MediaSavvy

Overture still looks like a loser, as new competitors enter its indefensible niche and its customers drive harder bargains. [Thanks MarketingFix]

Since [last year], Overture’s traffic acquisition costs have skyrocketed from about $40 million in the first quarter of 2002 to just over $120 million in its most recent quarter.

What’s more, Overture’s Ebitda profit margins have decreased from about 23 percent in the first quarter of 2002 to slightly north of 10 percent today

If Overture is to survive as an independent company, it’s going to have to pull off one of the greatest transformations of the Internet era. Overture will have to transform itself from ad company to search company. It will have to move from thinking of its customers as advertisers to thinking of its customers as consumers looking for information.

WorldCom (now MCI) is now virtually debt-free, thanks to the fact that they’ve declared bankrupcty and the creditors own the company. According to today’s Wall Street journal, investors believe that the telcos face some tough decisions now that MCI is no longer shackled by a need to price its service based on the cost of its past bad investments. [Subscribers only, alas!]

“We’re appalled,” says Randall Stephenson, SBC’s chief financial officer. “After committing massive fraud, WorldCom emerges out of bankruptcy with most of its debt wiped out.” Verizon Chairman Ivan Seidenberg said at a news conference Monday that, in WorldCom’s case, “crime pays.”

Yeah, right. Worldcom’s shareholders made the ultimate sacrifice for all that borrowing and fraud. Don’t expect Verizon’s and SBC’s shareholders to do the same any time soon.

I can’t wait until creditors get control of one of the wireless carriers.

The LA Times says Apple (i.e. Steve Jobs) is seriously considering buying the world’s largest record company, Universal Music.

People close to Jobs say he is convinced that the music industry is about to turn a corner in the copyright war. With the government shutting down pirate Web sites and the record industry now going after individuals for alleged piracy, the Apple chief believes digital theft will become increasingly more complicated, prompting fans to migrate to legitimate services, sources said.

Yikes.

I normally think this kind of consolidation destroys shareholder value. After all, Sony and Time Warner have found nothing but negative synergies in their music divisions. But Jobs can probably add more value to Universal Music than anyone, and Apple’s focus is probably more on consolidation of its (tenuous) position than any sort of monster growth trajectory.

I hate that Apple might take its eye off the ball of building better computers and improving OS X. But I love the idea that they’re developing a new music service and feel strongly enough to about it to own a record company. Apple is already refocusing on the consumer computer market. This will hasten their transition to becoming a consumer electronics company.

I don’t know if Apple can do it. But this is the best hope we’ve had in years that the music industry could overcome its innovative inertia.

This is late, but NY Times links are working again.

Dave Winer has posted a cryptic note about what’s going on: “Martin Nisenholtz, CEO of New York Times Digital, … brought me up to date on what’s going on. I agreed not to talk about it until we’re finished talking. I’ve talked with a few other people who I trust to try to make this come out right for the Times and for the Web.”

(I’d link to it, but this item’s permalink is broken.)

It’s going to be a long, long time before 3g goes anywhere, if this story is the norm for how content makes its way to mobile phones:

• SmartServ Online made a deal with a big, unnamed handset manufacturer to include the company’s financial news and data application inside some of the manufacturer’s Java-capable phones. The press release says, “The agreement contains three revenue components: upfront development fees, licensing fees and a share of recurring subscription revenue from wireless carrier subscribers.”
• Summus Inc. said its photo messaging service available through AT&T Wireless Services Inc. now supports the Panasonic GU87, Nokia 3650 and the Sony Ericsson T306.
• Verizon Wireless announced it will offer The FOX Sports On-Court Live Basketball game developed by Sorrent using Verizon’s BREW application download service.
• Boost Mobile announced it will offer snow reports from SnoCountry.

Apparently, to offer content on 3g phones, you have to make a deal with each mobile carrier, each handset manufacturer, and then customize your application for individual phone models. If that’s not discouraging enough for developers, you must pay upfront development and licensing fees.

When will the mobile carriers (and their suppliers) realize that having nondiscriminatory access to content is more compelling to consumers than a few exclusive content deals? Probably about the same time they realize that lack of number portability is costing them more money by limiting their market than it’s saving them in churn.

