Apple’s announcements at Macworld may have lacked some of the flair and sizzle that CEO Steve Jobs usually brought to his keynote, but there was one announcement that, arguably, will wind up changing the playing field considerably. That announcement is the news of DRM-free sales from all of the major music labels through iTunes, and the addition of variable pricing. As rumored during the run up to Macworld, the world’s largest online music store will soon start selling songs for 69 cents, 99 cents or $1.29 each.

The only question now, as Peter Kafka notes in a post at MediaMemo, is whether anyone will care or not — and whether it will help to fix any of the music industry’s systemic problems.

Amazon (among others) has had DRM-free songs from the four major record labels available in its online store for almost a year now, and it sells many of them at a lower price than Apple does. But so far that hasn’t helped Jeff Bezos and his team loosen the stranglehold that Steve Jobs has on the portable music market. The reality is that while DRM may be a big hobbyhorse for geeks, it isn’t really a big concern for most iTunes shoppers. The vast majority of buyers are happy to buy songs from Apple regardless of what format they come in — provided they can play them on an iPod. Anyone looking for DRM-free music can already find it pretty easily.

The more important part of this news, at least from a music industry point of view, is the introduction of variable pricing — or at least a three-tiered approach, which is as close to variable pricing as the record labels are likely to get (for now). Jobs has resisted the pleas of the industry for several years now, and Apple appears to have done a straight swap of DRM-free music in return for the tiered offerings. But as veteran music-industry observer and gadfly Bob Lefsetz describes in his latest letter, those concessions could wind up doing the record labels more harm than good — at least if the industry sees them as a solution to their larger problems. Lefsetz calls it “fiddling while Rome burns.”

The labels may be hoping they can sell the bulk of their hits for $1.29, but the reality could be very different. As Adrian Kingsley-Hughes points out in his column at ZDNet, they could easily wind up conditioning the market to expect even lower prices for most of the music they buy, apart from the mega-hits. That will make the labels even more desperate to pump up mega-brands like Britney, but the result could be an even thinner revenue stream from the bulk of their catalogues. Don’t be surprised if you see a lot of record executives thumbing through the Cliff’s Notes version of “The Long Tail,” with a fevered look in their eyes, while staring down a spreadsheet with some big holes in it.

Most would agree that Time Warner overpaid when it bought social network Bebo back in March. Given the challenges faced by the company’s online businesses since then, among them declining ad sales and the difficulty of monetizing social networks, the $850 million price tag for Bebo has come to look even more expensive. And now it appears that Time Warner is having second thoughts. CEO Jeff Bewkes told The Wall Street Journal that:

“I don’t want to rule [acquisitions] out, but they have been the cause of most of the value destruction in media companies, and that certainly has been the cause for a lot of value destruction at our company.”

To be fair, Bebo wasn’t the only expensive acquisition. Time Warner has spent nearly a billion dollars to build AOL’s Platform A advertising business, which continues to struggle. No wonder Bewkes is saying no to any more deals for now! That means one less buyer for all the startups that were looking to flip.

Photo courtesy of Gaetan Lee via Flickr.

The Recording Industry Association of America, which has spent the past five years suing tens of thousands of individual file-sharers for copyright infringement, has apparently decided to change tactics, according to a report in the Wall Street Journal (hopefully this one is a little more reliable than the recent story about Google’s views on net neutrality). The good news is that they are going to stop suing 13-year-olds and retired war veterans and single mothers for downloading music. The bad news is that their new plan involves cutting sneaky backroom deals with Internet service providers to take a so-called “three strikes” approach: They let the ISP know when they think you’ve been sharing copyrighted material, and the provider agrees to send you an email warning; the second time, you get a letter; do it again and your Internet access gets cut off.

This is not a new idea. The French government has proposed legislation that would require Internet providers to cut off subscribers for up to a year if they repeatedly engage in copyright infringement, and the British recording industry association managed to convince several major ISPs to agree to warn their users, although they have stopped short of cutting off their access altogether. While the European Parliament approved a resolution in November saying “three strikes” legislation was an unreasonable breach of the rights and freedoms of Internet users, the EU’s Council of Ministers rejected the resolution and it appears that the French law will go ahead.

Even if the RIAA or the ISPs could identify file-sharers or copyright infringers with 100 percent accuracy, the three-strikes approach would still be disturbing, since it effectively turns ISPs into an extra-judicial copyright police squad, with the power to cut off a service without any appeal. But it’s even worse than that. If there’s one thing that all the lawsuits launched by the RIAA have shown, it’s that the record industry has a pretty poor track record when it comes to actually identifying who is sharing what kinds of files and whether they are infringing or not. So now instead of lawsuits against the wrong people for the wrong reasons, Internet users will have their access summarily shut off for something they may or may not have done.

