2009, how will Yahoo! position itself with advertisers, consumers and Wall Street having relinquished one of its key product and services pillars.

What about the future of search-display convergence, which was cited as a key principle in Yahoo!’s rejection of earlier overtures from Microsoft? Search-display convergence, which implies the use of search data to better target display ads, is a key battleground for Google as it seeks to extend its advertising business into rich media and beyond.

One question that’s been raised that may be less important is whether the Microsoft-Yahoo! combination will significantly move needle on search share. Microsoft and Yahoo! together handle about 28% of the world’s searches, as compared with Google’s 65%. However, this question overlooks the strategic challenge that this deal represents. By dividing the search advertising market between premium buyers and self-service “long-tail” advertisers, Microsoft achieves a kind of pincer move around Google, challenging it directly on its home turf of self-service AdWords (it’s primary source of revenue) while empowering Yahoo! to block its expansion into the higher end of the market, the premium advertisers, where search and display convergence (along with mobile and social and online video and next-generation television) are important. In other words, this sharpens the distinction between Microsoft’s “technology company” role and Yahoo!’s “media company” role, making it harder for Google to play both against their alliance.

For advertisers, such escalating competition spells opportunity. AdWords users may now find AdCenter to be a more competitive option, especially in categories where Microsoft has focused Bing’s development like travel and retail, while premium brands and agencies may now find Yahoo! to be more capable of supporting brand campaigns with integrated search and search-related targeting capabilities. The fly in that ointment remains the privacy issues that will impede the flow of search data between the two companies. Watch for this issue to escalate in the inevitable challenge from Google.

Stay tuned.

Observers believe there will be additional efforts to delay the transition with a new bill making its way to the legislature containing a number of amendments.