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We will not publish the weeks ending July 2nd and July 9th.

This is our "summer solstice"
- when we turn the reporters out of their cages for fun, frolic and family.
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Many an industry analyst has bemoaned the fact that the music industry is trying to close the barn door after the horse has bolted when it comes to record labels' attempts to use various digital rights management (DRM) schemes to protect music on a CD. They point out that as long as the industry's main vehicles for delivering products to its customers are CDs, radio and downloads from the Net, existing technology will permit any song to be captured in a copyable, transferable format. Additionally, the technology for capturing and copying music off any of the most popular media is now very cheap - complete PCs with CD recorders go for a couple of hundred bucks and are getting cheaper. High-speed Internet connections are spreading and could be in every home with a PC within a few years. The number of homes around the world that are connected to the Net at broadband speed is increasing so fast that it's nearly a full-time job to keep count.

At the heart of the problem is the PC itself. Inherent in its design is the ability to store and facilitate the easy copying of digital files. The ability to capture and copy digital content is so deeply embedded in a PC that Microsoft and Intel have, as an alternative, been talking up and spending lots of money to develop a so-called "trusted computer" that would make it impossible to copy DRM'd content. "Trusted" in Microsoft and Intel terms does not necessarily mean that the consumers could "trust" their PCs to be free of spam, viruses and the software bugs that permit hackers to access confidential data and mess up the PC. Rather, their "trusted" means that content providers - movie, music and TV production companies - could trust that the PC would not permit users to illegally play, copy or forward their content. The problem with such PCs would be the consumers' reluctance to give up much of what they buy PCs for. IBM at one point had developed a "trusted computing platform" chip that it planned to put on the PC's motherboard in order to manage the flow of encrypted data within companies. It failed to generate any interest.

The question for the content and the computing industries is whether a band-aid can be developed for the many holes in the security of current PCs or whether it's better to develop a whole new PC platform that has better security designed in from day one. Such a new platform would be highly controversial, enormously costly for corporations and consumers plus take years, perhaps decades, to have much of an effect. Most worrisome to Microsoft, perhaps, is that such an undertaking could be just the boost that would make Linux a primary force in desktop-laptop computing.

So, what's to be done? Up to the plate steps VeriTouch, an eight-year-old company out of New York that's been operating under the radar. It's developing a delivery system and hardware that will bypass the PC completely when delivering entertainment content to consumers.

VeriTouch is a biometric security and encryption firm that has contracted with Swedish product designer Thinking Materials, which specializes in portable devices and includes Nokia as a client. The two have engineered a handheld music, video and videogame player that uses what VeriTouch calls "a revolutionary, patented" method for using a person's fingerprints to access encrypted content that is delivered wirelessly.

iVue is a handheld media player that checks a person's fingerprint before permitting encrypted content to be played. It's a small Linux-based unit with a 120GB hard disk and a 1200 x 800 resolution screen that also works as a Tri-Band GSM/GPRS mobile phone. It has wireless peripherals including a Bluetooth stereo headset that comes standard with the unit. VeriTouch is projecting release of the iVue by year-end but has yet to set a retail price. Based on the components needed for such a device, the guess here is that it will be in the $600 to $800 range. The price could be more or less depending on manufacturing volumes and more importantly whether a content provider or two might subsidize the unit in order to make it more saleable - a not infrequent practice based on the "razor and blades" marketing scheme.
Look Ma, No PC!
During a one-time registration process, iVue scans a new user's fingerprint and uses the fingerprint data to create an encrypted key that is unique to the user. The device uses its integrated browser and a wireless connection to a Wi-Fi hotspot, a Bluetooth short-haul network or the mobile phone industry's GSM/GPRS network to access a content site to download some entertainment. What the unit does not do is as important as what it does do. It doesn't connect to a PC or use a PC to connect to the Internet. By not doing so, the first and biggest loophole in today's content distribution method is avoided. The user doesn't have to use his fingerprint each time he buys content. When the device is first "enrolled" at a content provider's site, it sends the encrypted key to the content owner's download service. After that, the content owner's computer verifies the encrypted key each time the user makes a connection.

After the content has been downloaded, the user again scans his fingerprint into iVue and indicates which of the downloaded content he wants to activate for playback, including activating multiple content files simultaneously. Once activated on that iVue, any of the content can be played by anyone who has access to that unit - his fingerprints are not required. So after Mom watches a movie, she can hand the iVue to Dad for him to watch. If the whole family wants to watch at the same time - something that happens very infrequently these days - the iVue can connect to the TV for display on a big screen.

Gary Brant, VeriTouch CEO likens the iVue to a portable, wireless digital video recorder excepting that the user could conceivably have access to much more content at any one time than any TiVo-like device. Because of the security for content makers, Brant expects to have first-release entertainment never before made available to consumers in their homes.
Wireless All The Way
Content downloaded to the iVue can be played on conventional gear in the home, office or vehicle such as TVs, stereos and other A/V equipment without the content being in danger of losing its encryption. iVue broadcasts encrypted data wirelessly to a Bluetooth receiver that connects to one of the TV or stereo's inputs. VeriTouch claims, however, that the iVue can prevent an attached CD or DVD recorder from making a copy of the video as it is played by encrypting the TV or stereo output.

The iVue unit has no Ethernet, USB, audio or RCA-type output connector that would permit content to be copied or transferred to another iVue or to a PC. With no input or output connector, there is no way to duplicate the iVue's encrypted content to a PC or recorder. Thus, there is no way to make content available on a P2P network. The unit doesn't have any slots for removable storage either. VeriTouch emphasizes that no physical disk or media of any kind is needed for the iVue. All content is delivered to the player through wireless technologies.

"These days, the key to a successful product is the right combination of looks and function. With iVue, I believe we have created a great platform for how the next generation of media players will work, mixed with a fashion sense that is really top of the line," said Christian Bartholdsson, CEO of Thinking Materials, which did the hardware design of iVue.

Users can also secure their own content, say a company that has secret marketing programs, pictures of future product designs or confidential engineering documents that it wants to make available on a limited and highly secure basis.

"In practical terms, VeriTouch's breakthrough in anti-piracy technology means that no content that is delivered to a customer can be copied, shared or otherwise distributed because each file is uniquely locked by the customer's live fingerprint scan," says the company. In effect, what VeriTouch is developing is a total end-to-end solution for delivering copyrighted content in a way that prevents illegal copying and unauthorized redistribution.

And what happens if the hard disk goes haywire, as still happens all too frequently? Even sealed TiVos have been known to blow the hard disk, losing all the user's recorded TV shows and movies with no way of restoring them. Since a user cannot copy the iVue's hard disk's content to any other device, a wipeout would leave a user out of a lot of money, not to mention all that time spent collecting a library of entertainment. VeriTouch says that every content provider would keep a history of everything the owner has downloaded. That would enable a quick, one hopes, restoration of the user's library.

