Another Side of the Apple Shift to Intel

New Focus for Intel: The Home

When Paul S. Otellini, Intel’s chief executive, takes the stage at the [Consumer Electronics] show Thursday, he is expected to present a new Intel focused on selling a digital lifestyle rather than hardware.

Instead of bits and bytes, Mr. Otellini, the first nonengineer to run Intel, is expected to spend much of his time talking about cool new music and video features that will be made possible by the new home entertainment platform, called Viiv, and Core, a low-powered chip that will eclipse the Pentium M chip for portable computers.

The transformation of Intel will, in part, be defined by its new alliance with Apple Computer, which has come to dominate the digital music business and is entering the nascent digital video market with its iPod players.

[…] While an Apple-Intel living room alliance might not emerge as early as January, most industry observers say they believe that Intel’s alliance with Apple was shaped in part by Microsoft’s decision to pick the I.B.M. PowerPC chip for its Xbox 360 game machine.

“Intel has begun tuning up Yonah for an orchestra we haven’t heard yet,” said Richard Doherty, a computer industry analyst and president of Envisioneering Inc. in Seaford, N.Y.

LATimes Editorial On The Sensenbrenner Analog Hole Legislation

Interestingly, even the industry’s hometown paper doesn’t think it’s a good idea: Congressional copycats [pdf]

The studios have an understandable interest in combating piracy. But Congress should not be mandating the technologies used to fight it, particularly when they aren’t proven. As Sony BMG learned when it used a new technology to prevent CDs from being copied, unanticipated glitches can inflict more than enough pain to offset any reduction in illegal copying.

At any rate, this legislation won’t stop determined video pirates, who will find other ways to make bootlegs. Its effect would be mainly on typical TV viewers, who would be prevented from doing a number of things they expect to be able to do with video. Maybe you’re an HBO subscriber who recorded an episode of “Curb Your Enthusiasm” to watch on the bus the next morning on your way to work. Today, you can use analog connectors to convert that recording into a digital file suitable for your iPod or Sony PSP. If the bill became law, the tools needed for the conversion would be illegal.

[…] Such connectors are gradually disappearing from TVs and video recorders anyway, so this “hole” will eventually close on its own. In the meantime, if the goal is to deter illegal copying, Hollywood should work harder to help viewers watch what they want when they want to. And Congress should understand that piracy cannot be curbed simply by giving Hollywood more control.

Related: the LATimes’ end of the year roundup – High-tech Hollywood [pdf]

HOLLYWOOD CONTINUED ITS love-hate relationship with new technology in 2005. The industry made a few breakthroughs that will benefit entertainment’s producers and consumers alike — while still seeming to take one step backward for every step ahead.

One of the most promising children of the marriage between Hollywood and Silicon Valley was the deal between Apple Computer and a handful of TV executives to let Apple sell downloadable versions of their shows for the iPod. It was a small step in the grand scheme of things but a breakthrough nonetheless: It showed the networks’ willingness to experiment with new business models even if they conflict with the desires of affiliates and syndicators.

Meanwhile, Apple’s iTunes Music Store continued to dominate the market for downloadable songs, which grew about 150% in 2005. That growth helped ease the industry’s pain from yet another drop in CD sales. Yet revenues were comparatively small, showing that masses of consumers had yet to be persuaded to pay for music or video online.

The Movie Industry and China

An article on the contradictions and opportunities being pursued in the Chinese market by US movie companies – challenges of ideology, distribution and culture: Crouching U.S. studios, hidden Chinese market [pdf]

If Hollywood is ever going to find its way through the cultural mists and mazes of China — or get some of those 1.3 billion butts into seats for the next “Shrek” or George Clooney picture or whatever it is Spielberg decides to make — it is going to have to figure out how to get money out of people like Al Yon.

Yon already loves Hollywood. Loves American movies — even adopted his first name back in high school English class in honor of Al Pacino. Loves American TV too. “Seinfeld,” “Frasier,” “Friends,” “Sex and the City.” He’s seen every episode.

[…] And Yon should be Hollywood’s dream customer: a smart, young, urban guy in the world’s fastest-growing market, with a voracious appetite for just about anything the American pop culture machine throws out. ” ‘Desperate Housewives’ — I love it,” Yon says.

Problem is, Yon has never paid a dime to ogle Charlotte or snicker at the inside jokes with Jerry and Kramer. Never plans to. All that expensively produced American culture is being piped into his bedroom on the Internet, “shared” among Chinese consumers who swap digital files free. And Yon’s not some geek operating on the fringe. He’s the Chinese mainstream. He’s not even one of those consumers who get their Hollywood fix from buying pirated DVDs for a dollar.

“Why would I pay a dollar,” Yon asks, perplexed, “for something that is free?”

A Good Question: Who Cares?

What *is* it going to take to get the consumers to care about the choice between HD-DVD and Blu-Ray? This article suggests that it’s all just a fight over positioning deck chairs on the Titanic: Fiddling With Format While DVD’s Burn

There are growing signs, though, that the battle for supremacy in this multibillion-dollar market may yield a hollow victory. As electronics makers, technology companies and Hollywood studios haggle over the fine points of their formats, consumers are quickly finding alternatives to buying and renting packaged DVD’s, high definition or otherwise.

“While they fight, Rome is burning,” said Robert Heiblim, an independent consultant to electronics companies. “High-definition video-on-demand and digital video recorders are compelling, and people will say, ‘Why do I need it?’ ” when considering whether to buy a high-definition player.


