All Things Digital

For a while there, it looked like Advanced Micro Devices (AMD) was really going to take Intel (INTC) to the mat, didn’t it? But not lately. After seven consecutive quarterly losses, AMD shares fell to a six-year low last month, down 50 percent in the past year. Good thing, then, that the company has chosen to sell off its digital television business, which these days is more of a distraction than anything else. This morning, the struggling chipmaker said Broadcom (BRCM) has agreed to buy its TV unit for $192.8 million.

For AMD, the sale frees it of a business that’s been a drain on capital expenses and, in the words of CEO Dirk Meyer, will make the company “leaner and more focused” while it seeks to “create a business model to deliver sustainable profitability.” For Broadcom it’s an easy way to immediately scale its DTV business from low-end to mid-range to high-end interactive platforms and panel processors.

“What has become of the Sony known for its technology,” Japanese Economy, Trade and Industry Minister and former Sony employee Akira Amari asked in October of 2006. “I hope it will solve its problems soon to quickly recover its brand image reputed for technological prowess.”

If Amari can recall when that was Sony’s image, he has a good memory. Because Sony (SNE) lost its dominant position in consumer electronics to rivals in Japan, South Korea and the U.S. long ago and has yet to regain it.

But it will soon, according to company CEO Howard Stringer, who announced today a new growth strategy designed to re-establish its global supremacy. Stringer’s plan: to peddle software and video-downloading services, not just hardware. And to bind them together over the Internet. “Our mission is simply to be the leading global provider of networked consumer electronics and entertainment,” Stringer said at a news conference.

To that end, Sony will soon announce a movie download service for its PlayStation 3 game console. And this fall it will begin broadcasting films and television shows directly to its Bravia TVs via the Internet. And if all goes according to plan, 90% of Sony’s devices will wirelessly connect to the Net by March 2011. Perhaps even Rolly, Sony’s dancing iPod killer …

Said Stringer, “This is not your father’s Sony.“

Hope not. Because my father’s Sony is Apple (AAPL).

Intel’s putting the mobile phone market on speed dial. Two years after selling off its chip business for mobile handhelds and cellphones to Marvell, the world’s largest chip-maker is turning its attention once again to the mobile phone market with dollar signs in its eyes. Seems the company can no longer tolerate the idea of ARM, and not Intel (INTC), inside many of the mobile phones on the market today.

In an interview with the Financial Times, Intel CEO Paul Otellini (pictured above) said he’s confident the company’s new Atom processor will expand Intel’s reach into the mobile phone market. “If you accept that the value proposition of the high end of the mobile-phone market is full Internet access that happens to have voice, my view is that it’s easier to add voice to a small computer than vice-versa,” Otellini told the FT, noting that the company’s expertise in PC chips will come in handy in making inroads into markets where devices are becoming increasingly more PC-like. Among them, those for televisions, ultra low-cost PCs, embedded controllers and, of course, smartphones. “We are bringing an element of computing into large markets, many of which are larger than the PC business, certainly in terms of units,” said Otellini. “Each of these four markets is a $10 billion opportunity by 2010 or 2011.”

Message to ARM: We’re coming for you.

As one of the original 13 colonies, you’d think that New York State would have a particular antipathy toward things like “taxation without representation.” And perhaps it does, just not when it’s the one doing the taxing.

The state recently passed a so-called Amazon Tax, a new law compelling out-of-state online retailers to start collecting New York sales tax. The law, designed to recover sales taxes potentially lost to Internet purchases, requires any e-tailer with even a single affiliate site with a New York State address–say, a blog that earns a referral fee for sending customers to Amazon (AMZN)–to collect sales tax on all goods sold in the state, even those not sold through the affiliate.

Its authors say it will contribute about $50 million to the state’s budget, and it might, if Amazon doesn’t get it declared unconstitutional first. Earlier this week, the company filed a suit challenging the law because it imposes tax-collection obligations on retailers, online and off, with no physical presence in the state. Worse, it does so based on nothing more than advertising in New York, a definition that includes retailers with even the slightest connection to the state.

Said Amazon: “This statute was intended to impose tax-collection obligations on out-of-state Internet retailers such as Amazon. Nonetheless, the statute, as drafted, on its face would also impose tax-collection obligations on non-Internet out-of-state retailers who pay New York print media, television or radio outlets to advertise their products and thereby refer New York customers to buy them.”

Microsoft’s chief software architect Ray Ozzie has finally published the sequel to “The Internet Services Disruption,” the 2005 potboiler of a memo that charted Microsoft’s (MSFT) better-late-than-never software-as-a-service strategy. It’s called, intriguingly, “Services Strategy Update April 2008” and it describes in numbing detail Live Mesh, Microsoft’s ambitiously late entry into a rapidly growing cloud-computing market.

Live Mesh, though it takes Ozzie five pages to describe it, is essentially a “software-plus-services” platform that uses the Web to synchronize and share data among devices, applications and people (you’ll find a walk-through here and a good overview here).