The content provider never gets access to the user's fingerprint, only to the encrypted key that results from the scanned print. VeriTouch designed the system so that the encryption key is not able to be "reverse-engineered" in order to discover the identity of its owner, preserving customers' privacy and preventing identity theft. That means that the iVue owner's identification is protected from rattling around the Internet.

VeriTouch says it has demonstrated the unit's biometric security to the RIAA and the MPAA and is working with several record labels. It also says that it's negotiating with Samsung, one of the world's largest CE makers, about producing its own version of iVue.

VeriTouch sees its business plan as being the content delivery vehicle - the depository that links all the content and encryption keys. It wants to license the handheld hardware and software technology to as many product manufacturers as possible in order to put the product in as many hands as possible. It hopes that there will be many different versions of iVue including units that, like iPods, only play music and that would sell for less without an LCD screen. The company's goal is to make iVue hardware as "pervasive" as possible and available from as many hardware makers as it can.
Some Questions
The biggest questions facing VeriTouch start with whether consumers will give up their growing addiction to the PC as an entertainment device. Traditionally, the PC furnishes the technology to copy and distribute content freely on CDs, via e-mail, instant messaging and chat rooms or on P2P networks. It is also uncertain that a large number of consumers - a critical mass - will be attracted to one or even two or three versions of iVue. In a world where every consumer device comes in seemingly hundreds of models, one or two versions of iVue probably won't do.

Of course, consumers aren't going to buy an iVue if it doesn't provide access to the entertainment content that appeals to them - and at attractive prices. It's a chicken or egg quandary - enough consumers attracted by enough content - how much is enough? One of the two - content owner or consumer - will have to take a leap of blind faith. What is certain is that the leap-takers won't be consumers who already have access to several entertainment distribution networks - PCs with a broadband connection and DVR-equipped TVs connected to a cable or satellite TV network. The question then for VeriTouch is whether it can convince the content owners to jump. Content owners are increasingly desperate to protect their increasingly valuable and expensive-to-produce content - movies, music and video games.

Brant says that VeriTouch's goal is two-fold: get the artist paid and put the Kazaa P2P network out of business. That statement will appeal to the entertainment industry.
Three Downloading Methods
iVue has three methods of downloading from a content provider; all are wireless and all broadcast encrypted data:

- via a public Wi-Fi hotspot,
- via a local Bluetooth short-range network, or
- via one of the two types of cell phone networks. It works only over the GSM/GPRS network that AT&T Mobile, T-Mobile and Cingular use in the US and is widely used throughout Europe. If the user has access to a GPRS data network, the download speed for content is approximately 40 Kbps-60 Kbps. It won't work over a CDMA cell phone network such as the one that Verizon Wireless and Sprint PCS use.

VeriTouch supplies security authentication systems up to Homeland Defense Department standards in partnership with an Israeli defense contractor.

Note: The Trusted Computing Group (TCG) is an alliance of Microsoft, Intel, IBM, HP and AMD that promotes a standard for a "more secure" PC. PCs built according to their specification will be "trustworthier" from the point of view of software vendors and the content industry, but could prove to be less trustworthy from the consumer viewpoint. The TCG specification, as explained by the group's members, seems to transfer control of the PC from the user to the software owner or the owner of the content that the user wants to see, hear or play. The TCG project is known by a number of names. "Trusted computing" was the original one, and is still used by IBM; Microsoft calls it "trustworthy computing." Other names that are used are TCPA (TCG's name before it incorporated), Palladium (an old Microsoft name) and NGSCB (the new Microsoft name). Intel has started calling it "safer computing."   Back to Headlines

Dell called a telephone press conference this week to talk about its consumer operations and its plans to sell products for the digital media home. Not much new was said - mostly a recap of current products and vague talk about future plans. Dell is quick to talk about market share figures when it comes to PCs - both desktop and laptop - but refuses to talk about numbers when it come to its handheld Dell DJ media player or its music service, both of which compete, not so successfully, with Apple products.

The company has the financial and management strength to do in digital media what it has done in consumer PCs. Its US consumer operation is a $1.7 billion business that recently reported 18% year-over-year growth. Dell is especially proud of having increased its US consumer market share for PCs by more than 20 points over the last three years. It also claims to have the highest customer retention rate in the PC industry - a dig at HP and Gateway. Digital media PCs, mostly based on Microsoft's Windows Media Center Edition software, are pricey - in the $1,000 to $2,000 range, so Dell is quick to point out that it has a 45% market share in the US for consumer PCs that sell for over a thousand bucks.

Dell's digital media products today include:
- Digital media PCs - Primary competition is HP, which was the first to introduce a PC based on Windows Media Center Edition, and Gateway.
- Dell DJ music player - Has the advantage of supporting more music file formats than the iPod but has the disadvantage of competing with the Apple marketing behemoth that has made the iPod the category leader in both actual sales and "I want one" appeal.
- Dell Jukebox online music service - It's powered by Musicmatch in much the same way that OD2 powers most of the non-American music services in Europe, unfortunately with about the same results as OD2. It has minimal sales - Dell won't talk about its market share, of course - minimal traffic and no buzz - that necessary ingredient for attracting music lovers. Fortunately, with Musicmatch providing most of the service, Dell has minimal costs.
- Dell LCD TVs - Dell, which says it will enter the plasma TV market in the next few months, claims that its LCD TVs are selling well enough. No market share numbers were given, however. The company says there are plenty of consumers who are savvy enough about which TV features to buy without having to check them out in a retail store and that it's selling superior TVs with a much lower retail price. For example, Dell says that at $2,999 its 30-inch LCD TV is a thousand dollars less than the competition.

