Gizmodo and the New York Times weighed in Sunday on the previously stealthy consumer-electronics company Vudu, makers of a nifty-looking box that brings downloadable movies directly to a TV set. The stories emphasized the battle to come between Vudu's device and the AppleTV, but for some reason, neither one mentioned the obvious (and less-than-wildly-successful) precursor, Moviebeam. Like Vudu, Moviebeam's business model involves selling a box that could play movies on demand with little or no delay, with customers paying for each movie they watched. The main difference is that Moviebeam's $150 boxes held a hundred movie files transmitted through the air by a local TV station (refreshed at a rate of 10 per week), while Vudu's box (estimated price: $300) will let users choose from a list of several thousand movies stored online, then download them through their DSL line or cable modem.

There are a bunch of interesting technology-meets-advertising stories on the Web this morning. In no particular order:

MediaDailyNews reports that Fox has developed technology to update advertisements in time-shifted TV shows. It's talking to TiVo about testing the technology, which would allow DVRs to insert more up-to-date ads into recorded programs. Few details were offered, but it sounded like new ads (probably from the same advertisers) would be inserted into programs nightly. The point is to ease concerns that advertisers have about time-shifting, which is growing in popularity as DVRs proliferate (now in more than 17% of U.S. homes, according to a recent Nielsen survey). Of course, if viewers are skipping commercials as a matter of course, updating won't be much help.

Red Herring, meanwhile, reports that YouTube is getting plans together to add commercials to its videos. Look for quick spots before the video rolls, then longer ones after -- plus, possibly, interstitials. The obvious question is whether YouTube's efforts to monetize its massive audience will drive that audience to someone who isn't trying so hard to make money.

Finally, OnlineMediaDaily reports that p2p TV service Joost has lined up an all-star cast of advertisers, including some of the biggest agencies (such as Interpublic, Omnicom and Publicis) and brands (including Proctor & Gamble, Coca Cola, Microsoft and Nike). This is the kind of mainstream backing that Joost's p2p forebears (i.e., Kazaa) never attracted. Looks like protecting copyrights -- and giving partners the ability to control their own ad sales -- is good for business, at least as far as Joost is concerned.

With less than three weeks remaining before new webcasting royalties are due to take effect, two members of Congress introduced a bill today (Download Internet radio bill.pdf) to wipe out the looming increase. The proposal by Rep. Jay Inslee (D-WA) and Don Manzullo (R-IL) would give a new lease on life to small and non-commercial webcasters, as well as a potentially huge discount to large webcasters. But it would also force performing artists and their record companies to accept smaller amounts per song played than they received under the previous royalty regime, something they're not likely to do without a fight.

A federal judge in New York ruled today  that ASCAP -- one of the three major groups collecting royalties for songwriters from radio stations, bars and other music-playing venues -- had no right to demand fees from online music stores and services that offer digital downloads. The case, which began several years ago, started with a dispute between three companies offering subscription music services (AOL, Yahoo and RealNetworks) and ASCAP over what the companies viewed as a double-dip. Songwriters get paid performance royalties (which ASCAP collects) when their tunes are played in public. And they are entitled to mechanical royalties (which the Harry Fox Agency collects) when their songs are pressed onto CDs. Although downloaded songs seem more like CDs than radio broadcasts, both Harry Fox and ASCAP argued that they should be paid royalties by AOL, Yahoo and RealNetworks when their subscribers downloaded tracks onto their PCs.

Yahoo and Gracenote put another nail in the CD coffin today, providing a free source of lyrics to about half a million songs. It's a bit of a novelty -- the site lets you search for lyrics by phrase or song, but doesn't allow you to print the lyrics or move them into a portable player or digital jukebox. Still, it suggests what other digital ventures might do with Gracenote's lyrics database. For instance, an online music store might offer "enhanced" versions of a digital album that add lyrics to each track's metadata. Or MP3 players could add a "karaoke mode," with lyrics scrolling across the screen as songs play with their vocals filtered out. Needless to say, those are more compelling than lyrics printed on a CD insert. They also mirror what's already happening in the market, with or without the help of songwriters.

MPAA chief Dan Glickman ventured into friendly Beverly Hills waters today to make his first speech about digital rights management policy, offering his views to a DRM conference sponsored by LexisNexis and Variety. He sounded a bit like his frequent rhetorical sparring partner, CEO Gary Shapiro of the Consumer Electronics Assn., saying he "wholeheartedly" supported enabling consumers to make copies of the movies they buy. He added that consumers who acquire movies legally should be able to watch them on any device -- another thing that's not possible today, partly because of non-interoperable DRM, but also because the industry has demanded more protection against piracy than the typical home provides.

