History > 2008 > USA > Internet, media (I)

Illustration:

Drew Beckmeyer

The Undercover Parent

NYT

16.3.2008

http://www.nytimes.com/2008/03/16/opinion/16coben.html?ref=opinion

Wikipedia Questions Paths to More Money

March 21, 2008
Filed at 5:22 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

Scroll the list of the 10 most popular Web sites in the U.S., and you'll encounter the Internet's richest corporate players -- names like Yahoo, Amazon.com, News Corp., Microsoft and Google.

Except for No. 7: Wikipedia. And there lies a delicate situation.

With 2 million articles in English alone, the Internet encyclopedia ''anyone can edit'' stormed the Web's top ranks through the work of unpaid volunteers and the assistance of donors. But that gives Wikipedia far less financial clout than its Web peers, and doing almost anything to improve that situation invites scrutiny from the same community that proudly generates the content.

And so, much as how its base of editors and bureaucrats endlessly debate touchy articles and other changes to the site, Wikipedia's community churns with questions over how the nonprofit Wikimedia Foundation, which oversees the project, should get and spend its money.

Should it proceed on its present course, soliciting donations largely to keep its servers running? Or should it expand other sources of revenue -- with ads, perhaps, or something like a Wikipedia game show -- to fulfill grand visions of sending DVDs or printed books to people who lack computers? Is it helpful -- or counter to the project's charitable, free-information mission -- to have the Wikimedia Foundation tight with a prominent venture capital firm?

These would be tough questions for any organization, let alone one in which hundreds of participants can expect to have a say.

The system ''has strengths and weaknesses,'' says Jimmy Wales, Wikipedia's co-founder and ''chairman emeritus.'' ''The strength is, we don't do anything randomly, without lots and lots of lots of discussion. The downside is we don't get anything done unless we actually come to a conclusion.''

Even the foundation's leaders aren't unified. Florence Devouard, a French plant scientist who chairs the board, said she and other Europeans involved with the project are more skeptical than Americans such as Wales about moneymaking side projects with for-profit entities.

The project's financial situation is not exactly dire. Although the group does not have an endowment fund with interest fueling operations, cash contributions jumped to $2.2 million last year, from $1.3 million in the prior year. With big gifts recently, the foundation's budget is $4.6 million this year.

In the past year, the foundation has tried to become less of an ad hoc outfit, expanding staff from less than 10 people to roughly 15 and moving to San Francisco from St. Petersburg, Fla. It has a new executive director, Sue Gardner, formerly head of the Canadian Broadcasting Corp.'s Web operations, who expects to add professional fund-raisers and improve ties with Wikimedia patrons.

''Two years ago, if you donated $10,000, you might not even get a phone call or a thank-you letter,'' Wales said. ''That's just not acceptable.''

Gardner appears to favor an incremental strategy, stretching the staff to 25 people by 2010, with the budget increasing toward $6 million. Even such relatively simple changes, she said, would keep the foundation from missing out on business partnerships and other opportunities.

For example, project leaders would like to hold ''Wikipedia Academies'' in developing countries, to encourage new cadres of contributors in other languages. Wales also wants to implement software that makes it less technically daunting for newcomers to edit Wikipedia articles -- an idea that has been discussed for at least two years.

It might seem surprising that such a low-key agenda could prove contentious, given that Wikimedia and Wales have also encountered complaints of being incautious with donors' money. But some Wikipedians want the foundation to be spending more.

''Why should they have to be wise spending such a little amount of money when they could have so much more?'' said Nathan Awrich, a Wikipedia contributor from Vermont who advocates limited ads on the site, to help pay for technical improvements, better outreach and even a legal-defense fund. ''This is not a foundation that needs to last one more year. This is a foundation that needs to be planning for a longer term, and it doesn't seem like they're doing it.''

Gardner said she opposes advertising unless it came down to a choice between ''shutting down the servers and putting ads on the site. I don't think we're ever going to get to that point, so I don't see advertising as an issue.''

Wales sounds political on the matter. On one hand, he said he believes ''advertising is really a nonstarter'' because of the potential harm to Wikipedia's noncommercial image. However, he also said the subject requires more research, so Wikipedians truly understand how much money the project is leaving on the table by rejecting ads.

''I think it's a fallacy to say learning about something implies you want to do it,'' he said. ''I would like to learn about it because I suspect it's not worth it.''

Another subject getting carefully parsed is the foundation's relationship with Elevation Partners, the venture firm co-founded by Roger McNamee and U2's Bono. Elevation owns stakes in Forbes magazine and Palm Inc., among other companies.

McNamee has donated at least $300,000 to the Foundation, according to Danny Wool, a former Wikimedia employee who processed the transactions. More recently, the foundation said, McNamee introduced the group to people who made separate $500,000 gifts. Their identities have not been disclosed.

Officially, Gardner and McNamee say he is a merely a fan of Wikimedia's free-information project, separate from Elevation's profit-making interests. ''He has been clear -- when he talks to me, he's talking as a private individual,'' Gardner said.

Yet the relationship runs deeper than that would suggest.

Another Elevation partner, Marc Bodnick, has met with Wales multiple times and went to a 2007 Wikimedia board meeting in the Netherlands. (Wales described that as a ''get to know you session'' and said Elevation, among many other venture firms, quickly learned that the foundation was not interested in changing its core, nonprofit mission.)

Bodnick and Bono had also been with Wales in 2006 in Mexico City, where U2 was touring. On a hotel rooftop, Bono suggested that Wikipedia use its volunteer-written articles as a starting point, then augment that with professionals who would polish and publish the content, according to two people who were present. Bono compared it to Bob Dylan going electric -- a jarring move that people came to love.

McNamee and Bodnick declined to comment.

Although Wales says no business with Elevation is planned, that hasn't quelled that element ever-present in Wikipedia: questions.

In the recent interview, Devouard, the board chair, said she believed Elevation was interested in being more than just friends, though she wasn't sure just what the firm hoped to get out of the nonprofit project.

''It is easy to see which interest WE have in getting their interest,'' she wrote to Wales that day on an internal board mailing list, in an exchange obtained by The Associated Press. ''The contrary is not obvious at all: Can you explain to me why EP (Elevation Partners) are interested in us?''

------

On the Net:

http://www.wikimedia.org

    Wikipedia Questions Paths to More Money, NYT, 21.3.2008, http://www.nytimes.com/aponline/technology/AP-Wikipedia-Finances.html

Op-Ed Contributor

The Undercover Parent

March 16, 2008
By HARLAN COBEN
Ridgewood, N.J.

NOT long ago, friends of mine confessed over dinner that they had put spyware on their 15-year-old son’s computer so they could monitor all he did online. At first I was repelled at this invasion of privacy. Now, after doing a fair amount of research, I get it.

Make no mistake: If you put spyware on your computer, you have the ability to log every keystroke your child makes and thus a good portion of his or her private world. That’s what spyware is — at least the parental monitoring kind. You don’t have to be an expert to put it on your computer. You just download the software from a vendor and you will receive reports — weekly, daily, whatever — showing you everything your child is doing on the machine.

Scary. But a good idea. Most parents won’t even consider it.

Maybe it’s the word: spyware. It brings up associations of Dick Cheney sitting in a dark room, rubbing his hands together and reading your most private thoughts. But this isn’t the government we are talking about — this is your family. It’s a mistake to confuse the two. Loving parents are doing the surveillance here, not faceless bureaucrats. And most parents already monitor their children, watching over their home environment, their school.

Today’s overprotective parents fight their kids’ battles on the playground, berate coaches about playing time and fill out college applications — yet when it comes to chatting with pedophiles or watching beheadings or gambling away their entire life savings, then...then their children deserve independence?

Some will say that you should simply trust your child, that if he is old enough to go on the Internet he is old enough to know the dangers. Trust is one thing, but surrendering parental responsibility to a machine that allows the entire world access to your home borders on negligence.

Some will say that it’s better just to use parental blocks that deny access to risky sites. I have found that they don’t work. Children know how to get around them. But more than that — and this is where it gets tough — I want to know what’s being said in e-mail and instant messages and in chat rooms.

There are two reasons for this. First, we’ve all read about the young boy unknowingly conversing with a pedophile or the girl who was cyberbullied to the point where she committed suicide. Would a watchful eye have helped? We rely in the real world on teachers and parents to guard against bullies — do we just dismiss bullying on the Internet and all it entails because we are entering difficult ethical ground?

Second, everything your child types can already be seen by the world — teachers, potential employers, friends, neighbors, future dates. Shouldn’t he learn now that the Internet is not a haven of privacy?

One of the most popular arguments against spyware is the claim that you are reading your teenager’s every thought, that in today’s world, a computer is the little key-locked diary of the past. But posting thoughts on the Internet isn’t the same thing as hiding them under your mattress. Maybe you should buy your children one of those little key-locked diaries so that they too can understand the difference.

Am I suggesting eavesdropping on every conversation? No. With new technology comes new responsibility. That works both ways. There is a fine line between being responsibly protective and irresponsibly nosy. You shouldn’t monitor to find out if your daughter’s friend has a crush on Kevin next door or that Mrs. Peterson gives too much homework or what schoolmate snubbed your son. You are there to start conversations and to be a safety net. To borrow from the national intelligence lexicon — and yes, that’s uncomfortable — you’re listening for dangerous chatter.

Will your teenagers find other ways of communicating to their friends when they realize you may be watching? Yes. But text messages and cellphones don’t offer the anonymity and danger of the Internet. They are usually one-on-one with someone you know. It is far easier for a predator to troll chat rooms and MySpace and Facebook.

There will be tough calls. If your 16-year-old son, for example, is visiting hardcore pornography sites, what do you do? When I was 16, we looked at Playboy centerfolds and read Penthouse Forum. You may argue that’s not the same thing, that Internet pornography makes that stuff seem about as harmful as “SpongeBob.”

And you’re probably right. But in my day, that’s all you could get. If something more graphic had been out there, we probably would have gone for it. Interest in those, um, topics is natural. So start a dialogue based on that knowledge. You should have that talk anyway, but now you can have it with some kind of context.