I can’t believe that Boston.com have pimped up their logo with pictures of a product and links to an advertiser (Long’s Jewelers).

This site it produced by a company (The Boston Globe, a NY Times subsidiary) that would never consider anything even remotely like this in print. [Thanks, Adam Gaffin for posting to Online News and Adrian Holovaty for reminding me.]

The mobile carriers’ balance-sheet pricing and ignorance of network economics have made SMS a non-starter in the US.

SMS messaging hasn’t taken off in the United States because, according to The Economist, (1) better alternatives (land-line calls, mobile calls, instant messages) are available at flat rates, (2) the mobile carriers resisted connecting their SMS networks, (3) the mobile carriers’s have overpriced SMS-capable phones, encouraging their customers to hang on to their old phones. [Thanks Marketingfix]

As long as the mobile carriers base their pricing on debts they incurred in the nineties and not on what they cost to deliver or what they’re worth, they’re going to retard the development of the mobile Internet in the US. By they time they (or their receivers) wake up to the what’s happening, the wireless nearlynet will own the market.

The NY Times has every right to charge for their old stories, but I wish they hadn’t.

I’ve been collecting links for a couple of weeks in preparation for a series of posts on media and the broadband access monopolies. It turns out that the Times moved a bunch of really useful stories behind the barrier. If you want to read them, they’ll cost $2.95 each, which I doubt you’re willing to pay.

I think most publishers would get a higher NPV if they just gave their archives away, but the Times is a special case — at least in 2003. I’ll be more careful in the future about linking to them in the future. The SF Chronicle’s Gate doesn’t charge (for now), so I’ll try to give them a little more link action.

On Lawrence.com, the blogs are more popular than the content created by the pros. This is the kind of site that the dailies keep talking about, but not creating: tons of information on local bands, mp3′s, venues, concerts, restaurants, bars, and … blogs! And it’s published by the Lawrence Journal-World.

Until last week, I only knew Lawrence, Kansas as the setting of the nuclear war TV movie The Day After. Then I saw Rob Curley present Lawrence.com at the New Media Conference at Berkeley and was impressed with the site. Lawrence is a college town with a thriving local music scene and Lawrence.com does a remarkable job of laying it all out.

AT&T’s prepaid card for selling content is a confusing idea. In an excellent interview on PaidContent.org, Mike Palumbo, sales director of AT&T pre-paid services, says, “We did not want to get in the “Visa space”…so we stumbled into online content.”

The business of prepaid calling cards has a certain logic: the variable cost of the product is very low, prepaid cards allow the selling to disguise the real cost of a call, the typical buyer is less likely to have a credit card or a relationship with a long distance company. But for these reasons, the prepaid calling card business is pretty grubby, perhaps a step up from the check-cashing business.

The prepaid business has some distinct competencies, such as charging for small transactions, managing millions of “accounts” with stored value, and retail distribution. But there are a lot of reasons why Web content is a poor match for them:

• Too many middle men: Because they’re not selling their own content, they’re adding two middlemen (themselves and the retailers) with high margin expectations compared to those of credit card companies, the traditional single middlemen for content transactions.
• Retail friction: So far, AT&T has two retailers for this business. For Shockwave.com, it’s a chain of convenience stores. For Vindigo, a chain of truckstops. How many cards do they have to sell to justify the space that they would normally devote to Slim Jims and Tic Tacs?
• The big disconnect: So, you’re on Shockwave.com and you want one of these cards. Do you bike over to the Quik-E-Mart with a couple of twenties, or do you surf over on to another site? Same deal for the busy executives targeted by Vindigo. Meanwhile, prepaid calling cards are sold by establishments and vending machines that are just few steps from a pay phone.
• The wrong target: This is a product, AT&T admits, that is aimed at people who either don’t have a credit card or don’t want to use one online. What’s the overlap between these people and the market for online content?

Both Vindigo and Shockwave.com’s Gameblast seem like good candidates for selling “content”. AT&T’s Prepaid Web Cents card doesn’t seem like a very good way to pay for it.