But Glickman wasn't backing away from DRM -- not at all. Instead, he was simply making a case for better use of the technology.

Like the folks at Coolfer, I'm having some trouble understanding why Circuit City (and other consumer-electronics retailers, for that matter) is still trying to sell digital music on its website -- this time, in a partnership with Napster. The company bought MusicNow (ne FullAudio) three years ago, which it used to power a downloadable music store on circuitcity.com. A year and a half later, the retailer sold MusicNow to AOL (which, in turn, dumped MusicNow for Napster in January). According to Billboard, the deal announced today enables circuitcity.com to offer a reskinned version of Napster's 99-cent download store and subscription music service.

I guess there's a possible synergy here with the sale of MP3 players -- everybody who buys a player not made by Apple or Sony could be prompted to do Napster's free trial or load up on some downloads. But the vast majority of buyers are going for iPods, which don't work with Napster's DRM. Another, more interesting possibility would be pre-loading MP3 players with tracks tied to Napster's subscription service, as RealNetworks has done with SanDisk (and BestBuy). The risk is that unless the pre-loads are personalized, buyers will be turned off -- just as they are with preloaded software on new PCs. And again, Napster won't work on iPods....

Taking a page out of corporate half-sibling Sony BMG's playbook, Sony Pictures Home Entertainment is offering customers replacement copies of the DVDs they bought with problematic copy-protection software. The software was designed to buttress the protection provided by CSS, the standard anti-copying technology on DVDs. But just as CSS doesn't stop anyone who really wants to copy a DVD, nor did Sony's ARccOS. There plenty of work-arounds for bootleggers, and pirated copies of DVDs with ARccOS made their way online just as quickly, it seems, as the discs without it. Instead, the only purpose served by the software was to frustrate and alienate legitimate buyers of Sony DVDs by rendering the discs unplayable in some machines. A thin and imperfect layer of copy-protection has been enough to support a multi-billion-dollar DVD business; rather than making conventional DVDs harder to copy, maybe Sony should concentrate on building the market for the next generation of home video products, high-definition DVDs.

The consulting firm Accenture recently surveyed 110 high-ranking executives from major entertainment, communications and technology companies about growth opportunities and challenges posed by the Internet. Almost 60% of the execs said that user-generated content was one of the top three challenges they faced today. And while they were bullish on the opportunities presented online -- particularly for short-form, advertiser-supported video --  only 38% said professional content owners were the ones best positioned to take advantage of those opportunities over the next five years. More execs placed their bets instead on Internet companies (26%) and amateur content creators (13%).

A three-judge panel within the Copyright Office just rejected a request from online broadcasters to reconsider its March 2 decision to hike royalty rates. That increase, which applies retroactively to webcasts from 2006, is particularly threatening to public broadcasters and small commercial Webcasters, which lost the discounts they enjoyed under the previous royalty regime, and customized radio stations, which could be flattened by new minimum payments per channel. According to the Copyright Royalty Board, "none of the moving parties have made a sufficient showing of new evidence or a clear error or manifest injustice that would warrant a rehearing."

I wrote a column today for latimes.com on the new SanDisk Sansa Connect, a WiFi-powered digital music player that hit store shelves earlier this month. It's not a review of the player, so don't expect to find any information about battery life, user-friendliness or the like. If you're looking for that, go here for a roundup. Instead, I look at what it means to add real WiFi capability (as opposed to what Microsoft put in its Zune players) to a digital audio player, and how the Connect may signal the beginning of the post-iPod era.

Gee, that didn't take long. Reuters reports this morning (via News.com) that Warner Music Group doesn't want AnywhereCD, which had been in business for all of one day, to sell its albums as MP3 files. The record company claims the online retailer violated their deal, which evidently authorized AnywhereCD to offer a service enabling people to rip newly purchased CDs into MP3 files. Maybe what Warner had in mind was CD sales tied to an online locker service, a la MP3tunes (formerly known as Oboe), AnywhereCD CEO Michael Robertson's last start-up. Instead, what it got was AnywhereCD offering MP3 files with or without the CD. This may turn out to be another situation like the legal battle over MyMP3.com, Robertson's first run-in with the labels. There, Robertson offered an online music locker service that ripped and loaded tracks on users' behalf, rather than requiring them to upload songs themselves. Paying more than $100 million in settlements and damages in that case clearly hasn't dampened Robertson's enthusiasm for the format, or his willingness to push the labels out of their comfort zone.

