Digital Media

(Credit: CNET Networks)

There's a lot being written about the disappearance of Sony films from Xbox's Netflix streaming service, and most of it is wrong.

Several blogs have suggested that Sony pulled movies from Columbia Pictures, owned by Sony, because it has a problem with Microsoft or the Xbox. That isn't the case. It turns out that Netflix simply didn't get a licensing deal done with Sony that included the Xbox or some of Netflix's other distribution partners, according to sources close to the situation. This is a bad goof on Netflix's part.

Steve Swasey, Netflix's spokesman, refused to discuss any specific studio licensing deals but did say that titles "come in and out of licensing all the time." He acknowledged that some movies once offered as part of the Netflix-streaming service on Xbox aren't there anymore. He said the company hopes it's only temporary.

Netflix has done a great job of moving streaming movies from the Internet to TV sets with the Netflix Player from Roku and by partnering to offer its streaming service via Xbox.

But one of the main complaints I have with the streaming service is that it's still light on titles. If Netflix loses those they already have they're frustrating customers and hurting themselves. This is the kind of basic blocking and tackling the Netflix guys are typically so good at.

(Note to Netflix CEO Reed Hastings: don't flub this kind of thing. I'm sure you're aware some of the studios were lukewarm about Xbox offering Netflix and would have preferred to see Microsoft build it's own film offering).

A year after iTunes began offering music without copy protection software from EMI, Apple is in discussions with the other three top recording companies about acquiring DRM-free songs, according to two music industry sources.

The talks are still preliminary and no deals have been finalized, but one source said one of the major labels is close to a final agreement. Rumors have been swirling on the Internet for a week that Sony would soon be offering music without the controversial digital rights management software. My sources could not confirm this.

Spokespeople for Apple and the major labels declined to comment.

Should the deals get done, the songs offered by Apple's iTunes would no longer be restricted to playing on Apple devices, such as the iPhone or iPod. This has been one of the main criticisms of iTunes music for a long time. Apple says it's the music labels that force Apple to adopt DRM. Music insiders say Apple has long dragged its feet about getting unprotected music. Right now, Apple uses it's own proprietary DRM scheme, FairPlay, to lock down its music.

Talks with at least two of the labels have taken place on and off for several months, said the sources. They cautioned that there's no guarantee Apple and the labels can close the deals. But if iTunes is successful in acquiring the rights to sell unprotected music from Universal Music Group, Warner Music Group, and Sony BMG, it could help bolster iTunes' dominant position in digital music, as well as send competitors scrambling to find something new to differentiate themselves.

In the past year, the four top recording companies have been moving away from DRM--at least with other music services. In that time, companies such as Amazon, MySpace Music, and Napster have all begun selling open MP3s. MP3s are the format used to compress music files. Universal Music is expected to soon announce that it is licensing MP3s to Microsoft for Zune. EMI and Warner already have DRM-free deals with Microsoft for the Zune.

The marketing efforts of these Apple rivals have played up the idea that their music is unencumbered with DRM.

Also in the past year, technological shortcomings of copy-protection software have generated a lot of public scrutiny. As some iTunes competitors have exited the market, they have taken their DRM music with them.

This year, MSN, Yahoo, and Wal-Mart outraged some customers and consumer groups by announcing they would stop issuing keys for their DRM-protected songs. This meant the music would be prevented from being transferred to an owner's other devices.

Eventually, all three music services reversed their decisions, but it convinced DRM critics that DRM software never truly surrenders control of music to a buyer. While it's inconceivable to think that Apple would ever stop issuing DRM keys, it's absolutely possible.

CNET News reporter Ina Fried contributed to this report.

See also:
• Wal-Mart to carry iPhone after holidays?

Updated 1:30 p.m. PST, with Yahoo's closing price and additional information on Microsoft-Yahoo-Yang.

Yahoo shares went into a free fall Wednesday, plummeting 20.9 percent following comments from Microsoft CEO Steve Ballmer that the software giant is interested in a search-only partnership and not a buyout of the entire company.

The Internet search pioneer fell $2.41 a share to close at $9.14 a share, during the regular trading session. And at one point in the trading day, Yahoo's shares dipped as low as $9.07 a share.

