Yahoo reshuffles, and Google follows it in Asia

Today's news, slipped in after the markets closed, was that Yahoo has finally reshuffled its top management, with Terry Semel out as CEO and Jerry Yang in. In an attempt to appease frustrated shareholders as Yahoo continues to lag behind Google in popularity (both for searches and for ad sales), Susan Decker has also been promoted up to the newly-created role of president to support Yang.

Jerry Yang, who was one of the founders of Yahoo, has in recent years focussed a lot of his attention on the company's growth in Asia. The search giant has struck some very fruitful deals in the East, for example partnering with Softbank in Japan to offer a hugely popular Internet and broadband service. And when things started to go awry in China, Yahoo decided to bank on a similar type of arrangement, striking up a joint venture with local partner Alibaba, of which it now owns 40%. It's also attracted controversy for complying with Chinese authorities to provide information about its users (with them subsequently landing in jail for making anti-government statements).

Human rights notwithstanding, if Yahoo was hoping that it had stolen a march on Google in the East, Jerry Yang might have to rethink the strategy. Last week, Google announced it would team up with the Chinese portal Sina to offer services on the mainland. Google already has a respectable portion of the market for search in China (some 19% according to Analysys International), but it has found it difficult to gain the same kind of dominance in China as it has in other (western) parts of the world. Now Google is following in the footsteps of its rival Yahoo in teaming up to target the market. Google has also taken a similar route in South Korea, and one wonders if Japan or other Asian countries might also be JV targets.

Chatting about this deal with our Hong Kong-based correspondent Craig, he relayed this anecdote: "I tried using Google inside China's great firewall and it was amazing how frustrating and useless it is as everything's blocked. The way China controls stuff, you really need a partner."

He went on to say that the Sina deal makes sense as China will continue to focus on holding up national Internet champions. China doesn't have laws enforcing joint ventures for foreign Internet companies that want to do business in the country (as it does for infrastructure-based businesses like telecoms). But the moves by Yahoo aligning with Alibaba and Yahoo teaming with Sina demonstrates that this seems to be the de facto route anyway.

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.

The week in review: making mobile music

Hello. Two weeks ago I was holed up in the office putting to bed the launch issue of Total Content + Media magazine. Last week I was in Barcelona for the 3GSM mobile conference. Below is the Week in review that was published last Friday on the site:

This week, entertainment executives rode in to Barcelona to toot the horn of the convergence train at the annual 3GSM mobile conference and convention, which apparently drew some 55,000 visitors this year.

In amongst the various mobile operators and equipment vendors that normally dominate the conference schedule, there was a good dose of executives from the media and entertainment industries, including Edgar Bronfman, Jr, the CEO of the Warner Music Group; J.F. Cecillon, the new CEO of EMI Music International; Mika Salmi, head of global digital media for MTV Networks; and Lucy Hood, CEO of mobile content aggregator News Corp/Verisign JV Jamba.

The music contingent was particularly strong—Bronfman quoted uncited figures that mobile music will generate revenues of $9 billion in 2007, which would certainly make it the biggest mobile entertainment revenue generator this year if it comes to pass. There were lots of references to the Apple iPhone, which was the 800lb gorilla that didn’t actually show up to the party.

EMI’s J.F. Cecillon went great guns on the promise of mobile music and the future of EMI. On the subject of the company’s current problems, he summed those up in a simple enough statement: “EMI is doing great as long as our music is doing great.” Unfortunately for EMI, the currently skyrocketing sales of Norah Jones’ latest album haven’t been repeated enough in its other repertoire.

EMI issued its second profit warning, saying that in particular CD sales in the U.S. are still in a slump. The bad news prompted calls for CEO Eric Nicoli to resign. Nicoli has only been the CEO since January, although he’d been the company’s exec chairman prior to that. The news also hit other record labels hard, with shares of Warner Music tumbling. Aside from EMI, Warner Music is the only other of the four major record labels to trade as an independent company (Universal being a part of Vivendi Universal and SonyBMG being a joint venture between Sony and Bertelsmann). WMG had been eyeing up a merger with EMI, although European regulators seem to be looking on this idea unfavourably these days.