Update: AnywhereCD now offers only the more expensive package deal of a CD with downloadable MP3s. It's a nice deal for Warner, which gets paid by AnywhereCD for both the CD and the downloads. Sweet!

Could someone please explain to me how AnywhereCD could succeed? The bare-bones, brand-spanking-new venture -- the latest from MP3.com founder Michael Robertson -- sells music from many Warner Music Group artists and numerous indie-label bands as MP3 files. While the site doesn't charge a clear premium for the DRM-free format -- the prices are sometimes competitive with those on iTunes, but sometimes a dollar or more higher -- the tracks are sold as full albums only. Ouch. Bear in mind that more than half the tracks sold on iTunes are individual songs, which means that far more than half the units sold there aren't albums. What does that say about why shoppers choose downloads instead of CDs? AnywhereCD offers buyers a package deal for both the CD and downloadable versions of an album, but it typically costs an extra $3. Wouldn't people who want the CD order it from Amazon.com and convert it to MP3 files themselves, for no extra charge? It's interesting to see Warner downloads available without DRM, given the company's strongly negative reaction to the Steve Jobs manifesto and the recent EMI decision to sell MP3s. Still, I don't see the business here. I've got to be missing something -- what is it?

This morning, CBS announced that it would make video clips and full episodes from many of its top shows available online on a free, advertiser-supported basis through at least 10 third-party sites. The announcement is intriguing for a whole bunch of reasons. First, it confirms that the Eye Network won't be joining the video portal and distribution service announced last month by NBC-Universal and News Corp. Second, in addition to several straightforward Web video outlets, the initial distribution outlets include Joost, the peer-to-peer-powered video network (another sign that the entertainment industry really doesn't care what technology's involved, as long as its products aren't easily copied), BeBo, a social network, and Netvibes,  a personalized media aggregator. Moving beyond the AOLs and MSNs of the world is smart, given how fragmented the online audience is. Third, those outlets don't include YouTube. The two companies have a relationship, but it's not what it could be.

Film Fresh, an online DVD store that specializes in titles from around the world, alerted users today that it has begun making films available for downloading. Join the club, eh? Amazon, Netflix, Movielink, CinemaNow, MovieFlix -- the list goes on and on. But unlike many of its competitors, Film Fresh offers an easy way to watch a downloaded movie on your TV, even if the movie is just a rental. No expensive set-top box or networked game console required, just a DVD player capable of handling discs burned in the DivX format. There are tens of millions of these devices in homes today, DivX says. What a great solution! Too bad the major Hollywood studios continue to insist on far more convoluted methods that only hinder the market for legitimate downloads. DivX continues to pitch its format and rights-management technology  to the major studios, but like its competitor Nero (which mixes proprietary and standards-based approaches), it has focused its energy in recent years on putting its technology into a universe of devices and recording tools. In other words, it is building the ballpark. Now if only the studios would come out of the cornfields to play.... Yes, DivX is a top format of choice for online movie pirates, too, but that has only helped popularize DVD players and other devices that can handle DivX's format and DRM. Isn't that a good thing for Hollywood?

The folks at Recording Industry vs The People and Ars Technica have logged an interesting series of posts about an emerging trend in the Recording Industry Assn. of America's lawsuit campaign against file-sharers. The RIAA has routinely used lawsuits against broadband account holders to determine who actually infringed copyrights through that Internet account (a son or daughter, perhaps, or a roommate -- or even a total stranger taking advantage of an unsecured wireless router). If the suspected infringer turns out not to be the account holder, the RIAA goes on to sue the real infringer and, eventually, drop its claims against the initial target. Increasingly, though, account holders who didn't themselves infringe are fighting back, demanding that suits be dismissed with prejudice and that they be awarded attorney fees. And RIAA lawyers are developing more creative ways to end suits without having to face reimbursement claims.

Software maker Corel fired a kill shot recently (on Good Friday, no less) into WinDVD, one of the programs that hackers used to circumvent the electronic locks on high-definition movie discs. Made by Corel subsidiary InterVideo, WinDVD enables people to play high-definition discs -- in either the HD DVD or Blu-ray format -- on computers equipped with HD DVD or Blu-ray drives. But it also enabled a handful of highly motivated individuals to find the hidden keys to the locks that prevented HD DVD and Blu-ray discs from being copied onto a computer hard drive, burned onto blank discs or shared online. More than 100 HD DVD movies have been unlocked, along with well over 50 Blu-ray discs. (The Blu-ray format enables a second layer of anti-copying technology, dubbed BD+, but none of the initial discs appear to have been equipped with it.)

