EA wants Facebook's users, $3 billion in digital sales.

Reuters
by Liana B. Baker
Sept 21, 2011

(Reuters) - Electronic Arts Inc may never recover its Silicon Valley swagger. But maybe it doesn't have to, its top executive says.

Three years after EA went from being one of the hottest kids on the video games block to industry also-ran, the leaner, more focused company now hopes to take on Zynga and make $3 billion in revenue from digital game sales in the next few years.

Chief Executive John Riccitiello told Reuters in an interview his company survived a "near-death experience," three years ago when its profit shrank, game quality was poor and it lacked an Internet presence.

"We were once a swaggering success in the Valley and then we were suddenly an afterthought," he said of the Redwood Shores, California-based company's position in 2007, when game sales started to slip worldwide.

The CEO said that swagger may never fully return, but through cost cutting, slashing the amount of games it makes and publishing top games on Apple devices, EA has re-emerged as company that is setting its sights on social gaming phenomenon Zynga.

It is within shooting distance. Zynga, which filed with regulators for an initial public offering of up to $1 billion in July, receives the bulk of its revenue from making games for social networks, notably Facebook.

In just five weeks, EA's "Sims Social" game on Facebook attracted more than 53 million monthly active users, more than the company had expected and second only to Zynga's CityVille, which has more than 73 million monthly users, according to AppData, a firm that tracks social games data.

The goal is to one day surpass Zynga's users on Facebook. For now, AppData shows Zynga still dwarfs EA's user base on Facebook with 267 million users to EA's 94 million.

EA's comeback story, as well as job creation and tax policy, will be the topic of Riccitiello's speech on Thursday in front of the U.S. Chamber of Commerce in Washington.

Riccitiello said EA is now one of the few game companies, including China's Tencent, that will generate more than $1 billion this year in digital game sales.

He said the next step will be for EA to be the first video game company to make $3 billion in digital revenue -- sales made other than from the sale of traditional discs.

FROM GAMES TO COSTUMES

Digital revenue comes from everything from extra content gamers can download onto their console games -- such as on Microsoft's Xbox -- to the sale of virtual goods (like costumes) for a user's avatar in a Facebook game.

"We'd like to be the first to get to $3 billion in digital revenue," Riccitiello said, adding it could be in the "next two or three years."

To be sure, EA still has a way to go before it can reach that figure. The CEO said the company is only a third of the way done in its digital plans.

As for its console games, the part of its business which generates the bulk of its revenue, he said this holiday season will be crucial to see whether changes to that division have worked.

EA is chasing after Activision Blizzard's crown in first-person shooter games. EA's "Battlefield 3" video game is coming out in October, a month before Activision releases "Call of Duty: Modern Warfare 3," which is expected to shatter sales records.

"We don't think we can outsell them this time but we think we can knock them by 20-30 market share points, a gigantic chunk. On a market share basis, we are going to hurt them good," Riccitiello said.

The burning question on Wall Street is when EA's massively multiplayer -- so called because it hosts multiple players simultaneously in a single, common game world -- role-playing game "Star Wars: The Old Republic" will come out.

EA has poured millions of dollars and put years of labor into the game. The company has said the game would launch during the holiday season.

Riccitiello declined to comment on a release date. But he said pre-orders for the game were in the "hundreds of thousands" and above the 200,000 level the company's finance chief had mentioned to Reuters in July.

Schmidt says Google has not cooked search results.

Reuters
by Diane Bartz and Malathi Nayak
Sept 21, 2011

(Reuters) - Google Inc has not cooked its search results to favour its own products and listings, Executive Chairman Eric Schmidt told a U.S. Senate hearing looking into whether the search giant abuses its power.

Members of the Senate Judiciary Committee's antitrust panel said on Wednesday that Google had grown into a dominant and potentially anti-competitive force on the Internet.

"Google is in a position to determine who will succeed and who will fail on the Internet," said Republican Senator Mike Lee. "In the words of the head of the Google's search ranking team, Google is the biggest kingmaker on Earth."

Google has been broadly accused of using its clout in the search market to stomp rivals as it moves into related businesses, like travel search.

The Federal Trade Commission is looking into that charge and others, including whether Google manipulates its search result rankings to favour its own products.

Google is trying to convince regulators and lawmakers that it does not need restrictions placed on its growing portfolio of businesses, and that its business practices are legal and good for consumers.

Lee aggressively quizzed Schmidt over whether Google deviates from its search algorithm to boost its own listings.

He brought a chart that showed a study comparing the success rate for shopping-related key word searches. Lee said that search rankings for price comparison sites -- Nextag, PriceGrabber and Shopper -- varied while Google's shopping site consistently ranked third.

"I see you magically coming up third every time," Lee said. "I don't know whether you call this a separate algorithm or whether you've reverse engineered one algorithm, but either way you've cooked it, so that you're always third."

Schmidt replied: "Senator, may I simply say that I can assure you we've not cooked anything."

Google controls more than two-thirds of the global search market. But Schmidt argued that specialty web sites -- like those with restaurant reviews and travel search -- give Google stiff competition.