Parenting has never been for the faint of heart. One friend of mine, using spyware to monitor his college-bound, straight-A daughter, found out that not only was she using drugs but she was sleeping with her dealer. He wisely took a deep breath before confronting her. Then he decided to come clean, to let her know how he had found out, to speak with her about the dangers inherent in her behavior. He’d had these conversations before, of course, but this time he had context. She listened. There was no anger. Things seem better now.

Our knee-jerk reaction as freedom-loving Americans is to be suspicious of anything that hints at invasion of privacy. That’s a good and noble thing. But it’s not an absolute, particularly in the face of the new and evolving challenges presented by the Internet. And particularly when it comes to our children.

Do you tell your children that the spyware is on the computer? I side with yes, but it might be enough to show them this article, have a discussion about your concerns and let them know the possibility is there.

Harlan Coben is the author of the forthcoming novel “Hold Tight.”

    The Undercover Parent, NYT, 16.3.2008, http://www.nytimes.com/2008/03/16/opinion/16coben.html?ref=opinion

To Aim Ads, Web Is Keeping Closer Eye on You

March 10, 2008
The New York Times
By LOUISE STORY

A famous New Yorker cartoon from 1993 showed two dogs at a computer, with one saying to the other, “On the Internet, nobody knows you’re a dog.”

That may no longer be true.

A new analysis of online consumer data shows that large Web companies are learning more about people than ever from what they search for and do on the Internet, gathering clues about the tastes and preferences of a typical user several hundred times a month.

These companies use that information to predict what content and advertisements people most likely want to see. They can charge steep prices for carefully tailored ads because of their high response rates.

The analysis, conducted for The New York Times by the research firm comScore, provides what advertising executives say is the first broad estimate of the amount of consumer data that is transmitted to Internet companies.

Privacy advocates have previously sounded alarms about the practices of Internet companies and provided vague estimates about the volume of data they collect, but they did not give comprehensive figures.

The Web companies are, in effect, taking the trail of crumbs people leave behind as they move around the Internet, and then analyzing them to anticipate people’s next steps. So anybody who searches for information on such disparate topics as iron supplements, airlines, hotels and soft drinks may see ads for those products and services later on.

Consumers have not complained to any great extent about data collection online. But privacy experts say that is because the collection is invisible to them. Unlike Facebook’s Beacon program, which stirred controversy last year when it broadcast its members’ purchases to their online friends, most companies do not flash a notice on the screen when they collect data about visitors to their sites.

“When you start to get into the details, it’s scarier than you might suspect,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy rights group. “We’re recording preferences, hopes, worries and fears.”

But executives from the largest Web companies say that privacy fears are misplaced, and that they have policies in place to protect consumers’ names and other personal information from advertisers. Moreover, they say, the data is a boon to consumers, because it makes the ads they see more relevant.

These companies often connect consumer data to unique codes identifying their computers, rather than their names.

“What is targeting in the long term?” said Michael Galgon, Microsoft’s chief advertising strategist. “You’re getting content about things and messaging about things that are spot-on to who you are.”

The rich troves of data at the fingertips of the biggest Internet companies are also creating a new kind of digital divide within the industry. Traditional media companies, which collect far less data about visitors to their sites, are increasingly at a disadvantage when they compete for ad dollars.

The major television networks and magazine and newspaper companies “aren’t even in the same league,” said Linda Abraham, an executive vice president at comScore. “They can’t really play in this sandbox.”

During the Internet’s short life, most people have used a yardstick from traditional media to measure success: audience size. Like magazines and newspapers, Web sites are most often ranked based on how many people visit them and how long they are there.

But on the Internet, advertisers are increasingly choosing where to place their ads based on how much sites know about Web surfers. ComScore’s analysis is a novel attempt to estimate how many times major Web companies can collect data about their users in a given month.

Web companies once could monitor the actions of consumers only on their own sites. But over the last couple of years, the Internet giants have spread their reach by acting as intermediaries that place ads on thousands of Web sites, and now can follow people’s activities on far more sites.

Large Web companies like Microsoft and Yahoo have also acquired a number of companies in the last year that have rich consumer data.

“So many of the deals are really about data,” said David Verklin, chief executive of Carat Americas, an ad agency in the Aegis Group that decides where to place ads for clients.

“Everyone feels that if we can get more data, we could put ads in front of people who are interested in them,” he said. “That’s the whole idea here: put dog food ads in front of people who have dogs.”

Web companies also can collect more data as people spend more time online. The number of searches that American Web users enter each month has nearly doubled since summer of 2006, to 14.6 billion searches in January, according to comScore.

ComScore analyzed 15 major media companies’ potential to collect online data in December. The analysis captured how many searches, display ads, videos and page views occurred on those sites and estimated the number of ads shown in their ad networks.

These actions represented “data transmission events” — times when consumer data was zapped back to the Web companies’ servers. Five large Web operations — Yahoo, Google, Microsoft, AOL and MySpace — record at least 336 billion transmission events in a month, not counting their ad networks.

The methodology was worked out with comScore and based on the advice of senior online advertising executives at two of the largest Internet companies.

“I think it’s a reasonable way to look at how many touch-points companies have with their consumers,” Jules Polonetsky, the chief privacy officer for AOL, said of the comScore findings on Friday.

But Mr. Polonetsky cautions that not all of the data at every company is used together. Much of it is stored separately.

The information transmitted might include the person’s ZIP code, a search for anything from vacation information to celebrity gossip, or a purchase of prescription drugs or other intimate items. Some types of data, like search queries, tends to be more valuable than others.

Yahoo came out with the most data collection points in a month on its own sites — about 110 billion collections, or 811 for the average user. In addition, Yahoo has about 1,700 other opportunities to collect data about the average person on partner sites like eBay, where Yahoo sells the ads.

MySpace, which is owned by the News Corporation, and AOL, a unit of Time Warner, were not far behind.

ComScore said it recorded the ad networks using different methods and that the exact ordering of these top companies might vary with a different methodology, but the overall picture would be similar.

Google also has scores of data collection events, but the company says it is unique in that it mostly uses only current information rather than past actions to select ads.

The depth of Yahoo’s database goes far in explaining why AOL is talking with Yahoo about a merger and Microsoft is willing to pay more than $41.2 billion to acquire the company.

Traditional media companies come in far behind.

Condé Nast magazine sites, for example, have only 34 data collection events for the average site visitor each month. The numbers for other traditional media companies, as generated by comScore, were 45 for The New York Times Company; 49 for another newspaper company, the McClatchy Corporation; and 64 for the Walt Disney Company.

Some companies are trying to close the gap. Walt Disney, for example, is studying how to combine data from its divisions like ESPN, Disney and ABC. The News Corporation is exploring ways to use information that MySpace members post on that site to select ads for those members when they visit other News Corporation sites.

IAC is using data from its LendingTree site to deliver ads on its other sites to people it knows are looking for mortgages.

Some advertising executives say media companies will have little choice but to outsource their ad sales to companies like Microsoft and Yahoo to benefit from their data. The Web companies may prove they can use their algorithms and consumer information to better select which ads for visitors better than media companies can.

“I think a lot of publishers are going to find they don’t have enough data,” said David W. Kenny, chief executive of Digitas, a digital advertising agency in the Publicis Groupe. “There’s only going to be a handful of big players who can manage the data.”

People who spend more time on the Internet, of course, will have more information transmitted about them. The comScore per-person figures are averages; occasional Web users have far less transmitted about them.

The comScore figures do not include the data that consumers offer voluntarily when registering for sites or e-mail services. When consumers do so, they often give sites permission to link some of their interests or searches to their user name.

The figures also do not account for information people enter on social network pages. MySpace, for example, collects billions of user actions each day in the form of blogs, comments and profile updates, said Peter Levinsohn, president of Fox Interactive Media, which owns MySpace.

Even with all the data Web companies have, they are finding ways to obtain more. The giant Internet portals have been buying ad-delivery companies like DoubleClick and Atlas, which have stockpiles of information. Atlas, for example, delivers 6 billion ads every day. The comScore figures do not capture such data.

Executives from Web companies said they had been working to inform consumers on their data practices.

These companies noted their consumer-protection policies. AOL, for example, lets users opt out of some ad targeting, Google lets users edit the search histories that are linked to their user names, Yahoo is working on a policy to obscure people’s computer identification addresses that are connected to search results, and Microsoft says it does not link any of its visitors’ behavior to their user names, even if those people are registered.

A study of California adults last year found that 85 percent thought sites should not be allowed to track their behavior around the Web to show them ads, according to the Samuelson Law, Technology & Public Policy Clinic at the University of California at Berkeley, which conducted the study.

    To Aim Ads, Web Is Keeping Closer Eye on You, NYT, 10.3.2008, http://www.nytimes.com/2008/03/10/technology/10privacy.html?hp

Four Charged With Running Online Prostitution Ring

March 7, 2008
The New York Times
By ALAN FEUER

Federal authorities arrested four people Thursday on charges of running an online prostitution ring that serviced clients in New York, Paris and other cities and took in more than $1 million in profits over four years.

The ring, known as the Emperor’s Club V.I.P., had 50 prostitutes available for appointments in New York, Washington, Miami, London and Paris, according to a complaint unsealed on Thursday in Federal District Court in Manhattan. The appointments, made by telephone or through on an online booking service, cost $1,000 to $5,500 an hour and could be paid for with cash, credit card, wire transfers or money orders, the complaint said.

According to the office of the United States attorney in Manhattan, Mark Brener, 62, of New Jersey, was the leader of the ring, but delegated day-to-day business responsibilities to Cecil Suwal, 23, also of New Jersey. The office said that Ms. Suwal controlled the bank accounts, took applications from prospective prostitutes and oversaw two booking agents, identified by the authorities as Temeka Rachelle Lewis, 32, of Brooklyn, and Tanya Hollander, 36, of Rhinebeck, N.Y.