The presence of EMI, Warner Music, and other tunefully inclined companies at 3GSM underscores how labels are in a mad scramble to get a cut on the next generation of how music will be delivered.

And delivered, rather than sold, is the operative word in today’s world, it seems. At the end of January, EMI said that it had settled a long-standing dispute on copyright infringement with Chinese portal Baidu, with the result being that now all of EMI’s music is available on the site for free. The company hopes that it can instead now make money off of advertising that’s running alongside the tracks.

Cecillon told TC+M that he doesn’t think the free music model will be replicated elsewhere, at least for now. “We have put the system in place in China specifically because of the piracy issue. You have to do this to get into the Chinese market at some point. But we don’t have plans to extend the model outside of China,” he said. “Of course time will tell if that will change.”

Meanwhile, EMI is seeing small advances in its piracy battles. This week its Russian subsidiary Gala won a suit against a pair of Russian Internet sites, www.delit.ru and www.delit.net, who were selling EMI songs for 15 cents per track, without authorisation. As EMI only got the equivalent of about $2,300 as a settlement, the victory was perhaps more of a pyrrhic one.

“The music industry was worth $40 billion two years ago. Because of piracy, it’s now worth $30 billion,” said Cecillon. “That $30 billion is up for grabs.”

Indeed, back at 3GSM, Bronfman in his Wednesday keynote said that music execs weren’t there only to speak at the conference. Some of them were actually there doing business. He mentioned that one artist’s manager was walking around the stands. And if it really is true that the digital revolution is empowering artists to do more and more outside of the label’s reach, there may have been even more music managers walking around, unaccompanied by A&R men, in stealth mode.

(For a roundup of TC+M’s coverage of 3GSM and the iHollywood digital conference, type Barcelona in the search window at the top of http://www.totalcontentandmedia.com.)

The rest of the week…
In other news, the gaming industry got some attention, with Google apparently finally closing in on its purchase of in-gaming advertiser Adscape. The non-gaming media world is also taking a shine to the geek’s corner, it seems. This article from the WSJ says that publisher Hearst, among others, is incorporating gaming elements into web sites to grow traffic. Ladies mag Cosmopolitan is featuring a game called “Boy Toy.”

Baidu had a whopping fivefold increase in profits, but in what seems to be a theme at huge Internet portals, shares in the company traded down on the news. (Google too faced problems in its share price after reporting that profits had tripled.) In the case of Baidu, such is the boom in the Chinese market, that despite Baidu’s growth in profits, the company actually missed its ad revenue targets and didn’t take on as many new advertisers as expected. And analysts are very sceptical about its expansion into the Japanese market. Growing pains have never been so sweet.

Putting my convergence/telecoms helmet back on here to also note that Ericsson struck a deal with Turner Broadcasting last week to help reformat content for mobile phones, starting with CNN news—a very flashy interface for the service, I should add—and this week Huawei also got in on the vendor-as-content-aggregator act by signing a deal with the Orchard to develop a mobile music product. (Orchard represents smaller record labels.) Motorola was one of the first to move into this area in a deal in China several months ago where it effectively made itself into a label for non-pirated music.

Google faced a setback in Europe this week when a Belgian court ruled against it in the ongoing Copiepresse suit for copyright infringement when posting excerpts and links to plaintiffs’ news stories on its site without permission (the plaintiffs were French and German newspapers published in Belgium). The Internet giant is supposed to now pay a fine of E25,000 a day from when the suit was filed in September 2006, which amounts to E3.45 million. The sum is not huge for Google, but the implications of the suit are. Google is appealing the case.

