All Things Digital

Steve Jobs has apparently accepted the unacceptable: Things don’t always go Steve’s way. The mercurial Apple (AAPL) CEO has been notoriously intransigent when it comes to matters of variable pricing on iTunes, arguing that charging higher prices for more popular content might backfire, sending customers off to the file-sharing networks. Now, as predicted yesterday, he appears to have reconsidered that stance, at least when it comes to HBO’s Emmy Award-winning programming.

This morning, Apple’s U.S. iTunes Store began offering six HBO series: “The Wire,” “Flight of the Conchords,” “Sex and the City,” “The Sopranos,” “Rome” and “Deadwood.” The first three are priced at iTunes’ standard rate of $1.99 per episode. The second three are $2.99 each, marking the first time Apple has allowed variable pricing for TV shows in the U.S.

Quite a coup for HBO (TWX), especially given some of the other concessions it was able to win from Apple: HBO programs won’t be offered for purchase on iTunes until they hit the DVD window, and new episodes of series won’t be available until months after their TV premiere.

Hollywood is finally embracing day-and-date film releases.

Yesterday, Time Warner (TWX) CEO Jeffrey Bewkes said that Warner Bros. plans to experiment with VOD releases day-and-date with DVD later this year. And now this morning, Apple (AAPL) announced that a number of major and independent movie studios have agreed to make their films available on iTunes day-and-date with DVD–$9.99 for library title purchases and $14.99 for new release purchases. Among the studios participating in the deal: 20th Century Fox (NWS), Walt Disney Studios (DIS), Warner Bros., Paramount Pictures (VIA), Universal Studios Home Entertainment (GE), Sony Pictures Entertainment (SNE), Lionsgate (LGF), Image Entertainment (DISK) and First Look Studios (FRST.PK).

An impressive lineup and one that clearly heralds a shift in the movie industry’s view of digital distribution. A shift in iTunes movie purchases as well–upward. The removal of Hollywood’s typical 30-day lead time on DVD releases will no doubt boost new-release sales on iTunes, assuming customers don’t mind paying $14.99 for films that lack the extra features and picture quality of their DVD counterparts. It will boost movie studio revenues as well. With no manufacturing and reproduction costs to speak of, margins from day-and-date download releases are presumably quite high.

So much for that hard-fought DVD format war …

I hope DVD-D Germany Ltd. has a nice big landfill out behind its corporate offices, because it’s going to need it if its new disposable DVD technology takes off.

Produced with a chemical coating that renders them unreadable after 48 hours or so, the company’s Einmal (German for “once”) discs posit a play-once-and-toss model that, at a reasonably low price-point, could be a piracy-limiting means of distribution (the discs include no DRM, but why bother ripping them if they’re so cheap).

So it’s an interesting idea (though not a new one; Flexplay and SpectraDisc both tried something similar a few years back). Certainly the prospect of not ever having to worry about returning your latest Netflix (NFLX) or Inmotion Pictures airport rental could be quite appealing to some. But isn’t that an annoyance that video-on-demand is already doing away with? And really, who wants to increase their carbon footprint like this anyway?

A brassy little outfit called Psystar is getting a lot of attention today for peddling Leopard-compatible desktops. These “OpenMacs,” as the company’s named them, run on Intel (INTC) chips and feature 2GB of memory, a DVD drive and whatnot. They’re built from PC parts and, if you’d like, Psystar will even outfit them with Mac OS X Leopard.

Sounds like a compelling proposition for folks who would like the Mac OS on cheap hardware. Too bad the Mac OS X EULA specifically forbids installing the OS on non-Apple computers. Apple (AAPL) legal is, no doubt, already half-finished with a cease-and-desist letter.

The online hub of Netflix’s rental system went down Monday evening and remained unavailable until Tuesday afternoon, locking out subscribers for more than 18 hours. Spokesman Steve Swasey attributed the outage to an unanticipated problem that he declined to describe.”

–“Netflix reeling from customer losses, site outage,” Associated Press, July 24, 2007

Netflix’s infamous 2007 outage appears to be back in theatrical release. The DVD rental pioneer’s Web site went down at 6:58 a.m. Pacific Daylight Time today and has yet to return. “This is an unanticipated outage,” said a Netflix (NFLX) spokesman. “Our engineers are working feverishly on it.”

But perhaps not feverishly enough. As of 6:04 p.m. Pacific Daylight Time the site remains down and is jeopardizing DVD deliveries nationwide.

As service outages go, it couldn’t have been more ill-timed. Shares of the company rose to a new multiyear high last week after Cantor Fitzgerald analyst Derek Brown said Blockbuster’s (BBI) renewed focus on its traditional retail operations “has opened a significant window of opportunity for Netflix that the company seems to be capitalizing on very, very successfully.”

Hollywood has finally begun sniffing at the long tail.

Paramount Pictures (VIA) and application developer FanRocket this week debuted a new service for Facebook users that will enable them to send each other movie clips. A combination media player and clip library, the service called VooZoo aims to exploit the Hey-Remember-That-Funny-Scene-From-”Nacho Libre” phenomenon by providing users with access to clips from such movies and an easy means of bombarding their friends with them.

The studio will plug the DVD version of the movies after each clip is played in the hopes of driving further sales. An interesting strategy, but one analysts seem to have met with a raised eyebrow. “It’s one thing to go to a friend’s profile page and they have a clip of Eddie Murphy driving the Ferrari and go, ‘Oh, yeah, that was hysterical,’ ” said John Barrett, research director at Parks Associates. “It’s quite something else to say, ‘Hey, that was such a great scene I’m going to spend the next two hours right here in front of my PC.’ It would be some kind of clip that would make someone do that.”

