Archive for November, 2006

Blockbuster UK Puts DVD By Mail Program In Pause Mode

Nov 21

Posted by Davis in Disclosure - I own stock in co. mentioned, DVDs, Netflix | 2 Comments

Over the last few years, Blockbuster has been selling off their international operations piece by piece, in an attempt to return the company to profitabilty and to pay down the debt on their balance sheet. Over the last six months, we’ve seen speculation that Blockbuster is planning on selling their UK game division and in fact, they even took the unusual step of filing an 8K last September, indicating that a sale may or may not still be on the table, after a representative for the company told a UK trade group that they were planning on opening additional video game stores in 2007.

While Blockbuster hasn’t provided further comments on their Game Station plans, it is worth noting that earlier this year, Movie Gallery commented that they were planning on selling their own video game stores, but were hoping to wait until after the holiday season because of how profitiable these stores are during that time. It could very well be that Blockbuster has made the same decision with their UK Game Station stores, but when it comes to their online rental inititive in the UK, the end of the holidays may mean curtains for Blockbuster’s UK DVD by mail program.

In a post on his affiliate marketing blog, One Little Duck has said that Blockbuster UK will stop paying affiliates to sell the online service effective Christmas day 2006. In the meantime, they’ve announced that they are immedietely cutting all commissions paid for referals to only 4 pounds as a result of cost cutting at the company.

This move follows the replacement of Blockbuster UK’s Managing Director, Alex Sparks with management from Blockbuster’s Irish Video store chain, XtraVision. Despite the end of Blockbuster UK’s affiliate program and XtraVision’s new management over Blockbuster’s UK, Italy and Denmark divisions, XtraVision COO Gerry Butler has denied that the company is interested in selling Blockbuster’s international operations.

While I don’t fully understand why Blockbuster is backing away from their UK DVD by mail program, when they are simultaneously expanding their internet services in the US, it may indicate how difficult rental conditions have become in the UK. This could be a momentary pause in Blockbuster’s UK plans or it may be another indication that the company continues to struggle overseas and is trying to sell off their international stores, so that they can focus on their domestic opportunities instead. Either way though, putting the growth of their UK division into pause mode cannot be a positive sign for Blockbuster and will either force the company to sell these stores or watch as competitors poach customers from them.

Competitors have already taken notice of Blockbuster’s troubles and while Blockbuster continues to try and define their European strategy, two Irish entrepreneurs, Gavin and Iain McConnon, have already announced that they will be launching their own DVD by mail program named Moviestar.ie, that will compete directly with XtraVision.

With the competitve landscape for DVD rentals becoming increasingly tough, there is no telling how long Blockbuster will continue to be in downsizing mode. While the company could eventually transform their business into an internet business model that focuses on DVD by mail and VOD, it’s clear that this transformation will not come easily for a company that has a legacy of debt, store leases and poor management decisions to overcome.

Vending Killed The Video Store

Nov 21

Posted by Davis in Photos | 1 Comment

Vending Killed The Radio StoreVending Killed The Radio Store Hosted on Zooomr

Why Is Netflix Supporting A Penny Stock Touter?

Nov 21

Posted by Davis in Disclosure - I own stock in co. mentioned, Netflix, Spam | 8 Comments

Last year, I saw that Steve Swasey, Netflix’s Director of Corporate Communications, granted an interview with an investment website named WallSt.net. At the time, the site had erroneously claimed that Netflix was planning on unveiling a movie download service “shortly”, when Netflix had in fact, just told investors that they were scrapping their plans for a Netflix / TiVo service for the indefinite future.

When I pointed out the error in the company’s reporting, rather then making a public correction and admiting that they were wrong, they instead silently changed the story to remove the language that was in the original article.

Being interested in Netflix, I had registered with WallSt.net, in order to listen to the interview. Unfortunately, I quickly found the email address that I had used was overrun with penny stock spam. While I have no way of knowing whether or not WallSt.net was behind the spam, I did find it interesting to note that several of the companies that pay them to promote their stocks were included in these emails.