Advising patience, Dell says that its digital media products will succeed just as surely as its printer business. The company claims that, despite being a recent entrant, it has already garnered a 19% market share in the "all-in-one" printer/fax/copier market, the fastest growing printer segment - much to HP and Epson's chagrin.
CE Makers Are Vulnerable in Digital Media Space
Tooting its own horn to build up interest in its non-PC consumer products, Dell lists several reasons why it believes that traditional CE makers are vulnerable in the digital media market:
- Digital media products are more complex than traditional CE gear. Dell thinks it can simplify the products and their buying plus offer better customer support than the CE companies.
- Consumers are forced to pay too much for CE gear because of the costly retail stores that need high margins to pay for large inventories and pricey floor space in expensive shopping malls and other prime locations.
- Consumers often end up with incompatible products from the CE makers who don't have a unifying software platform such as Windows that runs on all their products.
- Incompatibility caused by proprietary formats that the CE industry and Apple, especially Apple, use instead of a standard platform such as Microsoft's Windows and Windows Media Player. Dell says that competitors, no doubt referring specifically to Apple, can only play music on their own brand of hardware.
- Traditional CE makers are inefficient in their production chain, including purchasing, outsourcing or the lack thereof, assembly and just-in-time delivery that reduces inventory costs.
The Dell Advantages
Dell eliminates or, in some cases drastically reduces, a number costly items that traditional CE makers and their retailers carry as an added burden:
- The markup that storefront retailers need to pay for pricey real estate and their own management infrastructure. Dell, and others, maintain that the Internet (clicks) is the most efficient distribution channel and can eliminate 20%-40% of the cost of a product that is sold through traditional outlets (bricks). Clicks over bricks, backed by a user friendly Web site, simplified yet dynamic pricing, trained customer sales reps and an excellent CRM computer system, are the keys to the success of the "Dell Direct" retailing method.
- Expensive manufacturing facilities. Dell assembles pre-manufactured components and receives complete products that are made mostly in Asia - and increasingly in China. Even Mexico with its low-cost labor is losing manufacturing jobs to China's even lower cost and surprisingly well-trained labor force. Companies like Dell and Wal-Mart, that are driven to lower product costs, have spurred much of China's recent growth.
- Dell also keeps close tabs on its competitors' strengths and weaknesses. For example, at this week's press conference Dell, without mentioning the words Apple or iPod, hammered at the iPod's notoriously poor battery system with its short life, the seemingly shorter and shorter use period as the battery ages and the inability of consumers to install a replacement battery. Dell is no doubt well aware that the battery is the iPod's biggest Achilles heel because it stressed that its DJ player has double the battery life - 20 hours between charges. Dell also emphasized that its DJ plays more industry standard file formats than its leading competitor (Apple) and promised to offer improved integration - no doubt to match the iTunes-iPod integration. The company said that it's not concerned about the slow start to its music business because consumers will soon tire of a lack of choice of music players (iTunes only works with iPod), higher prices (iPods are at the top of the price range) and the fact that a non-Windows company (Apple) cannot fully integrate its online music service and music player with Windows.

Dell also pointed out what it perceives as other advantages that it has over Apple in the digital music field:

- Dell is a more accessible company.
- Dell products are easier to buy.
- It is easier to get product support from Dell.
- Dell can uniquely untangle the complexities of the digital home in ways that consumers can understand.
Four Strategic Assets
Dell also has some inherent advantage over Apple and the CE makers that will help it in the digital media wars:
- Allies - Dell has the PC industry's two largest giants, Intel and Microsoft, on its side. Both companies, which have enormous financial and technological resources, would benefit by Apple's failures in the digital media business and consequently have every incentive to help Dell and the other "Wintel" PC makers succeed in the digital media industry.
- The Wal-Mart effect - Dell has the objective and the know-how to be, like Wal-Mart, the company that can wring costs out of products and their retail marketing and distribution. The Wal-Mart motto "We Sell for Less" could easily be Dell's as well. HP, Dell's hated PC rival, has had a hard time keeping up with (or is it "down with"?) Dell's prices.
- Customer support and service - Most Dell customers will attest to the company's penchant for taking care of the people who buy from Dell. It answers its phones promptly, puts trained people on the call, keeps records, dispatches overnight any needed replacement parts and sends out a trained technician (albeit from third-party service companies) when needed. It's a mystery why HP and Gateway haven't figured out why customer care is important to consumers or why they've had trouble implementing a service and attitude equal to Dell's.
- The Dell Web site - With a recently launched "new and improved" Web site, Dell has the goal of providing what it calls an "integrated shopping experience." With the complexities of a PC and the myriad of options a customer can tack on, Dell generally gets high marks for the ease with which a potential buyer can configure a computer that meets his requirements. If not, Dell is quick to put a live, trained person on the phone to help - and to close the sale. Dell says that the tenth anniversary of its Web site is coming up and that it has worked for those years on making it easy to buy from.

Dell did stumble badly during the press conference when asked how it would "out-market" Apple. It also hesitated when asked if it had any other advantage than lower prices to attract customers. The company was also unclear as to whether it has or would offer a music service in Europe, the current hot spot for online music services.
The Dell Direct Touch
Dell is nothing if not pragmatic. Realizing that digital media products are even more complex than office PCs and that consumers have not seen many of the new functions, the company started opening kiosks in shopping malls. The kiosks aren't designed for a customer to make a purchase and take it home, but they're built so a potential buyer can see the Dell products and options, then call or go online either in the kiosk or at home to make the purchase. Most are 10'x10'. None carry inventory, which reduces costs and makes losses due to pilfering less likely. Dell calls the kiosks a "Dell Direct Touch" but without any long-term expensive leases. Gateway wasted a lot of money when it closed all its retail stores due to such leases and other obligations. Dell is in the process of adding 20 new kiosks, primarily in California. When opened, the total will be 85 kiosks in 11 states.
Creating a Market
Can Dell create a market? It certainly didn't create the PC market but has used its twin strengths of low cost operations/product manufacturing coupled with customer support to become the market leader. Dell does little product research, apart from figuring out how to use industry standard parts and software to develop consumer-desirable PCs. Founder Michael Dell has said on a number of occasions that the company waits until a product market reaches a certain size before Dell enters it. That is the Dell philosophy and so far it has worked.

Apple on the other hand, primarily when Steve Jobs is at the helm, has repeatedly created what became enormous product segments: GUI-based and mouse-operated PCs, laser printers and desktop publishing (DTP) to name a few, and more recently, handheld music players and online music services. Apple wasn't first into the market with any of those products, trailing Xerox in GUI, Canon on lasers, several companies in DTP software/hardware, Rio and others in music players and a number of online music services such as RealNetworks. Apple also subsequently lost its GUI-operating system and laser printer dominance to Microsoft's Windows and to Hewlett-Packard's LaserJet respectively.

A blend of product design - smooth, sleek and tightly integrated are words typically heard describing Apple products - and marketing have enabled Apple to build emerging product segments into sizeable businesses and dominate them. Unlike its earlier slips in GUI PCs and laser printers - Apple still owns a sizeable share of the desktop publishing market - Apple does not want to cede to others its early leadership with the iPod and iTunes. Dell and Sony, on paper at least, could be Apple's biggest digital media competitors. Sony keeps wrong-footing itself - its first offerings in home networking, digital video recorders, entertainment PCs and online music services have faltered badly out of the starting gate.

Dell's management appear to be at the top of their game when it comes to executing a game plan whose strengths are customer support and service, picking the right moment to enter a product category, keeping operational costs low in order to operate profitably on slim margins and producing at low costs reliable products with all the "check list" features consumers desire.

Michael George, VP and general manager of Dell's consumer business, summarized the company's digital media efforts as comprising three components:

1. It will leverage its direct sales model to the CE business such as plasma and LCD TVs.

2. It will make it easy for potential buyers to do product research and then buy.

3. It will develop programs to help its customers get the most out of their Dell purchased gear.

Note: The manufacturing and assembly of electronics gear - everything from PCs to cell phones - for companies like Dell, have sparked most of China's growth in recent years. There is so much new construction taking place in China these days that it is using 47% of the world's cement, causing a shortage from Florida to California.    Back to Headlines

The Echo online music service that was started by a group of storefront music retailers will not launch, at least not any time soon. At one time the brick-and-mortar music sellers were very worried about getting left out of the race to build an Internet music service. But online music sales, despite all the ballyhoo about iTunes' success, still only account for a tiny fraction of total music sales.

