uisocialsciences.org

While the connection between Apple and Palm would seem like it should be strong, given how many former Apple employees now work at Palm, Google and Apple are actually more aligned. Not only does Google specially tailor a ton of its products for the iPhone (both with apps like Maps and Google Search, and specially formatted webpages), but its chief executive, Eric Schmidt, is on Apple’s board of directors. And don’t underestimate the fact that both share a chief rival: Microsoft.

Did Google CEO and Apple board member Eric Schmidt knuckle under to Apple on multitouch?

Further, the Android team member went on to say that they were relieved that Google didn’t go against Apple’s wishes, given the legal storm that appears to be brewing between Apple and Palm, which is using multi-touch technology in its new Pre phone. Even if Apple ultimately decides not to pursue legal action against Palm (it’s not yet clear how likely that is, but Apple does have an impressive array of patents), the situation has likely soured the relationship between the two companies. Google, it seems, wants no part in ruining its relationship with Apple.

While this all may sound a bit far-fetched, it’s worth noting that last month Apple was awarded a patent titled “Touch screen device, method, and graphical user interface for determining commands by applying heuristics.” Patent No. 7,479,949, originally filed in September 2007, covers the multitouch and all its gestures (swipe, pinch, rotation, etc.) that are used on the Apple iPhone.

(Credit:
Stephen Shankland/CNET News)

Now, according to a VentureBeat report by M.G. Siegler, we may have an idea of why Google skipped the feature on its mobile operating system:

While the open-source Android can be modified to support multitouch with a few well-placed lines of code, one has to wonder why the feature wasn’t initially supported and when Google will officially do so.

Apple, which of course makes the signature multi-touch mobile device, the
iPhone, apparently asked Google not to implement it, and Google agreed, an Android team member tells us.

One of the chief complaints about Google’s Android is its lack of multitouch support.

Siegler goes on to address the Palm connection:

A day after that patent was awarded, Apple COO Tim Cook warned iPhone competitors they should understand that Apple “will not stand for having our (intellectual property) ripped off, and we’ll use whatever weapons that we have at our disposal.” Those comments, made during Apple’s fiscal first-quarter earnings call, were believed to be intended for Palm even though Cook did not single out any particular company in making his comments.

The national transition to digital television remains on track for a scheduled date of February 17, after the U.S. House of Representatives on Wednesday rejected a proposal to delay the switchover.

Nielsen reports that more than 6.5 million U.S. households are still not prepared for the transition. Moreover, millions of consumers are still waiting for coupons for digital converter boxes from the National Telecommunications and Information Administration, which ran through the $1.3 billion allocated for the coupons. A Senate panel on Tuesday approved an additional $650 million for the coupon program as part of its so-called “stimulus” package.

John Rockefeller, the Democratic chairman of the Senate Commerce Committee, said in a statement after the vote that he was “deeply disappointed” and claimed that the Bush administration “grossly mismanaged” the program.

Proponents of the delay have warned that millions of consumers will be left without television service if the transition is not postponed.

The House vote of 258 to 168 failed to meet the two-thirds threshold required to pass the measure under the rules the Democratic leadership put in place for Wednesday’s debate. The vote comes just two days after the Senate unanimously approved pushing back the transition to June 12. President Obama’s advisers have also advocated delaying the transition.

Republicans opposed the delay, saying pushing back the date would create confusion for consumers and burden television stations that would have to continue broadcasting both analog and digital signals.

Of course, users will be the ultimate judge of whether Microsoft meets this goal. It set out many of the same objectives with Vista.

Click here for more news on Windows 7.

On Monday, I had a chance to talk with Windows VP Mike Nash about Microsoft’s approach with
Windows 7. In addition to his comments for this article, I also did a brief video interview with him that is posted below.

“The focus is on making sure the things you do (today) are easier and that the things you always wanted to do are possible,” he said. “There’s a lot of work we’ve done to just make things easier and faster.”

Nash’s overall summary of Windows 7 was this:

Sarah Palin

On the Internet forum 4Chan.org, where the e-mail break-in was first announced, posts attributed to someone named “Rubico” more or less described how the Yahoo account had been compromised using the password recovery feature. The e-mail address used for Rubico has been linked to Kernell.

