Best Buy Buys Napster...Why?

The big news today is that Best Buy in the U.S. has purchased online music download company Napster for a reported US$121 million. Which begs the question: why?

Online music downloading has been an arguably struggling business for years, plagued by illegal, peer-to-peer (P2P) music Websites and customer's (warranted) hatred of silly things like DRM that prevent you from listening to purchased tracks on various devices, or burning them to CD. According to the Financial Times, Napster actually reported a loss of US$16.5 million in the year ending March 31.

Along with the still existent P2P activity and DRM (which is slowly melting away, but could see a resurgence thanks to the Government's Bill C-61), online digital download sites like Napster still have to fight the leader in that realm: iTunes. And with the iPhone added to the iPod family, iTunes will likely continue to be the leader of the pack, likely by an even bigger gap.

I'm trying to fathom why Best Buy would take on the task of competing with iTunes. The only thing I can come up with is that the strategy works in tandem with the retailer's recent move to ramp up its involvement in the mobile phone arena. Best Buy is opening standalone Best Buy Mobile stores that sell mobile phones. As is evidenced by devices like the iPhone, Nokia N95, and Sony Ericsson Walkman phones, music is becoming a huge part of the mobile phone experience. Could Best Buy be working out deals with carriers to link Napster downloading with their services? Or is Best Buy just looking to get back into this side of the business now that companies are offering DRM-free tunes that are more appealing to customers?

On the portable media player side, perhaps this is a way for Best Buy to make money on the sale of devices other than the iPod. Maybe a Napster subscription will be offered as an incentive to the purchase of an MP3 player. Or on the flip side, maybe "deals" on music downloading will be awarded in store on purchases. Who knows.

While there's no official comment on how the takeover might affect the Canadian market, my guess is that Best Buy is just testing the waters for now, and making sure that the company is well equipped to compete should digital music downloading take a significant upsurge in the next few years. While I'm rooting for this to take off, I'm not holding my breath either.

Victory in Cablevision DVR Case...For Now

Several cable networks filed a suit two years ago that attempted to stop U.S. cable operator Cablevision from creating a network digital video recorder (DVR). The product would allow Cablevision customers to record programming onto a central network in the home rather than to the cable box itself. Naturally, the protests echo two words we've heard many times before in the consumer electronics arena: unauthorized reproduction. Not to mention that customers will continue to be able to skip through commercials, making it that much more difficult to sell advertising between programming.

The argument that such a DVR would be "reproducing" work is, in my opinion, ridiculous. The customer would be storing and/or "reproducing" the content for use in his own home; maybe to watch at a later date, maybe to watch two or three times, and yes, probably to watch while flipping past the commercials. Either way, it's like he's taking a CD in playing it in the stereo in his living room versus his portable Walkman. Does it really matter where or how he enjoys the content if he's paid for it?

The latter point about skipping over TV commercials is one that has become a real bone of contention in the TV world. But many networks have, rather than sit with their arms folded and bottom lips in the pout position, picked up on new and more clever ways to incorporate advertising within the actual content rather than in between it. This ranges from blatent product placements (even more so than usual), to in-show, one-minute rants about a product. I've even seen entire movie trailers being shown during a TV program, and touted as an "exclusive first look". Really, you're being tricked into thinking that by watching this show, you get to see this trailer while no one else does. But in actuality, you're watching a commercial without even knowing it!

The reality is that, despite the pushback from networks who insist upon getting rid of new technology devices like the DVR in question, traditional TV advertising as we know it simply won't continue forever. While some might frown upon the in-show ads, we do need to understand that someone or something needs to pay the bills. Some actors, like daytime talk show host Ellen Degeneres and nighttime talk show host Jimmy Kimmel, have even been said to add humour to the product pitches so that they become part of the program in a seamless and entertaining way.

We can certainly expect the networks involved to appeal the New York court's decision that overturned the ruling, and will essentially let the product be made. Nevertheless, the Financial Times cites Cablevision as saying that it will "waste no time in rolling out the technology."

While this case only pertains to laws in the U.S., it could certainly spill over to places like Canada, where we have our own battles with copyright law, DRM restrictions, and unauthorized (or perceived to be unauthorized) content reproduction.

Sony U.S. to Join Streaming Movie Foray?

According to the Financial Times, Sony will soon be offering movies from its own movie studio as streaming video files online. There are, however, a few catches.

First, the movies will reportedly only be available for download by people who own a Sony BRAVIA LCD TV along with the company's new Internet Video Link accessory. Second, although not really a catch, is that you'll have to pay for the streaming version, which will be available in standard definition format (given current bandwidth restrictions). And third, from the sounds of it, the price you pay for that streaming version will also include a price for the actual DVD. On the bright side, there is one plus: you'll get the streaming version before the physical DVD of the movie is released.

While innovative, I'm a bit skeptical about this arrangement. First, the Financial Times report implies that you can't actually buy a streaming version of the movie instead of the physical DVD, but rather purchase the streaming option as a secondary method of viewing the film along with the actual DVD when it becomes available. Many people choose to stream a movie online because they don't want to have to buy and store a physical DVD, they just want to watch it one time on-the-go, or they want to pay a lesser price. Although no pricing information for the streaming movies was revealed, I'd bet they'll be slightly higher than a standard physical DVD, especially if you're forced to buy that DVD as well.

The second downfall is obvious: you can only stream movies from Sony Pictures. This isn't surprising given other Sony initiatives, like the Sony-specific Memory Stick flash memory cards, proprietary connectors for Sony Ericsson mobile phones, and dare I point out beta? (It's worth pointing out that there are other formats that gain other manufacturer support, like Blu-ray). This system has worked for Sony for some time now, so why not in this new, innovative way to obtain online content? On a positive note, some fantastic movies hail from Sony Pictures. Hancock, starring box office golden boy Will Smith will be the first movie to launch in the new streaming format.

It's important to note that Sony U.S. has not yet made an official announcement about this service, so take this information with a grain of salt. Even so, no such service has been announced for the Canadian market (no surprise there), so it's really a moot point for us Canucks at this time. (Note that the Internet Video Link itself, however, is already available in Canada for $300).