In January 2003 Best Buy, Hastings Entertainment, Tower Records, Trans World Entertainment, Virgin Entertainment and Wherehouse Music announced, with much hoopla, their plan to use technology developed by Echo Networks for an Internet radio service to have their own Internet presence. Borders Group joined later. Although music sales have slumped significantly worldwide for a variety of reasons depending on who one asks, the CD as a device for delivering music is far from dead. The online music services, save for Apple, have struggled to sell any meaningful quantity of songs, much less make a profit. After surveying the online music scene and faced with enormous development costs, the retailers pulled the plug on Echo. "The reality is that compared to all the retailers' bottom lines, even Apple's music sales are insignificant," said Alex Bernstein, a co-founder and investor in Echo. "Our board repeatedly told us that." Bernstein says the technology is 100 days away from being able to launch.

As the development project stretched out, the individual retailers began taking matters into their own hands:

- Virgin decided to create its own online music service by using MusicNet to run its online operation. MusicNet also runs America Online's subscription music service. Virgin wants to closely connect its own-branded music site to its stores. Virgin Digital's president Zack Zalon said that the company wanted to provide a "seamless experience" between what the web site and the physical stores.

- Best Buy distributes software on CDs for joining RealNetworks' Rhapsody, Roxio's Napster and the MusicNow services much in the way that AOL does for its dial-up service. "We want to work with the leading services that serve our customers' needs," Best Buy VP Scott Young said. "It didn't make sense to us in the near term to focus on one thing and say that's the answer."

- A Borders spokesperson said the company was in a wait and see mode as to its online music plans. Borders and Amazon do collaborate in a venture to sell CDs online.

In addition to competition from the likes of Apple, Microsoft, RealNetworks and others, the retailers also could have to go up against the Internet's biggest retailer Amazon, which still not said anything about its own plans for a digital music service.    Back to Headlines

Wireless entertainment content and technology provider Mforma Group has raised an impressive $44 million in first-round financing, harking back to the days of the dot.com bubble when such amounts were the norm.

Catalyst Partners, eFund and Bessemer Venture Partners co-led the investment.

Mforma plans to use its newfound capital to grow its global distribution network, which will likely include buying up smaller mobile content providers in a bunch of countries. The company, which provides its wireless carrier customers with the distribution technology, managed services and content to offer services to end users, has embraced the growth-by-acquisition philosophy. Founded in 2001, Mforma has, through a series of mergers and acquisitions, managed to set up shop in Europe and Korea as well as the US. Home base is Kirkland, Washington, but the start-up also has stateside offices in Los Angeles and San Diego.

"The market for mobile entertainment is the fastest growing market in the world and the demand for our products by mobile users is growing exponentially," crowed Mforma CEO Daniel Kranzler. "This demand, combined with the surge in availability of multimedia terminals, has created unprecedented market conditions both in the US and internationally. Mforma is consolidating the best companies in the industry and meeting this demand as the single-source provider for wireless carriers around the world, delivering content and distribution technology that works across all networks, billing systems, handsets, operating systems and regions of the world."   Back to Headlines

The desire to take pictures with a cell phone will be one of the main drivers of mobile phone upgrades in Europe over the next year, according to market intelligence firm Telephia. Besides cameras, consumers also want music, video and TV functionality on the widgets.   

Mobile Applications Currently used regularly/Do not use regularly but want it on their next phone

Moblie App      Currently Use         Don't Use
                                                      but want

 Camera                  11%                       27%
 Music/MP3               4%                      19%
 E-mail                       8%                     18%
 MMS                        9%                      15%
 Integrated TV             0%                      11%
 Video viewing             0%                       8%
 SMS                        51%                       8%

Note: Results are based on surveys done in France, Germany, Italy, Spain, Sweden and the UK.
Source: Telephia

Telephia's latest study, which surveyed mobile device users in six western European countries, found that 11% regularly use the camera on their phone, and 27% want a camera in their next phone. Teenagers use and want a camera more than any other group, with 16% currently using a camera phone and 47% just waiting to beg their parents for one.

Not surprisingly, teens are also the most interested in music and video access on a cell phone. Some 45% of them want music/MP3 features, more than double the 19% overall percentage. Teenagers were also enthusiastic about video (3% use, 28% want) and integrated TV (1% use, 27% want).    Back to Headlines

Sony Network Services Europe has launched a mobile music service that actually streams full-length songs to cell phones instead of just clips or ringtones. Dubbed StreamMan, the service lets users listen to a wide range of songs from both major and indie labels, read up on the musicians, send messages to friends and exchange music with other users. They can also create personalized music channels and playlists.

Sony is working with managed service provider End2End to host the service, provide the digital rights management and deliver the content.

Nordic telecom giant TeliaSonera is the first mobile operator to provide the StreamMan service, which it's offering to its mobile phone subscribers in Finland. Besides the music content, the service broadcasts news from Finnish news agency STT. Initially, the service is only available to Sonera customers with Nokia 6600 and Ericsson P800 and P900 model phones.

"This is the beginning of a pan-European rollout that will see StreamMan launched by a number of mobile operators in other European countries later this year," Sony Network Services Europe senior VP Robert Ashcroft said. "StreamMan has the potential to generate large-scale growth in data applications for mobile networks, and has elicited strong interest from mobile operators around the world."    Back to Headlines

Mobile entertainment firm Three O'clock Ltd has launched the world's first video magazine service for mobile phones.

The free service gives registered users access to 60 video magazines they can watch and read on their Java-enabled mobile phones. The pubs, which provide a mix of video, photos, articles and graphics, cover a wide range of interests from music and sports to fashion, movies, cars and news. They'll be sent to subscribers on a monthly or bi-weekly basis.

The service is supposed to work on any mobile operator network in any country. See www.threeoclock.com.   Back to Headlines

According to the Yankee Group, there'll be some 1.78 billion wireless users around the world by the end of 2007, with EMEA owning 40% of the market. Due to the enormous growth potential in Asia, Latin America and Africa, Yankee expects that roughly 27% of the world's population will use some sort of wireless service by the end of '07.

Customer growth along with improved average revenue per user in most places will help drive an 8.7% CAGR in wireless service revenues from 2002 through 2007. Slated to see growth of some 13.6%, Asia-Pacific is supposed to experience the greatest increase during that time.

Two years ago, mobile data made up only 8.5% of global wireless revenues, but by 2007 it will increase to 25.9%. Asia-Pac will be the most significant contributor, with data accounting for more than a third of all wireless revenues in the region in 2007.    Back to Headlines

Despite the number of mobile phones already hanging from the ears of most people in most of the major European markets, handset sales last year were better than expected. According to the Yankee Group, the number of consumers set on replacing their mobile phones more than made up for the saturation level. After a disappointing 2002, mobile handset sales grew 12% in Western Europe in 2003 to 129 million units.