Ms. Hollander’s lawyer, Mary E. Mulligan, said her client was innocent, and that “up until today, she lived a very quiet life in a small town.”

The ring’s Web site showed pictures of the prostitutes, cropped so faces were not visible, and listed names like Sienna and Christine. The Web site, which was disabled shortly after the arrests were announced, ranked the prostitutes on a scale of one to seven “diamonds.” A three-diamond woman, for example, could command a fee of $1,000 per hour. A seven-diamond woman cost more than $3,000 an hour.

For its most valued clients, the Emperor’s Club offered membership in the elite “Icon Club,” with hourly fees starting at $5,500, according to the federal complaint. The club also offered clients the opportunity to purchase direct access to a prostitute without having to contact the agency.

As part of the investigation, federal agents worked with a woman who claimed to have worked for the Emperor’s Club as a prostitute in 2006, according to court papers. An undercover agent posed as a potential client and arranged appointments by phone and online.

After obtaining authorization to tap the club’s phones, federal agents recorded more than 5,000 calls and text messages and had access to 6,000 e-mail messages, court papers said. Many of these were somewhat mundane requests for appointments. The authorities — the case was investigated by the Internal Revenue Service and the F.B.I. — did not identify any of the clients.

Ms. Lewis and Ms. Hollander were charged with a conspiracy to violate federal prostitution laws. Each faces up to five years in prison if convicted.

Mr. Brener and Ms. Suwal were accused of prostitution and money laundering: The complaint says they funneled profits through bank accounts in the names of two front companies, identified as QAT Consulting Group and QAT International. They face maximum penalties of 25 years in prison if convicted.

    Four Charged With Running Online Prostitution Ring, NYT, 7.3.2008, http://www.nytimes.com/2008/03/07/nyregion/07prostitution.html

The Very Model of a Modern Media Mogul

March 3, 2008
The New York Times
By BROOKS BARNES

LOS ANGELES — When Michael D. Eisner left the Walt Disney Company in 2005 and set about remaking himself in new media, investing in a video-sharing Web site and starting a digital studio, some people in Hollywood snickered. Here we go, the whispers went, another fading star who doesn’t know when to leave the stage.

Could Mr. Eisner get the last laugh?

Among the Hollywood developers scrambling to create original Internet programs, Mr. Eisner, 65, is one of the very few who can claim early success. “Prom Queen,” a murder-mystery series distributed on MySpace and other Web sites, has been viewed by nearly 20 million people since its debut last spring.

He sold a dubbed version in France, peddled remake rights in Japan and made a sequel, “Prom Queen: Summer Heat.” The series, which came with commercials, even turned a profit along the way, a spokesman said.

Now, Mr. Eisner’s second series, “The All-For-Nots,” a comedy that documents the travails of a fictional indie rock band, will make its debut next week on the Internet, mobile devices and the HDNet cable network. The project reflects lessons learned. This time Mr. Eisner is protecting broad foreign syndication sales by restricting foreign access to the series, which will be available in the United States on YouTube and other sites.

With “The All-For-Nots,” which is sponsored by Chrysler and Expedia, Mr. Eisner is out to prove there is money to be made in the space between user-generated content and traditional television production.

“I would like to say I have a McKinsey study of a strategy,” he said, referring to the management consulting firm. “It doesn’t work that way. You just take your history and your education and your instincts and you put them all into a melting pot and out comes something.”

There are plenty of people in Hollywood who are rooting for him to fail. Jealousy over the success of “Prom Queen” — and Mr. Eisner’s occasional boasting about it — is one reason. He also retains his share of detractors from the Disney days. And while Internet types have overwhelmingly welcomed him, others remain skeptical.

“Just because Eisner is behind something, it doesn’t mean it is going to be a success,” said Darren Aftahi, a digital media analyst at ThinkEquity Partners in Minneapolis.

Still, the manner in which Mr. Eisner signed up Chrysler goes a long way toward explaining how he has become a leader of the digital media pack.

Most of his rivals — including his former employer, which announced the creation of a digital production studio last week — must labor to woo big-name advertisers to their untested Web content. The Disney-ABC Television Group spent months refining its strategy before Toyota signed on as the inaugural sponsor.

Mr. Eisner just flips through his Rolodex. When you spend 21 years running Disney, your friends are people like Robert L. Nardelli, the chairman of Chrysler. “I needed a car for the show so I called Bob,” Mr. Eisner said. (His successor at Disney and the other media kingpins have deep business relationships of their own, of course, but do not have the luxury of devoting their full attention to lining up product placements.)

Vuguru, Mr. Eisner’s Web studio, is just one of dozens of players trying to make a business out of Web shows. Many have popped up in recent months, as producers idled by the writers’ strike tested the medium. Others, like the producers of “Lonelygirl15,” have been tinkering in the area for years.

Studios like Warner Brothers and NBC Universal also have been trying to muscle in to the area. There have been pockets of success, but no studio has proved that it has a workable business model, said Michael Pond, a media analyst at Nielsen Online.

“The big studios have a lot of resources, but fast for them is pretty slow for the Web,” he said. “They are focusing harder on creating Web programs, but others are already there.”

Like Mr. Eisner. Vuguru, a made-up word he thought sounded hip, is part of a constellation of new-media plays he is making. Through Tornante, the venture capital firm he founded after leaving Disney, Mr. Eisner owns Vuguru; a large stake in Veoh, a site that allows users to download video with the quality of high-definition television; and Team Baby Entertainment, which makes sports-themed DVDs for infants and toddlers.

Most recently, Tornante, which is Italian for “hairpin turn,” paid $385 million for Topps, the longtime maker of trading cards and Bazooka bubble gum.

Mr. Eisner is keeping his ultimate playbook to himself, but drops a few hints.

“With Topps, I was interested in a company that could be a far bigger sports and entertainment media company,” he said. Among his ideas are the digital delivery of trading cards and the creation of Topps-branded sports movies or sports channels on cable. As for Bazooka Joe, the gum mascot, he recently told a trade magazine that “it would be foolish of me not to try and build that character into something as much as or more than he ever was.”

In some ways, “The All-For-Nots” is comfortable territory for Mr. Eisner. While working at ABC in 1970, he helped develop “The Partridge Family,” the series about a musical family that unexpectedly hits it big. “The new show is not that different from that experience of marrying music to story,” he said.

The idea for “The All-For-Nots” came last spring when Mr. Eisner saw “The Burg,” a Web comedy about the Williamsburg neighborhood of Brooklyn. “It had real flair,” he said. “It was funny.” He sought out the creator, a company called Dinosaur Diorama, and asked for ideas.

He passed on “The Burg 2,” but a pitch about the hubristic futility of trying to conquer the nation with indie rock sounded fun.

Bebo, the large social networking site, signed on as a distribution partner, along with a half-dozen other sites. “The All-For-Nots” cast members will have Bebo profiles that link to a channel where users can watch the series. David Aufhauser, Bebo’s business development director, noted that the site’s features would allow users to distribute “All-For-Nots” content among themselves.

Verizon Wireless became the mobile video partner and Mr. Eisner got HDNet on board. Mark Cuban, the founder of HDNet, had been a guest on Mr. Eisner’s CNBC talk show. “Michael and I talk ideas all the time,” Mr. Cuban wrote in an e-mail message. “The approach we have taken with ‘All-For-Nots’ gives us three shots at consumers, any of which could take off singularly or in combination. Web exclusivity is too limited.”

Like Chrysler, Expedia paid to be woven into the story line. As the band travels to 24 cities in search of fame, it books hotel rooms using Expedia, the online travel agency. Sarah Pynchon, Expedia’s vice president for brand marketing, said the company has been looking for product-placement opportunities in Web shows, but has been reluctant because the Internet audience “is going to be much more skeptical” of advertiser integration than television viewers.

Mr. Pond of Nielsen said that Mr. Eisner was smart to focus on music-driven stories, pointing to the success of shows like “Hannah Montana.” The concept also provides additional marketing angles. Cast members of “The All-For-Nots” will perform a concert on March 11 at the South by Southwest festival in Austin, Tex.

Mr. Eisner is the first to caution that, despite his early success, he has not found the Web video Rosetta Stone. Indeed, the slogan for “The All-For-Nots” could be his own. “The band that will conquer the World Wide Web,” the show’s Web site reads, “unless they run out of gas.”

    The Very Model of a Modern Media Mogul, NYT, 3.3.3008, http://www.nytimes.com/2008/03/03/business/media/03eisner.html

Adobe Blurs Line Between PC and Web

February 25, 2008
The New York Times
By JOHN MARKOFF

SAN FRANCISCO — On sabbatical in 2001 from Macromedia, Kevin Lynch, a software developer, was frustrated that he could not get to his Web data when he was off the Internet and annoyed that he could not get to his PC data when he was traveling.

Why couldn’t he have access to all his information, like movie schedules and word processing documents, in one place?

He hit upon an idea that he called “Kevincloud” and mocked up a quick demonstration of the idea for executives at Macromedia, a software development tools company. It took data stored on the Internet and used it interchangeably with information on a PC’s hard drive. Kevincloud also blurred the line between Internet and PC applications.

Seven years later, his brainchild is about to come into focus on millions of PCs. On Monday, Mr. Lynch, who was recently named the chief technology officer at Adobe Systems, which bought Macromedia in 2005, will release the official version of AIR, a software development system that will power potentially tens of thousands of applications that merge the Internet and the PC, as well as blur the distinctions between PCs and new computing devices like smartphones.

Adobe sees AIR as a major advance that builds on its Flash multimedia software. Flash is the engine behind Web animations, e-commerce sites and many streaming videos. It is, the company says, the most ubiquitous software on earth, residing on almost all Internet-connected personal computers.

But most people may never know AIR is there. Applications will look and run the same whether the user is at his desk or his portable computer, and soon when using a mobile device or at an Internet kiosk. Applications will increasingly be built with routine access to all the Web’s information, and a user’s files will be accessible whether at home or traveling.

