Category: Industry Trends

Microsoft’s Media/Entertainment & Technology Convergence Group

No-one could have predicted that Microsoft would evolve from selling DOS to being a company whose technologies shape many of the industries around us. Microsoft’s media products such as its Windows Media 9 platform are used throughout the media and entertainment industries from authoring, distribution and viewing. As the company’s relationship with the media and entertainment industries has grown very complex indeed, Microsoft have created a group to manage and develop these alliances: the Media/Entertainment & Technology Convergence Group.

The group aims to drive the company’s strategies for the digital convergence of home entertainment technologies, personal computing and media with a focus on market development, policy and standards.

The former chairman of the Universal Television & Networks Group, Blair Westlake, will join Microsoft and be the group’s new vice president.

“The creation of the Media/Entertainment & Technology Convergence Group and Blair Westlake’s appointment underscore Microsoft’s strong commitment to delivering cutting-edge products for the digital networked home and continuing to build mutually productive and profitable relationships with the media and entertainment industries,” said Steve Ballmer, CEO of Microsoft.

Microsoft on the new group

US CD Album Sales Continue to Rise

The first half of 2004 has been a good one for the US music industry, despite tales of woe from the RIAA. CD album sales are up 6.9% on the first half of 2003, according to figures from Neilsen Soundscan, the system for collection point-of-sale information from retailers in the US and Canada.

The January to June 2004 saw 305.7 million units sold, up from 285.9 million in the same period in 2003.

Universal is listed as the top distributor with 27.1% of the market, independent labels collectively take the second place with 17.5% and BMG are third at 16.4%. BMG’s market share was helped along by Usher’s “Confessions”, which was the top selling album in the first half of this year.

Even with the crowded online music store market, CD album sales are continuing to show promising growth, demonstrating that most consumers still have a healthy appetite for physical distribution mediums and have no wish to pirate music.

Soundscan

Siemens to Buy BBC Technology

Siemens Business Services (SBS) has been announced as the BBC’s single preferred bidder for its Technology division. There are a few hurdles yet to go – the deal is still subject to approval by BBC governors, the Secretary of State for Culture, media and Sport and needs to be cleared by the European Commission under EC Merger Regulations.

Once approved, the contract will run for ten years and is worth up to UK£2 billion (€3 billion).

The BBC is hoping that SBS will provide skills and expertise to reach its goals over those ten years, as well as substantial cost savings, estimated to be at least UK£20 – 30 million (€30 – €45 million). The corporation has been considering selling off its technology division for at least the last ten years, and, having finally done so represents a further slimming down of the corporation. The last big sell off of this type was a few years ago when the BBC disposed of properties to Land Securities Trillium – this of course gave rise to the Legend of the £50 Lightbulb Replacement Fee.

With a staff of 1400 and turnover of UK£230 million (€344 million), BBC Technology has a number of high-profile customers outside the corporation, including BSkyB, DirectTV, ESPN and Hutchinson 3G.

BBC Technology

Siemens Business Services

UK Download Chart Launches September 1

The Official Chart Company has announced that legal music downloads will be getting their own chart from September 1 2004. “The rapid growth of legal download music sites has shown the music industry that downloading is the future,” they said in a statement.

It looks like they’ve finally cottoned onto the fact that there’s not much point in doing a singles chart if only eight people are buying them. iTunes UK has sold 450,000 downloads since launch, against the 500,000 CD singles that were sold during the same period.

Now that we have a number of high-profile legitimate music download sites in Europe, there’s finally somewhere to collect reliable data from. ITunes, Napster and MyCokeMusic.com and others will be providing metrics. Where’s Bleep, eh?

Since those sites are doing very good business by all accounts, it’ll be interesting to see what total sales numbers are. I personally can’t wait to see what effects demographic spread, the complete lack of content from some labels, and the fact that under-18s don’t have credit cards will have on the new chart. However, when The Beatles’ back catalogue finally comes online, the charts will be entirely dominated by those irritating mop-topped shriekers once again.

