Internet Outsider

TiVo Provides the Missing Movie-Download Link; Threatens Cable Cos

At long last, someone has finally addressed the gaping hole in the digital-movie-downloading business. TiVo's new deal to let subscribers rent or buy Amazon.com digital movies directly from their TiVo boxes removes an awkward step in the process: customers no longer have to futz with their computers to rent or purchase a movie. Now, they can just pick up the TiVo remote.

Perhaps this will finally light a fire under the cable companies, whose resistance to unforced innovation is legendary--and whose grasp on the digital rental market continues to slip. Or perhaps it won't...

Cable giants like Time Warner Cable, Cablevision and Comcast have been trying for years to boost revenue with on-demand movie rentals. But success has been hindered by limited movie selection, short viewing windows, and the inability to for viewers to purchase downloaded movies outright.

Meanwhile, online movie services like Amazon's Unbox or Apple's iTunes have required a computer to make the transaction and download the movie file. Getting the movies to play on TV has been even more complicated and expensive, requiring either a complex computer setup or a pricey gadget like Apple TV. TiVo's deal with Amazon solves some of these problems, allowing subscribers to buy movies without leaving the couch, or rent them for 30 days, often for less money than 24-hour cable rentals.

But don't short cable yet: TiVo's impact is limited by its modest presence -- only 4.3 million total subscribers, of which only a small percentage have set-top boxes compatible with the new service. Also cheap, no-brand DVRs built into cable boxes have already reduced TiVo's market share, and now that TiVo has blazed the trail, the cable companies are presumably free to strike similar deals of their own. Because digital-download services require a high-speed Internet connection, moreover, even the TiVo box is not a total loss for the cable companies.

In any case, expect more deals like this in the near future from companies like Apple, Microsoft and Sony, all of which are eager for a place in your living room -- at your cable company's expense.

Amazon $400!

Yes, yes, I know, it took 7 years to get back there again (split-adjusted $67).  Better late than never?

Rip-Van-Amazon Awakes, Opens Music Store

For us old-timers, it's great to see Amazon innovating intelligently again.  The company should have launched a digital music store seven years ago, of course, before Apple ran off with the market, but better late than never.

The good news (for Amazon shareholders): This isn't a Bezos pipe-dream.  Amazon's existing music store, which has always been one of the best on the web, provides a marvelous platform from which to launch music downloads.  The company is also selling only un-copy-protected music, thus maintaining its religious commitment to customer satisfaction. Lastly, since the company is a neutral third-party not about to corner the digital music business forever (like Apple), record labels and musicians should rush to embrace Amazon's new store.  Labels hate Apple's chokehold on digital music, and Amazon may finally represent a viable competitor.

 

 

Amazon Buys DPReview.com - Bigger Site Than You Think

Jason Jones: Amazon acquired DPReview.com today (terms not disclosed).  DPReview.com is the leading review site for digital cameras.  It's also a wildly popular site, with 7.7m uniques in March.  To put this in perspective, CNET has roughly 30m monthly uniques.

I have heard from a credible source that CNET also provides the back-end ecommerce infrastructure for DPReview.com (although I do not see any mention of CNET on their site... perhaps CNET provides the comparison shopping lists).  Now that Amazon has acquired the site, I would expect that infrastructure contract to switch from CNET to AMZN in order to drive more digital camera sales at AMZN.

In general, I expect to see more digital content acquisitions by shopping sites looking to drive traffic.  TechTarget, an online provider of corporate IT content, is on deck for an IPO this week (read my post here).  It has been a rumored target in the past and likely will be in the future. 

Jason Jones on Yahoo/Right Media, VUDU, Amazon

Guest analyst Jason Jones weighs in on Yahoo/Right Media, the new VUDU box, and Amazon's S3 (the business that everyone's now prematurely salivating about):

Yahoo/Right Media: It seems to me like a lot of money to pay for a very young company that passes 90% of its revenue onto to its publishers and seemingly low barriers to entry.  $680m for 80% indicates a total value of $850m, which is larger than 24/7 Real Media's total enterprise value of $478m.  While TFSM does not directly compete in the advertising exchange model, it a profitable public company with a global platform in the media network, technology ad serving, and search engine marketing space and it is expected to do $270m in revs in '07. While Right Media has the first mover advantage, I find it hard to understand how they have a sustainable competitive advantage over companies like TFSM and DCLK that can leverage their ad serving technology and media networks to successfully enter the ad exchange space.  Perhaps that is why RM sold out.

That Cool New Movies-On-Demand Box--VUDU: Does the world really need another set-top box?  I think Vudu needs distribution.  TIVO is best positioned with its Comcast and Cox partnerships. Give it another 6-12 months and the spotlight will shift back to TIVO as the industry leader.  VUDU needs one of the major set-top box manufacturers to buys it or it must make deals with the MSOs for distribution.  Otherwise it isn't that interesting.

Amazon S3: In this blog post, SmugMug lays out the details of how much money his company has saved by switching to Amazon's S3, the new web-services service that Wall Street is all hot-and-bothered about.  On the call, Bezos said the service's contribution to Amazon's performance was immaterial.  Based on SmugMug's post, moreover, it seems like a very low-margin business.  So, is this really a good business for AMZN? AMZN is selling $423k of services for $84k? I am sure AMZN has some scale advantage but it seems like this is likely another low margin business.  If I was Smugmug, I would be concerned that AMZN would raise prices after standardizing on their platform.