Linkin Park Will Stay With Warner Music

Less than eight months after issuing a stinging, public vote of no-confidence in its record company, Warner Music Group, the multiplatinum rap-rock act Linkin Park has signed a lucrative new pact with the recording giant. The six-member Los Angeles band and its management company, the Firm, last week reached a deal with Warner calling for an estimated $15 million advance for the group’s next album, executives involved in the contract negotiations said. The pact provides the company’s Warner Brothers Records unit with an option for up to five more albums from the band, one more than had been called for in their original deal.

Warner also agreed to increase the musicians’ royalty rate to an estimated 20 percent. The next Linkin Park CD, still untitled, is expected to be released as early as mid-2006.

[…] Linkin Park joins a long list of major acts who have publicly threatened or taken legal action against their label only to back down after receiving a hefty check. Acts like the Dixie Chicks, Beck, Incubus and Don Henley have traveled the same path.

R. (c)rumb v. Amazon

Artist Puts His Foot Down on Amazon [pdf]

Jules Zalon, Crumb’s lawyer, said people who searched the Amazon website for a product that it didn’t carry were shown Crumb’s famous “Keep on Truckin’ ” image — a big-footed man in full stride, leaning sharply backward — with instructions to keep on looking.

When Crumb’s representatives complained to Amazon in 2003, the company promptly removed the image, Zalon said Tuesday.

The lawsuit, filed in Seattle last week, seeks unspecified damages. It came after the two parties were unable to agree on how much Amazon should pay for using the image, which over the years has been memorialized, among other places, on the mud flaps of trucks.

Speculation on the Rate of Change in Hollywood

From Slate: Hollywood’s New Year – My predictions for 2006

One doesn’t need a crystal ball to see that Hollywood’s future is now inexorably tied to the small screen. Just look at the studios’ own internal revenue numbers. Before the invasion of television, the big screen (aka movie theaters) provided 100 percent of the studios’ revenues. Now it accounts for less than 15 percent. The small screen—which includes computers, portable DVD players, and iPods as well as televisions—provides 85.6 percent. To be sure, much of Hollywood’s celebrity culture, and the entertainment media that feeds off it, remains rooted in nostalgia for the big screen. Meanwhile, the MBAs that run the studios—and their corporate owners—have come to grips with the cruel reality that the movie business is no longer primarily about movies, it’s about creating intellectual properties—the current term of art for a movie, TV series, or game—that can be sold or licensed for personal entertainment in a raft of different forms and markets. According to my crystal ball, the further migration of Hollywood—even with its sticky celebrity culture—into home entertainment will be greatly accelerated in 2006 by the following five events:

“Devolution” of Distribution

Music label forsakes CDs [pdf]

[Ex-Devo frontman Gerald Casale’s] new music is distributed by Cordless Recordings, a new breed of label that has dumped CDs and other traditional formats in favor of offering music only online.

The strategy is meant to cut the cost of catapulting a new artist to fortune and fame by tapping the medium where young fans are finding music.

”When you look at the cost of a major label signing an artist, it costs about a half-million dollars,” said Jac Holzman, who founded Elektra Records in 1950 and now oversees Cordless, a unit of Warner Music Group. He said Cordless does it for ”significantly less,” but wouldn’t be more specific.

Even in today’s iPod-centered music scene, it’s hard to say how far the all-digital strategy might take an artist. There’s no CD box, no liner notes, and very little in the way of traditional promotion.

But one thing’s for sure: Sales of digital music are growing.

Later: The Net Is a Boon for Indie Labels

Santangelo Suit Update

Santangelo in the WaPo: ‘Internet Illiterate’ Mom Sued Over Music Downloads [pdf]

The drain on her resources to fight the case — she’s divorced, has five children aged 7 to 19 and works as a property manager for a real estate company — forced her this month to drop her lawyer and begin representing herself.

“There was just no way I could continue on with a lawyer,” she said. “I’m out $24,000 and we haven’t even gone to trial.”

So on Thursday she sat alone at the defense table before U.S. Magistrate Judge Mark Fox in White Plains, looking a little nervous and replying simply, “Yes, sir” and “No, sir” to his questions about scheduling and evidence exchange.

[…] Her former lawyer, Ray Beckerman, said Santangelo doesn’t really need him.

“I’m sure she’s going to win,” he said. “I don’t see how they could win. They have no case. They have no evidence she ever did anything. They don’t know how the files appeared on her computer or who put them there.”

We’ll see.

Eliot Spitzer On A Rampage

Pricing of Downloaded Songs Prompts Antitrust Subpoenas

The New York attorney general, Eliot Spitzer, is investigating whether the four record companies that dominate the industry have violated antitrust laws in the pricing of songs that are sold by Internet music services, according to people involved in the inquiry.

[…] Warner Music disclosed yesterday in a regulatory filing that it had received a subpoena on Tuesday in connection with “an industrywide investigation” into whether the companies colluded in the pricing of music downloads.

Representatives for Warner and Sony BMG said their companies would cooperate with the investigation. Representatives for the other major companies could not be reached or declined to comment.

[…] Two major companies – Sony BMG and Warner – hit an impasse with Apple this year in talks about the price of music on the iTunes service in Japan. Apple started its service without music from the two companies, potentially offering a sign of the discord to come as the companies face contract renewal talks with Apple over its United States service.

Steven P. Jobs, the chief executive of Apple, later called the industry greedy for pressing for higher prices. Mr. Jobs’s critics in the music industry, in turn, have complained privately that Mr. Jobs is hoarding cash by holding down song prices to protect sales of Apple’s more lucrative iPod music player. An Apple spokesman declined to comment yesterday.

LATimes’ Pricing of Music Downloads Is Probed [pdf]

Slashdot story: Music Download Pricing Lawsuits Pending?