AIR is intended to help software developers create applications that exist in part on a user’s PC or smartphone and in part on servers reachable through the Internet.

To computer users, the applications will look like any others on their device, represented by an icon. The AIR applications can mimic the functions of a Web browser but do not require a Web browser to run.

The first commercial release of AIR takes place on Monday, but dozens of applications have been built around a test or beta version.

EBay offers an AIR-based application called eBay Desktop that gives its customers the power to buy wherever they are. Adobe uses AIR for Buzzword, an online word processing program. At Monday’s introduction event in San Francisco, new hybrid applications from companies including Salesforce, FedEx, eBay, Nickelodeon, Nasdaq, AOL and The New York Times Company will be demonstrated.

Like Adobe’s Flash software, AIR will be given away. The company makes its money selling software development kits to programmers.

Mr. Lynch and a rapidly growing number of industry executives and technologists believe that the model represents the future of computing.

Moreover, the move away from PC-based applications is likely to get a significant jump start in the coming weeks when Intel introduces its low-cost “Netbook” computer strategy, which is intended to unleash a new wave of inexpensive wireless connected mobile computers.

The new machines will have a relatively small amount of solid state disk storage capacity and will increasingly rely on data stored on Internet servers.

“There is a big cloud movement that is building an infrastructure that speaks directly to this kind of software and experience,” said Sean M. Maloney, Intel’s executive vice president.

Adobe faces stiff competition from a number of big and small companies with the same idea. Many small developers like OpenLazlo and Xcerion are creating “Web-top” or “Web operating systems” intended to move applications and data off the PC desktop and into the Internet through the Web browser.

Mozilla, the developer of the Firefox Web browser, has created a system known as Prism. Sun Microsystems introduced JavaFX this year, which is also aimed at blurring the Web-desktop line. Google is testing a system called Gears, which is intended to allow some Web services to work on computers that are not connected to the Internet.

Finally, there is Microsoft. It is pushing its competitor to Flash, called Silverlight. Three years ago, Microsoft hired one of Mr. Lynch’s crucial software developers at Macromedia, Brad Becker, to help create it. Mr. Becker was a leading designer of the Flash programming language.

The blurring of Web and desktop applications and PC and phone applications is further encouraged by the cellphone industry’s race to catch up with Apple’s iPhone. The industry is focusing on smartphones, or what Sanjay K. Jha, the chief operating officer of Qualcomm, calls “pocketable computing.”

“We need to deliver an experience that is like the PC desktop,” he said. “At the same time, people are used to the Internet and you can’t shortchange them.”

Much software will have to be rewritten for the new devices, in what Mr. Lynch said is the most significant change for the software industry since the introduction in the 1980s of software that can be run through clicking icons rather than typing in codes. This upheaval pits the world’s largest software developer groups against one another in a battle for the new hybrid software applications. Industry analysts say there are now about 1.2 billion Internet-connected personal computers. Market researchers peg the number of smartphones sold in 2007 at 123 million, but that market is growing rapidly.

“There is a proliferation of platforms,” Mr. Lynch said. “This is a battle for the hearts and minds of people who are building things.”

The battle will largely pit Microsoft’s 2.2 million .Net software developers against the more than one million Adobe Flash developers, who have until now developed principally for the Web, as well as a vast number of other Web-oriented designers who use open-source software development tools that are referred to as AJAX.

Microsoft executives said they thought the company would have an advantage because Silverlight has a more sophisticated security model. “Desktop integration is a mixed blessing. There is potentially a gaping security hole,” said Microsoft’s Mr. Becker. “We’ve learned at the school of hard knocks about security.”

Microsoft’s competitors challenge its intent and assert that its goal is retaining its desktop monopoly. “Microsoft is taking their desktop franchise and trying to move that franchise to the Web,” said John Lilly, chief executive of Mozilla. He faults the design of Silverlight for being an island that is not truly integrated with the Internet.

“You get this rectangle in a Web browser and it can’t interact with the rest of the Web,” he said.

He said Mozilla’s Prism offers a simple alternative to capitalize on the explosion of creative software development taking place on the Internet. “There are jillions of applications. A million more got launched today. The whole world is collaborating on this.”

Up to now, it has been a low-level war between Microsoft and Adobe. Silverlight, for instance, got high marks from developers for its ability to handle high resolution video, but Adobe quickly upgraded Flash last year in response.

“We said, ‘Let’s put this in right now,’ ” Mr. Lynch said. With revenue last year of $3.16 billion, Adobe is large enough to fight Microsoft.

Adobe, the maker of Photoshop, Acrobat and other software, also has a strong reputation as a maker of tools for the creative class. "We’re one of the best tool makers in the world," said Mr. Lynch, who worked on software design at MicroPro, the publishers of the Wordstar word processor, and at General Magic, an ill-fated effort to create what could be called a predecessor to today’s smartphones, before joining Macromedia.

“Adobe’s known for its designer tools, but they realize that development — for the browser, for the desktop, and for devices such as cellphones — is a huge growth market,” said Steve Weiss, executive editor at O’Reilly Media, a technology publishing firm.

    Adobe Blurs Line Between PC and Web, NYT, 25.2.2008, http://www.nytimes.com/2008/02/25/technology/25adobe.html

Judge Shuts Down Web Site Specializing in Leaks

February 20, 2008
The New York Times
By ADAM LIPTAK and BRAD STONE

In a move that legal experts said could present a major test of First Amendment rights in the Internet era, a federal judge in San Francisco on Friday ordered the disabling of a Web site devoted to disclosing confidential information.

The site, Wikileaks.org, invites people to post leaked materials with the goal of discouraging “unethical behavior” by corporations and governments. It has posted documents said to show the rules of engagement for American troops in Iraq, a military manual for the operation of the detention center at Guantánamo Bay, Cuba, and other evidence of what it has called corporate waste and wrongdoing.

The case in San Francisco was brought by a Cayman Islands bank, Julius Baer Bank and Trust. In court papers, the bank said that “a disgruntled ex-employee who has engaged in a harassment and terror campaign” provided stolen documents to Wikileaks in violation of a confidentiality agreement and banking laws. According to Wikileaks, “the documents allegedly reveal secret Julius Baer trust structures used for asset hiding, money laundering and tax evasion.”

On Friday, Judge Jeffrey S. White of Federal District Court in San Francisco granted a permanent injunction ordering Dynadot, the site’s domain name registrar, to disable the Wikileaks.org domain name. The order had the effect of locking the front door to the site — a largely ineffectual action that kept back doors to the site, and several copies of it, available to sophisticated Web users who knew where to look.

Domain registrars like Dynadot, Register.com and GoDaddy .com provide domain names — the Web addresses users type into browsers — to Web site operators for a monthly fee. Judge White ordered Dynadot to disable the Wikileaks.org address and “lock” it to prevent the organization from transferring the name to another registrar.

The feebleness of the action suggests that the bank, and the judge, did not understand how the domain system works, or how quickly Web communities will move to counter actions they see as hostile to free speech online.

The site itself could still be accessed at its Internet Protocol address (http://88.80.13.160/) — the unique number that specifies a Web site’s location on the Internet. Wikileaks also maintained “mirror sites,” or copies usually produced to ensure against failures and this kind of legal action. Some sites were registered in Belgium (http://wikileaks.be/), Germany (http://wikileaks.de) and the Christmas Islands (http://wikileaks.cx) through domain registrars other than Dynadot, and so were not affected by the injunction.

Fans of the site and its mission rushed to publicize those alternate addresses this week. They have also distributed copies of the bank information on their own sites and via peer-to-peer file sharing networks.

In a separate order, also issued on Friday, Judge White ordered Wikileaks to stop distributing the bank documents. The second order, which the judge called an amended temporary restraining order, did not refer to the permanent injunction but may have been an effort to narrow it.

Lawyers for the bank and Dynadot did not respond to requests for comment. Judge White has scheduled a hearing in the case for Feb. 29.

In a statement on its site, Wikileaks compared Judge White’s orders to ones eventually overturned by the United States Supreme Court in the Pentagon Papers case in 1971. In that case, the federal government sought to enjoin publication by The New York Times and The Washington Post of a secret history of the Vietnam War.

“The Wikileaks injunction is the equivalent of forcing The Times’s printers to print blank pages and its power company to turn off press power,” the site said, referring to the order that sought to disable the entire site.

The site said it was founded by dissidents in China and journalists, mathematicians and computer specialists in the United States, Taiwan, Europe, Australia and South Africa. Its goal, it said, is to develop “an uncensorable Wikipedia for untraceable mass document leaking and analysis.”

Judge White’s order disabling the entire site “is clearly not constitutional,” said David Ardia, the director of the Citizen Media Law Project at Harvard Law School. “There is no justification under the First Amendment for shutting down an entire Web site.”

The narrower order, forbidding the dissemination of the disputed documents, is a more classic prior restraint on publication. Such orders are disfavored under the First Amendment and almost never survive appellate scrutiny.

    Judge Shuts Down Web Site Specializing in Leaks, NYT, 20.2.2008, http://www.nytimes.com/2008/02/20/us/20wiki.html?hp

Facing Free Software, Microsoft Looks to Yahoo

February 9, 2008
The New York Times
By MATT RICHTEL

SAN FRANCISCO — Nearly a quarter-century ago, the mantra “information wants to be free” heralded an era in which news, entertainment and personal communications would flow at no charge over the Internet.

Now comes a new rallying cry: software wants to be free. Or, as the tech insiders say, it wants to be “zero dollar.”

A growing number of consumers are paying just that — nothing. This is the Internet’s latest phase: people using freely distributed applications, from e-mail and word processing programs to spreadsheets, games and financial management tools. They run on distant, massive and shared data centers, and users of the services pay with their attention to ads, not cash.

While such services have been emerging for years, their rapid adoption has been an important but largely overlooked driver of the $44.6 billion hostile bid that Microsoft made to take over Yahoo this week.

That proposed deal would give Microsoft access to Yahoo’s vast news, information, search and advertising network — and the ability to compete more squarely with Google.