As Peter Kafka notes in a post at MediaMemo, this approach clearly serves the interests of ISPs, which are concerned about the amount of bandwidth file-sharing services consume. And it definitely serves the interests of the RIAA, since it allows them to strike out at the perceived menace of copyright infringement without having to even go to court. But it should be disturbing to anyone who thinks that individual rights and freedoms, including the right to be presumed innocent — not to mention the idea that the punishment should be proportional to the alleged crime — are worth more than the record industry’s desperate desire to cling to an antiquated business model.

Traditional media outlets like the Wall Street Journal and the New York Times have begun to use some of the tools of social media — blogs, Facebook pages, even Twitter accounts. But they seem a lot less eager to adopt some of social media’s core principles, including a commitment to the two-way nature of the medium and all that it represents. This means a lot more than just talking about “the conversation” and how great it is to get links or comments. It’s about taking those comments seriously, responding to them regardless of whether they are positive or negative, and incorporating that approach into the way you do your job. It’s about looking at “journalism,” broadly-speaking, as a process rather than an artifact.

This is something that most of the blogosphere, or at least the part of it that cares about accuracy and integrity, does pretty well. Sites like GigaOM and others update their posts when information is added or corrected, and in many cases link to critical or differing opinions (and if they don’t, they should). In that sense, truth — to use a loaded word — is not absolute, nor is it something that a single entity has a monopoly on, particularly around a developing or complicated issue. The most we can hope for is that an outlet of any kind, whether it’s a blog or a traditional newspaper’s web site, does its best to represent an issue fairly and completely, and that requires additions, updates, links and discussion.

The WSJ arguably failed that test on Monday, with its story on Google and how its position on “net neutrality” had allegedly softened.

There has been, and will no doubt continue to be, debate about whether the Journal’s perception of Google’s behavior is correct. Some believe that Google is actually giving itself a benefit that others can’t match (except, of course, other large web companies such as Microsoft, Yahoo, Amazon, etc.). Others see it as a natural move by a large Internet company, and no threat to net neutrality at all. Whether you agree depends on what you think net neutrality is supposed to mean, and what Google’s role in it is. If you want to understand more about the issue and the way the Journal described it, read some of the links in David Weinberger’s post.

What isn’t in dispute, however, is that Google completely disagreed with the implications in the article, as company representatives made clear in a blog post written not long after the story went up on the Journal site. It’s understandable that Google might take issue with the story, of course, since it paints the company’s behavior in a negative light. But that’s not really the point.

What is important is how the Journal responded to these criticisms, both from Google and Lawrence Lessig (who was also quoted in the Journal story and noted, in his own blog post, that the description of his views was simply not accurate), and from other sources. Was the story itself updated? No. Were any links to the blog posts in question included, even as supplementary material? No. There was a blog post on the Journal site that mentioned how the story had “gotten a rise” out of the blogosphere, which included a couple of links, and then on Tuesday there was as second one, also with links to additional posts at Wired and elsewhere, as well as a description of what “edge caching” is.

No response to Lessig’s factual assertions about his views and the way they were described was provided. There is no acknowledgment of it apart from the Journal’s second blog post (which someone reading the original story might or might not even find). To any self-respecting blogger, this seems like a failure. Why not put all of that information, whether they be links to critical blog posts, updates on factual errors, or something else that is relevant, inside the original story? Why not allow those responses to help expand the way people look at the story? They’re going to do so anyway, once they come across them on their own. Is the Journal simply hoping that they won’t, and the story will remain pure and unsullied by criticism?

That’s an old-media approach. It’s a way of saying, either directly or by implication, “The truth is whatever we say it is.” Any critical responses, even from two of the major players in the story, are relegated to a blog post that gloats about the reaction the story got, but does little to treat it as valid or worthy of inclusion. As Scott Rosenberg of Salon points out, online media provides the tools for a real conversation, one that changes the way people look at an issue, and for a real “journalism as a process” approach to the news. It’s a pity the Journal couldn’t spot — or take advantage of — such an opportunity when it presented itself.

God, it is starting to get really really depressing! After the big cuts at Yahoo yesterday, today the Silicon Valley was rocked by job cuts at CBS Interactive and its CNET division. CBS had acquired CNET in May 2008 for close to $1.8 billion.

My sources estimate that the total job cuts were around 20 percent of CBS Interactive’s total workforce – roughly 200 people. Silicon Alley Insider reported the 20 percent number earlier today, though CBS said that number wasn’t accurate. But my sources say that is indeed the extent of the cuts. Yesterday, many CNET managers gathered in a conference room and were given specific instructions on how to handle the pending cuts. The room was packed; understandably so as the cuts are extensive. CNET isn’t the only portion of the company that got hit hard. Erick Schonfeld has been able to confirm that Last.fm, a company CBS acquired in 2007 for $207 million, also saw its work force get trimmed by about 20 – roughly 20 percent - from a total of 95 employees in London alone.

