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Are Telcos Fighting the Last War?
By Charles Hall
The future of the US telcos, and their ability to compete, is the focus as the telecom industry prepares for its upcoming annual SuperComm trade show in Chicago. The phone companies face stiff competition from the cable and satellite TV providers, not only in the broadband and content markets, but increasingly in the telephone service space as well.
The phone companies, like army generals, may well be preparing to fight the last war.
What follows are some observations and points to ponder:
- SuperComm looks like it's primarily about VoIP, which, in my opinion, is a zero sum gain or even a negative one for the phone companies. VoIP may be a short-term phenomenon, at least for residential users. Most consumers will eventually use a mobile as their primary phone, not VoIP. Fortunately for the three largest telcos, Verizon, BellSouth and SBC, they dominate the UScell phone market.
- Broadband and broadband-delivered content is where the money is. The cable TV companies are rolling in money from $40 a month broadband subscriptions. The Internet behemoths Yahoo, Google and AOL and probably MSN are already headed in the direction on Internet-delivered video entertainment.
- Serially delivered video, aka TV, will diminish as consumers opt for "content when and where they want it." Big advertisers like GM are reducing their TV ad spending and putting it in the Net, which allows more targeted ads whose results can be measured. For the first time ever, TV advertising will decline two years in a row. It isn't necessary to be a tealeaf reader to see what's happening.
- The big question is how much entertainment video goes to download and how much stays linear. Some folks think it will all go the way of downloading, knocking out broadcast TV and consequently most of the telcos' business models.
- The telcos should become content aggregators, at least as a "back door" to their pay-TV offerings. They should, at the very least, do what Telecom Italia (Rosso Alice) and Deutsche Telekom (Vision) are doing by offering a range of movies, music, sports, news and TV from an entertainment portal. And every set-top box they ship should have DVR and Internet capability. Once they get a DVR, most consumers find that their viewing of "live" (or "linear") TV has gone down by at least half, perhaps more.
There are three places the cable TV companies are vulnerable:
- Set-top boxes (STBs). The cablecos have a very small installed base of DVR- and high-definition-equipped STBs at this point. They are ramping up quickly, however, to defend their installed base against the satellite TV companies.
- Mobile phones. They will become the only phones for many individuals. Those mobile phones of the future will a) connect via Wi-Fi when the consumer is at home, b) via the cellular network when away from home and c) will, of course, have a high-speed Net connection at home and a slower one when away. They might even have a fast Net connection when away if WiMAX comes through as promised
- Internet-delivered entertainment and information videos. The cablecos have to protect their cash cow of TV subscribers just as the telcos are trying to protect their landline residential customer base. And just as the cable TV companies are not going to knock the telcos out of the phone business merely by offering a "me-too" service; so will the telcos have to offer a substantially better video service.
There are two places the cable TV companies are not vulnerable:
- Conventional (the linear type) TV service is a cable TV strength. They know how to slice and dice it better than the telcos - market it, bundle it, price it, package it - what content will sell and what won't and how to make deals.
- Broadband is a strength for the US cable TV companies in several ways. They have the installed base - a 60% to 65% market share - and folks don't want to change their e-mail address or try a new technology if the old one is working. Look at how many people still have a dial-up connection this late in the broadband era. By waiting to bring some marketing muscle to the broadband market and by having an inherently slower product, the telcos have had to resort to lowering their prices to attract subscribers. The cablecos, with a speed and installed base advantage, have been able to maintain higher monthly prices. The cablecos could put a major dent in the telcos' DSL business by lowering rates down to $30 a month or less - something they are unlikely to do, which is fortunate for the telcos.
The speeds the phone companies are talking about for broadband-over-fiber-optic don't appear to be much higher than what the cable TV companies are offering. One niche opportunity for the telcos could be the growing market for "citizen-produced" video content, a market that'll need higher upload speeds.
What If the Phone Companies Could Offer Any Movie, Any TV Show, Ever Made, Anytime, Anywhere?
So, being behind the curve in pay TV and broadband, the telcos should look to the coming trend of Internet-delivered video for an advantage. The cable TV outfits will be shackled by their revenue reliance on conventional pay-TV, unlike the telcos, which have no pay-TV revenue to lose. DVRs, video-on-demand, online music services, podcasting and P2P file sharing are all part of a movement that whets the consumer's appetite for the fulfillment of the "any time, anywhere" promise.
If the telcos could offer any TV show, any movie, any time, anywhere (keeping in mind that today they have most of the US' cell phone users), then they'd pose a major threat to the cable TV companies. Of course, there are some devilish details that'll have to be dealt with, such as copyright issues, royalty splits and DRM. Also, there is the fact that two of the telcos' pay-TV competitors - DirecTV and Time Warner Cable - are owned by companies - News Corp and Time Warner - that also own major content producers - 20th Century Fox and Warner Bros - of the movies and TV shows the telcos will need access to. No one said it'd be easy. On the other hand, going to market with only a "me-too" pay TV service doesn't sound like a good idea either.
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How Satellite TV Knocked Off Cable TV
The two US satellite TV companies, DirecTV and EchoStar, have taken on the cable TV operators and seized substantial market share. Knowing what they did could be helpful to the telcos in their assault on the cablecos' pay-TV business. Much of their advantage was based on superior technology, some on better content, some on better pricing.
1. Digital-quality video was a vast improvement over the cablecos' analog video.
2. Superior audio. The ambience of outstanding audio is one thing that still attracts consumers to the theaters - and to spending millions on home theater systems that connect TVs to their stereos.
3. More channels, more content.
4. Less expensive, at least initially.
5. Exclusive content. News Corp, for example, was able to land a deal with the NFL that permitted viewers, for an added price, to watch every game, not just those in which the local team was involved.
6. Customer support. EchoStar's Dish Network has won a number of awards for its customer service. DirecTV, especially since News Corp acquired controlling interest, has had good customer care.
What they satcos offer to attract subscribers may or may not be relevant for the current market situation because the cablecos have responded by enhancing their TV service.
However, it's a good place to start for assembling a game plan.