“Over the past ten years, the PC era has given way to an era in which the Web is at the center of our experiences–experiences delivered not just through the browser but also through many different devices including PCs, phones, media players, game consoles, set-top boxes and televisions, cars, and more,” Ozzie writes. “It is our mission in this new era to create compelling, seamless experiences that combine the power of the Internet, with the magic of software, across a world of devices. … the Web is the hub of our social mesh and our device mesh.”

“The Web is the hub of our social mesh and our device mesh.”

Wait.

Does Bill Gates know that? Because last year he told CNN’s “American Morning,” “We’re making the PC the place where it all comes together.” Clearly, in the ensuing year, Gates and Microsoft noticed that Google (GOOG) et al. are fast shifting computational relevancy to the Web, away from the desktop and, more importantly, away from Microsoft.

Live Mesh, if it’s successful, will change that. Because, as Joe Wilcox notes over at Microsoft Watch, “Live Mesh is Microsoft’s attempt to turn operating system and proprietary services platforms into hubs that replace the Web. Microsoft is building a services-based operating system that transcends and extends Windows and also the function of Web browsers.” Adds Wilcox, “It’s bold, brilliant and downright scary.”

It appears there may be a bit of a boxing match shaping up between Apple and Netflix. Amid reports that Apple has inked a video-on-demand deal with Twentieth Century Fox, Netflix has announced plans to develop a set-top box that will give consumers the ability to stream movies directly from the Internet to HDTVs. The DVD-by-mail pioneer has enlisted South Korean manufacturer LG Electronics to build a set-top box that will extend its Watch Instantly online movie-delivery service from the PC to the TV. Netflix plans to offer the service–expected to roll out in the fall–for free to its subscribers and the box for a price that’s yet to be announced.

“We think we have solved the real fundamental problem, which has been that choosing movies on a television has been extremely challenging,” Netflix CEO Reed Hastings told the New York Times. “Video-on-demand companies worked at it for a long time, but choosing movies on the TV just doesn’t have the power of the Web. We want to be integrated on every Internet-connected device, game system, high-definition DVD player and dedicated Internet set-top box. Eventually, as TVs have wireless connectivity built into them, we’ll integrate right into the television.”

A compelling vision of Netflix’s future and one that may sound the death knell for Blockbuster, Amazon’s Unbox and Vudu as well. Or perhaps not. Certainly, this little bit of legalese at the tail-end of the press release announcing the services belies Hastings’s optimism just a wee bit.

This press release contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding the development of a set-top box for delivery of content over the Internet to television sets, the delivery of a compelling online home entertainment service, Netflix’s strategy and positioning in online delivery of content, and the future of Internet to the television. These statements are subject to risks and uncertainties that could cause actual results and events to differ, including, without limitation; the risk that the development of the set-top box or its associated online delivery service may not meet technical requirements, consumer expectations, or otherwise be implemented by the parties; that certain studios will not grant either of the parties necessary rights or otherwise impose limitations on such rights that might impede implementation or hamper consumer adoption; Netflix’s ability to create other partnership opportunities for the delivery of digital content to the television; and possible technological or content licensing impediments.”

With little more than a year to go before television in the states goes all-digital, the federal government is doing its best to make the transition easier for couch potatoes dreading the looming obsolescence of their rabbit-eared sets.

Yesterday, the Commerce Department began accepting applications for $40 coupons to defray the cost of a basic digital-to-analog converter box (expected to sell for between $50 and $70) that will allow older TVs to receive digital broadcast signals. “There is a big change in television coming on Feb. 18, 2009, and people who have old televisions who receive free over-the-air broadcasting, which means they are not hooked up to cable or satellite or another pay-TV service, have to make a decision,” Meredith Atwell Baker, deputy assistant secretary of the National Telecommunications and Information Administration, told Broadcast Newsroom. “They have three choices. They can buy a new TV that’s digital, they can subscribe to cable or satellite or another service, or they can buy a converter box. Otherwise, their television won’t work.”

The coupons are available on a first-come, first-served basis at www.ntia.doc.gov/dtvcoupon/index.html. And there are about 33 million of them available. Great news for the estimated 26 million households in the United States that have yet to make the jump to digital TV.

Google is reportedly talking to Simon Fuller, the British entrepreneur behind the Spice Girls, about a joint venture in the Internet broadcasting market. “It’s a big idea on a global scale,” a source close to Fuller tells the Guardian. “It will change television in much the way iTunes changed music.”

Uh-huh.

Hate to say it, but the idea of Google hooking up with the guy behind the Spice Girls seems about as likely as the company’s founders joining the Spice Girls.

Mediated contract negotiations between the Writers Guild of America and Hollywood producers broke off last night setting the stage for a writers’ strike that could leave sitcoms without scripts, late-night shows without topical monologues and television viewers with an even more limited choice of broadcast dross than they have now (”America’s Next Top Model,” “Dancing With the Stars” and “Farmer Wants a Wife” on the CW! How will I ever decide?)