But a merger would also allow Microsoft to adapt its empire to compete in a world of low-cost Internet-centered software.

Yahoo’s huge user base could provide the audience and the infrastructure for Microsoft to change how it distributes its products and charges for them.

“Microsoft makes its money selling licenses to millions and millions of people who install it on individual hard drives,” said Nicholas Carr, a former editor at The Harvard Business Review and author of “The Big Switch,” a book about the transition to what the technology industry calls cloud computing.

“Most of what you need is on the Internet — and it’s free,” he said. “There are early warning signs that the traditional Microsoft programs are losing their grip.”

Certainly, analysts said, Microsoft’s revenue — $51 billion last year, most of it from software — is not yet suffering in any meaningful way.

The company said, to the contrary, that business is booming, and that Microsoft Office, a flagship product, is having a record-breaking year.

“Last year was our best year, and this year is better,” said Chris Capossela, a Microsoft vice president with the Office division.

At the same time, though, the company has lowered prices. Last year it began selling its $120 student-teacher edition to mainstream consumers, who had been asked to pay more than $300 for a similar product.

The bulk of the company’s profit comes from selling to corporations, which unlike consumers may be slower to adapt to a system in which proprietary data is not stored in corporate-owned data centers.

Microsoft said that corporate customers prefer using software that they are familiar with and that provides more functions and better security.

But the corporate business, too, is coming under increasing assault from lower-cost Internet competitors, including Microsoft’s archnemesis, Google.

On Thursday, Google took its attack to a new level. It released Google Apps Team Edition — a version of its productivity software that includes word processing, spreadsheet and calendar programs. In a form of guerrilla marketing, the fans of Google Docs can take it into the office, bypassing or perhaps influencing decisions made by corporate executives, who until now have overwhelmingly bought Microsoft software.

Google, while it gives such software free to consumers, charges corporations for a premium edition, though the fee is less than what Microsoft charges for productivity software, analysts said.

The change is coming not from corporations but on the computers of a growing base of individuals who increasingly expect their software to be free — and for it to be processed and managed over the Internet.

Kevin Twohy, 20, a mathematics student at U.C.L.A., uses a free service on Facebook to store and share photos, a program called Picnik to edit the images, and Gmail.

For his English class last semester, he wrote a term paper about William Blake using Google’s free word processing software, even though Microsoft Office had come loaded on his personal computer.

The advantage of the Google program, he said, was that it allowed him to keep his information on Google’s servers so that it was accessible at any computer, whether he was working at his fraternity, a coffee shop, a campus computer bank or the library. The experience, he said, has persuaded him not to pay money for software.

“I don’t ever see myself buying a copy of Office,” he said.

Those individual users may be able to do what an army of lawyers and regulators in the United States and Europe have never been able to do — rein in Microsoft’s monopoly power. There is some evidence that the erosion in its pricing power has already begun.

Last fall, Microsoft lowered prices of its most powerful productivity software for students, whom it regards as important future customers. For a limited time, it said, students could buy a $60 downloadable version of its most feature-rich version of Office, which ordinarily costs around $460.

Microsoft has also had ad-supported online competitors who have challenged other prominent brands, like the Encarta encyclopedia and Microsoft Money, personal finance management software.

“If Microsoft had to start over today, it wouldn’t even think about charging money for its software,” said Yun Kim, an industry analyst with Pacific Growth Equities. “Nobody in their right mind is developing a business in the consumer market to charge” for software.

Mr. Kim said that he expected Microsoft at some point to introduce a free ad-supported version of Office for consumers, though the company insists that it has no such intention.

Mr. Kim, however, expects that Microsoft’s corporate business is more entrenched and resilient, and less susceptible to the influences of free or ad-supported cloud computing.

Microsoft’s online competitors disagree. Among them is Zimbra, a division of Yahoo that offers Internet-centered productivity software for e-mail, word processing and spreadsheets.

Consumers pay nothing for the product, but corporations pay as much as $50 a year per license. About 20,000 companies, most of them small, are paying customers.

For Office software, Microsoft charges $75 a year per license to large companies, and up to $300 for small companies, according to Forrester Research.

Satish Dharmaraj, general manager of Zimbra, said the company could undercut Microsoft because it costs far less to create, maintain, fix and upgrade software that runs in a central data center instead of on thousands of individual computers.

But the relative quality of Microsoft’s software continues to attract customers, argued J. P. Gownder, an industry analyst with Forrester Research.

He said that Microsoft has an opportunity to develop a hybrid version of its software that combines the convenience of cloud computing with the security of processing on the desktop, thus helping it maintain and further its empire.

“This is the predominant reason why Microsoft has gone after Yahoo,” Mr. Gownder said. “The ad revenue is a nice short-term achievement, but in the long run it is much more about delivering apps over the Web.”

    Facing Free Software, Microsoft Looks to Yahoo, NYT, 9.2.2008, http://www.nytimes.com/2008/02/09/technology/09free.html?ref=business

Google Works to Torpedo Microsoft Bid for Yahoo

February 4, 2008
The New York Times
By ANDREW ROSS SORKIN and MIGUEL HELFT

Standing between a marriage of Microsoft and Yahoo may be the technology behemoth that has continually outsmarted them: Google.

In an unusually aggressive effort to prevent Microsoft from moving forward with its $44.6 billion hostile bid for Yahoo, Google emerged over the weekend with plans to play the role of spoiler.

Publicly, Google came out against the deal, contending in a statement that the pairing, proposed by Microsoft on Friday in the form of a hostile offer, would pose threats to competition that need to be examined by policy makers around the world.

Privately, Google, seeing the potential deal as a direct attack, went much further. Its chief executive, Eric E. Schmidt, placed a call to Yahoo’s chief, Jerry Yang, offering the company’s help in fending off Microsoft, possibly in the form of a partnership between the companies, people briefed on the call said.

Google’s lobbyists in Washington have also begun plotting how it might present a case against the transaction to lawmakers, people briefed on the company’s plans said. Google could benefit by simply prolonging a regulatory review until after the next president takes office.

In addition, several Google executives made “back-channel” calls over the weekend to allies at companies like Time Warner, which owns AOL, to inquire whether they planned to pursue a rival offer and how they could assist, these people said. Google owns 5 percent of AOL.

Despite Google’s efforts and the work of Yahoo’s own bankers over the weekend to garner interest in a bid to rival Microsoft’s, one did not seem likely, at least at this early stage.

For example, a spokesman for the News Corporation said Sunday night that it was not preparing a bid, and other frequently named prospective suitors like Time Warner, AT&T and Comcast have not begun work on offers, people close to them said. They suggested that they did not want to enter a bidding war with Microsoft, which could easily top their offers.

A spokesman for Time Warner declined to comment, as did a spokesman for Comcast. A representative for AT&T could not be reached.

In the meantime, people close to Yahoo said that the company received a flurry of inquires over the weekend from potential suitors. Some people inside Yahoo have even speculated about the prospect of breaking up the company. That could mean selling or outsourcing its search-related business to Google and spinning off or selling its operations that produce original content, these people said.

“Everyone is considering all kinds of options and a deal on search is one of them,” a person familiar with the situation said.

One person involved in Yahoo’s deliberations suggested that “the sum of the parts are worth more than the whole,” arguing that its various pieces like Yahoo Finance, for example, could be sold to a company like the News Corporation for a huge premium while Yahoo Sports could be sold to a company like ESPN, a unit of the Walt Disney Company.

Executives at rival companies were less optimistic about such a breakup strategy. “No one can get to a $44 billion price,” one executive at a major media company said, “even if you split it into a dozen pieces.”

In making its bid for Yahoo, Microsoft is betting that past antitrust rulings against it for abusing its monopoly power in personal computer software will not restrain its hand in an Internet deal.

In the United States, a federal district court in Washington ruled in 2001 that Microsoft had repeatedly violated the law by stifling the threat to its monopoly position posed by Netscape, which popularized the Web browser. The suit, brought during the Clinton administration, was settled by the Bush administration. But as a result of a consent decree extending through 2009, a federal court and a three-member team of technical experts monitors Microsoft’s behavior.

In 2006, for example, after Google complained to the Justice Department and the European Commission that Microsoft was making its MSN search engine the default in the most recent version of its Web browser, Microsoft modified the software so that consumers could easily change to Google or Yahoo.

In Google’s statement on Sunday, it said that the potential purchase of Yahoo by Microsoft could pose threats to competition that needed to be examined by policy makers.

Google’s broadly worded concerns lacked detailed claims about any anticompetitive effects of the deal, and the company did not publicly ask regulators to take specific actions at this time.

“Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?” asked David Drummond, Google’s senior vice president and chief legal officer, writing on the company’s blog.

Yahoo and Microsoft declined to comment Sunday on Google’s actions. Earlier on Sunday, Microsoft’s general counsel, Bradford L. Smith, said in a statement: “The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising.”

Google’s effort to derail or delay the deal on antitrust grounds mirrors Microsoft’s own actions with respect to Google’s bid for the online advertising specialist DoubleClick for $3.1 billion, announced in April.

The strategy is not surprising, considering that any delays would work to Google’s benefit. “Google can tap into all of the ill will that Microsoft has created in the last couple of decades on the antitrust front,” said Eric Goldman, director the High-Tech Law Institute at the Santa Clara University School of Law.

The outcome of any antitrust inquiry will hinge, in part, on how regulators define various markets. Microsoft-Yahoo, for instance, would have a large share of the Web-based e-mail market, but a smaller share of the overall e-mail market.

“The potential concern would be that Microsoft, if it acquires Yahoo, could do on the Internet what it did in the personal computer world — make technical standards more Microsoft-centric and steer consumers to its products,” said Stephen D. Houck, a lawyer representing the states involved in the consent decree against Microsoft.

Yahoo has not made a public statement about the proposed deal since Friday, when it said it was weighing Microsoft’s offer as well as alternatives and would “pursue the best course of action to maximize long-term value for shareholders.”