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Podcasting Picks Up Major Support
By Susan Schrank
Six months ago the term "podcast" would have drawn blank looks from all but the few who were in the know back in the early stages of the trend. Today it's being bandied about by everyone from amateur DJs to politicians, doctors, preachers, major broadcasters and just about anyone else wanting to share thoughts or opinions.
Podcasts are another piece of the "any time, anywhere" digital media phenomenon that has occurred in a world of always-connected broadband netizens who clamor for more online content,
whether it comes from P2P networks, blogs, digital music and movie services or news sites.
Despite the name, podcasts, which are sort of the love child of blogging and Internet radio, aren't limited to being played on an iPod. Anyone who wants to can listen to a podcast on a PC, burn it to CD or transfer it to just about any portable MP3 player.
The main benefit of podcasts, however, is that they allow people to "time-shift" their listening, similar to a portable DVR that lets folks digitally record TV shows onto a handheld device to take with them while traveling. Since podcasts are audio-only, they're even more portable - listen to them while jogging, driving, pretty much anywhere you can use an iPod.
This week alone, podcasting picked up some pretty big-name supporters, including Apple Computer, whose iPod portable digital music player sparked the craze - and its name - in the first place.
When Apple CEO Steve Jobs talked up the next version of the iTunes software at the Wall Street Journal's D: All Things Digital conference, the big news was that the application will offer podcast support. iTunes 4.9, which should be out sometime in the next two months, will add podcasts as a menu item and make it easier to subscribe to and download podcasts to an iPod. Users currently have to download third-party software in order to get a podcast onto an iPod.
Regarding the podcast support, Jobs told the crowd at the conference, "I think this will send it into orbit." According to the Journal, Jobs "sees podcasts evolving into an advertising-supported medium similar to radio."
Podcasts give the general population an outlet to express themselves beyond the blog. Now, instead of having to rant and rave in text (which most bloggers aren't very good at), people can literally speak their minds, sing their songs or tell a story in a format that others can download and take with them wherever they may go. A Web search for "podcast" will return any number of sites that offer these audio blogs as well as podcast aggregation sites designed to make it easier to find those that would be of most interest to the searcher.
Beyond the amateur sites, however, the corporate world is also realizing the potential business ramifications of podcasts. Companies are starting to see them as an opportunity to expand customer reach and take advantage of the latest Net-based craze.
BusinessWeek Online posted its first podcast this week. ABC and NBC both announced podcast plans this week as well. ABC is looking to offer podcasts of newscasts and other programming including "Good Morning America" and "Nightline" and NBC is planning to podcast segments from various shows including "Hardball with Chris Matthews," "Today" and NBC Nightly News" among others. Both networks also said they'll create "podcast-only" programs as well. Market research firm JupiterMedia even started a podcasting service featuring conversations with its analysts about key topics relating to the Internet and emerging consumer technologies.
National Public Radio, Clear Channel, Sirius Satellite Radio, Infinity Broadcasting and a host of other well-known brands have already launched podcasts or are planning to.
And where would an audio service designed for MP3 players be without tons of music? Sure, the major radio corporations have already locked on to podcasting's potential, but it takes more than radio broadcasts to fill an iPod. Independent music community GarageBand.com is looking to fill that gap with its new GarageBand Podcast Studio, which it claims is the world's first Web-based tool to record, mix and publish a podcast.
Podcast Studio was designed to benefit all segments of the GarageBand community. Artists get an easy way to license and distribute their music to podcasters. Podcasters get a simple point-and-click way to record, mix and publish their wares. Subscribers and listeners get easier access to podcasts for free, without an iPod or special software.
"We're on the forefront of a wave that will make personal broadcasting a reality and redefine how music is discovered and promoted," said GarageBand CEO Ali Partovi.
With Podcast Studio, anyone can create a podcast. Users can upload their own recordings and mix them with music from the GarageBand catalog using a point-and-click Playlist Manager. Once a new playlist is published, it becomes available for streaming, download and subscription from GarageBand.com's servers. Hosting is free. GarageBand intends to support the podcasts with advertising as well as offer premium ad-free options in the future.
In conjunction with the Podcast Studio launch, the site is hyping the first-ever "major artist" track released expressly for podcasting. The tune, "Papion," features long-time GarageBand.com member and American Idol runner-up Bo Bice and his band Sugar Money.
The Web site has also converted its 40,000 user-created playlists into podcasts and is offering them up via free subscriptions. Additionally, every artist that has music posted on GarageBand now has a free podcast where listeners can receive new songs and other audio messages, concert listings and news posted by the band. GarageBand.com also plans to issue additional podcasts of its own, such as a "track-of-the-day" feed for each musical genre.
For now, at least, podcasts are free to anyone who wants to download them. It won't take long, however, until folks start wanting to cash in. A number of sites will likely go the ad-supported route, giving away the content in exchange for listening to a 15-second commercial. Others will want to charge subscription fees, figuring that consumers who are short on time would rather pay a few bucks a month than have to sit through an ad before each podcast.
Micropayment technology vendor BitPass plans to be the first to market with software that will enable Web sites to charge for podcasts - both subscription plans and a la carte downloads. BitPass Unplugged, which will be available in Q4, will allow podcasters ranging from hobbyists to mainstream media to charge for premium podcasts.
"As podcasters face limited advertising revenue opportunities and significant hosting expenses, BitPass Unplugged makes it possible to charge for podcasts for the first time," said BitPass VP of products Kurt Huang. "With our solution, successful podcasters can look forward to new revenue sources without becoming submerged by the costs of catering to their audiences."
For folks who want to take advantage of podcasting or just want to learn more about it, author Jeff Mills has released a new e-book called Podcast Secrets Revealed that explains all about publishing and subscribing to podcasts. The e-book discusses the ways that podcasting can help consumers learn more about any number of subjects or share their knowledge on a favorite topic and tells businesses how they can make money from the new phenomenon. The book is available for download at www.podcastsecretsrevealed.com
Whether just a passing fad or the wave of the future, podcasts are =
wildly popular. According to recent research from the Pew Internet & American Life Project, more than 22 million folks in the US own an iPod or other portable MP3 player and 29% of them have downloaded a podcast. That translates into some six million US adults who've already sampled available podcasts. It will be interesting to see just how that number grows as the ABC, NBC and other major content providers get their podcasts online.