Peter Kafka and Rafat Ali have reported the news extensively on their respective blogs and are following the story closely. In a feelgood memo, CBS Interactive chief Quincy Smith and CNET’s Neil Ashe tried to spin the news as a positive, extolling that the combined network’s traffic was up 30 percent since the merger closed this summer. Of course, it could just be that the 8th-largest Internet network got a bump because of the increased interest in the U.S. elections.

The troubles at CBS Interactive will be acute for the company, and are symptomatic of the broader economic malaise that is going to impact every company - big and small - including us. In the case of CBS, the impact of the merger and the slowing economy resembles what happens when a sedan meets an SUV.

At the time of their merger, I wrote that buying CNET made a lot of sense for CBS. Now, looking back in the rear-view mirror, it doesn’t seem like such a good idea. Of course, this re-org could be the first step in many Quincy and his team have to take in order to shake up the accumulated dust from the old CNET. By cutting jobs and doing a management overhaul, they might be doing just that – though at this time, it is hard not to feel sad for the folks who got a lump of coal delivered this Christmas.

Nielsen, whose efforts to measure television audiences are ambiguous at best, says that we are watching more old television, prompting some childish headlines. According to the study, in the latest quarter:

• Americans viewers watched more than 142 hours a month of oldteevee – 5 hours more than last year.
• Americans are watching online video for 2 hours and 31 minutes per month.
• The number of homes with DVRs has grown to 27 percent and the time spent watching time-shifted video was about 6 hours and 32 minutes a month.

These numbers are an anomaly — 2008 was an election year, with the citizenry more actively involved in the process than any other election in recent memory. Millions were turning to television — broadcast, cable and the Internet — to keep up with political developments. And just like the viewing numbers, television revenues have been propped up by political ad spend. Next year, oldteevee companies are in for rocky times.

As a counterpoint to the Nielsen study, Liz over on NewTeeVee has collated together stats from some recent studies that show online video is exploding. Among them:

• Online video viewing is up 35.4 percent year-over-year
• 12 percent of U.S. teens and 11 percent of 18- to 34-year-olds watch online TV at least once a week
• 88 percent of U.S. Internet users are forecast to watch video online by 2012

Dave Winer wrote a poignant post this week about President-elect Barack Obama’s interview on “60 Minutes,” prompting me to actually go to the CBS web site in search of the most-watched “60 Minutes” episode…ever. It was hard to find the video on CBS.com, and only after I searched for it on Google did I end up at CBSNews.com, where the video interview — along with a full transcript — is available. That alone was an annoying experience, though the viewing experience got worse with time.

The interview was engaging, illuminating and informative — a throwback to a classic style of journalism that has been largely lost in this era of sound bites and bombastic proclamations and the drone-like newscasts on cable TV channels. But the viewing experience was ruined by a video that would stop, freeze and restart every so often.I did the speed check on my broadband connection and also checked if my wireless router was working properly — it all looked good. Beyond this, it could have been one of many problems — network congestion on my ISP’s network, congestion in the intercity networks, or perhaps CBS’s content delivery network wasn’t up to snuff. Or maybe CBS’s servers were simply overwhelmed by the demand for the Obama interview.

One way or another, it’s not just a CBS problem; problems like this can be found on almost all services — including YouTube, even despite having the unfair advantage of being hosted on Google’s infrastructure. There are too many points of failure when it comes to web video. These problems are only going to increase in the near future as more and more of us are going to watch more and more video online. According to a study by IBM, nearly 76 percent of consumers surveyed said that they watch video on their personal computers, indicating that watching videos on the web is quickly becoming as mainstream an activity as sending emails and instant messages.

And yet we continue to have a marginal experience with web videos. There is a lot of talk about offering HD-like videos on the web, but if the networks and the infrastructure can’t really deliver that experience seamlessly, then we have a problem.

Watch CBS Videos Online

Some two years ago, it started to become clear: The web was going to change the way we consume video. So in December 2006, in order to closely track and monitor the growth of online video, we launched NewTeeVee. There we have chronicled the massive influx of venture capital investment into literally hundreds of startups — some of whom dream of being the next YouTube, others that hope to come up with the magic potion for video advertising.

In the process, Liz Gannes and Chris Albrecht have developed deep insights into the online video industry. And they have done a great job of separating the noise from the signal. Today the two of them will get on stage for our second NewTeeVee Live conference, where they will talk to dozens of industry experts, insiders, movers and shakers to help guide the conversation around the future of online video.The world of video finds itself in a pretty awkward place – watching videos on the web has become as natural as sending email.