On Friday, Corel informed WinDVD users that they had to download a "security update" in order to continue playing high-definition discs. They'll have about three months to do so; after that, all newly minted high-def discs will include a set of instructions that permanently disables the older, hacked version of the software. Users who put one of these new discs into their PC will not be unable to play that disc, but they'll render the software incapable of playing any other high-def Hollywood movie -- even the older ones in their personal collections. Ouch!

The "security update" won't provide WinDVD users with any greater protection against viruses, spyware or anything else one usually associates with computer "security." Instead, it closes some of the software avenues that hackers used to defeat the locks on high-def discs. The goal is to make hackers and crackers start from scratch, rather than repeating the techniques they used to expose all those HD DVD and Blu-ray keys. In that sense, it marks the beginning of Round Two in the battle over Hollywood's effort to keep high-def home videos from fueling free downloads. The next step is likely to be a similar update for CyberLink's PowerDVD, which hackers claim to have cracked, too. That update should also defeat the high-def capabilities of Slysoft's AnyDVD disc-copying program, which is based on a critical (and soon-to-be-revoked) key taken from PowerDVD.

The success of the studios' cat-and-mouse efforts will depend not just on how long they can forestall the next hack. Other factors include how many innocent users fail to install the update in time, and whether the public views the effort as a legitimate response to piracy or an illegitimate attack on fair-use copying. The process of revoking software is a blunt instrument; everyone using WinDVD and PowerDVD will be affected, regardless of whether they traded bootlegged high-def movies, made back-up copies for personal use or merely played the high-def movies they bought or rented on their PCs. (The same is true for AnyDVD, but let's face it, the program is billed as a way to circumvent the locks on movies and protected CDs.) If Corel and CyberLink succeed in converting their users before the revocations begin, the battle between studios and hackers will be little more than background noise to consumers. If not, legitimate users who are caught in the crossfire will join those who already question Hollywood's motives, and the battle could move to a larger, more political stage.

The image above is the logo for InterVideo's WinDVD 8.

Another holdout from the 21st Century comes around! Universal Music Enterprises, a specialty division of Universal Music Group, and partner Hip-O Records announced today that Elvis Costello's first 11 albums -- from the perfect "My Aim Is True" through the near-perfect "King of America" -- would finally become available online. The launch date is May 1 on iTunes, May 31 everywhere else. If ever there was a reason to get happy, this is it. Although Costello's later work has been available from download stores and subscription services, the early classics were not -- at Costello's direction. But the angriest man in New Wave has come around at last, which means that any 16-year-old Rhapsody user who's had trouble hearing the genius in "When I Was Cruel" can spend some quality time exploring "This Year's Model."

IMHO, the two main winners here are Costello, who may now start to get paid by the millions of people who prefer downloads and streams to CDs, and subscription services such as Rhapsody, which need a broad and deep library to satisfy their users' musical cravings. Some major pieces remain missing, of course -- including the Beatles, Led Zeppelin, Radiohead and Garth Brooks -- but adding the classic Costello catalog will plug a huge hole.

For those with smaller appetites for brilliant music and lyrics, UME and Hip-O are releasing two new collections culled from Costello's first decade of recordings. One is a straightforward hits package, but the other, a more aggressive set called "Rock and Roll Music," sprinkles in some lesser-known tracks and alternate versions. Still, if you're going to buy just one Costello record, I say forget the compilations and go with "Imperial Bedroom."

Photo of the man himself courtesy of elviscostello.com

When commercial television made its U.S. debut in 1941, programs were little more than radio with pictures. It took a while for stations to grow into the new medium and take full advantage of the technology. The same could be said today of online video, which so far has been little more than TV with a progress bar. There have been plenty of experiments with interactivity, but for the most part, videos made for the Web have essentially been the same as those on TV, only less expensive. In other words, the production process hasn't really adapted yet to the fact that computers and the Internet are way smarter than TVs and broadcast pipes.

For a hint of how things might change, check out the announcement this morning from
Gotuit Media Corp. and Sports Illustrated. Gotuit's technology makes it easier for content owners and viewers to break a video into scenes and add metadata tags that describe the contents of each segment. These tags can then be used to search for and retrieve scenes from a library, and to create playlists of thematically related segments from disparate productions. Sports Illustrated's implementation is a straightforward collection of college football highlights, assembled into a video-laden website for the coming NFL draft. But the technology can also be used to power user-driven video remixing, as Gotuit demonstrates on its Scenemaker site. In addition, it can enable sites to sell and insert advertising timed to capitalize on what's happening within a video. For example, Nike might be willing to pay more to insert its ads into NBA highlight reels if they're guaranteed to run right after clips featuring Kobe Bryant (one of its clients), not those with Allen Iverson (a Reebok client).