Speculation on the Internet has centered on 20-year-old David Kernell, a University of Tennessee student.

Kernell’s father, Democratic Tennessee state representative Mike Kernel, further fueled speculation last week when he confirmed his son was the subject of the investigation. On Saturday, investigators searched David Kernell’s campus apartment.

(Credit:
Alaska governor's office)

Justice Department spokeswoman Laura Sweeney told the AP that the “government’s inquiry into this matter is ongoing.”

A grand jury in Chattanooga, Tenn., investigating who hacked Republican vice presidential candidate Sarah Palin’s Yahoo e-mail ended its meeting on Tuesday without indicting a Tennessee lawmaker’s son.

Opera Mini 4.2 beta, a test version released for Java phones just two weeks ago, on Monday became the first third-party browser available for
Google Android.

(Credit:
Opera Software)

We’re hoping that Opera will port its more robust Mobile version to Android next, and as always, that Opera will release a version that lets users type directly into a text field without pulling up an intermediary screen.

Opera Mini 4.2 is the first browsing alternative for Google’s Android mobile operating system.

What’s distinctive and commendable of the Android-optimized build: fast speeds over T-Mobile’s 3G network, a very crisp display, and quality that approaches the
iPhone when it comes to viewing a zoomed-out Web page, thanks to both screen size and image clarity. The G1’s two menu keys also enhance the experience, making Opera Mini’s controls easy to access and navigate.

We couldn’t make the video playback workaround that debuted on other Java phones work in this build, though T-Mobile’s USA’s G1 phone does support video playback (see our review on TuneWiki.) We hear that Opera will address this issue when the
mobile browser comes out of beta.

Google Android was low-hanging fruit for Opera. It would have been better, of course, if the browser had been available when the G1 began selling, but of all third-party developers, Opera still managed to bring its free browser first to Android’s market–and a very able version at that.

Opera Mini for Android, which was previewed in April, includes most of the familiar Mini 4.2 features: zooming, saving, bookmarking, and searching for in-line text has stayed intact, as has syncing via Opera Link and swapping skins.

commentary

Microsoft, for its part, asked the open-source community to judge it by its actions. Its actions have hardly been consistent, and many have been destructive of open source as Dana Blankenhorn argues. Still, I’m hopeful that the vocal minority within Microsoft will power the company to more transparent, open communications with the world.

Disclosures: I am chair of the Open Source Business Conference and vice president of business development for Alfresco, an open-source competitor to Microsoft SharePoint, which surely factors into my view on SharePoint.

What may be happening, however, is that Microsoft is adopting open-source principles to power the proliferation of SharePoint. As ZDNet’s Oliver Marks highlights, it’s free to evaluate, offers community-based add-ons, and has widespread distribution via Microsoft attaching a free version to every copy of Windows Server.

This week’s Open Source Business Conference in San Francisco surprised me: I thought the content was, on balance, the best it’s ever offered.

In part this stems from a new pragmatism that has settled on the commercial open-source world, where we’re increasingly striving to solve customers’ business problems, not vendors’ business-model problems. It shows up in some of the event’s discussions–a few of which are captured in Matt Aslett’s excellent OSBC synopsis and in Dries Buytaert’s OSBC wrap-up.

Stephen Walli captures the gist of their various presentations and gives the winning ticket to Sutor. As Walli notes, Sutor bucked the trend in the other keynotes to describe open source as “just about business,” insisting instead that “it’s NOT about business. It’s about solving hard problems.”

It’s a one-way street into Microsoft, with a proprietary data repository to make it difficult and expensive to get out. Cisco Systems is fighting back, as is IBM, but few have figured out how to distribute as efficiently as Microsoft. Open source may be the only alternative to Microsoft.

SharePoint is quickly becoming Microsoft’s next operating system, as Microsoft CEO Steve Ballmer has confirmed, with customers required to use it in conjunction with Microsoft’s other software.

North Bridge Venture Partners’ Michael Skok came up with one of my favorite lines from the conference, as detailed in Aslett’s post:

This was the best OSBC ever, with standing room only on the first day, and full sessions throughout. But if the lessons we’re learning are simply enhanced ways to lock in customers, we’re going in the wrong direction.