(Credit: Yahoo Finance)

The stock went into shock after Ballmer reiterated that Microsoft has no plans to acquire Yahoo and that its interests mainly lie in a potential to do a search-only partnership with the company.

Ballmer's comments were made during a question and answer session at Microsoft's annual shareholders meeting.

That disappointed Yahoo investors, who were holding out hope that Microsoft would come back to the negotiating table after the Internet search pioneer announced Monday that CEO Jerry Yang would step down as soon as a replacement was found. Many investors had blamed Yang for the failed Microsoft buyout talks, when the software giant walked away from its previous offer of $33 a share to acquire the company.

Yahoo's stock has undergone two rounds of whiplash this week, soaring as much as 16 percent in intraday trading on Tuesday after the Yang announcement.

Over the past 10 months, Yahoo's stock has repeatedly been whipsawed whenever Ballmer or Yang have made a reference to a deal or no deal.

Earlier in the week, after Yahoo had announced Yang would be stepping down, one influential Microsoft source had told CNET News that Yahoo investors who were still "lusting" after a Microsoft buyout would be disappointed.

The source had noted that the topic of a Yahoo buyout has not come up in Redmond for months and months now and that the two companies are not talking.

And another source quoted in the story, who is familiar with Yahoo's thinking, noted it was unlikely the Internet search pioneer would consider any search-only related deals until Yahoo had a new CEO in place, allowing that person to weigh in on the topic. Yahoo is expected to make a decision on its next CEO within the next six months.

Apple's iPhone jumped to the top spot on the AdMob Network for the month of October, with 4.1 percent of the mobile ads requested from the network, according to the AdMob Mobile Metrics Report released Wednesday.

Requests from advertisers for mobile ads targeted to iPhone users rose to 236 million in October, more than doubling from the 103 million requests recorded in the previous month. Worldwide, AdMob's mobile-ad requests for all device makers grew 13.8 percent in October, to 5.8 billion.

AdMob delivers banner and text ads to mobile devices, and these figures were analyzed and aggregated as part of its monthly Mobile Metrics report. AdMob-served ads are seen by people visiting clients' Web sites with their mobile phone. Advertisers can choose to have their ads appear on a certain type of device, or region of the world, and then AdMob places the ads on partner publishers' mobile sites.

Mobile advertising is on a fast track, with research firms projecting market revenue to reach $19 billion per year by 2011, up from the approximately $3 billion seen for last year.

Fueling the iPhone's October performance was particularly strong traffic outside the United States, which accounted for 37 percent of its ad requests, according to the AdMob report. Western Europe represented 17 percent of the iPhone ad requests, and Asia represented 8 percent.

Other handset players following close behind included the Motorola Razr V3, which received 3.4 percent of the requests; Nokia's N70, with 3.2 percent; and the Motorola Krzr K1c, with 1.8 percent.

But in the U.S. market alone, the iPhone ranked No. 2, with 6.9 percent of the requests, while Motorola's Razr V3 led the market, with 7.7 percent. The U.S. market accounted for 62.8 percent of the iPhone's ad requests in October.

Requests from advertisers for mobile ads targeted to iPhone users more than doubled from September to October.

(Credit: AdMob)

Colleges in Tennessee will be required to root out file sharing.

(Credit: University of Tennessee )

Tennessee has agreed to filter computer networks for unauthorized music downloads at the state's colleges and universities.

Tennessee Gov. Phil Bredesen signed into law a bill designed to thwart music piracy at the state's campuses, the Recording Industry Association of America said on its Web site.

The bill requires Tennessee public and private schools exercise "appropriate means" to ensure that campus computer networks aren't being used to download copyright material via peer-to-peer file-sharing programs, the RIAA said.

"Upon a proper analysis of the network," the RIAA continued, "those institutions are required to implement technological support and develop and enforce a computer network usage policy to effectively limit the number of unauthorized transmissions of copyrighted works."

The Electronic Frontier Foundation, an Internet-user advocacy group, called the law "ridiculous," and said the costs of enforcing it would top $9 million.