The point here is that the beauty of the Web isn't in its ability to delivery video. Broadcasters have been able to do that since 1941. It's in the power to manipulate and customize what's delivered and viewed. That power needs to be unlocked by changes in the production process, and that's what is exemplified by companies such as Gotuit.

Pablo García Arabéhéty works on New Media issues for music-industry trade group in Argentina, the local version of the RIAA. He wrote this piece last week as an op-ed, but it was a bit too far down in the intra-industry weeds for us to run it in the newspaper. In light of Monday's news from EMI, though, it's extremely timely. Therefore, with his permission, I'm publishing a copy-edited version below. The views are his own, not those of his employer. My goal is not only to share some interesting thinking on the DRM issue, but also to remind readers that the seemingly monolithic "music industry" comprises many different people with minds of their own. I also want people to see that I'm not the only person who writes long pieces about DRM. Heck, I'm a piker next to Pablo. But please, read on here and after the jump.

It might have been because of some tough lawyers. Maybe not. But the fact is that we have let people with an "enforcement" approach lead the most radical transformation the music industry has ever gone through. The result is that in the last years the music industry has been trying to preserve rights instead of selling music. The most notorious outcome of this biased priority has been the blind bet many industry players have placed on DRM. A new focus on these issues through Digital Rights Empowerment, or DRE, might bring innovative answers.

As my colleagues Dawn Chmielewski, Michele Quinn and Joe Menn reported today, EMI is making the long-rumored leap into future of music sales -- or maybe just into the 1990s. The company announced this morning that it would make most of its music catalog available without electronic locks (a.k.a. digital rights management, or DRM, technology) at a premium price for singles ($1.29, up from 99 cents), and without a premium for albums. The limits on copying would be legal, not technological, just as they were for every format prior to digital downloads. The other benefit: the tracks will be encoded at a higher bit rate, which means better sound quality.

It's hard to tell today whether the news marks the end of DRM-locked tracks generally or just Apple's one-price strategy. For about a decade now, the major labels have clung to the dream of locking down their customers' music collections through DRM-wrapped downloads. That dream began before the original Napster emerged in 1999 to cement MP3 as the lingua franca for downloadable music, and it stayed alive despite such failures as SDMI and Liquid Audio. Ironically, Apple did more than any other company to sustain the labels' reverie by launching the first successful online music store, iTunes, in 2003, which introduced DRM to tens of millions of consumers around the world.

This dream is, shall we say, not compatible with EMI's new vision. But its competitors may very well follow EMI's lead because, frankly, what's not to like about a 30% increase in price for essentially the same product? As Jobs pointed out in today's press conference, 90% of the music sold today is on CDs that don't have DRM, so what's the big deal about DRM-free downloads? Until the CD format disappears, restricting downloads with DRM makes little or no difference to global piracy rates -- every track that appears on a CD will also pop up, free, on file-sharing networks. Instead, the main purpose served by DRM on permanent downloads is to restrain paying customers and inflict pain on them when they switch computers or trade their iPod for a player that's not compatible with Apple's DRM. If the labels want a more realistic fantasy, they can look forwarda to a wireless-Internet-enabled future where consumers stream all their music from DRM-protected online jukeboxes, rather than collecting and trading MP3s.

The bigger question in my mind is how music fans will react to the price increase for singles. How often do you hear consumers complain that the downloads they buy don't sound good enough? Probably not as frequently as they complain that the price is too high. That's why I wonder whether EMI is answering the wrong complaint. (It's worth noting that EMI has been urging Apple for some time to charge more for new releases, and Jobs famously resisted such pressure. The new deal, at least, gives consumers something for the extra money.)

Meanwhile, the offer of non-DRM-protected albums with no price premium reflects how troubled the labels are by the steep decline in CD sales, which more than offsets the rise in paid downloads. Many industry executives have long been leery of having to survive by selling 99-cent tracks instead of $17.99 CDs. But changing the relative value proposition of singles vs. downloadable albums (by raising the cost of the former while holding prices on the latter) won't changes consumers' distrust of the major-label LP and the perception that albums contain only one or two good tracks.

EMI CEO Eric Nicoli's remarks at the press conference are instructive. "We take the view that we have to trust consumers. The fact that some will disappoint us and share music is inevitable," he said when asked why EMI was willing to drop DRM from the premium tracks and albums. "The key is to give consumers a compelling experience, the best quality digital experience.... We think that way we'll grow sales, rather than diminish them." What about growing sales by giving consumers, who've been happy to trade off sound quality for lower prices and greater portability, more value for their money?