Follow me on Twitter at mjasay.

If we have a better product, and it happens to be open source, we’re going to win. But it has to be in that order.

The application of open source to business was highly pronounced in the various keynotes, in particular those delivered on the second day of the conference by Sun CEO Jonathan Schwartz, Microsoft President of North America Robert Youngjohns, and IBM Vice President of Linux and Open Source Bob Sutor.

That’s a great distinction, and an important reminder.

Is this what we can expect the proprietary software world to learn from open source–distribution efficiency but not the freedom that accompanies it in open source? If this is all we get from the new pragmatism in open source, we’ll go backward, not forward.

As it promised to do, Google has begun testing ads shown next to image search results.

Google’s cash cow is its ability to display small text ads next to search results, but the new examples include pictures as well. That could be more distracting or more useful, depending on how you see it, but Google insists that it’ll place the ads only in a way that adds to the user experience, one measurement of which is that people search more often.

Google Blogoscoped and TechCrunch carried screen shots from readers showing the new tests, and Search Engine Land added a shot of a banner ad as well. Now I’m seeing the image ads too.

Google has begun showing ads next to image search results. (Click to enlarge.)

(Credit:
CNET News)

But a federal jury voted unanimously in favor of Universal Music and other defendants in the case, including rapper-producer Dr. Dre’s record label, Aftermath Records, according to an Associated Press report.

Some musicians want compensation for downloads to be structured like licensing fees they receive when their music is used for movies, TV shows, ringtones or commercials. In those cases, artists and labels split equally what’s left after publishers takes their 9.1 cents.

Richard Busch, lawyer for plaintiff F.B.T. Productions told the AP that his clients–brothers Mark and Jeff Bass–were disappointed and were considering an appeal.

Universal Music representative Peter Lofrumento told CNET News that the label “was pleased with the jury’s verdict.”

Universal lawyers successfully argued that digital sales should be handled the same way as physical sales and that the royalty rate was fair.

The case brought by rapper Eminem’s former production company against Universal Music Group could have handed music artists a larger share of digital sales.

Things like breakage are deducted from the artist’s cut. As other bands, such as Cheap Trick and The Allman Brothers have argued, there isn’t any breakage in digital music and such charges are unfair.

At the core of the case was F.B.T.’s argument that digital albums were different than physical sales. Artists are compensated on a royalty structure for traditional CD sales. When a CD is sold at a retail store, say at a Wal-Mart Stores outlet, the artist receives about 16 cents. The music publisher gets 9.1 cents.

Despite early signs that it’s performing well, Sprint’s new 4G network could be heading down the same doomed path as EarthLink’s citywide Wi-Fi networks.

These prices are not drastically different from other broadband options. In Baltimore, Comcast offers a 6Mbps download service for about $43. Verizon Communications offers a 3Mbps DSL service for about $30 a month.

Sprint has talked about leveraging its 3G network to augment coverage until WiMax is ubiquitous. It’s also teaming up with Clearwire in a joint venture to combine WiMax assets in an effort to jump-start deployments. But right now it doesn’t have an extensive footprint nor does it offer roaming between the WiMax network and the cellular network.

“In a market that is over 80 percent penetrated, it becomes difficult to convince investors and creditors to give you money, especially in a market like the one we’re in now,” he said. “If the economy and the credit markets don’t improve, there’s a healthy chance that this whole project will die.”

It may only be a test bed for future WiMax deployments, but I think the business model Sprint is using in Baltimore looks eerily similar to what EarthLink attempted to do with its citywide Wi-Fi business. As a result, I see Sprint facing many of the same hurdles that EarthLink faced in trying to sell this service to consumers.

That said, Entner believes that Sprint’s big picture vision is correct. Consumers want faster wireless connectivity. And they will gobble up whatever bandwidth capacity they are offered. The problem is that Sprint has to give them a compelling enough reason to spend money on WiMax instead of subscribing to increasingly faster cellular services. For example, AT&T says it will soon offer 7Mbps downloads over its 3G HSPA network next year. And Verizon has big plans to roll out its 4G network in a few years.