Regardless of whether or not WallSt.net was responsible for sending out the penny stock spam though, it’s clear that the company uses press releases as a tactic to tie legitimate companies to illiquid penny stocks that they have a financial interest in promoting. At the time of their first Netflix interview, they had issued a press release that appeared on the Netflix business wire, that included a mention of Teleplus Enterprises (TLPE.OB) in the headline. Since that date, Teleplus has lost over 52% of their value.

A few days later, WallSt.Net issued another press release on the Netflix business wire, promoting their Netflix interview yet again and this time referencing a company named Securac Corp. (SECU.OB) and China Mobility Solutions (CHMS.OB). Since that time Securac has lost 91% of their market value and China Mobility has lost 80%.

At the time, I had dismissed the interview as an honest mistake by Swasey and had assumed that Netflix would not have initially provided them with the interview, had they known about WallSt.net’s penny stock tactics beforehand. After seeing them abuse their coverage of their initial interview to tout these penny stocks, I had assumed that Netflix would cut off communication with their firm, yet earlier this week, I was suprised to find out that Steve Swasey has yet again, given another interview to WallSt.net and this morning, surprise surprise, WallSt.net issued another press release to the business newswires, reminding investors that they have an update on Checkpoint, Netflix and a company named Infinix Corp (INXR.PK). Infinix is a penny stock that trades on the pink sheets that has convienently agreed to pay WallSt.Net $3,150 for “media and advertising services.”

Now I don’t know anything about Infinix or their business model, but I do know that because they trade on the pink sheets, it which means that they are exempt from providing regulatory filings that legitimate public companies have to maintain. Investors don’t get quarterly financial reports, an accurate view of the number of shares outstanding, or any other important information that one needs to make informed decisions.

Why Netflix would allow their good corporate reputation to be sullied by these cheap carnival barkers is beyond me, but I find their continued support of the company to be truly disturbing. Considering, that after covering every single intimate detail about Netflix for nearly three years, that I can’t even get Netflix’s PR department to respond to a single email from me, I’m amazed that this site has been able to get not one, but two opportunities to muddy Netflix’s financial reputation. Had Netflix investors fallen for WallSt.net’s press release touting scheme last year, it would have cost them dearly and yet a year later, Steve Swasey is more then happy to publically discuss Netflix from a financial perspective on their site. Fool me once shame on me, fool me twice shame on Netflix.

So Many Movies – Never Enough Time

Nov 21

Posted by Davis in Disclosure - I own stock in co. mentioned, DVDs, Netflix, TiVo | Comments off

Today’s fun fact for the movie buffs everywhere, is that American consumers watch an average of 50 movies per year. If you happen to fall into the 18 – 24 demographic, then you rent closer to an average of 88.

What’s interesting about this statistic is that it seems to be way too high compared to most of the people that I know. When I asked my friends and colleagues about how many films they rent per year, they don’t come anywhere close to one per week. Instead I got estimates ranging from one DVD every other month, to one every other week. When I checked my own Netflix queue, I was a little suprised to learn that my own DVD watching habits were a bit lower then I anticipated. According to Netflix, I’ve rented 66 DVDs so far this year. This puts me on track to hit about 76 by the end of the year. It also means that the average DVD cost at Netflix is closer to the $3 mark, then the $1.75 that I try to hit each month.

I place a large part of the blame, on the decline in the number of average DVDs that I watch each week, on the introduction of the TiVo series 3 into my home. Every since I’ve had access to a dual tuner THX high definition televison on demand experience, it’s really cut into my DVD time. It’s also made traditional DVDs less appealling, when I can get a higher resolution experience from television.

Nontheless, my Thanksgiving resolution for this year is to finish watching the La Femme Nikita series and to make it through the final two seasons of Alias. While my normal Netflix method is to only rent one TV show and two movies at any given time, I’ve decided to speed up the process after spending the last 9 months trying to make it through two great spy series and barely being able to make a dent. While some will find the amount of TV that I watch a bit shocking, I’m proud to be doing my part to help lift the national average higher then the other DVD slackers that I know.