The number one downloaded track last week was the Pixies’ Bam Thwok, which is an iTunes exclusive. Happily this reinforces my point about the demographic skewing of the new chart: the last time the Pixies were number 1 was …. never, having last bothered the single-buying public in 1991 with a brief stint at 27.

The BBC is considering broadcasting the chart on Radio One. Surely they should be webcasting it?

The Official Chart Company

Instat: Digital Set-top Box and PC TV Tuner Market US$3.8 billion in 2008

In-Stat/MDR are projecting that the worldwide market for digital tuners in set-top boxes and PC TV cards will be worth US$3.8 billion (€3.12 billion) by 2008.

PC TV cards are growing rapidly in popularity, due to PCs being more readily accepted as the entertainment centre of households. Many lifestyle PCs are being sold with cards preinstalled and preconfigured – and even if a PC doesn’t ship with one, the installation of a decent card will enable the owner to turn their PC into a fully functional PVR.

Consumers now expect their PC to be able to satisfy all of their entertainment needs, and television is an important aspect of this. A home entertainment computer without digital television will not be acceptable for much longer.

Motherboard manufacturers are also getting in on the act, and are producing boards with integrated tuners. Motherboards have always demonstrated a trend for integration – many features which previously required an expansion card, like 5.1 sound, RAID arrays, graphics accelerators and Bluetooth, are now built into some boards.

In-Stat predict that international growth (i.e. non-US) will be key, and that Europe will continue to lead the market for some time. Lifestyle PCs are remarkably popular in Europe, with many major brands such as Sony, HP and Shuttle doing well out of products aimed specifically it the entertainment niche. Asia is rapidly climbing into second place – will there be a time when Asia becomes the world’s largest entertainment market?

In-Stat

Hauppage

AOL Buys Advertising.com

America Online Inc, the world’s largest distributor of disposable CDs and apparently also an interactive services company, has announced that it has signed an agreement to hand over US$435 million (€359 million) in cash for Advertising.com, the internet’s third largest advertising network.

Advertising.com plans and optimises online campaigns for more than 800 advertisers, and also works with some 1500 online publishers to bring them 110 million unique visitors every month. About 70% of all US internet users encounter Advertising.com’s work in the course of a month’s surfing.

This is AOL’s biggest deal since it merged with Time Warner, and shows that there may be some life in online advertising after the bubble burst after all. AOL, having ditched its broadband product and now staring at declining dial-up business, is understandably keen to drive growth in other areas, and believes that content and services are what it’s best at.

Jonathan Miller, Chairman and CEO, America Online, Inc., said, “Online advertising is showing very strong growth across the industry, and the acquisition of Advertising.com underscores AOL’s determination to strengthen its competitive position. Advertising.com has built a profitable, scalable and highly attractive business. This acquisition is a strategic move that will bolster AOL’s advertising business, building on the strides made in the past year.”

Advertising.com

Five May Buy Flextech

Jane Lightning, speaking at a Royal Television Society event last night, dropped an unsubtle hint that Five are considering buying Flextech, the content arm of Telewest.

While the rest of the industry is still speculating about the proposed merger with Channel 4, Lightning, Five’s chief executive said “Flextech could be one of the options we are looking at.”

Well, it either is one of the options they’re looking at or it isn’t. I’ll fetch my deerstalker, pipe and magnifying glass for a second and say that they most definitely are looking at it, otherwise she wouldn’t have mentioned it in the first place. Oh, and it’s rumoured that Five execs paid a visit to Bill Huff, the fund manager who holds 20% of Telewest, in March.

Flextech would bring Bravo, Challenge, Living, Trouble and the half of UKTV that isn’t owned by BBC Worldwide.

With C4, Sony US and Disney also sniffing after Flextech, they’d better get a move on.

Telewest are keen to sell the company to get out of debt and concentrate on its upcoming marriage to NTL, and are looking for about UK£750 million (€1.1 billion) for it.