Entner speculates the companies will need at least an additional $2 billion in 2009 to build the network.

“I don’t think it’s a forgone conclusion that Sprint’s WiMax network will be dead within a year,” Entner said. “But it has an extremely tough road ahead of it, absolutely. They cannot afford any hiccups.”

Sprint recognizes this reality. And its long-term vision is to create a ubiquitous 4G network that will provide wireless broadband to all kinds of portable devices, including everything from digital cameras to music players to portable gaming devices.

“There isn’t much differentiation right now in the WiMax offering,” said Roger Entner, senior vice president in the communications sector at Nielsen IAG. “It might be a little cheaper than cable or DSL, but not much. But they really needed to show Wall Street and their investors that the technology works.”

Where Sprint may be able to win customers is among some business travelers. Sprint’s mobile service is $45 a month, about $15 a month cheaper than 3G data services from carriers such as Verizon Wireless, which charges roughly $60 a month for 5GB worth of downloads.

Like Sprint, EarthLink also lacked network coverage. But it did have an abundance of devices able to access its Wi-Fi network, such as laptops with embedded Wi-Fi and the
Apple iPhone. And yet these devices weren’t enough on their own to drive demand for the service.

This was the same conundrum that many EarthLink customers faced. And in the end, most consumers didn’t see enough differentiation to switch to Wi-Fi. I expect the same thing will happen with WiMax.

Several large companies such as Intel, Nokia, and Motorola have thrown their weight behind WiMax. And they promise to launch new components and devices to support the technology. But so far, devices with WiMax have been few and far between. Nokia has announced the N810 “Portable Internet Tablet,” and Samsung has announced a WiMax-capable Q1 Ultra Premium Mobile PC. And Intel will soon be including WiMax in its chipsets. But so far there is not a critical mass of WiMax products in the market.

And even though initial reports on the network’s performance are good, reviewers note that wireless signal strength can greatly affect throughput speeds. In other words, consumers will be asked to subscribe to a service that costs about the same or slightly less than what they can get from a fixed broadband provider with less throughput consistency.

The other major problem facing Sprint as it rolls out more of its WiMax cities is the fact that the economy is in utter shambles. Not only does it make it less likely that consumers will spend more on broadband services. But more importantly, it will likely mean that Sprint and its soon-to-be-partner Clearwire won’t be able to access capital necessary for finishing their network.

On Monday, two years after announcing plans to use WiMax to build a 4G network, Sprint began selling the new service, Xohm, in Baltimore. The network, which offers wireless broadband downloads in the 2Mbps to 4Mbps range, is supposed to be a leap forward in terms of throughput for wireless networks. And according to bloggers and journalists who have tested the network in the first two days it’s been up and running, it seems to be performing as expected.

And even though Sprint is competing directly with fixed broadband providers, it is not offering customers a huge discount. The home service, which requires users buy a $79 WiMax modem, costs $25 initially, but will eventually be priced at $35 per month. It’s also offering a mobile only service, which requires users buy a $59 WiMax wireless card for their laptop. This service starts at $30 and will increase to $45 after six months. The combination service, which allows users to share their bandwidth with other users at home and also offers mobility, will initially cost $50 a month. But the price is expected to eventually jump to $65 a month.

Small footprint
The other big problem for Xohm is that it’s limited in terms of footprint. So far, the company has only launched a network in Baltimore. More cities will soon follow, including Philadelphia, Chicago, Washington, D.C., Providence, R.I., Boston, and Dallas. But even then, the service will only be available in a handful of cities. And when people in those cities venture to the suburbs, they won’t be able to access the network.

“This particular offering is not really fulfilling an unmet need,” said Charles Golvin, senior analyst with Forrester Research. “So the prospects for the service are limited. But I see this particular deployment more as an experiment to see how the market will react and what pricing model is best.”

Like EarthLink, Sprint is targeting incumbent cable and DSL providers with its service. The big difference is that it’s also offering mobility. But because there are only a handful of devices that support WiMax today, most people subscribing to the service will likely only be as mobile as they can be with an air card plugged into their laptop. In other words, they probably won’t be walking around town surfing the Net. Instead, if they aren’t at home, they’ll be parked in a coffee shop or library where Wi-Fi is typically already available.