"The wealth of possibilities enabled by 3G, Moore's Law and the growing pool of mobile developers means that the current upturn in sales can be maintained for at least the next five years," Yankee wireless/mobile Europe senior analyst Farid Yunus figures. "However, over the long-term, there is the fear of upgrade fatigue among consumers, which may lead to slower sales cycles at least until the next big technology leap."   Back to Headlines

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Streaming Media West Conference & Exhibition
October 26-28, 2004

Santa Clara Convention Center
Santa Clara, California
(800) 300-9868 [(609) 654-6266]
info@streamingmedia.com
www.streamingmedia.com/west
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It looks like the movie industry finally wished on the right star. 321 Studios, the St Louis start-up whose DVD copying software has been a thorn in its side for a couple of years now, is thinking of filing for bankruptcy protection.

Having lost three suits already this year, 321 now finds itself facing another group claiming that one of its products violates the Digital Millennium Copyright Act by circumventing anti-piracy technology and making copies of copyrighted CDs and DVDs possible.

The new suit, filed in the US District Court for the Southern District of New York earlier this month by PC and videogame giants Atari, Electronic Arts and Vivendi Universal Games, aims to stop 321 from selling its Games X Copy software, the stuff that cracks the copy-protection system the game makers use to protect their titles from poachers.

This latest suit is the first brought against the company because of Games X Copy, which has only been on the market since January. The software backs up PC games to a hard drive or blank CD or DVD. According to 321 founder and president Robert Moore, it's intended to be used to make a backup copy of a person's favorite game so he can use the copy and to keep the original from getting scratched or damaged.

However, according to Douglas Lowenstein, president of the Entertainment Software Association, the trade group that represents US computer and video game publishers, Games X Copy is "a device to facilitate the illegal copying of games" that is "masquerading as a consumer-friendly tool." Lowenstein says top-selling videogames cost $5 million-$10 million to develop and market and "Videogame copyright owners stand to lose an enormous amount from the piracy enabled by products like Games X Copy."

The amount of damages the plaintiffs are seeking hasn't been explained.

On three separate occasions so far this year 321 has been enjoined from selling its DVD X Copy family of DVD backup software on the grounds that, like the latest suit claims about Games X Copy, it violates the DMCA.

In February, District Judge Susan Illston ruled in favor of movie studios MGM Studios, TriStar Pictures, Columbia Pictures, Time Warner Entertainment, Disney and Universal City Studios and ordered 321 to stop selling a version of DVD X Copy that included "ripper" code, the stuff that lets users get around the copy-protection technology.

The following month District Judge Richard Owen ruled along the same lines in a case brought by 20th Century Fox and Paramount, two studios that hadn't participated in the first suit. Then in May, Judge Owen, who was hearing another case brought by Macrovision, issued another injunction ordering 321 to stop distributing DVD X Copy.

Moore, who has been an extremely vocal advocate of fair use rights, vowed to appeal the judgments, although he did heed Judge Illston's order to remove the ripper code from the software. The company asked its retail partners to take the original product off their shelves and delivered a "ripper-free" version of the software to replace it.

The multiple court battles have taken their toll on the little ISV. 321, which started the year with nearly 400 people and was hoping for 2004 sales of $100 million, has laid off most everybody and reportedly now has a mere two dozen workers.

According to the Wall Street Journal, Moore is getting ready to file for Chapter 11 protection. The paper says that whatever money 321 has in the bank would be used to pay off its outstanding bills and fulfill any remaining customer rebate obligations.

Still clinging to the blind belief that 321's software doesn't break the law, Moore told the Associated Press that the folks suing him "clearly want to drive a nail through our heart and make us dead…I wish we could get justice. I don't know where it is."

Proving that sometimes people just don't know what they've got.    Back to Headlines

Digital music distributor On Demand Distribution (OD2) has finally released its SonicSelector jukebox application that's supposed to let online music fans in Europe experience the first "pay-as-you-go" model for music streaming.

SonicSelector, which went into beta in January, is a plug-in that essentially turns Microsoft's Windows Media Player 9 Series into an on-demand music service. Customers of any participating OD2 retail partner can browse an online store, stream and download tracks, burn the music to a CD or transfer downloaded content to any of the 70-odd compatible portable music players - all through the Windows Media Player.

Music storefronts powered by SonicSelector offer OD2's full catalog of 350,000 tracks with downloads starting at 75 pence ($1.37) a track. For an introductory period, however, tracks are half-price, going for as little as 38 pence (70 cents) each. With OD2's bulk purchase packages, the more tracks a user downloads, the cheaper the individual price.

The plug-in also introduces a new option - the ability to listen to any song in the catalog for a penny a play. Unlike other digital music services that feature streaming, the OD2-powered sites don't require a subscription; they provide "no strings" interactive streaming.

"Users can stream any song any time, and download or burn to CD the titles they want to keep," OD2 CEO Charles Grimsdale said. "The pay-as-you-go system also allows the users to spend as little or as much as they wish each month, without the burden of a fixed rate subscription."

Besides the à la carte streaming, SonicSelector lets users create playlists that include songs from the OD2 database together with songs from their personal collection. It boasts a recommendation engine that monitors a user's searches, matches them against the listening habits of other users and offers up a list of songs the listener might like.

The integration with Windows Media Player, the cheaper prices (at least temporarily) and the on-demand streaming arrived just as OD2's partner sites face new competition from big-name US services Napster in the UK and Apple iTunes in the UK, France and Germany. Both Napster and iTunes require a proprietary software jukebox download whereas fans of OD2's major retail partner sites can simply use the Windows Media Player that they're likely familiar with and have on their PCs.

OD2 partners MSN, MTV, Packard Bell and Tiscali are the first to offer the SonicSelector plug-in for folks who visit their sites in the UK, France, Germany and Italy.    Back to Headlines

Ecast, whose technology powers thousands of broadband-connected commercial jukeboxes, has secured a deal with the Independent Online Distribution Alliance (IODA), which represents the online rights and distribution of dozens of independent record labels. The licensing agreement gives Ecast the rights to offer more than 10,000 songs from hundreds of indie bands and musicians in genres ranging from rock and hip-hop to Dixieland jazz and modern classical.

The Ecast Location-based Broadband Network currently runs thousands of digital downloading jukeboxes in restaurants, nightclubs and bars throughout the US. For the year ending March 31, Ecast logged some 39 million plays on its broadband-enabled devices.

According to Ecast, the IODA deal could help level the playing field for indie artists and record labels through a network of millions of potential listeners in the places people go to hear music. IODA plans to promote its artists on the Ecast jukebox network through the kind of on-screen ad spots that have been used to drive plays for better-known artists. When the jukeboxes are idle, the ads are set to play automatically on the touch screen monitors that customers use to make their song selections.

"In many ways, Ecast has put the promotional power of radio inside the jukebox," said Glenn Streeter, owner of Rock-Ola, which makes several models of Ecast-powered jukeboxes. "In the early days jukeboxes were one of the main ways people became introduced to new record albums and where they often discovered music that was outside of radio's playlists."

