A lot has changed since Microsoft’s attempt, in 2008, to buy Yahoo! The target company is now worth less than half of the $45 billion that Redmond offered for it back then. Management ructions at Yahoo! seem to have worsened in the intervening years, particularly following the termination of CEO Carol Bartz earlier this year. But other things have stayed the same: Yahoo’s continued strategic uncertainty and the weak online advertising market, to name just two. To name a third, there remains a general sense that there really isn’t room anymore for MSN and Yahoo! and AOL in this new world we live
in. The music in this dance eventually has to stop, and surely there will only be two chairs to sit in, not three, when it does.

Microsoft must certainly have this in mind as it signs a  new non-disclosure agreement and looks again at Yahoo! – and if nothing else it will want to lock its competitors out of the negotiation room. But it’s more complicated now. As The Times points out, Microsoft’s strongest imperative now is to shore up the search and ad sales arrangement with Yahoo! to maintain this toehold in its search battle with Google. Therefore, the company is unlikely to make a play for full acquisition of Yahoo! again, perhaps preferring instead to
participate in a consortium bid to buy Yahoo’s business assets. Microsoft
has wider issues, issues which are beyond the help of a Yahoo! alliance, that warrant its resources nowadays.

And what does Yahoo! want? Strategic clarity; a firm idea of what the company will look like in a year’s time. Right now, that’s so unclear that they are operating with an interim CEO and talking to all different kinds of possible investors, each with different agendas. That’s not good for any of the company’s stakeholders – not for partners, not for
employees and particularly not for shareholders. And spare a thought for those
shareholders, as they yearn for 2008 and what might have been.

Godin’s new partnership with Amazon, The Domino Project, is fascinating from several angles. It’s also scary, if you are inclined to hang on to the old ways of doing things. Content owners should be paying close attention to the things that are going on here:

Blending of content. You used to buy a book, get a book and own a book. Now the words that constitute a book come with all kinds of other content cross-promoted with it and wrapped around it. This is how media is going to be consumed in the future.

The growth of content snacking. The Domino Project is very much about short pieces of content. Whether we like it or not, in a 140-character world, this is the way things are going, and it’s smart of him to recognize that.

Short term ownership and sharing. The digital delivery of content, cloud warehousing and micropayments are combining to facilitate and encourage ephemeral ownership, rental and subscription models. It won’t be long before we don’t “own” anything.

Innovative pricing. Hand in glove with all of this, and liberated by promotion bundling, look how price structures are changing.

This is all very interesting to watch. As Godin himself says: “Each time, we’re going to try to push one boundary or another.”

If you already own a piece of music – whether originally in the form of a compact disc or a downloaded file – do you have the right to store a copy of it on a server somewhere and access it when and how you like? It depends on who you ask. The labels will say no; Amazon and Google, yes. This issue is the subject of a long court case between EMI and MP3tunes and it’s hard to see any of the labels duplicating that law suit in this case. So how this plays out will be fascinating.

And this is important for the future of music. Digital music distribution is still poorly established. It is a jungle dominated by one plant – iTunes – that eclipses all the other tiny plants trying to grow. The scary thing is that everyone (except Apple) wants new services to succeed because a viable competitor to iTunes must be found. But they’re making heavy going of it.

On the one hand, online services need to be respectful of copyright owners – both the labels and the publishers of the musical works. Apple, Google and Amazon all make lots more money from other product and service offerings, but that does not entitle them to use music as a loss leader just to promote those other products and services.

On the other hand, the record labels have to get out of their own way. Harmed by their own laissez faire attitude to licensing video rights to MTV in the early 1980s, the major record labels have been tyrannical in the way they approach licensing of content to internet services, ever since the first flickering of Web 1.0. Whether they like it or not, attitudes to intellectual property are shifting quite quickly. They can either move with it and try to shape it, or push against it and come off second best.

Amazon is a dangerous competitor. A pioneer Web 1.0 company that has survived and thrived better than anyone else – with the possible exception of eBay – it has massive brand penetration, a huge range of integrated services and an enormous established user base to sell to. And Netflix is much more vulnerable than it appears to be.

Netflix has lots of problems. Testy relationships with content suppliers who feel threatened by new rental distribution models are presenting in high content costs. Established competitors such as Hulu (Plus) and iTunes are burrowing into its market share. And it’s entangled in a complex bandwidth problem because of the huge amount of internet traffic it generates (especially for a paid service) and because of its involvement in the dispute between Level 3 Communication and Comcast.

It gets worse. Now, it transpires from a Netflix 10-K form recently filed, that the company depends on Amazon for a significant strategic activity – Netflix has outsourced “the majority of our computing” work to Amazon Web Services. In other words, Netflix is dependent on one of its new competitors for a core part of its operations. And that’s not something that can easily be switched for a company that operates a major commercial activity inside the “cloud.” Lots to think about for Netflix.