The next-generation DVD format war was a costly one–for Sony (SNE). In addition to the untold funds the company spent on pro-Blu-ray propaganda, it also reportedly spent quite a bit to buy the allegiances of Hollywood.

The Toronto Globe and Mail reports that Sony paid Warner Bros. as much as $400 million to throw its support behind Blu-ray and abandon HD-DVD. An interesting little footnote to the DVD format war, since Warner’s decision all but sealed HD DVD’s fate.

So it was a reported $400 million well spent, then. For the time being, anyway. “People are saying Blu-ray won the war but who cares,” Seagate CEO Bill Watkins said last year. “The war is over physical distribution versus electrical distribution, and Blu-ray and HD lost that. In this, flash memory and hard drives are on the same side. The war is over and the physical guys lost.”

Amazon (AMZN) is so far ahead of the curve it’s actually behind it. Today, the online retailer declared its support for Sony’s Blu-ray DVD format–nearly a full 24 hours after Toshiba (6502.TO) officially discontinued its rival HD DVD.

“The high-definition landscape is rapidly changing, and consumers are looking for guidance on how to make the best high-definition buying decisions,” said Peter Faricy, vice president of movies and music at Amazon.com, who apparently didn’t receive Toshiba’s HD DVD press release until early this morning. “Our customers have clearly voiced their support for the Blu-ray format. … In order to best serve our customers, Amazon is recommending Blu-ray as the preferred digital format and will continue to carry the ‘Earth’s Largest Selection’ of Blu-ray products.”

The next generation DVD format war has become a format funeral. Toshiba (6502.TO) said today it is pulling out of the HD DVD business. The company will cease production of its HD DVD players and recorders immediately and shutter the business entirely by the end of March.

“This was a very difficult decision to make … but when we thought about the trouble we would cause to consumers and our partners, we decided it was not right for us to keep going with such a small presence,” Toshiba Chief Executive Atsutoshi Nishida told a news conference, adding that Warner Bros.’ decision to back Blu-ray had made the move inevitable. “That had tremendous impact,” he said. “If we had continued, that would have created problems for consumers, and we simply had no chance to win.”

PREVIOUSLY:

• Investors: We Come Not to Bury HD DVD, but to Celebrate Over Its Lifeless Body
• Bring Out Yer HD DVDead
• Will the Last Person to Leave the HD DVD Camp Please Turn Off the Blu-ray Player?
• There’s a Singing Fat Lady Here to See You, Sir.
• Ah Yes, a $2.7 Million Super Bowl Ad Will Fix Everything …
• Mistah HD DVD–He Dead …

The markets are having their say about Toshiba’s rumored withdrawal from the next generation DVD format war and their message is clear: Get on with it, already.

Shares in Toshiba (6502.TO) moved sharply higher in early trading today as investors welcomed reports that the HD DVD champion is itself planning on abandoning the format and throwing its support behind Blu-ray. “We have entered the final stage of planning to make our exit from the next generation DVD business,” a nameless source inside Toshiba told Reuters over the weekend.

Publicly, however, Toshiba claims it’s still considering its options. “Toshiba has not made any announcement or decision,” a company representative told the BBC. “We are currently assessing our business strategies, but nothing has been decided at the moment.”

Well, perhaps not at this particular moment, but certainly at one in the near future. As Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments, notes, the consumer electronic industry has been echoing with HD DVD’s death rattles for quite a while. It’s time to put the old boy out of his misery: “It doesn’t make sense for Toshiba to continue putting effort into this,” said Ogawa, “It needs to cut its losses and focus its resources on promising businesses.”

PREVIOUSLY:

• Bring Out Yer HD DVDead
• Will the Last Person to Leave the HD DVD Camp Please Turn Off the Blu-ray Player?
• There’s a Singing Fat Lady Here to See You, Sir.
• Ah Yes, a $2.7 Million Super Bowl Ad Will Fix Everything …
• Mistah HD DVD–He Dead …

By June, Wal-Mart will only be carrying Blu-ray movies and hardware machines and, of course, standard-def movies, DVD players, and up-convert players.”

–Susan Chronister of Wal-Mart sticks a fork in HD DVD.

HD DVD may soon join Betamax in the consumer electronics industry’s Museum of Failed Formats. Though publicly HD DVD champion Toshiba professes its commitment to the next generation DVD standard, privately it’s plotting its demise. Sources close to the company tell the Hollywood Reporter that the continued marginalization of HD DVD by movie studios and big box retailers like Wal-Mart has driven Toshiba to concede defeat in the DVD format war. The company plans to pull the plug on HD DVD in a matter of weeks. “An announcement is coming soon,” said one source close to the HD DVD camp.

But not soon enough for some, who are finally seeing their predictions of an HD DVD rout borne out. “Blu-ray’s better, and I told everyone,” said film director Michael Bay. “I was very vocal about it. I knew HD [DVD] was not going to make it. Am I thrilled? It really wasn’t my fight, but remember what I said in the press? I was kind of saying HD [DVD]’s going to lose… No one believed me.”

PREVIOUSLY:

• Will the Last Person to Leave the HD DVD Camp Please Turn Off the Blu-ray Player?
• There’s a Singing Fat Lady Here to See You, Sir.
• Ah Yes, a $2.7 Million Super Bowl Ad Will Fix Everything …
• Mistah HD DVD–He Dead …