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'We Are In Full Swing of a Media Revolution'
"The information revolution is over...we are in full swing of a media revolution. We are going through this period of a shift from the mass media order to personal media order. We are seeing one industry after another flip from mass to personal and from information to media. This is like the end of the days of the independent PC builders or the little desktop publishers in the late 1980s. Little blogger babies will get hosed by the mainstream," said Paul Saffo, director and Roy Amara Fellow at the Institute for the Future in a ZDNet interview.
Saffo describes media as information that is intimate, ubiquitous and immersive - all around us. PCs, laptops, e-mail and spreadsheets typified the information revolution. Blogs, instant messaging and "wikis" are enabling the personal media revolution, he said.
ZDNet's Dan Farber interviewed Saffo at the Churchill Club event "The Next Wave of Technology: Iterative or Incendiary."
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FTC: Off With Their Heads
We've been warning that spam, viruses and other such malware would destroy the emerging digital media market. The severity of the problem is demonstrated by the US government's attempt this week to solve the problem by having innocent people's hijacked PCs disconnected from the Internet.
The FTC said this week it would ask some 3,000 ISPs around the globe to disconnect from the Net any of their subscribers whose PCs have been hijacked by spammers. Spammers take control of the PCs of otherwise innocent users so they can hide the true source of spam and avoid bandwidth costs. They turn consumers' PCs into "zombies" that send the spam on command. Zombie networks are estimated to account for 50% to 80% of all spam. The FTC said PCs that are being used to send spam should be disconnected from the Internet until the machines are fixed.
The FTC's recommendation is just that - it does not have the authority to force ISPs to disconnect their subscribers. It recommends that identify their customers' PCs that send out large amounts of e-mail, quarantine them if they are found to be zombies, help them clean their machines and tell them how to keep them safe in the future.
The FTC request is like one in which those who have a virus are quarantined. The recommendation is a drastic step, but then the spam problem is severe enough to cripple the use of the Net as a vehicle for delivering video entertainment. We have called for some of the bigger organizations to step up and help solve the problem - some of the ones that have profited from the Net's growth, like Intel, Microsoft, Cisco, AOL plus the cable TV and phone companies - or those that will benefit in the future from the digital media industry such as Time Warner and Sony What we didn't have in mind was the government threatening to bounce off the Net any home users whose PC was being used by outside villains to send spam.
Disconnecting consumers isn't the solution. They use their PCs for shopping, communicating with families and friends, comparing prices, looking up store locations and entertainment.
Once reconnected, the PC is going to get hijacked again. It's like putting a bandage on cancer. A broadband-connected PC, according to every survey that addresses the topic, has become as much a part of consumers' lives as other appliances. Providing software that makes such malware less likely is what's needed. What is needed is a vaccine for the malware, not the death by isolation the FTC recommended. Disconnecting what could be hundreds of thousands, perhaps millions, of Internet users would cause chaos and set the industry back. However, if the major beneficiaries of the Net can't or won't provide a solution, then disconnecting every hijacked PC is what it'll have to be.
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Harder to Track Users with New BitTorrent Software
The latest version of the BitTorrent software, popular with swappers of movies and TV shows, does not require Web site hosting of centralized files, known as "trackers," according to CNET Trackers, which allow users to collect statistics about a specific file, are easy to find files that antipiracy investigators use to identify individuals who downloaded and shared copyrighted
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BROADBAND BEAT
Telenor Expands Broadband Base
Norway's Telenor said it would spend about $1 billion to buy high-speed Internet providers in Sweden and Denmark to strengthen the company's existing Nordic operations. The two companies are Bredbandsbolaget, which is number two in the Swedish broadband market with 335,000 subscribers (24% market share), and Cybercity, Denmark's number-three broadband service with 90,000 subscribers (8% market share).
Telenor executive VP Morten Karlsen Soerby said the acquisitions strengthened the company's broadband business and will enable substantial cost cuts.
Broadband is the only growth area the world's phone companies have for the wires they have into homes.
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Tiscali Rolling Out LLU in UK
Tiscali UK will use Huawei Technologies' gear to roll out LLU (Local Loop Unbundling) in the UK. Installations have already started as part of Tiscali's initial LLU trial in 27 BT exchanges in London, which should be completed by the end of May.
Local Loop Unbundling allows third-party broadband competitors to install their own equipment in BT's local exchanges, providing, in theory, better quality of service and newer, faster and more competitive broadband products as well as enabling services such as VoIP and video-on-demand. Connection from the exchange to the residence is still done entirely over BT's infrastructure.
Tiscali says it'll be the first broadband provider to migrate existing customers to the new platform and is expecting to provision completely new customers by the end of July. Subject to successful completion of the trial, the company plans to extend its unbundled network to over 200 exchanges by the end of the year and continue with further rollout in 2006-07 to a target of 600 exchanges nationally.
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US 12th, UK 14th, Canada 5th in Broadband Penetration
As expected, broadband growth continued during 2004 in the developed nations, according to a report from the Organization for Economic Co-operation and Development (OECD), an association of developed countries. It says that growth was fastest in parts of Europe. According to the report, the main highlights of broadband development during 2004 were:
-Broadband subscribers in the OECD nations reached 118 million by the end of 2004, adding 34.1 million subscribers during the year.
-The OECD broadband penetration rate reached 10.2 subscribers per 100 inhabitants in 2004, up from 7.3 subscribers per 100 inhabitants in December 2003.