Last but not least, this week a person at Yahoo told me that the company is getting ready to launch a new service that will combine the best of branded entertainment content with user-generated content and social networking. Given that Vaio Nation, a Sony-backed venture, seems to be promising the same sort of thing, this clearly will be the place that large media properties will hope to play in the year ahead.

The week in review

originally posted last friday on www.totalcontentandmedia.com....

It’s a testament to the current market dominance of Google that every day seems to bring a new story about the company. This week the news flow included items on Google ads in video games, on billboards and music videos; Google partnering with the BBC; Google accidentally releasing user data; and Google on top in searches, again (it will report its figures on the 31st so next week is bound to contain more stories).

But more interesting, I thought, was the news coming out about its competitor-in-chief, Yahoo.

After a burst of dealmaking at CES earlier this month, things have taken a dimmer turn. The week didn’t start off too well, when on Monday a story emerged that Didier Lombard, the CEO of France Telecom, said that the operator was considering ending its Yahoo contract and potentially trying to develop services themselves. France Tel is one of Yahoo’s biggest customers in Europe and uses Yahoo advertising products on its Web portals. Even if we don't know the actual terms of their agreement, it's high profile enough to be a problem for Yahoo, which is trying to win lots of new customers in the telco space.

Things didn’t get any better when Yahoo reported that net profit was down 61% on 2005—largely because of one-off investment gains last year—and revenue rose a mere 13%, to $1.7bn from $1.07bn in the fourth quarter last year. To compare, online business competitor Ebay reported net income growth of 24% on the back of similar revenues of $1.72bn. To further Yahoo’s regional woe in Europe, the MD for the area said growth in the UK market, one of its biggest worldwide, is likely to stagnate. Suddenly that exclamation mark they use starts to look especially out of place, doesn’t it? Yahoo!

Yahoo tried to make up for any further grumblings, about its new ad system or anything else, by announcing that it would actually be coming on line earlier than originally promised.

The silver lining to all this seems to be that Yahoo’s joint venture in Japan with Softbank is still coming up strong, reporting a 20% rise in profits over the same period last year. There, a big appetite for online shopping seems to be offsetting stagnating growth in search advertising.

Japan made some other notable appearances this week. The European Commission released its latest report on the digital economy. Online revenues in the region will grow to E8.3 billion by 2010, it forecast, but Europe will still lag behind the US and Japan, where people have proven to be tech crazy. Plus, the connectivity that people are getting both for at-home Internet and on-the-go wireless massively outpaces developments in Europe.

As a juggernaut, however, nothing can compare to China. This week, the country’s ministry of information industry said that Internet users grew 23% to 137 million. In a country with a population of more than 1.3 billion, the potential is still largely untapped.

Back in Japan again to note that Nintendo, the games company, has reported that it’s reached its full-year profit targets in nine months, underscoring how aiming modestly can sometimes pull off magnificent results, particularly compared to its rivals in the games area, Sony and Microsoft. While the Wii was largely written about as a simpler, cheaper new games console compared to its competitors, Nintendo clearly wants to bring its own stamp onto the idea of convergence, launching a news service that can be accessed through an graphic map, a Wii player, a broadband connection and an Opera browser.

On the subject of Nintendo's game's competitors, Microsoft had some bad news this week: a drop of operating profit (tho still profitable!). In the area of new products, AT&T pointed its finger at the software behemoth for ongoing glitches in its IPTV services.

Endemol sell-off buzz continued to be pushed out this week, with rumours that Disney is interested in bidding for the company in the same consortium that includes the company’s founder John de Mol. Such a buy would secure Disney a major producer of reality TV and game shows, which have so captivated audiences around the world (and cost relatively little to put together, and definitely less per episode than an instalment of Lost).

No one has brought up whether Disney would come up against any shareholder problems stemming from how some of the Endemol shows’ content might conflict with its corporate image of offering family entertainment.