San Francisco’s Board Of Supervisors Play Hardball With Free WiFi

Nov 21

Posted by Davis in Technology | 2 Comments

Well it must be close to Thanksgiving because the San Francisco politicians are out acting like a bunch of turkeys again, when it comes to bringing free wifi access to the city’s poor. Instead of of empowering those who can’t afford the internet, they’ve instead forced a showdown between Gavin Newsom’s plan to let Google and Earthlink give away free wifi to the citizens at no cost to the residents and the board of Supervisor’s plan to borrow money and build out their own network in a desperate attempt to squeeze money out of some of the city’s poorest residents.

Here’s a little hint, San Francisco politics + technology = guaranteed to screw it up.

Why the city leaders would delay implementation of free wifi when there is a bona fide offer on the table at no cost is beyond me. I wish I could say that I’m surpised by this latest piece of news, but after watching these turkeys in action last month, I find news of the stalemate anything but shocking.

During a time of the year known for peace between the founders of our country and the Native Americans, it’s sad to see the San Francisco board of Supervisors on the warpath over an issue that could be a social benefit to everyone. I did my part by trying to vote my turkey Supervisor out of office last November 7th, but unfortunately he squeeked by with a narrow victory in my district’s race.

I say that if San Francisco politicians don’t want free wifi then Google and Earthlink should just cut their losses and let them screw it up themselves. Sure it means higher taxes for me, higher broadband fees and a lame version of free wifi at the end of the day, but I’d understand after the abuse that they’ve taken over an inititive that really won’t even be all that profitable for them to begin with.

Given that the technology will likey be obsolete within five years anyway, the board of Supervisor’s plan to borrow money will ensure that residents are still paying interest on this long after the network has served it’s usefulness. The city of Alameda also provides a city owned broadband service and while it’s a breath of fresh air compared to the four year sweeheart monopoly that the board of Supervisors granted Comcast, it’s been anything but a success from an economic point of view.

Critics of the mayor’s plan, object to letting Earthlink use city lamposts for their wifi equipment because the company may actually turn a profit by providing a positive social benefit to the city. Nevermind that the city doesn’t even have the cash to do this themselves, the board of Supervisors smells money and they can’t resist getting their fingers in some of that Thanksgiving pie.

Rather then reward free enterprise for finding creative solutions to a social problem, the board of turkeys would rather ensure that the government retains central ownerships of the wifi network. Their plan then is to build and own the network and then to try and lease access to it to people like Google. Not only do they want to screw Google and Earthlink by invalidating all of the work they’ve done to date on this, but then they want to screw them again by trying to charge them money to give away broadband on their network.

If I was Google or Earthlink, I’d tell the board of Supervisors to kick rocks and refuse to buy access to their network regardless of what they charged. If the San Francisco board of Turkeys really thinks that extracting ad revenue out of web surfers is that easy, then force them to do it instead.

Critics of the mayor’s plan have pointing out issues with the proposed free wifi network not being fast enough, not being able to easily go above two stories and not offering enough privacy protections for the citizens, yet these are all red herrings designed to delay the implementation of the plan, while the critcs worked towards their real end game, controlling the network themselves. Once the city provides these services, none of these issues will go away and yet these same critics will quietely forget to bring them up because they never cared about the limitations of wifi to begin with, they only cared about embarassing the mayor and trying to get a piece of the free wifi pie.

Because of the showdown between the Supervisors and the Mayor, San Francisco citizens have once again seen their interests set aside over petty local politics. While the upcoming vote on the issue will likely mean the end of the road for Google and Earthlink and the beginning of an expensive technical and bureaucratic process for the city, Google and Earthlink can at least take comfort in the fact that Mike Tyson is now working at Heidi Fleiss’ stud farm in Nevada, in case they ever want to get another taste of what San Francisco politics are really like.