Sprint is also offering $10 day passes, which is a clear differentiator from the 3G data services offered today for laptop users. 3G data services require a monthly contract. But considering that WiMax day pass users would have to dish out $60 for a WiMax wireless card to even access the $10 a day service, I don’t see this being a huge hit, especially when Wi-Fi is also widely available either for free or for $10 a day.

And because mobility is dependent on network coverage, it’s unlikely that the mobile aspect of Sprint’s WiMax network will appeal to more than a niche audience.

Price matters
EarthLink planned to blanket cities with Wi-Fi and compete directly with cable and DSL providers. It offered its service for about $20 a month, slightly less than services from cable and phone companies. But consumers didn’t see the value in the service, and subscription uptake was dismally low. Within three years of hatching its vision, EarthLink pulled out of the citywide Wi-Fi business, even abandoning assets in some cities.

This is a huge accomplishment, especially because it is the first commercial network in the U.S. to use mobile WiMax technology. But given the paucity of devices available that can even access the network, Sprint is being forced to apply traditional broadband and wireless business models to the new network. And as a result, the company will initially compete with existing broadband services and 3G data services.

” I don’t think having more devices and more proprietary software or hardware in the market is the right answer. Microsoft has been trying to do that now for a few years with their Zune ecosystem…lots of proprietary silos I don’t think scales well.”

Q: The music industry was accused of trying to kill digital music rather than understand it. Compare the industry’s attitude then to now.
Caraeff: I think we’ve definitely learned a lot over the last few years. We’re much more flexible. We’re more experimental. We’re trying new things constantly. There is nothing we won’t try. We’re continually revising our business models. And we’re reacting to what the marketplace is asking us for both in terms of what customers want as well as what our distributors and artists want. It’s clear that fans like to stream music on the Internet. We wanted to figure out how to create a business model to allow audio to be streamed on a free-to-consumer basis online. Before we had an ad supported streaming model for audio we had a subscription-based program for streaming audio and that’s basically a small amount of people who are willing to pay for that. But we look at the scale and size of the opportunity so we created a new model to allow audio to be streamed in full-length high quality on demand fashion. We put those deals in place with everybody from Last.fm to iMeem to MySpace and a variety of other sites where you can stream anything you want on demand for free.

Q: Let’s talk about MySpace and Amazon. Does the fact that they don’t have a device hold them back from competing with Apple?
I don’t’ think not having a device is holding them back per se but I think that there is something to be said for an elegant and integrated solution, a complete thought so to speak that Apple has breathed into the market. The entire ecosystem of a proprietary player and a dedicated store and a seamless integration has been a very powerful thing for our industry and for Apple. On the other hand, I think many people already have devices. They have iPods, they have mobile phones that play music. It’s really about getting the Amazon store to work seamlessly with the devices and software you already have or getting MySpace services to work well with the services you already have. I don’t think having more devices and more proprietary software or hardware in the market is the right answer. Microsoft has been trying to do that now for a few years with their
Zune ecosystem. It is elegant, it does work well, but lots of proprietary silos I don’t think scales well either. So I think what’s missing is the evolution of the middleware, the evolution of the user experience, turning 10 clicks into one click, more elegant software and more elegant web services, which I think need to evolve a generation or two.

Q: That sounds like a big challenge.

That’s how everybody at our company is approaching the business. It’s certainly what gets me excited about coming to work in the morning. The change and disruption in the music industry and many other industries as well is personally satisfying and drives a tremendous amount of excitement. I’m part of something that’s larger than myself. It’s the opportunity to change and transform. It doesn’t happen quickly enough. Conversations with partners like Google, Apple, or Comcast, or Nokia are slow take time to come to fruition. We’re certainly not about how do we get everybody to buy CDs again. We’re very much focused on how do we segment the market so that we can derive revenue from everybody and not just the people willing to pay.

Q: So you are seeing some good revenue from this YouTube deal?

Yes. It’s early days but it’s definitely tens of millions of dollars at this point.