Most IODA tunes should be available on all Ecast broadband jukeboxes by the end of summer, with new albums to be uploaded as they are released.

Ecast already has licensing deals in place with all five major labels and several independents.    Back to Headlines

Its Napster digital music service has only been up and running in the UK for a few weeks, but Roxio has already managed to forge a major marketing deal with broadband service provider NTL.

The exclusive arrangement has NTL, the largest broadband ISP in the UK with a million users, bundling the Napster subscription service with its Broadband Plus content bundle, discounting the monthly Napster fee by nearly a third. Aside from Napster, NTL's Broadband Plus offers premium content from 15 services, all for 3.99 pounds ($7.29) a month. If ordered separately, the services would cost 34 quid ($62) a month.

For subscribers wanting to include Napster in their bundle, the cost rises to 9.95 pounds ($18.18) a month, the same as a standalone Napster Premium subscription.

NTL customers can also access Napster via a link from the www.ntlworld.com Web site. The broadband provider will start offering Napster in mid-July beginning with a free 30-day trial of the Premium service.

Napster has reportedly sold more than 10 million downloads across its US, UK and Canadian services.    Back to Headlines

As predicted here in the Online Reporter and a slew of other publications last week, Apple's iTunes Music Store made its European debut on Tuesday. Unlike Roxio's Napster, which launched only in the UK, iTunes opened its virtual store in the UK, France and Germany where it will soon face competition from Sony's Connect music store in addition to existing services.

The new iTunes stores are pretty much the same as the one in the US, with catalogs of some 700,000 music tracks and more than 5,000 audiobooks, à la carte downloading, free previews, one-click buying and downloading and the new iMix playlist sharing.

Users can play the songs they download on up to five PCs, burn a single song to a CD an unlimited number of times, burn the same playlist up to seven times and listen to the music on an unlimited number of iPods.

Per-track pricing is a fractional 0.99 euro ($1.19) in France and Germany and 99 pence ($1.80) in the UK.

"The number one online music store in the world has finally come to the UK, France and Germany," Apple CEO Steve Jobs said. "With a huge catalog of over 700,000 songs, breakthrough prices…and seamless integration with Apple's wildly popular iPod, we think this is the digital music store that Europe has been waiting for."

Peter Jamieson, chairman of the BPI, the British trade association for record companies, agreed that iTunes is an important addition, at least for the online music scene in the UK. The iTunes launch "is another important step forward in the growing UK downloads market," he said. "iTunes joins Napster and mycokemusic as the third high-profile legal digital music service to launch in the UK this year, and with the imminent arrival of an official UK Downloads Chart we expect 2004 to be a landmark year for digital music."

iTunes launched into Europe with a key ally - America Online. The iTunes Music Store will be integrated into the AOL Music channels in Britain, France and Germany, giving AOL members instant one-click registration and access to the online music store. Once it's fully integrated, AOL members in the three countries will have access to iTunes by clicking on iTunes buttons located throughout AOL Music. They can also use their AOL screen names and passwords to access the service and browse through exclusive AOL/iTunes pages.

In the US, iTunes has been integrated into AOL Music since December.

In addition to launching its service in the UK, France and Germany, Apple announced plans for a European Union version of the iTunes Music Store to open in October.    Back to Headlines

Internet radio network Live365 and indie music community GarageBand.com have hooked up to bring "breaking new music" to Live365's broadcasters and listeners. The two forged a deal that has Live365 adding hundreds of tracks from GarageBand's community to the database its broadcasters choose their playlists from - without having to pay royalty fees.

Live365 will take advantage of GarageBand's review process, which sorts through the thousands of songs on its site and uses listener ratings to find the "cream of the crop" so it can offer only the "best music."

In exchange for giving up their royalties, GarageBand musicians whose tunes are offered through Live365 will get the airplay that exposes them to a potential audience of millions. The companies plan to create revenue opportunities for the musicians through links that encourage fans to buy or download CDs.    Back to Headlines

Universal Music Group, the king of all record companies, has licensed software from Vancouver-based Destiny Media Technologies to securely distribute digital content via e-mail to radio stations in the US.

Under the deal, Destiny will customize its MPE delivery system to meet Universal's requirements in delivering near CD-quality music to major market radio stations. The songs will get encoded in Destiny's MPE format and sent to authorized users via e-mail powered by Destiny's Clipstream Audio technology, which lets them listen to a song directly in the e-mail, without opening a player, before deciding to download it. If the recipient chooses to download the track, it gets reported in real-time back to the label.

MPE authenticates the recipient before allowing access to the digital track. If the recipient has been provided with export rights, he can burn the song to a CD, but he shouldn't plan on making extra copies for his friends. The system adds a digital watermark to the track to identify the original user in case an unauthorized copy is discovered. Songs can also be locked down to a particular release date to keep stations from playing them before the official "start" date.

Promo Only, which distributes promotional music and videos, is working with the companies on distribution. Promo expects that at launch, the system will reach more than 90% of the radio stations in major US markets and eventually grow to include other trusted users.

Universal already distributes some of its tracks digitally to radio stations north of the border. The record company hooked up with Ontario-based Musicrypt last year and now uses the company's DMDS Web-based content delivery system to distribute music to stations across Canada and internally throughout its Canadian operations.    Back to Headlines

Most-Played CDs on the Internet For the Week Ending June 13

This          Last
Week       Week           Artist/Title

Aggregated from over 30 million listeners using media players powered by the Gracenote CDDB Music Recognition Service.    Back to Headlines

The number of American households with a broadband Internet connection will go from the current 25 million to 33 million by year-end, predicts Goldman Sachs Internet analyst Anthony Noto in a report he authored called "Internet Usage." Noto says that two factors are driving growth in the broadband market: price and the desire for speed. Since everyone wants speed, he says that it's only price that stands between all 65 million Internet households in the US and higher broadband penetration.

Noto posits that if the average national monthly rate for broadband dropped from the current $41 a month to below $35, then instead of 33 million broadband users by year-end there would be 40 million. He bases his projection on research that shows most consumers will pay 30% more for broadband than narrowband. His conclusion is that virtually every one of the narrowband households in the US will eventually upgrade to broadband.

Noto's optimistic predictions about online advertising and e-commerce are exemplified by his explanation of the coming explosive growth in online advertising. Online ads today account for only 3.5% of all advertising revenue yet people spend 16% of their media-consuming time on the Net. He says that advertising expenditures will rise to close the gap, a growth of 400% in online ad spending. Despite the impression that Internet stocks such as Yahoo and eBay are overpriced, Noto says that their growth curve is just beginning.

He believes that a company like Yahoo will eventually develop its own content just as Fox's FX cable channel did after building up its revenue and cash by running "bought-in" content.

