NBC and Miscrosoft may team up to create a content owner’s dream device, one that will provide “filtering technology that allows for playback of legitimately purchased content versus non-legitimately purchased content.”

My take? NBC and MS will gratify each other in an Alcatraz-like Zune yin-yan, one that’s sure to provide a pretext for private lavish director-level NBC-MS lunches, gushing press releases, demonization of fair use, and circle-jerky boardroom meetings that will make defense contractors blush.

And the public will continue to ignore the Zune because of it. These companies just don’t get it.

A future update of the software for Microsoft’s portable media player may well include a feature that will block unauthorized copies of copyrighted videos from being played on it.

Tuesday, Microsoft announced that it would start selling video programming for the Zune, mainly TV shows. These include programs from NBC Universal, which has pulled its shows off Apple’s iTunes Store.

Late Tuesday afternoon I reached J. B. Perrette, the president of digital distribution for NBC Universal, to ask why NBC found Microsoft’s video store more appealing than Apple’s.

He explained that NBC, like most studios, would like the broadest distribution possible for its programming. But it has two disputes with Apple.

First, Apple insists that all TV shows have an identical wholesale price so that it can sell all of them at $1.99. NBC wants to sell its programs for whatever price it chooses.

Second, Apple refused to cooperate with NBC on building filters into its iPod player to remove pirated movies and videos.

Microsoft, by contrast, will accept NBC’s pricing scheme and will work with it to try to develop a copyright

I think that’s more of a statement than a question these days. Vista is, at best, seeing lukewarm reception in the OS marketplace. And the Zune? Hmmm. Not much to say about that. Microsoft has seen a string of music services go down in flames to Apple’s iTunes Store and iPod juggernaut.

So how about that core?

If Microsoft resolves all those concerns, no one (including the Open Document Format camp) will have a problem with it. Microsoft doesn’t seem to grok that true openness breeds trust. If it were submitting a truly open standard, it wouldn’t matter what anyone thought of the company submitting it.

It looks like Microsoft’s days of rolling over opposition with a superior lobbying budget and the lack of clear alternatives is over. It might actually have to play nicely now with the other children. Imagine that.

To me the question isn’t so much is the core business fading, but rather can its new businesses and related services like Xbox make up the difference? If Microsoft can iron out significant manufacturing problems with the Xbox 360, and keep its (very) healthy share of the server and corporate desktop markets, it’ll be ok for the next half decade. If not, watch out.

With Apple’s and EMI’s move to release digital-rights-management-free music on the iTunes Store, it’s hard to imagine the dam not breaking.

Apple’s EMI offerings will come in the form of 256kbps AAC tracks, and will be offered at $1.29 each. Let’s take a look at what this does:

• EMI gets more revenue per track — something the labels have been wailing about
• consumers get higher bitrate, and DRM-free tracks
• and Apple probably increases iTS sales

All of a sudden, everybody wins. Continue reading »

Apple has a major announcement due to be aired in a Superbowl ad spot on February 4th.

Touchscreen iPod ala iPhone? Beatles catalog in iTunes Store? OS X 10.5 Leopard shipping?

via Digg

Q: Why are Disney, Paramount and Viacom the only studios whose movies are available at the iTunes store?

A: Fear.

While the vast majority of moviewatchers are buying DVDs and seeing movies in theaters, many are ripping DVDs and downloading movies on their PCs and Macs, disabling or stripping out the digital rights management features. It seems the best digital rights management (DRM) the studios can come up remains uncracked — at best — for a few weeks. And if that wasn’t enough bad news, the US theater box office take was eclipsed by game revenues for the first time in 2005.

The worldwide video game industry, with revenues of $24.5 billion last year, overtook movie box-office receipts…

Studios are treading carefully, and slowly, because their business plan is now littered with uncertainty and big decisions. The livingroom-PC merge is happening quickly for studios.

Too Accessible?
According to Ronald Grover at BusinessWeek, many studios specifically balk at Apple’s DRM rules: iTunes Store movies and TV shows can be shared with up to 2 other Macs/PCs (via iTunes’ authorization limits). In reference to Apple Inc.’s CEO Steve Jobs, Grover wrote:

“His user rules just scare the heck out of us,” one studio executive told me.

Generally speaking, studios hate backups and multiple copies of their material. They want you to own Mission Impossible, and if the DVD gets scratched, lost or warped, they’re happy to sell you another. Luckily there’s a legal concept in the US known as Fair Use that allows us to legally back up our media, which opened the door to legally owning a second copy of movies and music (and software).

Old Media and New Pirating
Studios are still comfortable with optical media (DVD, HD-DVD, BluRay) because — despite all three formats’ protection schemes having been breached — ripping the contents to a Mac or PC remains a technological hurdle for regular users.

Downloading movies from torrents is likewise demanding in both skill and drive space. When it comes to downloading movies, we’ve yet to equal the ease of music pirating in the late 1990s in terms of the speed of downloading and storing the files (downloaded file size vs. average hard drive size vs. average connection speed). But the days of terabyte storage and even faster download speeds for cable and DSL subscribers will soon make moving movies over the internet easier, and the studios know it.

Studios Learn from Music
Studios are wary of Apple’s Jobs and his smashing success selling music online at a 99¢-per-song price point. The music industry largely feels it lost a big opportunity when it agreed to that price point (the bulk of the music industry anyway). Maybe it wasn’t using its crystal ball to see that the iTunes Music Store (as it was known back then) would become the runaway online music sales leader, and that 99¢ per track would become a standard.

In March 2006 the record labels tried and failed to have Apple raise that price point. They faced significant obstacles, including Jobs’ and the music buying public’s reluctance, and the likelihood that pricing tracks over a dollar would break a psychological barrier and send online music buyers (back) to the land of online music pirates. [For anyone interested, I’ve detailed my feelings about Apple’s music DRM here.]

Relationships are Precious
And then there’s the delicate relationships between the studios and movie retailers:

Charging $14.99 for new flicks and $9.99 for older ones, Jobs clearly wants to undercut big-box retailers like Wal-Mart (WMT) and Target (TGT), which sell the great majority of the newer DVDs these days for as much as $19 a pop. That’s a bad move on Jobs’s part. Both Wal-Mart and Target have made their feelings known about being undercut by Apple. Big surprise—they’re not happy about it, and Hollywood has been paying attention to these all-important retailers.

I agree with Mr. Grover that all the major studios will eventually sell movies through Apple. Only they’ve seen the road map of what not to do, thanks to the music industry’s missteps, and they’re going to move with extreme caution.

If all this looks like the famous Who-Needs-Physical-Media-Distribution argument, it’s because it is. Physical media is more in our past than future. It wastes resources like fuel and paper.

The asteroid is about to hit the DVD world… you can see it approaching in the sky on clear evenings.

I wouldn’t want to be a dinosaur.

[Author’s notes: Paramount and Viacom have hedged their bets by restricting the titles sold in the iTunes Store to older, less popular films. Blockquotes #2 and #3 pulled from Why Hollywood Snubbed Jobs at MacWorld.]