Q: What about piracy? Do you guys just let the RIAA handle that? Or do you direct some of the strategy there?
Personally I believe the only long-term solution is a marketplace based solution, you address the needs of the customer to give them what they want when they want it. If we don’t there are other services that don’t have the same rules who will. Basically pirates have every advantage. They have no licenses they need to take, no rules they need to abide by, no geography with which they have to be concerned about. That’s our competition. You have to compete with that in a marketplace based model. Other tactics, such as litigation or other legal remedies is something we always reserve the right to pursue, but I don’t believe that’s a definitive or long-term fix. I don’t think we’re ever going to ever eliminate piracy with the most progressive and aggressive digital policies. There’s always going to be people who have more time and money and the thrill of circumventing the channel is what its about. It’s not about getting the music. Our goal is to give the mass market every opportunity to consume music wherever and whenever they want in a convenient and easy way so it’s just not worth it to get involved in a gray or black market.

It’s early days on Android. There’s not that many out there on T-Mobile, but even with the small amount out there, they’re downloading and purchasing a ton of music over the air on T-Mobile. It’s not the first example of where we’ve integrated a music store into a cell phone but the example is once the device becomes more full featured with the user experience it becomes easier to use. Once the platform evolves, you’ll see music consumption really start to skyrocket.

q&a Rio Caraeff didn’t come up in the music business scouring nightclubs and honkey tonks for talented new acts.

We also merged our mobile group with our online group recognizing that the world is changing. The customer doesn’t want a mobile only experience. They want an all digital multi-platform experience. They want to consume music on their mobile handset but have parity on their PC and other online platforms. Partners like Verizon and AT&T wanted to have multi-platform online experiences as well. It didn’t make sense to have a silo approach. Now at Universal, we don’t have a mobile business. We don’t have an online business. We just have one multi-platform digital business. We equalized our pricing so it costs the same amount of money to buy a song on a cell phone as it does on a PC. These are things that make sense on a consumer perspective.

The removal of DRM on songs and albums is also a major example of how we’ve changed, both in terms in enabling existing retailers that works on devices like iPods. We’re not saying we’re inflexible. We’re saying we’re going to change, we’re going to adapt, we’re going to listen to what the market is asking for, we’re going to accommodate.

Unlike more traditional industry suits, Caraeff doesn’t believe litigation is the answer to piracy. He doesn’t believe in copy-protection software. He doesn’t believe that the music industry needs to find a strong competitor to Apple to flourish. What he does believe in nurturing new revenue streams and pruning 10-click online music shopping to one. He believes in the power of mobile devices to sell music (he says Google’s cell phone, Android, is proving to be a powerful music-buying tool).

Perhaps the best illustration of how Universal and the rest of the music industry is starting to catch on is the disappearance of digital rights management, the software that attempts to block unauthorized music copying. DRM, which failed to do much more than alienate those who bought music legally, was done away with last week at iTunes–the country’s largest music retailer. Last month, the lobbying group for the four largest labels said it was moving away from suing individuals for file sharing. Caraeff agreed to speak with CNET recently.

Universal Music exec Rio Caraeff (left), with R&B singer Akon, says Universal is more flexible and willing to experiment with new technologies than ever.

He appears to be right in at least some of his beliefs as Universal, the home of U2, Akon, and the Black Eyed Peas, is coming off a productive year. For the first nine months of 2008, Universal reported that revenue was up 3.5 percent to nearly $4 billion and digital sales grew 33 percent.

YouTube is in many countries. It’s a dominate source with which customers and music fans go to find out about new music and to sample music and consume music to discover content, to participate in a community around video and so it’s become more than a store and its not like radio or TV, but it’s become essentially a very powerful place with which our record companies work with our artists to drive awareness and drive links back to their site and drive general marketing and promotion and distribution of our artists. At the same time it’s inherently revenue generating.

Q: So this is the new distribution method?
I think you’re right, but the future for us is about dozens of unique revenue streams and dozens of different products. It’s not about just selling a CD anymore. We have subscription based annuity models, we have download models, free to consumer ad models. On much of our new front line Pop or R&B or Urban release–everything from Fergie to Rihanna to Pusscat Dolls–were seeing mobile comprising 20 (percent) to 45 percent of the revenue for those artists, which is a tremendous amount.