When comparing the cable TV and phone companies broadband efforts, Noto says that VoIP is the cablecos' main asset. The cable companies, who sell their broadband for a third or more than the phone companies do, can use the lower cost VoIP to price bundles of services that the phone companies cannot match. He calls VoIP a critical element in the cable TV companies' attempts to best the telcos.    Back to Headlines

Telstra, the Australian phone company, and Optus, the cable TV provider, have reported their most recent broadband numbers and the total exceeds 900,000 with one million clearly in sight.

Australian Broadband Market
              Total*         Market Share

Telstra    750,000            83%
Optus,    150,000            17%
*As of June 2004

Telstra now has 750,000 subscribers and expects to have one million by mid-2005 said the company's group managing director of broadband Bruce Akhurst. The number includes consumers that connect to its ADSL network through third-party ISPs such as iiNet, TPG, OzEmail and Netspace. Akhurst said Telstra had a 46% increase in the five months since its retail operations cut entry-level broadband prices to start at $29.95 Australian ($20.50). Telstra previously forecast that it would have one billion Australian ($684 million) in broadband revenue by the end of 2006.

After Telstra cut its retail, but not its wholesale, prices the Australian and Consumer Commission forced Telstra to offer its broadband resellers lower prices.

Optus has surpassed 150,000 broadband subscribers.   Back to Headlines

The number of broadband users in Holland passed the two million mark in Q1, with ADSL growing at 24.7% and cable modems at 8.7%. ADSL subscribers totaled 1.2 million compared with just over a million cable subscribers. Wanadoo is now the largest Dutch broadband provider with 350,000 customers - 163,000 ADSL and 187,000 cable. Chello, the previous number one provider, has 345,000 subscribers at the end of Q1.     Back to Headlines

Telefonica now claims more than two million broadband subscribers in Spain, an increase of 55% over June 2003. Telefonica says its goal is to have six million broadband subscribers worldwide by 2006. It has invested two billion euros since 2000 in its broadband infrastructure, content and services and expects to spend 700 million additional euros per year through 2007.     Back to Headlines

On-demand movie download houses Movielink and CinemaNow probably thought they were safe from major competition until Netflix got its act together and started renting out movie downloads as an option to sending out DVDs to its subscribers.

If so, they were wrong.

Starz Encore Group, the cable and satellite TV movie service, and RealNetworks have stepped up to the plate with something they call Starz Ticket on Real Movies. The new subscription service runs $12.95 a month for unlimited access to the hundred or so movies on offer. Subscribers can download as many movies as they want and watch them as often as they like throughout the whole month, unless they get rotated out of action. The companies plan to change about 25% of the movies each week to keep the selection fresh.

Movielink, which has some 800 movies plus a bunch of cartoons and documentaries, charges $1.99-$4.99 per download. Although the movie stays on the PC's drive for 30 days, the user only gets a single 24-hour viewing period, unless he pays an additional fee for a second peek. CinemaNow, with some 4,200 movies, films, concerts and TV shows, offers both à la carte downloads and a subscription service. Rental fees for individual flicks range from $2.99-$4.50. The "Premium" service costs $10 a month or $50 a year and a "Premium Plus" service goes for $30 a month or $100 a year. Unlike its rivals, CinemaNow offers a "download to own" option for some movies in its catalog.

All the movies available through Starz Ticket on Real Movies are protected by Real's Helix DRM software, which supposedly protects them from piracy. "We have long been opposed to piracy, having seen the havoc it has caused in the music industry," Starz chairman, founder and CEO John Sie said. "Offering a legal, high-quality, convenient service at a great value is the best way to prevent illegal file sharing and put the movie industry on the right path."

Subscribers can watch the films through the RealPlayer or RealVideo 10 and have a choice of full-screen or theater mode. The service offers DVD-like functionality, letting the viewer fast-forward, pause and rewind. Users can also download movies to as many as three PCs and watch them on a TV that's connected to a PC with an S-Video cable. Both CinemaNow and Movielink let users watch movies on a TV too.

Studios that have agreed to let Starz offer their movies online include Disney, Universal, MGM, Sony, Fox, New Line, Revolution Studios and Miramax. The films range from recent hits like "Finding Nemo," "Pirates of the Caribbean: Curse of the Black Pearl" and "Chicago" to classics like "Taxi Driver," "The Poseidon Adventure" and "Alien."

RealNetworks and Starz first announced plans for a similar service 18 months ago. They were to launch the thing early last summer. The original idea was to make it available only to folks who subscribed to the Starz Super Pak of movie channels from their cable or satellite TV provider. They apparently delayed the thing - and maybe thought twice about limiting the potential subscriber base - because consumer broadband connections weren't pervasive enough. The new service requires a connection speed of at least 600 Kbps, fairly common now, but rare a year ago.

Depending on the connection speed, movies can download in as little as 20 minutes. Users can schedule them when they won't be using the connection for anything else to maximize bandwidth.

In October 2002 Sie predicted that in five years the movie business would realize billions of dollars in revenue from newly released movies streamed over cable and broadband Internet. Even back then he believed that the key to success was to charge a flat monthly retainer rather than ask people to cough up $3.95 whenever they want to watch a movie.

According to Sie, "In the cable and satellite world the 'all you can eat' subscription business model has proven to be much more popular than the transactional pay-per-view model." He sees the Starz Ticket on Real Movies model as a good fit with the way people watch movies and figures it will drive the adoption of higher-speed broadband services as well.

Downloading movies isn't the only option for subscribers, however. They'll also have access to a streamed version of the Starz flagship cable movie channel, marking the first time a premium movie channel has been delivered simultaneously over broadband.    Back to Headlines

The MPAA, which under the leadership of Jack Valenti promised never to sue individuals, is embarking on a multimillion-dollar anti-piracy ad campaign in the US. Ads will go in daily newspapers, consumer magazines and about 100 college newspapers. The message will explain why movie piracy is illegal, how piracy impacts jobs and the economy and the penalties for engaging in illegally copying and distributing movies. Anti-piracy ads will also appear in movie theaters.

According to the cyber-sleuth firm BayTSP, the most popular movies currently on the P2P networks are: "The Passion of the Christ," "Hellboy" and "Van Helsing."

Valenti, who has said he will retire shortly, may be softening the association's stance against suing individual file sharers, something the music industry is doing in a number of countries. He recently said, "We want to try everything possible before we start going into the courtroom."    Back to Headlines

Niveus Media, a maker of home media entertainment devices, is pre-installing the Wavexpress TVTonic broadband video application on all its AVX Media Center PCs.

The Niveus AVX is made to co-exist with other home entertainment gear in the living room. It's a powerful, ultra-quiet, fanless entertainment PC measuring roughly 17 inches wide and four inches tall to fit in an entertainment center. Its standard model has a 2.4GHz HT Pentium 4 processor, 512MB of 400MHz DDR SDRAM, an 80GB drive, a DVD recorder, a TV tuner and Microsoft Windows Media Center Edition software. It also features WMV High-Definition compatibility, Intel chipsets and FireWire connectivity.