Who is right?

Sometimes a dumb question yields a smart answer and a mistake yields triumph. Whether or not The Daily is able to immediately thrive and to create a model for others to follow, it’s at least an attempt to create a new foundation. Critics of Big Media so often tell it what NOT to do, but few are able to tell it what it SHOULD do, to reshape their business models and compete in the new media world. Rupert Murdoch’s organization has repeatedly shown that it’s willing to take on big challenges and stick with them to the end. Others have repeatedly shown a willingness to criticize, and then to follow, his lead when he’s proved himself correct.

Both companies are struggling to maintain the buoyancy of their business in the face of several challenges, particularly the threat presented by content-streaming services. But is this really a good reason to get married?

Is a merger of this size in this sector persuasively in the public interest? There are significant questions to do with media ownership diversity and vertical integration that the conditions have addressed, but perhaps not fully resolved.

And is the vision of the merger a chimera? In 2000, two companies – both of whom were “media companies,” but very different kinds of media companies – set sail on a perilous and ultimately disastrous journey. Those companies were named AOL and Time Warner. There are a number of similarites in the Comcast/NBCU union. Has the last decade taught anyone anything?

Lots more to come on these issues!

This article by Forrester Research shows just how loose and shaky this handrail has become. Mark Mulligan’s discussion of HMV’s retail woes in the United Kingdom over the Christmas period is about much more than sluggish compact disc sales. It’s about how the idea of owning a round piece of plastic or a bound set of papers is becoming terminally unpalatable for consumers.

As a result of the “Media Meltdown” of the last decade, Mulligan says, there are now viable paid digital alternatives for books, magazines, music, movies and television programs, most of which can be accessed from a device in real time from anywhere. In the clutter and clang of modern life, who wants more stuff on the shelves? When it comes to media, why buy physical things from a retail store? And it gets worse. As Mulligan points out, non-physical sales of all these products (music files, electronic books, paid movie downloads) are not yet making up for the decline in physical sales.

That’s bad enough. But the core message of his article is even scarier – that the pay-per-unit model for content – whether for physical or non-physical products – is dead, but doesn’t yet know it. In other words, the future consumer is not going to want to pay to own either a physical or a non-physical unit of content. In other words, content owners are swimming through stormy, shark-invested waters in an effort to reach an island that itself is sinking. Mulligan’s point is that consumers now value access to content more than ownership of it, and that, because of the “contagion of free”, few are willing to pay for either privilege.

Is he right?

First, in terms of access to content, his assertion seems strong. There is now a definite culture, strengthening by the day, of ephemeral content being consumed from websites and through applications. People will find a piece of content, experience it, show it to someone else but without feeling the need to own it. The move towards cloud-based storage and always-on internet access will accelerate this trend. If you don’t need to own a New York Times article or a blog post, why do you need to own a song or a movie? It’s the experience of it, and ever more so the ability to share it, that counts.

And what about the “contagion of free”? Will this doom content and copyright material to unpaid oblivion? This was certainly the fear several years ago, before Big Content had evolved realistic paid content models and before the application and tablet PC markets provided new paths to payment. But the case is not yet closed. At the very least, there will continue to be significant downward pressure on payment for content.

With all these layers of challenge facing the content industry, it’s hard to see any real future for physical media storage. A decade ago, it all seemed so different.

Even allowing for distortion due to the difference between public and private financing, this is still a staggering thing to contemplate. A venerable publication whose stock-in-trade is the writing of highly-qualified journalists and editors is now half the value of an adolescent organization whose unpaid authors write in 140 character tweets. Interesting times indeed.

Bill Shope, an analyst at Goldmans, reckons that at least 19 million notebook sales will be lost to tablet PCs in 2011, and over 26 million in 2012.

When this shift happens, it should not be a surprise to anyone. The trend towards smaller, more mobile computing devices began years ago when the laptop began to challenge the desktop. It’s since continued with notebooks, netbooks and smartphones and there is no reason to think that the direction will change. People will always want more ability to work, to manage data and be entertained on the go. People will also always want devices that are integrated with reading, communicating and social networking functionality, things that do not only happen when one is sitting at one’s desk. Even though tablet PCs have been around for a long time now, Apple’s iPad has unblocked the adoption channel, and it’s now a slippery slope.

Where will it end? Probably with a tiny voice-activated, smartphone-like device implanted somewhere on the body that draws its data from the cloud and “talks” to different screens in whatever location the individual happens to be in. This vision is a long way off, but in the meantime don’t be expecting to get a lot of money for your notebook when decide to sell it and upgrade to an iPad.