Long-Suffering Amazon Shareholders Catch a Break

I remember thinking I was getting a good deal on Amazon in the summer of 2000 when cash concerns had knocked its stock price down to $50.  Then it went to $6.  Then it survived the bankruptcy forecasts and Internet bust and got up a good head of steam.  Then Jeff started running it like a private company.  Then, then, then... Anyway, now, 7 years later, I've finally clawed my way back to even again.

Amazon hasn't become the company I hoped it would back when I put that $400 target on it ($67 in today's split) in December 1998.  As you may recall, the stock blasted through the target in two weeks, soared to $600, and then, over the next 18 months, collapsed. Amazon's still a great franchise, and I'm still a happy customer.  I don't own the stock because I expect it to soar.  I own it because...well, for old times' sake and because I'm going to own it until it breaks through $400 ($67) again or goes bust, whichever comes first.  I don't follow the company closely enough to have insight into this quarter's numbers.  But they certainly come as a breath of fresh air.

Attention Web 2.0 Start-Ups: Party May Be Ending

Who says Wall Street firms are always bullish?  According to Reuters, Merrill Lynch published a report today suggesting that housing market woes could drag the economy into a recession and that, if it does, investors can expect a drop in the S&P 500 of at least 30% from the peak.  Even if there is no recession, and the market just does a head-fake, we should expect a drop of about 20%.

How will a public-market stumble affect Web 2.0 start-ups?  The same way the market crash in the fall of 2000 did, albeit to a lesser extent:

• Money will get harder to raise.  (Because VCs will be feeling pressure from their clients, and exit valuations will be lower).

• Financing and exit valuations will be lower.  Because the stocks of acquirers and comparably public-market companies will be lower.

• Investors will get impatient for start-ups to develop businesses instead of "products" and "communities."

• The growth rate of online advertising will slow dramatically.  In tough times, advertising is one of the first expense lines to get cut (by big businesses and small).  What's more, some start-ups that are currently buying advertising will cut back or cease to exist. 

In short, being a Web 2.0 entrepreneur or employee may soon get more difficult and less fun.  Hit the bids while you can!

UPDATE

Oh, well.  Merrill Lynch's economist David Rosenberg just blasted Bloomberg for mischaracterizing his report and said he is merely suggesting that we could have a "growth recession," meaning that the economy's growth rate could slow, and this only if the Fed doesn't cut interest rates.  So that's still bullish.  For what it's worth, I am calling for a real recession, in which the economy shrinks and the stock market tanks, regardless of what the Fed does. 

Calling All Guest Writers!

Apologies...I'm gone this week and most of next.  So I figure this is a good time to try an experiment I've been meaning to try for a while: guest posting. 

Some of the comments on this blog are excellent, and we would all benefit from them being more visible.  With this in mind, please send any on-topic comments you would like published (Google, Yahoo, Amazon, eBay, Web 2.0 Bubble Bursting, etc.) directly to me at share@internetoutsider.com, along with your full name (real name, please).  You can also obviously post them in the comments section, and if there's duplication, fine.  I will then post the ones I think would be of interest to the community as separate posts under your name.  I'll be online only intermittently for the next two weeks, so please give me a couple of days to respond.

Depending on how this goes, I may make it an ongoing and more-formal process, with guest writers, etc.  Despite the latest web crash, there's a ton going on, and I can only cover a small piece of it.

Thanks.

Yahoo-eBay Shotgun Wedding

Yes, fine, the Yahoo-eBay alliance is a "win win."  Amid all the delirious cheering, though, it seems worth noting that it's also a "Because we're getting our butts kicked." 

What I wonder:

1. Now that they are thick as thieves, could eBay be persuaded to flip Skype to Yahoo?  I haven't heard diddly about Yahoo Messenger for Voice, and Skype is still going gangbusters.  I don't care what eBay says--Skype would still be much better off merged with the Yahoo communications suite than the eBay commerce and payment platforms--and as a Yahoo mail and Skype customer, I'd like everything in a single package.
2. Could Jeff Bezos ever be convinced to put himself out to pasture and sell Amazon to eBay?  The two companies are pretty much in the same business now, and eBay would benefit greatly from Amazon's design, distribution, and merchandizing expertise.  With its limited cash flow, Amazon is severely constrained in the Google-inspired investment arms-race, and one wonders how long it can keep up. 

Disclosure:  I own both eBay and Yahoo.  And Amazon, for that matter.

Rip Van Amazon Awakes, Plans Movie Downloads

Having slumbered through the development of massive market opportunities like Netflix and iPod, Amazon is trying to drag itself out of bed in time to catch what's left of the next one: movie downloads.  The company actually has a significant asset in this arena, the IMDB, which is apparently the most popular movie-related site on the net.  If memory serves, Amazon bought the property back in the Dark Ages and has now grown it into something worth writing about.   

From the WSJ:

People familiar with the situation say the online retailer is talking with movie studios including General Electric Co.'s Universal Pictures, Viacom Inc.'s Paramount and Time Warner Inc.'s Warner Bros. about making their content available on its site, both for Internet rental and purchase. Negotiations are continuing, but a service could begin this summer. Amazon declined to comment.