Even though only a small percentage may actually choose to download and buy music, a large percentage will actually consume music. We’re asking how do we build new business models that will allow us to get paid by hundreds of millions of people whether they buy music or don’t buy music versus getting paid by those who choose to pay. It’s really about do we want a large piece of a small pie or a smaller piece of a much larger pie. That’s really about looking out five years ahead in terms of how we transform UMG from the company we used to be to the company we need to be.

“It’s early days on Android. There’s not that many out there on T-Mobile, but even with the small amount out there, they’re downloading and purchasing a ton of music over the air.” –Rio Caraeff, Universal Music Group digital chief

Q: How big is mobile within your digital business?
About 40 (percent) to 45 percent of our overall digital business is coming from mobile channels like Verizon and AT&T.

Caraeff, executive vice president of Universal Music Group’s eLabs, has a background in mobile technology and software. Nonetheless, he just might be the prototype for the label exec of the future.

Other things we included were helping Amazon to launch its music store. We worked with Amazon to get their store integrated into the Android platform and now Amazon will tell you that Android is their single largest source of downloads from any third-party partnership that they’ve ever done. It’s a tremendous amount of consumption that we’re seeing once you integrate it seamlessly into a user experience that’s elegant and easy to use. It’s not 10 clicks. It’s very elegant and easy. We’re starting to see consumption increase significantly.

It’s not like radio, where it’s just promotional. It’s a revenue stream, a commercial business. It’s growing tremendously. It’s up almost 80 percent for us year-over-year in the U.S. in terms of our revenue from this category. We have a great relationship with YouTube, and the future for us will be more than with YouTube than we’re doing today. We’re working with them on a variety of new concepts and new businesses to take the groundwork we’ve done in the last year and half and do a lot more with it. I wouldn’t expect to see us just do business with YouTube like we used to do. You’ll see us get closer to YouTube to do things we’ve never done before and try and increase the amount of revenue and the reach for our videos and new programming we want to create around our artists.

Q: Tell me about mobile. You come from that sector and you obviously believe in it very much. How have you guys benefited from handhelds?

I joined the company in 2005 with a specific mandate of building a large mobile business for Universal. My background is in wireless and software. So over two years I built a very large mobile business, well in access of $100 million. We built a distribution network. We built relationships with every wireless operator and every device manufacturer. We established channels of distributions so we could put our content through to every one of those partners. We started developing new content so it wasn’t just ringtones or re-purposing old content for mobile. We started diversifying away from ringtones. We launched ring-back tones, we launched voice and video tones. We launched full-length music sold over the air to the mobile handset. We launched mobile video services that were both paid and free to consumer under ad models.

(Credit:
Anne Gim)

Q: What about the shift away from DRM?

We recognize the sale of downloaded music only meets the needs of certain customers. We would love it of course if everybody downloaded music but we recognize that’s not the way the world works. A big part of my job and a big part of our strategy is figuring out how to derive revenue from everybody who consumes music when only a small subset of people who choose to buy it. A lot of that ties back into a long-term strategy shift about how do we shift from a revenue per unit model to a revenue per user model where the metrics for success and the metrics for how we define and grow our business are driven by what type of revenue we’re getting from every user who accesses the network, every user who has a music-capable handset.

Q: Talk to me about YouTube as a music hub

If you look at where the bright spots are in the music industry, certainly in the last year the rise of free-to-consumer ad-supported video has become a very significant part of our business coming from a variety of areas. YouTube is driving a very large quantity of that, but about 70 percent of that growth is coming from outside of the U.S. YouTube is a large driver of that outside of the U.S. as well. It’s really coming to fruition I think in part due to YouTube’s recent focus on monetization and really trying to drive revenue around premium content more so than they have in the history of their short existence. They have finally turned the spotlight on ‘How do we turn this into a business’ and that’s benefiting the entire ecosystem of content owners as well.

These are some small examples of how we’ve changed. Our culture across our management, across our labels is very much in tune with creating new business models, diversifying where our revenue comes from, listening to what people want to do with music and coming up with ways to support that instead of suppress that.