News Corp. is another big media player rumoured to be interested in taking a stake of Endemol, but the company has denied interest. One other M&A play the company hasn’t ruled out, though, is throwing its hat into the ring for the Tribune Group in the United States. According to reports, News Corp. would buy almost only for the purpose of consolidating operations between Newsday and the New York Post, two Big Apple dailies that are not keeping analysts happy with their numbers. I wonder if they might also be a little interested in some of their television stations and maybe a sports team or two?

Indeed, the connection between how sport can be used to drive media domination is one that Murdoch has played to perfection in other markets, namely the UK and Asia. Now in the latter market, sport is being used again to try to grow a business—this time around it’s HDTV. It looks like it will be a challenging game, though: so many people get their content through free pirated signals that some think it will be hard to get companies to ramp up investment in costly HD services that have little chance of being sold.

Last week's week in review

Hi there. I posted this review on the Total Content and Media web site last Friday. For the record I'm putting it here, too. If you are interested in seeing it on the site, or to read fresh news for this week, click here.

The week ending 12 January was dominated by news coming out of two technology trade shows in the U.S.—the Consumer Electronics Show in Las Vegas and the MacWorld Show in San Francisco.

But first a look as some other interesting things this week: HarperCollins is following in the footsteps of other News Corp subsidiaries and investing in the digital world. If it’s half as prescient as Fox Interactive with its MySpace buy, it’s picking a winner in NewsStand.

EMI is continuing to bleed. This week’s news is even lower than expected profits after a dud Christmas and the departure of two of its top executives. Will someone please put this music giant out of its misery already?

YouTube got barred, and then re-released, on the Brazilian market. I point this story out because of the uproar it caused when it was banned (for running a racy video clip), and to show how hard it is still to control content on these very popular sites, and to show how easy it is to simply shut them down.

And in the still young IPTV world, a few little beeps: BT hired an ex-Sky executive to beef up its sports coverage, and Deutsche Telekom seems to be having some problems getting subscribers to its TV service. Some are pointing out that IPTV is a doomed business, but I’m sure that both of the aforementioned operators hope they can do as well as one of their smaller neighboring incumbents, Belgacom.

Now on with the shows…. In Vegas, the story was all about the digital, connected home, which according to reports is finally becoming a reality.

That top-line story was bolstered by an avalanche of announcements from media companies, device makers and every one in between about deals, new services and new products. (Type in CES in our search window to get the full whack.)

Yahoo seemed to be particularly rampant on the news front, with lots of releases concentrating on mobile phone deals as well as key agreements to provide its hitherto Internet-only content to television, and vice versa. I suppose it has a lot of catching up to do to get close to Google again.

It’s a testament to the power of Apple right now that the MacWorld show had almost as much heft in terms of media coverage—mainly because of Apple launching two products that has all other consumer electronics rivals and practically everyone else in the digital media value chain watching closely: a new phone, currently being called the iPhone—which is not really a phone but a multimedia device; and a product called the Apple TV--which is not really a TV but something that links to your set to let you watch all your digital content there.

The phone seems to have attracted the most attention, most likely because it looks like it could potentially become be a successor to the hugely famous iPod—not only can you play music on it, and use it as a phone, but you can effectively use it like a little portable computer, complete with wifi access and even Apple’s operating system behind it all.

People of course are citing all sorts of reasons why the iPhone will need a lot of tweaking before it flies off the shelves—price and form factor being the two main areas of criticism. But even if Apple does not stay on top with this particular product, it is pushing the boundaries for what other portable device manufacturers should be fervently developing next.

Apple’s new baby has also attracted some secondary attention, in the form of a lawsuit that’s been filed by Cisco, who says it owns the name iPhone. Given the numerous announcement that came out in advance of the MacWorld show about how Cisco is going to try to become a Big Name in the consumer market, specifically for digital/connected home products, I can’t help but wonder if Cisco’s suit was another way of it trying to steal a little bit of the limelight being generated by its Bay Area neighbor.

Particularly since many observers suspect the whole kerfuffle will be settled out of court anyway.