Seems writers and producers still can’t agree on pay schedules for content distributed on the Internet and via other digital media. Or rather, the Alliance of Motion Picture & Television Producers is a bit too attached to the lousy DVD deal it convinced the writers to agree to 20 years ago, which gives writers, directors and actors a combined 20 cents for each DVD sale–30 cents less than the sum given to manufacturers of DVD packaging material.

“The companies refused to continue to bargain unless we agree that the hated DVD formula be extended to Internet downloads,” the guild said in a statement. “[W]e presented the AMPTP with a comprehensive package of proposals that included movement on DVDs, new media, and jurisdictional issues. We also took nine proposals off the table. The companies returned six hours later and said they would not respond to our package until we capitulated to their Internet demand. After three and a half months of bargaining, the AMPTP still has not responded to a single one of our important proposals.”

Too bad for the writers then. Because AMPTP president Nick Counter says increasing the DVD formula (a huge money-maker for the studios) is a nonstarter. “We want to make a deal,” he told WGA negotiators. “We think doing so is in your best interests, in your members’ best interests, in the best interests of our companies and in the best interests of the industry. But, as I said, no further movement is possible to close the gap between us so long as your DVD proposal remains on the table.”

Way to extend that desiccated olive branch, Nick. As John Scott Lewinski notes over at Wired, the producers offering to settle if the Guild drops all that is like the Galactic Empire telling Luke Skywalker, “OK, we’ll surrender … but only if we get to keep the Death Star.”

Why Hulu? Objectively, Hulu is short, easy to spell, easy to pronounce and rhymes with itself. Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we’re building.”

–Jason Kilar, CEO, Hulu

Hulu.com, the News Corp./NBC Universal video service that sounds like it was named by the Web 2.0 Bull—t Generator™, went into private beta today, and while critics continued to snicker at the name, most admitted the ad-supported service was, by and large, pretty decent. ”I am impressed thus far,” wrote BoomTown’s Kara Swisher. “I will, of course, reserve judgment until I get to test-drive it for a while, but in concept and tone and aims–that is, more open than I ever expected the service to be–it is off to a good start.”

Over at GigaOm, Om Malik, who ridiculed the service this past summer, reversed course and called it brilliant. “From the moment I learned about the new company, I was skeptical,” he wrote. “And now, after spending three hours or so on the service, I am ready to eat crow. And not just any crow, but rotten, six-month-old crow: I have never been more wrong. … Hulu doesn’t seem like a YouTube (GOOG) competitor. (This is yet another thing I was wrong about.) What it really is trying to do is time shift–and place shift–television on a massive scale. It’s basically an attempt to counterbalance the tight control that cable and satellite networks have over distribution. [Hulu] is the kind of service that should scare start-ups trying to develop their own distribution platforms, such as Joost. It is also the kind of service, if it can attract enough viewers, that could succeed in relegating YouTube and others like YouTube to the ‘user-generated content’ world, at least in the U.S. market.”

We have nothing to do, the writers aren’t here. So a guy’s gonna come in and shave me. Fifty-five minutes, ladies and gentlemen! Fifty-five minutes to go!”

–David Letterman wings it during the last writers’ strike in 1988.

Unscripted reality TV, box-office bombs, endless reruns–dreck. There’s plenty of it on television now and there will be even more if the industry’s writers and producers cannot agree on a new contract by the end of the month. Because the writers’ unions–the Writers Guild of America, both West and East–have voted overwhelmingly to authorize a strike should negotiators determine that a fair deal cannot be reached with producers.

At the top of their list of grievances: pay schedules for content distributed on the Internet and via other digital media. The guilds were screwed years ago when they agreed to a discounted pay schedule for DVDs, only to see that business blossom. And they’re determined not to make the same mistake. “The guild made a bad deal 20 years ago, and they’ve been angry ever since and they don’t want to do it again,” entertainment industry attorney Jonathan Handel told the Los Angeles Times. “That’s why we’re seeing a line drawn in the sand.”

Problem is, the Alliance of Motion Picture & Television Producers doesn’t seem to be paying that line much mind. It claims there have been profound economic changes in the industry in recent years that make the terms and conditions of writing for digital platforms the guilds have proposed untenable. And hey, just because writers are paid residuals whenever their work is rebroadcast or sold on DVD doesn’t mean they should be paid residuals when their work is streamed over the Web–even if distribution costs are lower.

“[The guilds] continue to pursue numerous financial proposals that would result in astronomical increases in our costs,” said Nick Counter, president of the producers’ alliance. “Their proposals would also further restrict our ability to promote and market TV series and films and prohibit us from experimenting with programming and business models in new media. Instead of working toward solutions that would give the industry the flexibility it needs to meet today’s business challenges, [they continue] to hold onto demands that would impose unreasonable restrictions and unjustified costs.”