The US ranks 12th Great Britain was 14th. Canada was 5.th
OECD Broadband subscribers per 100 inhabitants by technology,
December 2004
DSL
Cable
Other
Total
1. Korea
14.1
8.5
2.2
24.9
2. Netherlands
11.6
7.4
0.0
19.0
3. Denmark
11.8
5.5
1.6
18.8
4. Iceland
17.4
0.2
0.7
18.3
5. Canada
8.6
9.1
0.1
17.8
6. Switzerland
10.8
6.5
0.0
17.3
7. Belgium
9.6
6.0
0.0
15.6
8. Japan
10.4
2.3
2.3
15.0
9. Finland
11.2
2.2
1.6
15.0
10. Norway
12.3
2.0
0.5
14.9
11. Sweden
9.5
2.6
2.5
14.5
12. United States
4.7
7.2
0.9
12.8
13. France
9.9
0.7
0.0
10.6
14. United Kingdom
7.1
3.4
0.0
10.5
15. Austria
5.5
4.7
0.1
10.2
16. Luxembourg
8.9
0.9
0.0
9.8
17. Spain
6.4
2.0
0.0
8.4
18. Germany
8.1
0.2
0.1
8.4
19. Portugal
4.0
4.2
0.0
8.2
20. Italy
7.6
0.0
0.5
8.1
21. Australia
5.7
2.0
0.1
7.7
22. New Zealand
4.2
0.3
0.3
4.8
23. Hungary
2.4
1.1
0.1
3.6
24. Ireland
2.9
0.2
0.3
3.4
25. Poland
1.3
0.8
0.0
2.1
26. Czech Republic
1.0
0.6
0.0
1.6
27. Slovak Republic
0.7
0.2
0.2
1.1
28. Mexico
0.5
0.2
0.0
0.8
29. Turkey
0.6
0.1
0.0
0.7
30. Greece
0.4
0.0
0.0
0.4
31. OECD
6.2
3.4
0.6
10.2
Source: OECD
- Broadband growth has been rapid, with subscriptions increasing 41% =
during 2004.
- Broadband adoption is picking up speed with the fastest growth of 2004 realized during the final quarter of the year (an increase of 11% from the previous quarter).
- Korea leads the OECD in broadband penetration with 24.9 subscribers per 100 inhabitants.
- The Netherlands moved into second place with a penetration rate of 19.0 subscribers per 100 inhabitants, followed closely by Denmark, Iceland and Canada.
- By December 2004, no other OECD country had reached the penetration rate Korea recorded in March 2002 (19.1%). However, at current growth rates, the Netherlands could match Korea's penetration rate by the end of 2005. Korea has the most mature broadband market in the OECD and growth has slowed accordingly.
- DSL is the leading broadband platform in 27 OECD countries. Canada, Portugal and the United States have more cable modem than DSL subscribers. Fiber optic is becoming a significant platform in Japan, with nearly 2.5 million subscribers, or nearly 12% of all broadband connections in Japan.
The breakdown of broadband technologies in 2004 for OECD countries is:
- DSL: 60%
- Cable modem: 33%
- Other technologies: 7%, (eg fiber optics, LAN, satellite and fixed wireless)
Total broadband subscriptions, percentage of OECD, top 5 countries, 2004
2004
United States
31%
Japan
16%
Korea
10%
Germany
6%
France
6%
Rest of OECD
31%
Source: OECD
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LEGAL MATTERS
MPAA's
Glickman: China Dragging Heels on Fighting Piracy
The US offers China an open market for its goods, making the States China's biggest customer. Imagine that if 95% of US buyers of Chinese goods didn't pay for them, perhaps stole them from warehouses under the US government's winking eye. China has by-and-large closed its ears to US requests for protection of American intellectual property rights. The MPAA last week warned Chinese officials that US lawmakers are becoming increasingly restless about China's refusal to make fighting piracy a primary objective. MPAA leader Dan Glickman said he delivered the message to heads of various government departments in Beijing during his first visit to China as MPAA CEO.
MPAA members Walt Disney, Warner Brothers, Sony's Columbia Pictures and Viacom's Paramount Pictures say they estimate that about 95% of all DVDs sold in China are pirated, costing the industry $280 million last year. The Wall Street Journal reported that pirated copies of the newest "Star Wars" movie, released only last week in the States, was already on Beijing streets for about 85 cents. "These just came in this morning. The quality is very good, they're not like those pirated copies that are filmed in the cinema," a Beijing vendor told the Journal as he fished a pirated DVD from behind a bush.
"We said the US Congress is becoming increasingly agitated about piracy," Glickman said during an interview with Reuters "We said they need to do something or there would be trade-related problems. There's consequences if they don't get it down."
US lawmakers are caught in a conflict. Many of their constituents benefit from buying low-cost Chinese goods at the likes of Wal-Mart Also, many American technology companies have much of their gear made in China, as do suppliers of everything from running shoes to fishing gear.
The MPAA says it has worked with Chinese law-enforcement agencies to close shops that duplicate pirated DVDs and the stores that sell them. The MPAA, publicly at least, has praised the agencies, although it appears it is the MPAA that has been making the initiatives. As in the US, the MPAA has bypassed the law enforcement agencies and taken copyright offenders to court directly, reportedly winning all 10 of the cases it has brought. It's also preparing to bring another round of such cases.
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Tax Proposed for Portable Music Players
Some members of the UK music industry are calling for a tax on every music player sold in the country, according to MacWorld UK They want to distribute the revenue to music authors and rights holders. Some countries such as Canada and Germany already collect a similar tax on media such as tapes, CDs and DVDs. Canadian legislators, however, recently refused to pass a tax on portable music players. Dutch legislators recently authorized a levy that would add about €180 ($225) to the price of a 60GB portable music player.
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Canadian Court Rules Against Labels
A Canadian Federal Court of Appeals last week rejected the record labels' attempt to learn the names and identification data of 29 people accused of unlawfully sharing thousands of music files.
The court said that privacy rights must supercede copyright claims, at least in "the early stages of this case." It said that "technology must not be allowed to obliterate" intellectual property rights and "the potential for unwarranted intrusion into individual personal lives is now unparalleled." The labels, through the Canadian Recording Industry Association (CRIA), are not expected to stop suing individuals. "If the US experience is any indication, we can expect thousands of suits against individual Canadians in the months ahead," University of Ottawa law professor Michael Geist said. "There is now every reason to think that Canadians will be subjected to a similar legal barrage."
The appeal was based on a 2004 lower court ruling in which the CRIA requested that five ISPs - Bell/Sympatico, Rogers Communications, Shaw Communications, TELUS and Videotron - provide identity data on subscribers the CRIA accused of trading files illegally.
The appeals court, however, was not as adamant about the legality of file swapping as the lower court. Appeals Justice Edgar Sexton wrote, "In my view, conclusions such as these should not have been made in the very preliminary stages of this action. Such hard conclusions at a preliminary stage can be damaging to the parties if a trial takes place and should be avoided."