"The entertainment industry lobby seems to be succeeding, bit-by-bit in persuading legislators to coerce universities into buying 'infringement suppression' technologies," the EFF said in a blog post, adding that these technologies are expensive and "won't stop file sharing on campus networks."

The RIAA said that a 2007 Student Monitor survey found that more than half of college students download music and movies illegally.

A friend of mine, Patricia Montesinos, a senior at the University of Tennessee, said Tuesday she's seen no notifications yet from the school about filtering.

Mark Cuban

Mark Cuban is not one to hush up in the face of controversy or for that matter, let others get the last word in.

The owner of the pro basketball's Dallas Mavericks and founder of Broadcast.com has responded again to the insider-trading charges filed against him by the Securities and Exchange Commission.

The SEC accuses Cuban of selling his shares in Internet-search firm Mamma.com in 2004 after acquiring nonpublic information and avoiding a $750,000 loss. The feds charge that Cuban made an agreement with Mamma.com's CEO to not disclose the information about a future stock offering.

Cuban denied in a post on his personal blog that he made any such agreement. But we'll leave it for Cuban and his lawyers to explain. Below is a copy of the post from Cuban's blog.

On behalf of Mark Cuban

RE: SEC Civil Action in the United States District for the Northern District of Texas, Dallas Division

The SEC knows their case centers on one telephone conversation between two individuals- four years ago. The SEC claims there was an agreement between these parties to the conversation to keep certain information confidential. We interviewed Guy Faure, the former CEO of Mamma.com Inc., with whom the SEC claims Mr. Cuban made an agreement. We had a court reporter transcribe the interview. There was no agreement to keep information confidential. Here is a relevant excerpt from the interview with Mr. Faure:

CHRISTOPHER CLARK :

1) Q- We spoke earlier about you were telling Mr. Cuban in words or substance : "I have confidential information for you".

A- Right.

2) Q- Do you recall anything Mr. Cuban said in response or reply to that statement by you ?

A- No, I do not.

The SEC knows this-they have the transcript, yet they brought the case anyway. Why? Do they have a different statement from Mr. Faure ?

Why did the SEC end their multi-year investigation of Mamma.com Inc. for alleged securities laws violations days before interviewing present and former Mamma.com Inc. executives about this matter? Was the timing a coincidence? We think not.

Yahoo's board and outgoing Chief Executive Jerry Yang agree that his skills aren't the right ones to turn the company around. What strengths, then, should his successor have?

Given Yahoo's sluggish responsiveness and years of trouble, a turnaround expert with a high pain threshold certainly is a good place to start. But there are other options beyond that.

Among the options are a mergers-and-acquisitions specialist who might broker a deal with Microsoft or another partner, a buttoned-down operations expert who could speed up Yahoo's existing strategy, and a bold visionary who could take Yahoo in a new direction altogether. (Vote your opinion here, and weigh in with comments below.)

Opinions varied among experts surveyed about the matter, but one thing seems clear: a fresh set of eyes soon will look at Yahoo's business.

"An outsider seems like the best possible option," said Jennifer Chatman, an organizational behavior expert at the University of California at Berkeley's Haas School of Business. "They need someone who's less invested. Jerry Yang was there from the beginning...I think he's really suffered from not having an objective view of what the company is worth."

One source familiar with Yahoo's thinking shared the company's wish list of desirable attributes for Yang's replacement: someone with prior CEO experience who's got both operational and strategic skills, someone experienced in technology, and somebody energetic and young--which apparently means in his or her 40s or 50s. The company expects to come up with a pool of about a dozen candidates and settle on one within six months, though there's no hard deadline, the source said.

Companies searching for a new CEO typically select a handful of top requirements and attributes then work with an executive search firm to refine the qualifications list, said David Nosal, chief executive of Nosal Partners, one such firm. Yahoo could come up with a short list of candidates within 45 days or so.

Analysts also believe it's better to hire a new CEO whose experience tilts more toward the advertising and media realm than the technology realm. Yahoo still has a powerfully large audience, and it's not going to outdo Google when it comes to letting the robots rule the roost.