When recovering from my heart attack, I turned to Hulu to provide on-demand fun. Today, I don’t think twice about spending $20 a month on TV shows from Apple’s iTunes store or $10 for a couple of movies from Jaman. My video-watching habits, while extreme, are precisely what is scaring cable companies into taking the self-destructive and short-sighted approach of imposing metered broadband on their customers. Phone companies are following suit.

Meanwhile, the broader economic downturn and subsequent advertising slowdown is threatening the vibrancy of this business I love so much. Layoffs have started to mar the online studios producing eclectic independent content, and a lack of advertising dollars is poised to plunder the meager treasuries of startups that are finding that the VC spigot has run dry.

But just as when you think the (online video) world is coming to an end, you have companies like Netflix, Blockbuster and others introducing devices that marry the web video to the living room experience, and in the process, inventing a whole new dynamic.

Today we will hear from Netflix CEO Reed Hastings, who is going to share his vision of the future, while Sling CEO Blake Krikorian is going to talk about the future of our living room in a fireside chat with yours truly.

The success of Hulu has awakened the Hollywood studio system to the possibilities of online video, among them the riches that don’t need to be taxed by cable companies and other gatekeepers. With that in mind, Jason Killar, CEO of Hulu, is going to be sharing his story.

CSI creator and executive producer of the CSI franchise, Anthony Zuiker, seems to have figured out the magic formula for cross-platform storytelling and he is one of our keynote speakers.

The online video industry is transitioning from being a gangly teenager to a grown-up; what remains unclear is exactly how it will evolve. I’m confident that by the end of the day we will have a better sense of what that will involve, allowing Liz, Chris and I to bring you the stories that will help all of us prepare us for this new future. We hope to see you there.

And if you can’t be present in person, we will be streaming the conference, thanks to the efforts of our partners, Ustream. We will also be posting to NewTeeVee Live’s Twitter stream, and will be live-blogging the conference over on NewTeeVee.

Wired editor Chris Anderson’s theories about the Long Tail have been the source of considerable controversy almost since the day his first Wired magazine piece on the topic was published in 2004. The initial criticisms of his thesis centered on whether there was such a thing as a “long tail” at all — in other words, whether digital distribution of music and other forms of content have allowed little-known songs, movies, and so on to prosper where they might otherwise have been ignored. Later attacks, however, have focused on how the Long Tail theory functions in certain markets, and whether or not the existence of such an effect actually helps anyone in those markets create a workable business model.

The most recent criticisms came a few days ago, at a mobile telecom conference in London, where an economist named Will Page — who works for the MCPS-PRS Alliance, a British copyright licensing-fee collection agency — spoke about research he conducted into music-buying behavior. The results of this research, Page said, didn’t conform to the “power law” distribution described by Anderson’s theory, but instead followed a more common “log normal” distribution (if you really need to find out more about a topic only a statistician could love, you can check here and here).

The bottom line is that Page reportedly argued the data didn’t support the existence of a Long Tail for music buying (a claim that The Register pumped up into a post about how the entire concept is flawed, and how this is “bad news for Californian technology utopians”). Anderson, for his part, says the data appears to have come from research into mobile music-buying patterns — since mobile music provider Mblox was a partner in the study — and that he has already admitted mobile behavior is subject to different effects (music-industry theorist Gerd Leonhard makes some excellent points about other reasons why we shouldn’t necessarily believe the numbers, as does Yankee Group analyst Benoit Felten).

Why does this debate matter? Because Anderson’s theory suggests that content providers should expand their catalogs of music and movies to include more obscure titles, as a way of appealing to consumers with broader, Long-Tail type interests. By extension, the theory also suggests that musicians, writers and directors who are outside the mainstream might be able to pursue their creative dreams and still make a living. If there’s no Long Tail, then all bets could be off, and the Top 40 mentality could once again rule over content-related industries.

There have been previous attempts to bury the Long Tail, including one launched by a former research partner of Anderson’s, Anita Elberse, who wrote a piece for the Harvard Business Review about flaws in the theory based on data she collected. In that case, the former Wired editor made a fairly convincing argument that, far from torpedoing his conclusions, much of the data actually helped enhance the theory. Page’s study may not do that, but it is a long way from a smoking gun.

Contrary to what some might think, Chris Anderson didn’t invent the idea of the “long tail” — similar theories about the effect of diminishing production and distribution costs on digital media were
being discussed at least a decade before he wrote his Wired article, and many of the central concepts have been around since the mid-1940s. Whatever its flaws, it is still a powerful way of expressing the
changes the web has wrought in content-related markets of all kinds. Whether content producers, distributors and creators want to adapt or not is a different question.