Milton Friedman 1912-2006 – A Hero Passes

Nov 17

Posted by Davis in Uncategorized | Comments off

I haven’t had a lot of heroes in my life, but Milton Friedman was one of them. When I first started studying economic thought, his free market principals played a huge influence in my life and it was with great sadness that I learned of his passing today. While I have no doubt that the power of his ideas will live on long past his passing, he will still be missed.

“A society that puts equality – in the sense of equality of outcome – ahead of freedom will end up with neither equality or freedom. The use of force to achieve equality will destroy freedom. On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality. Freedom means diversity but also mobility. It preserves the opportunity for today’s less well off to become tomorrow’s rich, and in the process, enables almost everyone, from top to bottom, to enjoy a richer and fuller life.”

Stuck Inside Of Web 1.0 With the Web 2.0 Blues Again

Nov 16

Posted by Davis in Music, Technology, Web 2.0 | 3 Comments

Ten years ago, my favorite possesion was my CD collection. I had spent years collecting, sorting and listening to music and whenever my friends would come by, I always delighted in showing them how extensive my collection was.

Whether it was the mainstream hits or the classics, somewhere in my collection there was a song for whatever mood I happened to be in. At that time, most of my collection stemmed from countless hours spent bargain hunting at independent record shops or from massive binge buying from CD clubs like BMG and Columbia House. As my collection grew, I found that storing them became an escalating problem and remember having to spend more money on a CD storage rack then in on any other piece of furniture I owned at the time.

This collection was never cheap and it took many years to build up, but it was a labor of love and one of my favorite things to do would be to continually reorganize the collection either alphabetically, categorically or chronologically. Like an old miser who delights in counting his gold, I would continually flip through one CD after another even if there was never enough time to listen to them all.

Somewhere along the way technology developed though and it rendered my CD collection useless.

It started with Napster where I learned that I didn’t need physical CDs. I could suddenly build up a digital database of songs and by the time I realized how easy it was to convert my legal CD collection into mp3′s, things quickly evolved into a full scale ripping project.

As my ripping project moved forward I quickly learned that I was going to need space. Just like I needed a CD case to store my albums, I needed external hard drives to store my mp3s. My first external drive was a 200 GB drive that I thought would last me for a couple of years at least. When 200 GBs turned out to be inadequate, I added more and more and more drives until I eventually had over a terrabyte of storage dedicated to my storing my mp3s.

It wasn’t until I got a few years into this process that I began to realize that I had made a big mistake by embracing the hot 1.0 technology of the day. The hard drives turned out to be nothing but problems. In the last few years, I’ve had at least five hard drive failures and while three of those were still under their 1 year warranty, getting the data back was about as much fun as being the one stuck with having to clean Alice Cooper’s hotel room after a concert.

After a couple of data failures I learned to start backing up my music, but after constant I/O device errors and continually being prevented from backing up my music by what I suspect were DRM laced music files, I finally gave up on trying to save multiple copies of my mp3 files.

Because of the size of my collection, I could never get any music players to effectively manage the entire thing. Whether it was using Media Player, iTunes or Winamp, every system seemed unable to respond after I would import the collection into their software. To make matters worse, everytime my computer crashed, I could never prevent my external drives from trying to autoplay the entire collection everytime I restarted.

While I’ve loved having an extensive music collection, my problem now though, is that over the last few years technology has innovated so fast that we’ve moved from a web 1.0 world to a web 2.0 world and I’ve been left behind.

Just like my CD collection is largely irrelevant today, my mp3 collection has become less relevant by the shift toward networked solutions. This fact was highlighted to me when I was reading a great review of the Sonos music system, which Joel Spolosky titled “The Infinite Music Collection.”

By combining a wifi Sonos sound system with a Rhapsody music service, Joel has been able to replicate my entire music collection (and more) without the headaches of hard drive failures, loss of data or buffer overrun issues.

In retrospect, had I been able to think forward five years, I would have been better off putting off innovation and using Rhapsody (or more likely Yahoo! music because Real Network sucks), then to try and assemble a collection on my own.