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Feds Bust BitTorrent Network
The US Departments of Justice and Homeland Security this week announced the first-ever criminal enforcement action against BitTorrent network users. Needless to say, the MPAA and RIAA stood and applauded, along with every TV show producer. BitTorrent has proven especially useful to those who swap very large files, particularly videos.
Agents of the FBI and US Immigration and Customs Enforcement (ICE) executed 10 search warrants across the United States against leading members of a peer-to-peer network known as Elite Torrents. Federal agents took control of the main server that coordinated all file-sharing activity on the Elite Torrents network. Brad Buckles, executive VP of anti-piracy at the RIAA said it was clear that the federal government is "committed to an aggressive, forward-thinking approach to the online theft of intellectual property." He said the action recognized that "theft is theft, regardless of whether it's done on BitTorrent or by an individual shoplifting from a local record store."
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ENABLING
TECHNOLOGY
Enterprise Partners Buys Muze
Enterprise Partners Venture Capital has acquired Muze Inc, which developed the largest collection of metadata and related databases for music, books, videos and games. Muze, whose customers include eBay, Yahoo/Musicmatch, Borders, RealNetworks, Best Buy and Overstock.com, also provides customized e-commerce platforms.
The acquisition marks the VC firm's entrance into the world of digital content management.
With the support of its new parent, the 15-year-old Muze will be able to be more aggressive with its growth strategy to expand the use of the Muze database for the management and retailing of digital content.
"Over the past 15 years, Muze has painstakingly developed a world-class library of metadata that covers the entire range of entertainment content," said Bill Stensrud, managing director of Enterprise Partners. "As the acquisition of digital media content has exploded and digital collections have expanded, people are facing the headache of organizing and finding what they want. Muze data is the key that unlocks the promise of digital media."
Terms of the deal were not disclosed. Back
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Coding Technologies Takes Case for aacPlus to Musicians, Music Fans
The aging technology of the MP3 format - universally loved and used for storing music files in a digital format - makes it ripe for a replacement. Now that RealNetworks' RMA compression scheme has ebbed, there appear to be only two main contenders for replacing MP3. One is Microsoft's Windows Media Audio (WMA) format and the other is the industry standard aac format for which Coding Technologies offers enhancements. The enhanced aac is called aacPlus.
The biggest boost for aac, the genealogical child of MP3, has been Apple's adoption of it as the format of choice for iPod and iTunes. iPods also plays MP3 tracks. In fact, so prevalent is MP3 that most people call all portable music players MP3 players.
As part of its efforts to make aacPlus the dominant format, Coding Technologies decided to go directly to musicians and music fans by employing some retail marketing. It has spearheaded the formation of the Internet Surround Music Project to make multi-channel surround sound widely available as a way of showing aacPlus' superior fidelity over what comes on music CDs and in MP3 files. CDs are stereo only, of course. They do not have surround sound, the audio that's heard on movie DVDs. If a music lover wants surround sound, he has to buy either a DVD Audio disc or a Super Audio CD. The Internet Surround Music Project aims to change that by making it easy for musicians to code their tracks in a surround sound format and then making it available via the Net to the fans.
The Project's goal is to let music fans hear what they're missing. It'll try to accomplish that by:
1.Provide a way for artists to get their music heard in surround sound - multi-channel - by "publishing" it on the Internet. Project members want to show music lovers what they're missing when they listen to a music CD or to an MP3 track. Delivering it over the Net eliminates the consumer having to buy or use equipment that plays DVD Audio discs or Super Audio CDs.
2.Encourage more artists to produce content in surround sound by running contests where artist submissions are judged and awarded prizes based on quality, originality and popularity.
The move is part of Coding Technologies' effort to beat out Microsoft's WMA format as the replacement for MP3 with aacPlus. AacPlus is the enhanced version of the aac format, on which MPEG, DVD Forum and 3GPP have already standardized. Coding Technologies' SBR (Spectral Band Replication) and Parametric Stereo technologies are added to aac, creating the aacPlus format, which delivers streaming and downloadable 5.1 multi-channel surround sound audio at 128 Kbps.
As to the current state of the music format market, it's thought that:
1. MP3 still accounts for the majority of music files that currently exist on user PCs - the installed base.
2. Microsoft's WMA, however, may account for the majority of new files that are being put on PCs because: a) Windows Media comes with every PC, b) most software other than Windows Media that consumers use for ripping defaults to WMA and c) WMA is superior to MP3 in both compression and fidelity.
3. There's also the familiarity factor - everyone's heard of MP3 and WMA - who ever heard of aac or aacPlus? That is what Coding Technologies hopes its Internet Surround Music Project can overcome.
4. No discussion of any aspect of the digital music industry is complete without considering Apple's position with its dominant market share in media players and online music services. The Apple iTunes store delivers music only in a DRM-protected version of aac, which helps familiarize all iTunes and iPods users with the acc brand. The iPod does play MP3 files as well as Apple's aac. Like crying in baseball, though, there's no WMA format in Apple's music world.
Some, such as Microsoft CEO Steve Ballmer, have speculated that most of the music on most of the iPods is in the MP3 format. They base their reasoning on their belief that much of the music was downloaded illegally from a P2P network or ripped from a CD. That could be sour grapes, of course.
The Internet Surround Music Project has already started an Internet forum at www.tuner2.com for artists to publish 5.1-surround music and will run contests to encourage aspiring artists. The ploy is based on the recognition of the dynamic that radio has traditionally driven demand for new music formats by providing broad exposure. It's using the Net, rather than radio, to drive exposure.
Step one for the project is making artists aware of the opportunity in surround music. The group will appeal to musicians to submit their multi-channel music to contests hosted at Tuner2.com. Artists who register will receive free MPEG aacPlus encoder software from Coding Technologies to encode their content for electronic submission to Tuner2.com. The Internet Surround Music Project will host that content and run the contests on Tuner2.com, delivering the content both on-demand and in aggregated "radio" streams.
"Our goal in creating the Internet Surround Music Project is to increase awareness of the benefits of surround music for both artists and consumers," said David Frerichs, VP and US general manager for Coding Technologies. "By increasing the amount of surround content being created by artists and distributing that content on the Internet using MPEG aacPlus, the demand for surround music will increase, even beyond the PC."