TVTonic, an Internet video distribution and management application, provides access to Internet-delivered video channels that are downloaded and stored for viewing at the user's convenience. TVTonic features full-screen DVD-quality video, automated program delivery and expiration, integration with the Media Center Remote and a channel design optimized for the TV screen.

"The opportunity for broadband entertainment services in the living room is an exciting new realm for the Media Center PC," said Niveus president and CEO Tim Cutting. "Pre-installing TVTonic on the Niveus AVX enables our customers to receive IP-based video channels which offer unique and original programming not necessarily available from cable or satellite TV providers."

The Niveus AVX Media Center is shipping at a starting price of $2,400.    Back to Headlines

Next month iRiver will begin shipping two of the three so-called "video iPods" that it previously announced. Based on the Linux operating system as opposed to Windows, the two models are the PMP-120 and PMP-140. Both have a 3.5-inch, 16-bit LCD display. The 120 has a 20GB hard drive and the 140 a 40GB drive. Sometime this month the company will start shipping its first video players, the H320 and H340, in Japan.

iRiver says it's on schedule to ship the PMC-120 and PMC-140 video players, based on Microsoft's Windows Personal Media Center, in late Q3. The Japanese products do look somewhat like iPods with a color video screen but the PMP and PMC units are more like tablet PCs. Prices were not given.

The units play a long list of media formats: MP3, WMA, ASF, Ogg Vorbis and WAV for audio; JPEG and BMP for still photography; and MPEG 1, MPEG 2, MPEG 4, AVI, DivX 3, 4 and 5, Xvid and WMV for video. They also have an FM tuner and microphone built-in and are equipped with line-in and TV-out ports. A USB connector permits the user to send digital pictures directly from a camera without the need for an intervening PC. A removable, rechargeable battery can supposedly play up to 16 hours of audio or five hours of video on a single charge.    Back to Headlines

Networking solutions provider SMC Networks said that its new 2.4GHz 11 Mbps version of the EZ-Stream Wireless Audio Adapter supports RealNetworks' Rhapsody Internet jukebox service.

The adapter works with an existing 802.11b or 802.11g wireless home network so people can listen to music stored on a PC in any room of the house. The Universal Plug and Play (UPnP)-compliant gadget provides secure access to the premium music service as well as Internet radio and plays MP3, M3U and WMA music files.

Users install the EZ-Stream software, including the Musicmatch jukebox, on a PC, connect the adapter unit to the stereo and add audio content to its music library. The adapter has a remote control and a large LCD display.

The device retails for $129.99 and comes with a coupon good for a free month of the Rhapsody premium service.    Back to Headlines

Rather than fear that his company's supremacy in European online music may be rocked as the US music services start cropping up in his territory, Charles Grimsdale, CEO of digital music distribution business OD2, the outfit that powers a couple of dozen online music stores, seems to welcome the competition. According to Macworld UK, Grimsdale said that Napster's appearance on the UK scene has boosted business for OD2. He told the publication that since Napster UK launched, OD2's sales have risen by 30%. Happy are the validated.    Back to Headlines

Hard-disk-drive maker Seagate says that one out of every three hard drives returned to it as defective is "actually in perfect working order." The company says that the system error that caused the customer to return a drive "may have been caused by a virus, a loose connector, a power spike or some other problem that has nothing to do with the hard disk." Diagnosing supposedly defective drives shows that the drive itself is not at fault 45% of the time. Most alarmingly, the diagnosis shows that the operating system is to blame 37% of the time. Most PCs use Windows so the report adds another cross for Microsoft to bear in addition to the holes in its operating system that permit hacking, viruses and other maladies.   Back to Headlines

A business awash in personality, ego and contacts is going outside for new blood. Bono, U2's lead singer and amateur statesman, has joined Elevation Partners, the new Silicon Valley VC fund set up by VC fixture Roger McNamee and former Electronic Arts president John Riccitiello. Apple's ex-CFO Fred Anderson is also joining Elevation, which is supposed to raise an initial billion dollars to put into media and entertainment companies. Anderson is fresh from Apple's negotiations with the record labels - a rare victory in digital music. Bono, who has ties to the White House, co-founded DATA, a non-profits interested in "debt, AIDS, trade and Africa," with money from the Bill and Melinda Gates Foundation, George Soros' Open Society Institute and the Center for Global Development.   Back to Headlines

The folks at Network Associates have reportedly found what they say is the first computer worm targeting mobile phones.

According to the Financial Times, the anti-virus guys say the worm, known as "Cabir," causes no immediate threat. It's a proof-of-concept kind of thing.

It replicates on phones using the Symbian operating system and spreads via Bluetooth. Although it won't harm the phone or software, it spends its time scanning for other Bluetooth devices to inhabit, which uses up the battery.

A bunch of "experts in various countries" got the code from an anonymous source, the FT says. It was reportedly developed by the international hacker group 29A. So far there haven't been any reports of it in the wild. According to the paper, "If the virus succeeds in penetrating the phone it writes 'Caribe' on the screen and is activated every time the phone is turned off and on."   Back to Headlines

Napster will be heating up the music service wars this summer with the offer of a free MP3 player to new subscribers. Napster newbies who sign up for a yearlong $119.40 subscription to the Napster Premium service will get a free Rio Chiba Sport, while supplies last of course. The $130 Chiba Sport has 128MB of storage and includes a stopwatch, sports headphones and armband. If the Chiba Sport doesn't hold enough songs, subscribers can cough up an additional $80 and upgrade to the 1.5GB Rio Nitrus. The Nitrus, which sells for $200, can store 50 hours of music and supposedly plays 16 hours straight on one battery charge. "At hundreds of dollars less than the cost of some individual players, we're offering the best deal in town…both a cool Rio MP3 player and a full year of unlimited listening to Napster's massive catalog," Napster chairman and CEO Chris Gorog bragged.    Back to Headlines

Nintendo is reportedly developing a new home videogame console code named "Revolution" to compete with Microsoft's Xbox and Sony's PlayStation. Nintendo president Satoru Iwata provided no details because he was afraid that competitors would steal the company's ideas. He did say that a prototype would be shown next year and that the unit would present "new ideas" for entertainment and not be merely a more powerful GameCube.    Back to Headlines

Wireless Internet access will soon be available on the Paris Metro according to RATP, which runs it. Wi-Fi-equipped buses will be shown at the Public Transport Exhibition 2004 that is being held in Paris. Trials will begin shortly on one of the bus lines. Wi-Fi and GPRS are both used to maintain the Internet connection as the buses pass between Wi-Fi hotspots. The agency will also use the network to send up-to-the minute information to the drivers.    Back to Headlines

A recent raid shut down a Malaysian karaoke bar in the capital city of Kuala Lumpur when authorities discovered that 5,000 songs in the karaoke system were pirated. The software running the thing wasn't licensed either. According to the Associated Press, officials found the bar's owners could be facing a fine of 10 million ringgits ($2.6 million), or 2,000 ringgits ($536), for each unlicensed song..