While it’s easy to see what AOL gets out of a potential merger with Yahoo!, it’s harder to see what Yahoo! gets.

Digital Cities/AOL’s own former managing editor, after all, recently called the challenge of reviving AOL — 20 million of whose users have fled since 2002 — akin to "making a Marc Jacobs purse out of a sow’s ear."

AOL seems sadly lost in the broadband age. The very thing that powered its initial rise to prominence — its $9.99 dial-up service — has now become a liability in negotiations with potential suitors. Its own search capabilities are touted as "enhanced by Google".

Were Yahoo! to combine with AOL, it may choose to grab AOL’s remaining 10 million members and its workable sub-brands,

and, taking its cue from Time Warner’s Life Magazine, allow AOL to gently fade into the history books.

Posted under Uncategorized

Microsoft’s $44.6 billion bid for Yahoo! is as much about its software business as its Internet business.

 

Microsoft is ill-prepared to counteract Google’s assault on its Office monopoly.. Instead of fighting Microsoft in the PC software market, Google has taken word processing, spreadsheets and calendars to the web – creating a free, ad-supported, collaborative service-as-software  business that threatens Microsoft’s  bread-and-butter.

 

At the same time, Google’s search strategy has essentially made it the Internet’s operating system. You go to Google to search. But you stay for the other cool applications. Just like you get all kinds of great extras like Internet Explorer and Media Player when you install Windows.

 

Google’s software-as-service approach – nascent as it is – bears an ironic similarity to Microsoft’s own clandestine assault on IBM, DEC and other big iron companies in the 1980s.  The giants were slow to retool their seemingly dominant  mainframe businesses to account for the rising profile of PCs. IBM virtually handed Microsoft a monopoly for MS-DOS and paved the way for cheap PC clones that threatened its survival.

 

Now Microsoft is watching from the sidelines while Google pulls a similar ploy.  As broadband penetrates everywhere, Google is betting that consumers will favor options that reflect the  ethos of the Web – free and community-based. Why install Office if you can get the same functionality from an always-on, super-fast connection that lets you collaborate with your friends and colleagues?

 

Microsoft’s own attempts to cash in on the Internet have been relatively feeble thus far. Its search business only commands a roughly 6% market share, compared  with about 77% for Google and 17% for Yahoo. Small wonder that it’s bidding for Yahoo!  It has little choice.

 

The software-as-service  business model has interesting implications for the entertainment business. What are DVDs , CDs and games if not software?  As consumers become more comfortable with low or no-cost server-based applications, might they become more open to video-on-demand and streaming music? It’s a question that has important implications for Time Warner, which which faces the specter of growing irrelevance for AOL in a search universe dominated by Google and Microsoft.

 

Microsoft  still has plenty of life. Profits are bountiful. No software competitors seriously threaten Office’s dominance. But then, IBM dominated computers in the 1980s, too.

 

 

 

See Also

• Ballmer Makes Big Bet to Get to ‘Next Level’

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Movie download services have been about to take off for nearly 20 years.

In the mid-1990s, Time Warner spent $10,000 a customer in Florida to show downloading movies over cable lines was technologically feasible. In 2008, movie downloads are still mired in the "proof-of-concept" stage.

Apple’s announced plans today for an online movie rental service could be the spark that sets movie downloads alight in consumers’ minds.

Not because Apple is offering a fundamentally new twist on VOD. But because it’s Apple.

The movie download market today is remarkably similar to where online music was before Apple launched its first iPod. Back then, MP3 players were already on the market. But they were largely niche products and most music that played on them was pirated. Apple created the first cool digital music player.

Steve Jobs was also the first technology executive with the heft in Hollywood to actually cut deals with studio executives to allow enough legal content online to create a marketplace — and demonstrate that making money from digital music was at least possible.

In 2008, most consumers still aren’t all that interested in cable companies’ movie download offerings — largely because the studios are so worried about piracy and cannibalizing their existing TV syndication and DVD businesses that they haven’t supplied enough product to interest subscribers.

Movie downloads from services like Netflix and CinemaNow are still largely a curiosity for hobbyists and people who don’t know how to download the pirated stuff. 

Until now, Apple hasn’t fared  that much better. It’s sold only about seven million movies, compared to about four billion songs and 125 million TV shows.

Once again, Jobs has persuaded the studios to make vastly greater stores of content available to consumers in exchange for the tacit promise that he can create enough of a market to offset the inevitable increase in piracy that will occur when millions of new consumers realize how easy it is to download and share movies on their computers, iPods and TV sets. (Just look at the movie piracy rate in Korea, which has the world’s most ubiquitous broadband).

Apple’s movie rental service could be exactly the spark Hollywood needs to jumpstart its online cinema business. Or the spark could become a conflagration that devours industry profits. Or it could flop once again, just as so many for-profit video-on-demand ventures have since Time Warner first dipped its toes in Orlando.

The only certainty is the movie downloads — legal or not — are here to stay.

See Also

• Apple Unveils Online Movie Rentals, Ultra-Thin Laptop Computer
• Time Warner’s ‘Time Machine’ for Future Video

Posted under Uncategorized

Can The Internet really generate new entertainment properties?

 

 

The reported cancellation of the HBO/AOL online comedy venture “This Just In” demonstrates that an age-old (for this business) question about the entertainment possibilities of the Web still have not been resolved in the halls of major media. Launched loudly in early 2007 as a comedy destination for AOL and a potential incubator for new programming concepts, the site never got audience traction and recently suffered staffing changes. Both Hollywood Reporter and Variety are reporting the project will close in coming months, reflecting division in Time Warner about the best uses of the Internet in relation to the other businesses. Rather than generate new businesses and ancillary ad revenue online, HBO seems to be aiming towards leveraging existing brands with an on-demand portal, Variety reports. Apparently reacting to reports of its imminent demise, “This Just In” opens this morning with a YouTube clip of office workers singing “Don’t Worry, Be Happy.”

 

Interestingly, the recently departed head of “This Just In,” Steve Sanford has already come this route before at his previous company, Icebox.com, which tried to incubate animation concepts. Anyone remember “Hard Drinkin’ Lincoln” and the racially charged “Mr. Wong” series? They live on at Icebox.com, by the way. The dream of using the Web as a breeding ground of new talent and programs that can port to offline platforms remains just that, a dream more than a reality. TheAlphaMarketer blogger Gary Bourgeault asks whether the online comedy market has just become too cluttered already. In fact, it has been hard enough just building a dedicated online audience around a serialized creative property of any kind. Bud.tv is the latest example of high profile Web-exclusives that fail to slip into people’s online rituals. Veterans of new media will remember the big crash–and-burns of the pre-bubble years like TheDen and PseudoTV as well.

 

Both scale and distribution seem to bedevil many of these projects (well, and there is talent and quality, too). But the big successes online have been smaller (“Ask a Ninja”, “RocketBoom”) and viral. Whether big-footed big media really can come into a grassroots medium like the Web and fabricate the kind of low-overhead economics and highly imaginative homegrown energy that fuels these small winners remains an open question. The cancellation of “This Just In” underscores how major media still haven’t gotten their heads around this medium yet.   

 

See Also

• HBO
• This Just In

Posted under Michael's Blog