"You're in the business of aggregating audiences and selling them to advertisers," said Forrester analyst David Card. "How you create that has more technology than in TV or movies or newspapers, but it's not like you're in the business of having armies of developers who run massive server farms and bring efficiencies out of algorithms."

Outsell analyst Ned May agreed. "I think the technology is less important than the advertising and media focus," he said. Just coming up with new technology doesn't guarantee it'll be a hit, he said, citing Google Docs as an example. "You can build it and they won't come."

Opinions varied, though, on whether Yahoo wants a CEO who will bring a new strategy to the company or one that will bring the existing one to fruition.

May expects somebody who can execute the plan Yang set in place, which seeks to improve search and display advertising on the one hand and to offer users more active, useful Web sites on the other.

"I think it's an execution person--someone who works well with current company," May said.

But Terry Hendershott, a professor at Haas, expects bigger changes.

"They have a strategy problem," Hendershott said. "They've been existing on the idea that they have a lot of traffic and they'll someday monetize this. And they're not doing this very well."

Forrester's Shar VanBoskirk believes the current strategy is workable but needs some pizazz.

"They need somebody with a little bit of guts and some operational expertise," VanBoskirk said. "They don't lack for legacy, they don't lack for data, they don't lack for experience. They lack for the flash in making that all sexy again."

CNET News staff writer Dawn Kawamoto contributed to this report.

Timing is everything.

And, so, it should come as no surprise that Yahoo Chief Executive Jerry Yang feels the "time is right" for a new leader to guide the embattled Internet search pioneer. The company announced Monday that it has started a search to replace Yang as CEO.

Two weeks ago, Yahoo's proposed search advertising partnership with Google was abandoned, after federal antitrust regulators indicated they would challenge the deal. For Yahoo, that dealt a blow to its plans to generate as much as $800 million in additional revenue, and had served as a cornerstone to ward off an earlier unsolicited buyout bid by Microsoft and later a search-only hybrid offer.

The failed search advertising partnership, in essence, marked a closed chapter in a series of tumultuous chapters that engulfed Yahoo's operations for the better part of the year. There were the failed buyout bids from Microsoft, followed by a proxy fight from dissident shareholder Carl Icahn (who has since become a company director), then intense negotiations with federal antitrust regulators over the Google deal.

In his blog posting Tuesday, Yang offers this assessment of his CEO tenure over the past 18 months:

Ever since founding Yahoo! with David Filo 13 years ago, I've been passionate about this company, its brand, its employees, and the millions of people around the world who consider it their online home. That's why I accepted the Board's request to become CEO in June 2007, taking on the challenge of transforming Yahoo! at a time when the industry was evolving quickly and we needed to rethink and restructure our business.

And despite the tough external environment that we face, I truly believe we've made tangible progress in bringing our strategic vision to life. Most significantly, we've rewired our entire network to create a Yahoo! that has opened its doors to outside publishers and developers. We've launched an advertising platform that we think will transform how ads are bought and sold online. And we've continued to grow our audience -- standing first or second in more than 20 product categories and demonstrating that Yahoo! is the place users turn for major events like the Olympics and the Elections.

And now I believe the time is right for us to bring in a new leader -- someone who will build on the important pillars we've put in place and who will take the reins on the critical decisions our company faces.

Yang notes he will continue to serve as CEO until a successor is named. Then he will resume his role as chief Yahoo, working on global strategy and improving the company's products and their development. Yang will also continue to serve on the company's board of directors.

In closing, Yang writes:

It's been an extraordinary year here at Yahoo! -- for all of us. I'm really proud of the determination and resilience of Yahoos around the world who are so committed to giving you the best Internet experience possible. It is for them, and for you, that I will always bleed purple.

File this one as improbable, but it's interesting that this rumor continues to crop up. Project Playlist, a little known start-up with 9 million monthly visitors, is supposedly kicking the tires on social media site iMeem, according to music industry sources.

The alleged acquiree, iMeem, which has 20 million monthly visitors, denied the rumors are true. "Project Playlist buying us is like us buying Apple. This is just not accurate," said Matt Graves, iMeem's spokesman and a longtime straight shooter.