Two PC-based media players currently support aacPlus surround sound - the RealNetworks' RealPlayer 10 and AOL's Winamp. To get the full impact, the PC needs a 5.1 speaker set as well.
Charter Members
Internet Surround Music Project
America Online's Winamp player
Cakewalk
Recording artist Richard Devine
Jazz Mutant
Minnetonka Software
Nasseri Music Business Solutions
Native Instruments
Steinberg
Recording artist Amon Tobin
Tuner2.com
"Our Winamp audience is on the leading edge of adoption, for both technology and music," said Scott Brown, Director of Media Systems Development for America Online. "With aacPlus and the Internet Surround Music Project, we can now bring that same audience the latest in 5.1 surround music while increasing the reach of artists."
"I hope that this project will open new doors for musicians and artists who are interested in creating music for surround environments. I think the surround sound format is an exciting new way to hear music now. You have so many options, and now have the ability and technology to add multi-dimensional qualities to sound, that make the musical listening experience even more interesting," said recording artist Richard Devine. "This will particularly be interesting for music in the electronic/glitch/techno genre where all the layers and sounds can be manipulated at pinpoint accuracy. The possibilities seem endless, so I feel it is an important to get involved with as many projects that push for support of surround sound music."
Musicians, engineers and producers have been empowered with a new level of creative surround editing and mixing tools," commented Cakewalk marketing director Carl Jacobson. Cakewalk makes Windows-based music and sound software such as its MediaWorks, which provides an "all-in-one digital media experience for organizing, archiving and sharing" photos, music, video and data on CDs, DVDs and the Internet. "With MPEG aacPlus encoders from Coding Technologies and the launch of the Internet Surround Music Project, these artists are now being given tools they need and the venue they have been looking for to air their surround sound projects online."
Coding Technologies is a spinout of the joint effort of Fraunhofer Institute (creator of MP3), Dolby, AT&T and Sony that developed the aac technology. It positions itself as a developer of audio compression and enhancements for audio compression for the Internet, mobile and broadcast industries.
What iPod?
A similar market share battle is being waged over music formats in the mobile phone industry. Coding Technologies says it has taken most of the market and will have some 20 million cell phones in use by year-end that have embedded media players capable of playing aacPlus music files. They'll outnumber all the iPods and come from the likes of Nokia, Samsung and LG
When the music format market is seen from the US/PC/Napster viewpoint, =
it looks like Microsoft's WMA format is winning. However, when seen from the Apple/mobile market, aac appears to have the lead. Coding Technologies is counting on the Internet Surround Music Project to raise awareness of aacPlus' superiority at the retail level in the PCmarket.
A Technology Note
Coding Technologies says that its SBR technology enables audio codecs to deliver the same quality at half the bit rate. Its Parametric Stereo enhances the codec efficiency a second time for low-bit-rate stereo signals., near transparent stereo at 32 Kbps, excellent quality stereo at 24 Kbps and great quality for mixed content down to 16 Kbps and below. The company touts that these levels of efficiency "fundamentally enable new applications in the markets of mobile and digital broadcast." That won't matter, of course, if someone else gets their first. Hence the Internet Surround Music Project.
Approximately the same audio fidelity is produced by:
Compression Scheme
Speed
An MP3 file recorded at
128 Kbps
An aac file recorded at
96 Kbps
An aacPlus file recorded at
32 Kbps
Coding Technology explains aacPlus's audio superiority in terms of recording speed - the faster the recording speed the better:
Consequently, an aacPlus file takes less disk space and, more importantly to mobile phone operators, less bandwidth than an aac or MP3 file. That also means it will download faster over a cell phone network that is inherently much slower than a broadband connection.
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HOME NETWORKING
Better Networking, Not More Networking, Needed
Parks Associates says the penetration of data networking solutions into US households crossed the line between early adopters and later purchasers sometime between 2003 and 2004. With more than 17 million homes enjoying at least some basic connectivity, it says, the next phases of home networking deployment will center on solutions that deliver enhanced value to connectivity. Amen. Like playing PC-stored music on the stereo or a downloaded film on the TV in the bedroom.
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Surprise: DVR Sales Booming
About 9.2 million households subscribe to DVR services, up from 3.6 million in May 2004, according to an estimate from In-Stat The report also says that hardware vendors shipped 11.4 million DVR units during 2004, compared to 4.6 million in 2003.
North America is currently the largest DVR market, followed by Japan. The two regions combined represent about 88% of the global DVR marketplace. Europe doesn't know what it's missing.
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Profits Dropping, Speed Increasing for Home Wi-Fi Market
The makers of wireless networking gear for the small office, home office and home market are shipping more but enjoying it less, according to In-Stat The high-tech research firm says that prices have eroded sharply over the past several years, and few vendors are making much money in this market segment at present. It expects unit shipments to increase from about 17.6 million in 2004 to roughly 32.6 million units in 2009.
The company also says there is a transition underway from the 802.11g standard to MIMO-based products. MIMO (Multiple Input, Multiple Output) technology quadruples the speed of 802.11g from its current maximum of 54 Mbps to over 200 Mbps. The MIMO technology that the likes of NetGear, Linksys and Belkin are currently implementing is not compatible with each other's products. However, chipmaker
Airgo's MIMO could become the basis for the new 802.11n protocol that the industry is trying to establish as the IEEE 802.11n standard. Airgo is first-to-market with 802.11 a/b/g-compliant MIMO chipset, software and reference design solutions.
"In-Stat believes that there will be a gradually shrinking price premium for MIMO/802.11n throughout the forecast period," said In-Stat analyst Sam Lucero. "The benefits of dramatically increased range appear to be resonating with consumers, actually more so than the increased throughput offered, and we believe customers are willing to pay the extra amount for whole-home coverage."
The latest Wi-Fi report from In-Stat found the following:
- 802.11g will remain dominant throughout the forecast period in very cost-optimized equipment.
- MIMO/802.11n will become the primary air standard. Its "universal" air standard is less confusing for consumers and easier to manage for vendors.
-Shipment volumes for MIMO-based equipment were small in 2004, but at least five vendors have now introduced products, with more expected in 2005.