Of course there are downsides to a web 2.0 solution. Because you don’t own the music it’s more difficult to share it or move it onto other consumer electronic products, because the all you can download services are subscription based, you have never ending fees instead of a one time purchase, and of course there will always be DRM restrictions associated with these services, but given the amount of time and money I’ve spent on my music collection, I think I would have been much better off renting 2 million songs, instead of trying to build my own music catalog.

Sony’s Big Gamble On Blu-Ray

Nov 16

Posted by Davis in DVDs, HDTV DVDs, Movies, Technology, Video Games | 3 Comments

Research firm iSuppli has reverse engineered the PS3 and has estimated that it will cost Sony $805.85 – $840.35 for each unit sold. With Sony pricing the console at $499 and $599 depending on the model, it means that they will be eating a loss of between $241 – $306 everytime someone upgrades to their new console. Ouch, don’t expect Sony to respond to the console price war in the near future.

While subsidizing hardware in order to sell higher margin video games is an old trick in the console industry, it’s worth noting that the loss that Sony is taking, is three times what it cost Microsoft to subsidize the Xbox 360 and they even sold the 360 at a lower price.

In looking at the breakdown of where the expenses are coming from, I couldn’t help but notice that the bulk of this cost comes from the $125 charge that they are paying for their Blu-Ray optical lasers. The PS3 has been Sony’s biggest reason for convincing the studios to extend the current HDTV DVD format war and with a shortage on the Blu-Ray diodes, I doubt that the studios will be very happy when they see that there will only be 150,000 – 200,000 PS3′s released at the launch, according to some estimates.

“Are you kidding me? Are blue ray diodes grown on a remote mountaintop in the Himalayas retrievable only by tiny faeries on unicorns? It must be because 400,000 PS3s is now 150,000 – 200,000 PS3s. Lazard Capital Market’s analyst, Colin Sebastian, surmises as much based on retail numbers.”

Whether Blu-Ray is being made by magic unicorns or Sony engineers, incorporating Blu-Ray technology into the console was a huge and unnecessary risk for Sony to take. In their attempt to monopolize control over the future of the DVD, they’ve alienated home theater enthusiasts and have frozen the development of the only thing that might extend the dominance of the DVD by another 10 years. By making every customer purchase a Blu-Ray drive with their console, it will not only cost Sony millions of dollars from delays, but as iSuppli demonstrates, there is a very real hardware cost involved as well.

The irony of all this, is that many of the hardcore gamers who are already waiting in line, hoping beyond hope to get a console, will lack the necessary HDTV equipment to even utilize this feature in the console. With the European launch delayed until March, I can’t help but wonder how much more time the studios will give Blu-Ray, before they realize that Blu-Ray won’t be the money maker that they had hoped.

There is no reason why Sony couldn’t have licensed their films to Blu-Ray and HD-DVD and let consumers decide which was the superior format. Had they done this, they would have had enough PS3′s to satisfy this year’s holiday demand and they could have still included an add on Blu-Ray drive for consumers who would prefer their technology.

While the thought of watching high resolution DVDs on my big screen TV holds tremendous appeal, you can bet that I won’t be investing in any technology that has the potential to be obsolete within a year. It’s still possible that the PS3 could pay off big time for Sony and that their Blu-Ray support could be the straw the breaks the HD-DVD back, but considering that their insistence on including the technology is going to put them a year and a half behind the Xbox 360 in market penetration and that it’s significantly added to the cost, I think it’s a gamble that will end up costing them even more their Betamax fiasco.

Ain’t That A Kick In The Head

Nov 16

Posted by Davis in VOD | Comments off

Life In The Longtail – Surely Make You Lose Your Mind

Nov 16

Posted by Davis in Disclosure - I own stock in co. mentioned, Marketing, Netflix, Spam | 1 Comment

If there was ever a poster child for the longtail, I would be it. Every movie I rent from Netflix is from their archived content, when I search for music online it is always for indie bands, I even bought my car through an internet site that gave me more flexibility then a traditional dealership. I’m not sure that I can pinpoint the exact appeal of the longtail, but part of it, is that I like being able to support the underdog.