Carl W. Tobias, a law professor at the University of Richmond in Virginia, said an antitrust review of the Microsoft-Yahoo deal could take a long time and “may well bleed into a new administration with an entire new view on antitrust than the Bush administration.”

Steve Lohr contributed reporting.

    Google Works to Torpedo Microsoft Bid for Yahoo, NYT, 4.2.2008, http://www.nytimes.com/2008/02/04/technology/04yahoo.html?hp

Talking Business

A Giant Bid That Shows How Tired the Giant Is

February 2, 2008
The New York Times
By JOE NOCERA

Oh, how the mighty have fallen.

This may seem like an odd way to characterize a company that just announced its willingness to plunk down $44.6 billion to make its first hostile takeover ever. A company that will probably generate somewhere around $60 billion in revenue when its fiscal year ends in June. A company whose market share in its two core products is still so high — despite recent inroads by a certain flashy competitor — that it qualifies as a monopoly.

But this is Microsoft we’re talking about, and if its proposed acquisition of Yahoo signals anything, it serves as a confirmation that Microsoft’s glory days are in the past. Having failed to challenge Google where it matters most — in online advertising — it has been reduced to bulking up by buying Google’s nearest but still distant competitor. In many ways, the company has become exactly what Bill Gates used to fear the most — sluggish, bureaucratic, slow to respond to new forms of competition — just as I.B.M. was when Microsoft convinced that era’s tech behemoth to use Microsoft’s operating system in its new personal computer.

The I.B.M. PC was introduced in the summer of 1981. Here we are nearly 27 years later, and Microsoft’s core product is still its operating system, now called Windows — that and its suite of applications, called Office, that run on Windows. They generate billions of dollars annually for the company. The most recent version of Windows, released almost exactly a year ago, has already been installed in 100 million computers. Yet in technology, 27 years is a lifetime, and there is a powerful sense that while it has spent enormous effort over the years protecting its monopoly, the world has passed it by. In particular, the technology world now centers on the Internet, where Google reigns supreme, and Microsoft has never succeeded in making serious inroads. Years ago, it started its own online service, MSN. It has made efforts to develop a search engine that could compete with Google’s. It has developed an advertising infrastructure to both place ads on other Web sites —another Google specialty—and to generate its own ad revenues. In every case, it has come up a day late and a dollar short. For instance, only 4 percent of Internet searches worldwide are done with Microsoft’s engine, compared with over 65 percent done with Google’s.

“Of its five major divisions,” said Brent Thill, the software analyst for Citigroup, “the online division is the only one that loses money. They are software engineers at Microsoft,” he continued, “and their DNA is very different from the DNA of someone who builds online assets. It’s just a different mind-set.”

Besides, the old strategies that once worked so well for Microsoft — strategies that worked when the world still revolved around Windows — have no place in this new world. In the mid-1990s, when Netscape posed a threat to Microsoft’s hegemony, Microsoft created its own competing browser, Internet Explorer, made it an integral part of Windows, and used its desktop monopoly to fight back. Eventually, Netscape was reduced to also-ran status — and the Justice Department took Microsoft to court on antitrust violations.

Today, Microsoft lacks both the weaponry and the nimbleness to compete with Google. Its operating system monopoly gives it no advantages in this battle. People can use Microsoft’s operating system and browser to get to the Internet — and to Google — or they can use Apple’s. It truly doesn’t matter. Meanwhile, with every new Internet fad, like the current frenzy over social networking, Microsoft is invariably caught flat-footed and has to race to just get a foot in the game. But that’s always the way it is when companies get big — and it is why real innovation always comes from small companies that don’t have a predetermined mind-set, or monopoly profits to protect.

Will the purchase of Yahoo — assuming it goes through, which is far from a foregone conclusion — be a game-changer for Microsoft? Anything is possible, I suppose. I spoke to a number of technology experts Friday who were convinced that it made some sense. Andy Kessler, the technology investor and writer, called it “a smart offensive move.” Mark Anderson, the president of Strategic News Service, said, “They are getting the No. 2 online guy in the ad business at a good time and a good price.” Rob Enderle of the Enderle Group told me that it was only a matter of time before somebody made a bid for Yahoo — “and it makes sense that it’s Microsoft.”

But let’s be honest here. Microsoft isn’t exactly buying a high-flier. Even after a Microsoft-Yahoo merger, Google would still have twice the search market of its competitor. Its ad placement service is superior to either Microsoft’s or Yahoo’s. And Yahoo has struggled enormously in the last few years. It, too, could have been early in social networking; its chat rooms could have lent themselves easily to something that might have rivaled Facebook. Just like Microsoft, it missed the opportunity. It is quite clearly a company that has lost its way, and the question of whether Microsoft can refocus into a viable Google competitor, well, let’s just say I’m dubious.

I also have to wonder about what Yahoo gets out of the deal — other than a premium for its depressed stock. “Does it help their brand?” asked Mark Mahaney, who covers Yahoo for Citigroup. “No. Does it give them better search technology? No. Does it give them a better ad sales force? No. I suspect this is the question being asked in Yahoo’s boardroom right now,” he added.

What was most striking to me Friday was Microsoft’s own expectations for the deal. To put it bluntly, they are awfully low. When I spoke to Yusuf Mehdi, Microsoft’s senior vice president for strategic partnership — and the man who had been driving much of its online efforts in recent years — he never once talked about crushing the competition, or even catching up.

A Yahoo deal, he told me, “will be good for consumers who want another search engine, Web publishers who want another ad placement service, and syndicated advertisers” — who also want a choice other than Google. He continued: “Because of Google’s heavy volume and its algorithms, they are a very efficient buy. But people are rooting for a credible No. 2. We got lots of calls today from Web sites and others saying, ‘We’re with you.’ ”

Was he really saying that Microsoft would be content as a “credible No. 2?” I had a hard time believing it. But when I pushed him on this point, he reiterated it. “Online advertising revenues are going to be $80 billion within a couple of years,” he said. (They’re about $50 billion now.) “That is going to mean a tremendous opportunity to all players. There has to be a place for another credible player.”

I think back to the fall of 2005, when Bill Gates visited The New York Times, and an editor asked him if Microsoft “would do to Google what you did to Netscape?”

“Nah,” laughed Mr. Gates, “we’ll do something different.” This ain’t it.

    A Giant Bid That Shows How Tired the Giant Is, NYT, 2.2.2008, http://www.nytimes.com/2008/02/02/technology/02nocera.html

Microsoft Bids $44.6 Billion for Yahoo

February 1, 2008
The New York Times
By MIGUEL HELFT

SAN FRANCISCO — In a bold move to counter Google’s online pre-eminence, Microsoft said Friday that it had made an unsolicited offer to buy Yahoo for about $44.6 billion in a mix of cash and stock.

If consummated, the deal would redraw the competitive landscape in Internet consumer services, where both Microsoft and Yahoo have both struggled to compete with Google.

The offer of $31 a share represents a 62 percent premium over Yahoo’s closing stock price of $19.18 on Thursday. It would be Microsoft’s largest acquisition ever.

Microsoft said the combination of the two companies would create efficiencies that would save approximately $1 billion annually. The software giant also said that it has an integration plan to include employees of both companies and intends to offer incentives to retain Yahoo employees.

Steven A. Ballmer, the Microsoft chief executive, said that he called his Yahoo counterpart, Jerry Yang, on Thursday night to tell him that Microsoft intended to bid on the company, and that they had a substantive discussion. “I wouldn’t call it a courtesy call,” he said in an interview.

Mr. Ballmer said he had decided to pursue a takeover because friendly deal negotiations would most likely be protracted and would probably become public.

“These things are hard to keep quiet in the best of times,” he said. He said his conversation with Mr. Yang was constructive, but suggested that a deal may not come easily.

Yahoo said in a news release Friday that its board would evaluate Microsoft’s bid “carefully and promptly in the context of Yahoo’s strategic plans.”

In a letter to Yahoo’s board, Mr. Ballmer wrote that the two companies discussed a possible merger, as well as other ways to work together, in late 2006 and 2007. Mr. Ballmer said that in February 2007, Yahoo decided to end the merger discussions because its board was confident in the company’s “potential upside.”

“A year has gone by, and the competitive situation has not improved,” Mr. Ballmer wrote.

As a result, he said, “while a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing.”

Mr. Ballmer met several times in late 2006 and 2007 with Terry S. Semel, then Yahoo’s chief executive, people involved in the talks said. While the talks — originally focused on the prospect of a merger or a joint venture — were initially constructive and appeared to move forward, they quickly broke down, these people said.

After a series of secret meetings between both sides in hotels around California and elsewhere, Mr. Semel and Yahoo’s board decided against progressing with the talks, betting that its stock would turn around as it introduced a new advertising system called Panama, these people said. Mr. Yang, in particular, was adamantly against selling the company to Microsoft and championed the view of remaining independent, they added.

Mr. Ballmer constantly consulted with Bill Gates, the Microsoft chairman, about the progress of the negotiations, people close to the company said, and when the talks collapsed, he decided to wait to see the fate of Yahoo’s stock price. As the stock continued to fall, they said, Microsoft’s management became emboldened and began internal meeting in late 2007 about the prospect of making a hostile bid.

Despite their heavy investments in online services, both Yahoo and Microsoft have watched Google extend its dominance over Internet search and the lucrative online advertising business that goes along with it.

In recent months, Yahoo has struggled to develop a plan to turn around the company under Mr. Yang, its co-founder, who was appointed chief executive amid growing shareholder dissatisfaction last June.

Yahoo investors, however, remain skeptical. The company’s shares have slumped, and the closing price on Thursday was 44 percent below its 52-week high.

In pre-market trading Friday, Yahoo’s shares were up 50 percent, to almost $29. Microsoft’s shares were down about 4 percent, and Google’s shares were down 6 percent.

Microsoft, like Yahoo, has faced an uphill battle against Google. The company invested heavily to build its own search engine and advertising technology. Last year, it spent $6 billion to acquire the online advertising specialist aQuantive. Microsoft’s online services unit has been growing, but remains unprofitable.