-In contrast to the enterprise WLAN market, 802.11a/g equipment is not expected to gain traction in the SOHO/consumer WLAN market.
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iPod As Home Stereo Component
TuneStage is a new $179 device from Belkin that wirelessly connects an iPod with a home theater system using Bluetooth technology.
Belkin says the device, which enables transmission from up to 33 feet away, will begin shipping in late July. Last December, when Belkin first started talking about the product, it was scheduled to ship in March.
TuneStage consists of two devices - a Bluetooth connector that connects to the iPod and a base station that connects to the stereo system. For about the same price, of course, consumers could buy a digital media receiver from the likes of NetGear and connect the PC with all its songs to the stereo.
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ENTERTAINMENT
PORTALS
T-Online Top Portal in German-Speaking Europe
T-Online is waving a report from Arbeitsgemeinschaft Online-Forschung e.V. that says it's the portal with the strongest coverage in the German-speaking areas of Europe. The audience measurement survey shows an average 11.4 million unique users every month avail themselves of the content range at the www.t-online.de page. That increases the portal's appeal as an advertising medium. The company says that in the broadband market of the future, T-Online is well positioned with more than 3.5 million DSL customers in Germany and attractive content. The portal's Musicload service, with over 1.2 million registered customers, is the leading provider among the German music download platforms.
Additionally, the video-on-demand service of T-Online's Vision entertainment portal draws numerous broadband users with an extensive range of top Hollywood films. This user group is particularly interesting for advertisers, since those with a DSL connection and the right equipment can use high-impact rich media formats and Internet spots without restriction. Quality content is attractive not only for Internet users, the company says, but for the major brand name articles manufacturers as well. "Nearly 90% of the largest online advertisers already count on T-Online performance," the company said.
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SHOW
TIME
BitTorrent Joins Internet Video Fray
Another Internet-based purveyor of videos will emerge shortly to compete with the likes of Google, Yahoo, AOL, Comcast's The Fan, Telecom Italia's Rosso Alice and Deutsche Telekom's T-Online Vision. Competition is sure to be fierce as the Net becomes the largest distribution vehicle for entertainment, news, sports, information and education videos. BitTorrent, the newest entrant, has been in use for couple of years for swapping movies, TV shows, software and other large files.
Bram Cohen, developer of BitTorrent and considered something of a boy wonder, will within two weeks launch an advertising-supported version that includes a search engine, according to Wired News BitTorrent has become very popular because of the speed with which large video files can be downloaded. A BitTorrent site last week had the first copy of the new "Star Wars" movie available for download. So great was the demand that it caused a strain on the Net's resources and slowed all Internet traffic. Downloads of the flick took upwards of 40 hours instead of the usual two to three.
What makes BitTorrent faster than traditional P2P at downloads is that everyone downloading a file over BitTorrent is unknowingly uploading it to other users simultaneously in multiple "torrents" - hence its name. Surprisingly, and unlike other P2P software, the more popular the file, the faster the download is. According to BitTorrent, "each new participant brings not only demand, but also supply. Instead of a vicious cycle, popularity creates a virtuous circle. And because each new participant brings new resources to the distribution, users get limitless scalability for a nearly fixed cost."
Wikipedia says that with BitTorrent, files are broken into smaller fragments, typically a quarter of a megabyte each. As the fragments get distributed to the peers, they can be reassembled on a requesting machine in a random order. Each peer takes advantage of the best connections to the missing pieces while providing an upload connection to the pieces it already has.
As with other P2P services, BitTorrent users connect directly to each other. However, like first-generation P2P networks such as Napster, BitTorrent requires a central server called tracker. Reportedly the tracker is "agnostic" because it does not know what files are being transferred; it is said to only keep track of connections. Second-generation P2P networks such as Kazaa, eDonkey, Gnutella and Direct Connect do not require a central server.
Cohen says he's anxious to demonstrate that BitTorrent has lawful uses. What he has in mind is its use for distributing entertainment and information videos that individuals can now produce using relatively powerful - yet inexpensive - gear. The new search feature will catalog and index the thousands of movies, music tracks, software programs and other files for download over the BitTorrent protocol.
Ashwin Navin, COO of the five-person San Francisco-based outfit, said anyone can now publish their own movies, music or software because BitTorrent all but eliminates expensive bandwidth costs. Google Video's initial approach to videos is based on making bandwidth available to video producers for free. It allows them to upload the video, a one-time event. It would then index and catalog the videos, making them available for download at no charge to the producer. Yahoo's approach with its online video is more traditional in that it does deals with known movie and TV studios rather than start-ups and individuals.
The BitTorrent search engine will take advantage of knowing how popular a particular file is by counting the number of torrents to determine the number of nodes downloading and uploading. That will let the BitTorrent search engine list results based on the torrents. "Web search rates things by relevance," Navin, a former strategist for Yahoo, told Wired News "Our search rates things by relevance and availability."
Most of BitTorrent's revenue so far, according to the publication, has come from donations and sales of T-shirts. The BitTorrent search site will have sponsored links provided through a partnership deal it's done with Ask
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Libraries Offering Video Rentals
Video rental stores and online video services like Netflix have a competitor as the nation's libraries are loaning out more and more videos, according to the Los Angeles Times story "More Movies Are Stacking Up at Libraries." It says libraries are investing more money in DVDs and videos with some even charging borrowers to cover the costs of buying new releases. The number of videos stocked by libraries nationwide has risen by 56% in five years, according to the National Center for Education Statistics. Blockbuster and Movie Gallery, the nation's two largest video rental chains, told the paper they had not seen any evidence they were losing business to the libraries.
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Blinkx Adds UK Sports Videos
Blinkx, which offers a searchable index of Web audio and video content, has signed a deal with In The Box Media to add video content from three UK sporting Web sites to its index. Blinkx will now include highlight videos and other content from ConferenceFootball.tv, PGAPro.tv and
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NarrowstepUpgrades Extreme Sports Internet Video Channel
Extreme sports network www.High.tv is a "TV channel" broadcast over the Net 24 hours a day, seven days a week that anyone, anywhere with a broadband connection can watch. It specializes in showing extreme sports such as break dancing, windsurfing, snowboarding and kite surfing.