Whether it’s choosing a small club over a stadium concert or prefering a new restaurant over an old favorite, I’m the sort of person who will only bet on the underdog when I go to Las Vegas. It could be the demographic I’m in, it could be my natural affinity for innovation, or it may just be that I like having lots and lots of choices, but when it comes to choosing between the longtail or the short head, I’ll pick the longtail 95% of the time.

Given my natural bent towards longtail preferences, it came as no surprise, that when I needed to find new furniture for my place, I naturally turned towards the internet. This wasn’t my first move though, in fact I spent several Saturdays picking through local furniture stores, but everything I found was either generic or extremely expensive. It wasn’t until I turned to the net, that I realized I could not only save 50%, but that I could also increase my choices by expanding my search beyond the few local shops in my neighborhood, and into the thousands of local businesses across the entire US.

At first the choice was almost overwhelming, but finally I came across a store named Everything Furniture that seemed to have what I needed. Not only did they offer me a diverse and unique selection to choose from, but I found a number of positive reivews online as well.

While initially I had intended on writing a glowing review on the company by using them as an example of the benefits of living in the longtail, unfortunately my experience didn’t allow me to score this transaction as a victory for my longtail lifestyle. Yes, they delivered the furniture and yes it was much less expensive then purchasing furniture using a more traditional route, but there were several obstacles I had to overcome along the way.

The first was actually receiving the furniture itself. The delivery took longer then expected and while I didn’t mind waiting, I was disappointed when the shipping firm that they outsourced my order to, tried to extort me when it did arrive. Basically, my shipper flat out refused to move any of my furniture beyond the front door of my apartment building, despite there being an oversized elevator designed for just such a delivery.

When I protested that he he was leaving me with a lot of cargo and without any means of getting it to my apartment, I was told that for $20 (wink wink nudge nudge) he’d bend the “insurance” rules and bring the cargo to my front door. While I wouldn’t have minded paying an extra $20 for shipping, I did mind that this was never disclosed upfront and that the shipper was willing to break the rules as long as I slipped him a Lincoln. When I refused he left me to transport several large boxes on my own, without the proper equipment.

Once I managed to drag the boxes into my apartment, I quickly discovered that one of the pieces had been damaged during the shipping. I contacted Everything Furniture and they agreed to ship out a replacement piece, but it meant I had to wait another 2 – 3 weeks before completing my purchase.

While these issues were minor obstacles for me to deal with, the one that made me never want to do business with Everything Furniture again, was what happened after I completed my purchase. Shortly after receiving my furniture, I began to receive, at least, 2 catalogs a day from countless mail order companies. Over the last month, I’ve called 2 dozen companies and have asked to be taken off of their mailing lists, yet everyday I seem to get another catalog from a different company, which necessitates another telephone call on top of a 90 day waiting period, before they actually stop sending me anything. While I understand that Everything Furniture needs to turn a profit, they never asked my permission to sell my name and address to a catalog spam list and receiving junk mail is something that I’m particularly sensitive to.

We have laws against unsolicited phone calls, rules pertaining to spam and prohibitions against junk faxes, yet there is little that I can do to prevent being bombarded with one Christmas catalog after another.

I’ve never purchased anything from a catalog in my life and I don’t intend to start now. By quickly glancing over many of these mailings, I can tell that the prices are outrageous and that they are wasting their postage by sending them to me. While the discount on the furniture was nice, I would have picked another company to do business with, in a heartbeat, had I known that the cost of my purchase would be death by mail.

My experience isn’t likely to change my outlook on the longtail, but it does serve as a good warning on the dangers of living in the longtail. With many choices comes many risks and while I may have been smart enough to make sure that I wasn’t going to be ripped off by Everything Furniture, I never thought to research their business practices before placing my order. While the abundance of choice can be a good thing, something can also be said for sticking with brands that have established reputations as being good corporate citizens. Everything Furniture may have fulfilled their contractual obligation with me, but the experience now serves as an important reminder to be more careful when doing business with companies I’ve never heard of.