Meanwhile, Google’s share of the search market and of the overall online advertising business has continued to grow.

Announcing its quarterly earnings earlier this week, Yahoo said it would cut 1,000 jobs in an effort to refocus the company and reduce spending, and issued an outlook for 2008 that disappointed investors.

The timing of Microsoft’s bid could allow the company to mount a proxy contest for control of Yahoo’s board should it try to dismiss the offer. Microsoft has discussed the prospect of mounting such a campaign, people close to the company said, and has until March 13 to propose a slate.

In his letter to Yahoo’s board, Mr. Ballmer wrote, “Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

On Thursday night, Yahoo announced that Mr. Semel, its nonexecutive chairman and former chief executive, was leaving the board. Under Mr. Semel, a long-time Hollywood studio executive who ran Yahoo from 2001 to 2007, the company became more focused on its advertising and media businesses, but was unable to keep up with Google’s challenge in Web search and advertising and with the rise of social networking sites such as MySpace and Facebook.

A longtime board member, Roy J. Bostock, has been named nonexecutive chairman, Yahoo said.

Microsoft said it believes the Yahoo transaction could receive the necessary regulatory approvals in time to close by the second half of this year.

Andrew Ross Sorkin contributed reporting.

    Microsoft Bids $44.6 Billion for Yahoo, NYT, 1.2.2008, http://www.nytimes.com/2008/02/01/technology/01cnd-subyahoo.html?hp

Yahoo to Cut 1,000 Jobs, and Warns on Growth

January 30, 2008
The New York Times
By MIGUEL HELFT

SAN FRANCISCO — After announcing a sharp drop in fourth-quarter profits Tuesday, Yahoo issued a disappointing outlook for this year, suggesting that investors would have to wait until 2009 for a turnaround.

Yahoo also said that as part of its plan to revive its fortunes, it would cut 1,000 jobs by mid-February to reduce costs and narrow its focus to its most important businesses.

The company, however, said it planned to invest aggressively in some areas, like advertising technology and selected portions of its Internet portal, as it tries to capture a larger share of online ad dollars. Since some laid-off employees could apply for new jobs at Yahoo, the net effect on the work force, which recently grew to 14,300, was not clear.

Jerry Yang, the chief executive, warned investors of “head winds” this year. Yahoo’s projections for revenue growth and profitability in 2008 were either at the low end of analysts’ expectations or below them.

Yahoo executives said those projections were largely independent of the slowdown in the United States economy, noting that it was too early to predict whether weakness in the financial, travel and housing sectors would hurt online advertising.

“There is not a lot of positive about the outlook,” said John Aiken, an analyst with Majestic Research, an investment analysis firm in New York.

In a sign of growing impatience, investors reacted negatively to the announcements, which were made in a conference call after the markets closed. In after-hours trading, Yahoo shares fell more than 10 percent, to levels of more than three years ago.

Yahoo said that its fourth-quarter net income fell to $206 million, or 15 cents a share, down 23 percent from $269 million, or 19 cents a share, in the same quarter a year ago. Revenue grew 8 percent to $1.8 billion. Excluding commissions paid to certain advertising partners, revenue was $1.4 billion, in line with analysts’ expectations.

Mr. Yang, the Yahoo co-founder who was named chief executive last summer amid growing shareholder discontent, has promised to focus on three objectives: becoming a starting point for consumers on the Web; making the company a top choice for marketers seeking to place ads on sites across the Web; and opening Yahoo’s technology infrastructure to third-party programmers and publishers.

It is a strategy that will require time and investments. Yet Mr. Yang said he was upbeat. “We are seeing early signs of success as a result of this clear new focus,” he said.

Yahoo has begun narrowing the focus of its portal on a few key areas, including its front page, the personalized home page service MyYahoo, search, mail, and properties like news, finance and sports.

Improvements to those services has led to double-digit increases in visits to Yahoo, said Susan Decker, Yahoo’s president. Meanwhile, the company has said it would de-emphasize or shut down a number of other services, including photos, podcasts and a largely unsuccessful social network.

Ms. Decker also said that Yahoo had begun to make investments to revamp its advertising and search technology infrastructure, which would allow the company to be more efficient.

Yahoo needs to make some of those investments as it tries to become the seller of ads on a network of Web publishers, which for now includes eBay, Comcast, hundreds of newspapers and others. Some analysts said the plans made sense, but questioned whether the changes could translate into financial gains quickly enough.

“How long does all of this take?” asked Christa Quarles, an analyst with Thomas Weisel Partners. “How long does the board stay satisfied? How long does it take to grow the publisher network? Yahoo’s problems didn’t start in 2007; they started in 2003.”

Yahoo also said that it renegotiated and expanded a lucrative partnership with AT&T. Instead of receiving fees for each broadband customer AT&T signs up, Yahoo will share search and display advertising revenue with AT&T. Under the four-year deal, Yahoo’s search technology will also be available to AT&T’s cellphone customers.

The deal will result in upfront payments from AT&T to Yahoo for $300 million to $400 million, which will be recognized over the length of the agreement. Yahoo executives said that the deal would result in a net revenue loss this year, but that it stood to make more money over the life of the agreement.

Yahoo also said Tuesday that it had appointed Aristotle Balogh, 43, known as Ari, as chief technology officer, a crucial post vacant since Farzad Nazem left months ago. Mr. Balogh had been chief technology officer at the online security firm VeriSign.

    Yahoo to Cut 1,000 Jobs, and Warns on Growth, NYT, 30.1.2008, http://www.nytimes.com/2008/01/30/technology/30yahoo.html

Wall St. Journal to Continue Its Charges for Web Content

January 25, 2008
The New York Times
By RICHARD PÉREZ-PEÑA

The Wall Street Journal will continue to charge readers for access to much of its Web site, Rupert Murdoch said Thursday.

For months, Mr. Murdoch, who took control of the paper in December, has vacillated publicly over whether to maintain its subscription firewall. But officials at his company, News Corporation, say that this time, a decision has actually been made to keep it — for now, at least.

Speaking at the World Economic Forum in Davos, Switzerland, Mr. Murdoch said that the pages on WSJ.com “giving the greatest insights, that will still be a subscription service,” according to Reuters.

People at News Corporation who have been briefed on the matter confirmed that the policy had been settled, in general terms. They spoke on condition of anonymity because they were not authorized to discuss the subject.

But they said the company had not intended to announce the policy yet and had not expected any statement by Mr. Murdoch, who is known for speaking his mind. In November, Mr. Murdoch said of the Journal site, “We expect to make that free,” and in that case, too, people involved in the discussions were caught off guard and cautioned that nothing had been decided.

Currently, The Journal’s site puts most of the newspaper’s news articles behind the firewall while giving free access to a wide range of other material, like opinion columns and video.

News Corporation officials said that while Mr. Murdoch would keep the hybrid model, the mix of what is free and what is not could change significantly. And, they said, the entire matter is likely to be revisited before long.

Few newspapers have tried such a hybrid system, making readers pay only for content that is considered premium. And some that have — including The New York Times — have abandoned it.

Since his bid last spring for Dow Jones & Company, the publisher of The Journal, Mr. Murdoch has repeatedly made it clear that his instinct was to make the Web site free, which could greatly increase the number of people who read the paper online. The added traffic, he argued, would generate more than enough ad revenue to offset the loss of subscription fees, which Dow Jones executives put at $70 million a year.

But Dow Jones executives argue that the firewall not only generates revenue, it also creates an elite audience of high-income business-oriented readers whom advertisers pay a premium to reach. The Journal has a million paying online subscribers, some of whom also subscribe to the paper in print.

    Wall St. Journal to Continue Its Charges for Web Content, NYT, 25.1.2008, http://www.nytimes.com/2008/01/25/business/media/25journal.html

Hundreds of Layoffs Expected at Yahoo

January 22, 2008
The New York Times
By MIGUEL HELFT

SAN FRANCISCO — Yahoo is planning to lay off hundreds of employees in an effort to increase its profitability, prop up its deflated stock price and narrow the focus of its sprawling Internet portal to a smaller number of crucial areas, people close to the company said Monday.

The final number of layoffs from Yahoo’s work force of about 14,000 is yet to be determined and is likely to be announced around the end of the month, perhaps during Yahoo’s conference call on Jan. 29 with analysts after it reports fourth-quarter results, these people said.

Company executives are still trying to determine exactly which areas will be cut. One person close to the discussions said a final plan, or perhaps a few alternative plans, would be submitted to the board at a coming meeting. The plan’s final shape may be influenced by the company’s fourth-quarter performance, this person said.

Yahoo declined to comment specifically on any plan for layoffs. In an e-mail statement, a company spokeswoman, Diana Wong, said: “Yahoo plans to invest in some areas, reduce emphasis in others, and eliminate some areas of the business that don’t support the company’s priorities. Yahoo continues to attract and hire talent against the company’s key initiatives to create long-term stockholder value.”

The statement echoes a strategy sketched out in recent months by Jerry Yang, the company’s co-founder, who was appointed chief executive last summer amid growing shareholder dissatisfaction.

After a 100-day review of the company, Mr. Yang said in October that Yahoo would focus on three areas: becoming a “starting point” for the most consumers on the Web; extending its advertising offerings to sites across the Web; and opening up Yahoo’s technology infrastructure to third-party developers and publishers.

The strategy is aimed at revitalizing Yahoo, which has been eclipsed by Google in Internet search, and has faced increasing competition from social networks like MySpace and Facebook. As a result, Yahoo’s share of the overall online advertising market has declined. Still, the company remains a powerful force on the Internet, with about 500 million people visiting its sites around the world each month.

Company executives have said that to achieve its “starting point” goal, Yahoo would continue to invest in areas like Internet search, e-mail, the Yahoo front page and the personalized home-page service MyYahoo, as well as news, finance and sports.

Some other areas would be de-emphasized. In recent months, Yahoo said it would phase out or consolidate services like photos, premium music, auctions and Yahoo 360, a largely unsuccessful social network.