After running for almost two years, High.tv has started using a new "viewer" that its parent company Narrowstep spent 18 months developing.
High.tv's new features include full VCR controls - fast forward, rewind button and mute button. There is also a "mini mode" that allows viewers to minimize the TV screen so they can continue working while still having the player in one corner of the screen. Other features include displaying the local time, an indicator to measure network performance and a "DVD chapter" view that lets viewers see each part within a program.
Iolo Jones CEO of Narrowstep, the "TV on the Internet" company, said that High.tv is an excellent example of what narrowcasting TV is all about. For the extreme sports fan, he said, the technology is incidental because they just care that they can see their favorite sports anytime, anyplace, anywhere.
Graham Bell, a former Olympic skier said, "I think High.tv is a great concept - to be able to watch my sport and many others when I like and where I like gives me utmost control and freedom of choice. Broadband television offers a whole new medium which is catching on rapidly and will soon become the preferred choice of accessing great content in a high quality format."
The channel is free to view and is paid for by advertisers and sponsors including Sony Ericsson, Philips, Nissan, Nike, Red Bull, Canon, HSBC, KPMG, COI, AOL, Easy jet, Quiksilver and Warner Bros
High.tv can also be found on the sports broadband pages of ISP partners =
such as AOL UK, Tiscali, Wanadoo, Blueyonder, Comcast and Windows Media in the UK, US, Australia and Canada.
To mark the launch, High.tv will broadcast exclusive highlights from the King of the Caribbean professional windsurfing competition that started this week in Bonaire.
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LIES, DAMN LIES, AND STATISTICS
Record Mobile Phone Sales in Q1
Sales of mobile phones increased 17% in the first quarter to 180.6 million units, up from 153.7 million in the year-ago quarter, according to Gartner Inc.
The record-breaking quarter saw sales growth in all regions.
"In the mature markets of Western Europe and North America replacement sales ensured a buoyant performance," said Ben Wood, Gartner's research VP for mobile terminals research. "The Asia/Pacific region reflected seasonal trends by virtue of strong sales associated with Chinese New Year and other festivals."
Rapid growth in emerging markets such as Eastern Europe, Middle East and Africa and Latin America also helped spur global sales, he added.
As for the mobile phone makers, Nokia maintained its leading position and even saw its market share increase, despite poor performance in North America in the quarter. According to Gartner principal analyst for mobile terminals in Asia Pacific Ann Liang, Nokia can thank Asia-Pac, especially Mainland China, for much of its growth. Apparently, "aggressive pricing, significant investments in marketing and its distribution network delivered sales of more than 5.6 million units" in China.
Motorola also had a good quarter, selling 30.3 million units and keeping roughly the same share of the market. Gartner says that a strengthening brand, largely due to the success of its sleek RAZR V3 phone and improved relationships with network operators contributed to the solid quarter. But the road ahead won't be an easy one. "Motorola must now work hard in 2005 to grow its market share further without sacrificing margins too dramatically, particularly given its commitment to supply ultra low-tier products," Wood said.
Although still in third place, Samsung eked out a bit more market share in Q1 - 13.3% vs 12.6% a year earlier. It saw particularly strong sales in Western Europe and Russia and gained more traction in other regions due to lower prices on its handsets.
While other manufacturers gained or maintained market share, Siemens felt the brunt of their success, dropping from 8% of the market in 1Q04 to 5.5% in Q1 of this year. According to Gartner, this is the company's lowest market share level since 1999. "The uncertainty about the future of Siemens' business has hurt it as network operators and key channels lose confidence in the company and its products," said Wood.
Wood added that although consumers are buying more mobile phones, profit margins are being squeezed because "consumers in emerging markets want cheap handsets, and competition in more-developed markets keeps prices low." This will likely lead to trouble for smaller manufacturers, many of whom are already struggling to stay afloat. "We expect some of them to be bought out, and a few will choose to leave the mobile phone market completely," he said.
Based on the Q1 results, Gartner expects worldwide mobile phone sales for the year to near 750 million units, up 13% over 2004.
Worldwide Mobile Terminal Sales to End-Users in 1Q05
(Thousands of Units)
1Q05
1Q05
1Q04
1Q04
Company
Sales
Market Share (%)
Sales
Market Share (%)
Nokia
54,943.1
30.4
44,259.1
28.8
Motorola
30,293.6
16.8
25,111.0
16.3
Samsung
24,099.0
13.3
19,362.5
12.6
LG
11,138.6
6.2
8,210.0
5.3
Siemens
9,942.7
5.5
12,285.8
8.0
Sony Ericsson
9,900.0
5.5
8,638.6
5.6
Others
40,293.0
22.3
35,879.9
23.4
Total
180,610.0
100.0
153,746.9
100.0
Note: This table excludes ODM to OEM shipments.
Source: Gartner Dataquest (May 2005)
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Web Surfers Replacing Couch Potatoes; Internet Chipping Away at TV Ads
The signs are evident that the Net is beginning to take away advertising dollars from TV in increasing numbers, according to a recent Los Angeles Times article. As evidence it cites the commercials for Land Rover, the Army and Staples that run before music videos and TV clips on Yahoo. The report says that General Motors cut commercial orders on some broadcast networks but simultaneously agreed to pay $4 million to sponsor an America Online music service. GM knows what it's getting because it's expanding a campaign that placed Buick spots before AOL's recaps of the hit show "Desperate Housewives." The newspaper also reports that Microsoft's MSN.com recently landed such blue-chip advertisers as American Express, Volvo and Sprite.
"Our business is probably coming more from television, especially broadcast television, than from any other medium," said Wenda Harris Millard, chief sales officer for Yahoo, which did $3 billion in online ads last year. "Brand marketers have finally recognized they cannot ignore the shift in media consumption patterns."
John Hayes, chief marketing officer at American Express, said, Network TV isn't watched by as many consumers as it used to be. The couch potato," he said, "has been replaced by the Web surfer."
The size of the advertising market broadcast network, cable TV and local TV ads runs about $60 billion a year. Online ad revenue grew 33% to $9.6 billion in the States last year. About the same amount of growth is expected in 2005. As the Net has become more of a standard part of people's everyday life, the paper reports the TV ad market's best days might be behind it after run of more than four decades.
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