Flextech

Loudeye Acquires OD2

Loudeye, a business to business digital media company has acquired Peter Gabriel and Charles Grimsdale’s On Demand Distribution (OD2) business.

The move will effectively double Loudeye’s revenue, and has created the world’s largest digital media company.

OD2 provide outsourced digital distribution for companies like Coca Cola when they want to launch an online music store. Customers include HMV, MyCokeMusic and Wannadoo, but combined Loudeye and OD2 will have more than 200 customers across the world.

Jeff Cavins, Loudeye’s president and chief executive officer said in a statement: “By combining with OD2, the leading digital music service provider in Europe, we become the largest business-to-business digital media provider in the world with the largest licensed digital music catalogue in the industry,” “This significantly strengthens our solutions for our customers globally and immediately expands our customer relationships and partner opportunities. Together OD2 and Loudeye deliver a powerful, next-generation digital media platform to enable companies to launch complete digital music offerings around the world. In addition, this will globalize Loudeye’s content management, piracy protection and promotion services and will enable us to leverage OD2’s broad reach and strong customer relationships to expand our business into new markets.”

“OD2 and Loudeye share virtually identical goals, vision and passion for the future of digital music and I see tremendous opportunities for our combined company to drive digital media deployments worldwide,” said Charles Grimsdale, co-founder and chief executive officer of OD2. “Our proven success managing the specific challenges of pan-European digital media deployments will be a strong asset for Loudeye and significantly raises the barriers to entry for other service providers looking to enter the European market. Furthermore, Loudeye will enable us to offer a much broader range of new services to our current customers and extend our capabilities into such fast growing areas as the wireless arena.”

With online music sales across Europe predicted to reach €1.3 billion by 2007, there is a lot at stake in the industry – expect more mergers and disappearances over the next 18 months.

On Demand Distribtion

Loudeye

Copy-protected CD Reaches Top of US Chart

A copy-protected CD has reached the top of the US album charts for the first time. Velvet Revolver’s “Contraband”, published by BMG uses the MediaMax copy protection system from SunnComm.

BMG have stated that they intend to release more protected CDs over the year, but is carefully choosing which ones get the treatment. So far, the label has released 12 DRM-protected disks, with about 2.5 million units out in the wild.

The disk stops PCs ripping the audio part of the disk to MP3s, but has copy-managed WMA format versions of the music on another section of the disk. This of course means that consumers are getting a lower fidelity product because the full capacity of the disk is not used to store the original music. The Windows Media files also tend to be encoded at a lower bit rate than audiophiles usually prefer. Because of the mixed format, these disks are no longer strictly CDs because they don’t adhere to Phillips’ Redbook standard for Compact Disks.

The WMA/copy protection scheme used by MediaMax makes it all but impossible to transfer music you have legally acquired to an iPod, as Apple’s music player will not play Windows Media Files. Given that it’s the most popular music player out there, SunnComm are working with Apple to provide a solution, though this seems to be centred around petitioning Apple to incorporate other formats into the iPod rather than getting their own house in order.

You can of course circumvent the whole copy protection scheme by simply holding down the Shift key when inserting the CD. This technically means that American readers will be breaking the Digital Millennium Copyright Act and could end up in prison.

SunnComm

UK Digital Radio Market Set to Double by 2005

The Digital Radio Development Bureau (DRDB) has claimed that the UK’s £45 million (€67.75 million) market is going to double by the end of the year.

There are currently 547,000 digital radios in use in the UK, and this is hoped to expand to 1 million by 2005.

Why the sudden jump? One theory is that personal stereos and portable music systems equipped with digital radios are about to hit the market, rapidly increasing the installed base. As the cost of integrating a digital tuner into consumer electronics declines, many more audio devices that featured analogue only tuners will get digital ones by default.

The DRDB is a trade body funded and supported by the BB and commercial radio operators, with a remit to ensure the swift adoption of digital radio in the UK, so you can imagine that they’re pleased at this proposed sudden spike in uptake.

The Digital Radio Development Bureau