The week in review: new ideas for avatars

This was published last Friday on the Total Content + Media web site. For past weeks in review not posted here, go to http://www.totalcontentandmedia.com.

Today, Spanish telco Telefonica finally announced that it would start the process to sell off the remainder of its 75% stake in TV production company Endemol. The company is being valued at a whopping €3 billion. Since Telefonica floated 25% of its Endemol stock in November 2005, the share price of the company has gradually worked its way up from €9 per share to current prices of around €22 as speculation about interested buyers has ratcheted up over the last 15 months. According to this article, private equity firms including Apax, KKR, Providence and CVD are all circling around the company. Mediaset and Telecinco, bidding jointly, are among the media companies that have also expressed interest in the producer of formats like Big Brother and Deal or No Deal.

On Wednesday I shared a cowhide-upholstered sofa in Soho with Silvio Scaglia, founder of IPTV pioneer Fastweb in Italy, to talk about his newest venture, an online P2P video company called Babelgum. The company is coming in on a wave of online video aggregators, some of which are also based on peer-to-peer networking technology—BitTorrent (which relaunched the other week as a legit, commercial enterprise) and Joost among them. (Joost, incidentally, has signed a deal with Endemol.)

This is what Scaglia told me would be Babelgum's unique selling points: it will have a transparent pricing structure for content providers ($5 for every 1,000 CPMs when providers upload the content themselves); a strong mix of "professional" rather than user-generated content; and an intuitive "smart channel" service that morphs to your tastes based on what you choose to watch, and what you choose to skip. The channel will be advertising-supported and free to watch, as Scaglia says he doesn't believe people will ever pay much for these services.

Folks will be able to see for themselves when the site launches its beta later this spring, but I think Babelgum will have a challenge ahead of it amidst this glut of other online video contenders.

A case in point: online video market got another player this week in the form of Amazon linking up with TiVo for its Unbox service. Users of the service can now use their TiVo boxes to transfer their films directly to their televisions for viewing—something that seems simple and obvious but actually is not that common in the majority of video downloading services, which still largely expect people to watch programmes on their computer screens. I expect that with deals like the one signed between Yahoo and Akimbo at the beginning of this year, the area of transferring Internet content to televisions will be a focus for other companies too in the months ahead.

In another piece of news that underscores the bridge between the television set and the Internet, Sony this week announced a new dimension to its PlayStation 3 that will offer users the chance to play games with other users in "3D." The service, to be called Home, will use interactive elements, virtual worlds and avatars, a la Second Life, but all be accessible via your television rather than your computer monitor. Analysts have greeted the news positively—Sony's been lagging behind Microsoft's Xbox and Nintendo's Wii in the games console stakes and needs a boost of something fresh to drive sales.

I've thought of a good application for business people in this emerging 3D world: This week has been a big one for media conferences: the IPTV World Forum and the FT Media Conference and the Digital TV Group's Annual Summit in London; and the Bear Stearns annual media confab in Florida were among them. As we were finishing with the second issue of Total Content + Media magazine, I didn't manage to attend any of them. But it strikes me as a very good idea for these conferences to eventually move into the 3D world so that at least my avatar could have come in my place.

Last week's Week in Review

This story was originally posted last Friday on TCM's web site

It's been a curious week for results reports. All looks very good on the surface, but not so great deeper down. Google said that for the fourth quarter, its net profit nearly tripled over the quarter last year to $1.03 billion from $372.2 million. But nevertheless its shares were sent down on the news and are still trading down two days later.

What gives? There were different reasons floating around explaining why: some believed the market's response was because people have become inured to the Google good-news wagon, and what they really need to see is wildly excellent news to be enthusiastically buying up the stock, which is already trading at sky high prices of just under $500/share.

Others in the investment community say they are getting concerned with Google's business model being too focussed on a single revenue stream. The reality of breaking into all the new markets that they'd like to tackle to grow their business - online video (with YouTube), online payments (using Checkout), and putting their advertising model onto other media like newspapers - could be more costly than originally expected.

The online shopping giant, Amazon, provides an instructive example for Google about what this can mean to the bottom line in the longer run. Amazon had beat analysts' expectations for the fourth quarter on sales of $4 billion, an increase of 34% on the year before. But while still profitable, with sales of $98 million, this number was down significantly on sales of $199 million for the quarter a year ago, and is its lowest profit margin since 1999. This rather huge drop has been attributed to shrinking margins: its traditional businesses of selling books, movies and other items online has matured, and it's been spending a lot of money trying to shift products in new areas, like toys and electronics.

The lesson here might be that Google needs to get some value creation in those new areas before the old, established ones start to really fade.

Comcast, the US cable operator, is another company that's reported a tripling of profits for the quarter. With a lot of their growth coming from a welcome triple-play boost of customer spend, Comcast is going to reinvest a chunk of their money on expanding their telephone services. Their new attention could not be coming at a better time: they were also in Washington this week filing an appeal with the FCC over a recent set-top box ruling that will force them to 'open' their STB's to competitors' services. With the huge influx of new companies out there offering video on demand and other TV-based entertainment, this could seriously disrupt Comcast's (and other pay-TV providers') bread and butter.

Over in the UK, the satellite broadcaster owned by News Corp., BSkyB, also reported some healthy numbers on the back of triple play excitement. We'll be providing a full analysis of what they are doing in our launch issue of TCM magazine, which will be out in a couple of weeks.

Yo space or Myne?
Emap is the latest media company to try to follow the News Corp. example of getting into social media by acquiring an existing user-generated content player. Today it announced it bought Yospace Technologies, for £8.7m, with a possible further £5.7m in deferred payments based on their performance between now and March 2010. Yospace is behind a number of social-networking sites like "See me TV," a video sharing site designed for mobile operator 3 (which happens to have a content deal with Emap…). Three has claimed that it has had huge success with its video service, thanks largely to See me TV.

The price that Emap's paying for Yospace is a tad less than the $580 million that News Corp. forked out for MySpace. Yospace made a loss of £480,000 in 2005 (no figures for '06 have been released), and it's not yet clear that MySpace is turning a profit, either. No matter how much you pay for social networking, it's still not clear whether it will pay back.