During the weekend, some blogs reported that Yahoo was considering layoffs of 10 to 20 percent of its work force. But the people close to the company, who discussed Yahoo’s layoff plans on condition that they not be identified, said the cuts would most likely be in the hundreds.

The last time Yahoo had sizable layoffs was in 2001, after the dot-com crash. During the last year, the company added several hundred people, some through hiring and some through acquisitions of companies like the online advertising specialists Right Media and BlueLithium and the e-mail provider Zimbra.

Mr. Yang and other Yahoo executives have said recently that they believe that those acquisitions and a series of reorganizations have primed the company for a turnaround. But they have cautioned that financial results may not improve quickly. They have also said they believe Yahoo can succeed as an independent company, amid growing speculation that the company could become a takeover target.

With the stock price sliding, Mr. Yang and the board may see layoffs as necessary to ensure that the company can indeed remain independent. Yahoo shares have lost more than half of their value since early 2006, closing Friday at $20.78.

    Hundreds of Layoffs Expected at Yahoo, NYT, 22.1.2008, http://www.nytimes.com/2008/01/22/technology/22yahoo.html

MySpace and 45 States

Team Up to Fight Online Predators

January 14, 2008
Filed at 10:53 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

ALBANY, N.Y. (AP) -- MySpace.com has agreed with more than 45 states to add extensive measures to combat sexual predators.

An official familiar with the multistate agreement said MySpace, the huge online social networking Web site, has agreed to include several online protections and participate in a working group to develop age-verification and other technologies.

The official said MySpace will also accept independent monitoring and changes to the structure of its site.

The agreement is scheduled to be announced today in Manhattan by attorneys general from New Jersey, North Carolina, Connecticut, Pennsylvania, Ohio and New York.

The official spoke on condition of anonymity because the agreement hadn't yet been announced.

The attorneys general have been seeking greater controls for online networking sites to prevent sexual predators from using those sites to contact children.

There was no immediate comment from MySpace, a unit of News Corp.

Investigators have increasingly examined MySpace, Facebook.com and similar social networking sites that allow people to post information and images on the Web and invite contacts from others.

Last year, New York investigators said they set up Facebook profiles as 12- to 14-year olds and were quickly contacted by other users looking for sex.

A multistate investigation of the sites -- announced last year -- was aimed at putting together measures to protect minors and remove pornographic material, but lawsuits were possible, officials said.

''We have to find the best way to make sure parents have the tools ... to protect their children when they're on social networking sites,'' North Carolina Attorney General Roy Cooper said in September.

    MySpace and 45 States Team Up to Fight Online Predators, NYT, 14.1.2008, http://www.nytimes.com/aponline/technology/AP-MySpace-Agreement.html

Warner Backs Blu-ray, Tilting DVD Battle

January 5, 2008
The New York Times
By BROOKS BARNES

LOS ANGELES — The high-definition DVD war is all but over.

Hollywood’s squabble over which of two technologies will replace standard DVDs skewed in the direction of the Sony Corporation on Friday, with Warner Brothers casting the deciding vote in favor of the company’s Blu-ray discs over the rival format, HD DVD.

In some ways, the fight is a replay of the VHS versus Betamax battle of the 1980s. This time, however, the Sony product appears to have prevailed.

“The overwhelming industry opinion is that this decides the format battle in favor of Blu-ray,” said Richard Doherty, research director at the Envisioneering Group, a market research firm in Seaford, N.Y.

Behind the studio’s decision are industrywide fears about the sagging home entertainment market, which has bruised the movie industry in recent years as piracy, competition from video games and the Internet, and soaring costs have cut into profitability. Analysts predict that domestic DVD sales fell by nearly 3 percent in 2007, partly because of confusion in the marketplace over the various formats.

HD DVD, however, is not dead. Two major studios, Paramount Pictures and Universal Pictures, have deals in place to continue releasing their movies exclusively on HD DVD, as does DreamWorks Animation. Warner Brothers, part of Time Warner, will also continue to release its titles on both formats until the end of May.

But by supporting Blu-ray, Warner Brothers, the largest player in the $42 billion global home entertainment market, makes it next to impossible for HD DVD to recover the early momentum it achieved.

While the specifics of the Blu-ray and HD DVD skirmish might be of interest only to insiders, the consequences of deciding a winner are not. Consumers have been largely sitting on the sidelines, waiting to buy high-definition players until they see which will have the most titles available. Retailers have been complaining about having to devote space to three kinds of DVDs. And the movie business has delayed tapping a lucrative new market worth billions. High-definition discs sell for a 25 percent premium.

“Consolidating into one format is something that we felt was necessary for the health of the industry,” Barry M. Meyer, the chief executive of Warner Brothers, said in a telephone interview. “The window of opportunity for high-definition DVD could be missed if format confusion continues to linger.”

In addition to Sony, a consortium of other electronics makers back Blu-ray. For Sony, Warner’s decision is a chance to rewrite history: the company faltered in its introduction of Betamax in the consumer market in the 1980s. Many analysts say the HD DVD players now risk becoming the equivalent of Betamax machines, which died out in large part because it became harder for consumers to find Betamax movies as studios shifted allegiance to VHS.

With Warner on board, Blu-ray now has about 70 percent of the market locked up; Walt Disney, 20th Century Fox, MGM, Lionsgate and, of course, Sony are all on Blu-ray’s team. Warner Brothers has some of the bigger releases in 2008, including “Speed Racer,” the Batman sequel “The Dark Knight” and the sixth Harry Potter installment.

“This doesn’t necessarily kill the HD DVD format, but it definitely deals it a severe blow,” said Paul Erickson, an analyst at the NPD Group’s DisplaySearch. “When a consumer asks a store clerk which format to buy, that clerk is now going to have a hard time arguing for HD DVD.”

In a prepared statement, Toshiba said it was “quite surprised” and “particularly disappointed” by Warner’s decision. “We will assess the potential impact of this announcement with the other HD DVD partner companies,” the company said. Universal Pictures declined to comment.

Warner Brothers has been courted for months by both sides. Toshiba dispatched Yoshihide Fujii, the executive in charge of its HD DVD business, to the studio three times in recent months, according to Time Warner executives who were granted anonymity because the negotiations were confidential. Sony has aimed even higher: Howard Stringer, the conglomerate’s chief executive, has leaned on Jeffrey Bewkes, the new chief executive of Time Warner.

Money was an issue. Toshiba offered to pay Warner Brothers substantial incentives to come down on its side — just as it gave Paramount and DreamWorks Animation a combined $150 million in financial incentives for their business, according to two executives with knowledge of the talks who asked not to be identified.

Kevin Tsujihara, president of the Warner Brothers Home Entertainment Group, declined to comment on whether any payments were offered for support of Blu-ray. “This market is absolutely critical to our future growth,” he said in a telephone interview. “You couldn’t put a number on that.”

For his part, Mr. Meyer said, “We’re not in this for a short-term financial hit.”

Which high-definition technology is better has been the subject of intense debate in Hollywood and electronics circles for years. HD DVD players have been much cheaper than Blu-ray machines, but Blu-ray discs have more storage space and more advanced protections against piracy. Both versions deliver sharp resolution.

Consumers were inundated with marketing from both sides during the recent holiday season. Wal-Mart, as part of a temporary promotion, offered Toshiba players for under $100. Sony and its retailing partners, including Best Buy, responded by dropping prices on Blu-ray players, although not to the same level. Blu-ray players can now be purchased for under $300.

Still, Blu-ray was emerging as a front-runner as early as August. Blu-ray titles have sharply outsold HD DVD offerings — by as much 2 to 1, according to some analysts — and some retailers like Target started stocking only Blu-ray players. Blockbuster said last summer that it would carry Blu-ray exclusively.

“We’ve been monitoring the situation with consumers for a while now and they have clearly made their choice,” Mr. Meyer said. “We followed.”

    Warner Backs Blu-ray, Tilting DVD Battle, NYT, 5.1.2008, http://www.nytimes.com/2008/01/05/technology/05disc.html

Wikipedia Founder Brings Search Project

January 2, 2008
Filed at 10:44 a.m. ET
By THE ASSOCIATED PRESS
The New York Times

NEW YORK (AP) -- The founder of Wikipedia says taking the online encyclopedia's collaborative approach into the field of search won't dethrone Google Inc. or another major search engine -- at least not soon.

After months of talk and a few weeks of invitation-only testing, Wikia Search is to open to the general public next week.

Wikipedia founder Jimmy Wales says his goal is to let volunteers improve search technology collectively, the way Wikipedia lets anyone add or change entries, regardless of expertise.

''That reduces the sort of bottleneck of two or three firms really controlling the flow of search traffic,'' said Wales, chairman of Wikia Inc., the for-profit venture behind the search project.

Engineers at Google and other search companies continually tweak their complex software algorithms to improve results and fight spammers -- those who try to artificially boost the rankings of their own sites. Search companies have not disclosed many details to avoid tipping off competitors and spammers.

Wales' approach would open that process. Initially, participants will help make such decisions as whether a site on ''Paris Hilton'' refers to the celebrity or a French hotel.

Danny Sullivan, editor in chief of the industry Web site Search Engine Land, has his doubts. Finding all the Web sites to index and staying ahead of spammers are huge undertakings, Sullivan said.

''I think he doesn't really understand the scale of what Google has to handle in terms of the queries from around the world and the amount of traffic that flows to it and the attempts that are made to try to manipulate it,'' Sullivan said.

Wales said the project would launch with about 50 million to 100 million Web pages indexed, a fraction of the billions available with major search engines.

Even as Wales tries to challenge search, Google has announced a project that could challenge Wikipedia. Google's version, called knol, will differ from Wikipedia by identifying who wrote each article and giving authors a chance to share in Google's advertising revenue.

------

On the Net:

http://search.wikia.com

Wikipedia Founder Brings Search Project, NYT, 2.1.2008, http://www.nytimes.com/aponline/technology/AP-TechBit-Wiki-Search.html