So why is this acquisition scenario still being passed around the music industry?

Beverly Hills, Calif.-based Project Playlist, a company that provides an embeddable music player used at MySpace and Facebook, is primarily known for being accused last April of copyright violations in a lawsuit filed by the Recording Industry Association of America.

More recently, the company named Owen Van Natta, Facebook's former chief revenue officer, as CEO. Van Natta is also an investor in the company. The company also recently raised an additional round of funding.

So did the stirrings about an acquisition come from simple wishful thinking on the part of Project Playlist or is Van Natta looking to get out of the RIAA lawsuit by buying a music service with licensing agreements in place?

Updated at 9:47 a.m. PST, with details about the likelihood of any potential Yahoo overture to Microsoft.

If Yahoo wants to get Microsoft back to the negotiating table, it would do well to try the lure of a search-only deal--regardless of whether Jerry Yang is CEO.

That's the assessment from one influential Microsoft source.

"If Jerry was still CEO and called Steve tomorrow and said, let's talk about a search-only deal, I think Steve would listen," said the source. "Microsoft is open to a mutually beneficial search deal. But people are still lusting after a Yahoo (buyout) and no one is thinking about that in Redmond. There's been no discussion of it for months and months."

Apparently, the "lust" is still alive. In early morning trading Tuesday, as the stock market opened in the wake of the news that Jerry Yang will be stepping down as CEO, Yahoo's shares soared nearly 12 percent to $11.90 a share. Meanwhile, analysts churned out research notes speculating that Microsoft may come back with an offer to buy the entire company.

Yahoo's shares leaped early Tuesday on news that Jerry Yang would be stepping down as CEO.

(Credit: Yahoo Finance)

Analyst Benjamin Schachter at UBS noted in a report:

We still believe Microsoft will eventually own Yahoo. Jerry moving out of the CEO role may accelerate this. Yahoo is a key strategic asset in the online space and given the scarcity of key players of size, we see value here not reflected in the stock's current valuation.

UBS has a price target of $18 a share for Yahoo.

Analyst Jeffrey Lindsay of Sanford C. Bernstein said in his research note that Yang's resignation is a good sign, because it demonstrates Yahoo's board is frustrated with the company's performance and management. He further notes:

It is a signal they are prepared to examine more deal options, in particular with Microsoft.

Back in May, Microsoft walked away from the negotiating table after sweetening its initial unsolicited buyout bid for the entire company from $31 a share to $33 a share. But when Yahoo countered with a proposal of $37 a share, Microsoft ended its buyout talks for the entire company.

Yahoo's stock had closed at $19.18 a share on the day before Microsoft announced its $31 a share buyout offer.

The source noted that Yahoo and its investors should bury the notion of a full-up, or entire buyout, of all of Yahoo. If Yahoo were to come to the Redmond giant with a search-only buyout or a search-only partnership, however, that would get its attention--whether it's delivered by Yang or not.

And the source added that any expectation on Yahoo's part to reclaim the approximately $8 billion to $10 billion Microsoft had offered back in late May under its previous search-only, or "hybrid," deal would be a faulty assumption.

Yahoo's shares were trading in the $27 a share range when Microsoft submitted its search-only proposal. Yahoo's shares closed Monday at $10.63 a share.

"Microsoft would not be willing to buy Yahoo's search business at the price offered back in May," said the source.

Should Yahoo take the initiative and approach Microsoft with a search-only partnership, joint-venture, or proposal to sell just its search business, the source offered up one piece of advice to make the process smooth.

"Consistently, Yahoo's board didn't believe Steve. A hundred percent of everything he said in public was what he thought," said the source. "If people go back and carefully read his public statements, they'll see that what Steve said is what Redmond has been thinking."

Microsoft will likely have to wait awhile for any overtures from the Internet search pioneer, said one source familiar with Yahoo's thinking.

Yahoo is launching a CEO search and, as a result, would want to receive input from the new executive on whether it makes sense to approach Microsoft about a search-only deal or partnership.

As previously reported, the companies have not been in recent contact to date.

See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Jerry Yang memo to staff about stepping down