In an oblique reference to Microsoft, which faced nearly two decades of legal scrutiny for antitrust violations, Schmidt told lawmakers: "We get it. By that I mean, we get the lessons of our corporate predecessors."

Colin Gillis, an analyst at BGC Partners, said some of the senators were "gunning hard" for Google but Schmidt handled himself professionally. "He appeared well-coached to me," Gillis said.

The senators were at times frustrated by what Democratic Senator Al Franken characterized as "fuzzy" answers from Schmidt about how Google prioritizes its search results and whether it unfairly uses rivals' content.

Franken questioned Schmidt about complaints from Yelp -- which provides user-generated reviews of restaurants, shops and other local businesses -- that Google unfairly rips reviews from Yelp to build Google's competing site, Google Places.

Franken asked if Google still used Yelp's content to drive business to Google Places.

"As far as I know, not," Schmidt answered.

Franken skeptically asked, "As far as you know?"

"Again I'll have to look, but I'm not aware of any," Schmidt said.

Schmidt was Google's chief executive officer from 2001, but vacated the post to company co-founder Larry Page in April.

Schmidt now serves as executive chairman and oversees government affairs -- a position of critical importance during the FTC probe and lawmakers' reviews.

Some of Google's rivals made their case at the hearing for why Google needs to be reined in.

Jeffrey Katz, the CEO of Nextag, an Internet comparison shopping company, said Google was initially a huge help in building innovation.

"But what Google engineering giveth, Google marketing taketh away," he said in written testimony.

He argued that Google is now the Internet neighborhood bully. "Google doesn't play fair. Google rigs its results, biasing in favour of Google Shopping and against competitors like us," Katz said in written testimony. "As a result, Nextag's access is more and more discriminated against ... because we compete with Google where it matters most, for very lucrative shopping users."

Katz and Yelp CEO Jeremy Stoppelman both said they would not start new businesses in the current environment.

"I personally wouldn't. I'd find something else to do," said Stoppelman at the hearing.

Google spurns Oracle $2.2 billion Android damage claim.

Reuters
by Jonathan Stempel
Sept 21, 2011

(Reuters) - Google Inc urged a federal judge to reject an Oracle Corp expert's recommendation that it pay more than $2.2 billion for infringing patents for Java technology used in the Android operating system.

U.S. District Judge William Alsup in San Francisco had on July 22 rejected Oracle's request for as much as $6.1 billion of damages, but gave the company a chance to revise its claim. A trial is scheduled to begin next month.

Oracle had sued Google in August 2010, claiming that the Internet search company's Android system infringed Java patents that Oracle acquired when it bought Sun Microsystems Inc seven months earlier. It also alleged copyright infringement.

The lawsuit is one of several among phone and software companies seeking a greater share of profits in the growing market for smartphones and tablets.

In a Tuesday letter to the judge, Google lawyer Robert Van Nest said a new report by Oracle damages expert Iain Cockburn recommended damages of more than $2 billion for copyright infringement, including $1.2 billion for unjust enrichment in 2012 alone, and $201.8 million for patent infringement.

Van Nest said the September 12 report is deficient because Cockburn either speculated about or did not explain how he calculated damages, and failed to show how much revenue Sun or Oracle might have earned by partnering with Google on Android.

The report "ignores governing law and the guidelines in this court's July 22, 2011 order," Van Nest concluded.

Google plans to ask Alsup to exclude portions of Cockburn's findings from the case. A Google spokesman called the revised damages estimate "flawed."

Oracle spokeswoman Deborah Hellinger declined to comment. Cockburn, a Boston University management professor, did not respond to requests for comment.

In the July 22 order, Alsup faulted Google for trying to downplay the value of Android, and use its 2006 talks with Sun regarding a lower-cost Java license as a basis to limit Oracle's damages to a fraction of what it seeks.

But he scolded Cockburn for having "overreached" in an earlier report by assuming the entire value of Android was tied to Oracle's patents, rather than only parts alleged to infringe those patents. He urged that any revised report be more specific, and threatened to exclude it altogether if it "fails to measure up in any substantial and unseverable way."

Alsup suggested that $100 million should be a "starting point" to help determine damages, before adjusting for several changes in the marketplace since the Sun license talks.

Google is based in Mountain View, California, and Oracle in nearby Redwood City.

Google's Larry Page and Oracle's Larry Ellison Square Off in San Francisco Court.

Bloomberg News
by Brian Womack, Aaron Ricadela and Karen Gullo
Sept 19, 2011

Google Inc. and Oracle Corp. (ORCL) chief executive officers will square off in court today to resolve a dispute that may pose the biggest threat to Google's Android mobile software, now running on more than 150 million devices.

Google's Larry Page and Oracle's Larry Ellison were ordered to appear before a federal court magistrate in San Jose, California, after tussling over patents for more than a year. Oracle accused Google of infringing patents related to its Java software, and a settlement means the companies avoid the risk of having a jury decide whether Google owes royalties.

"It's like Gorbachev and Reagan," said Scott Daniels, a lawyer with Westerman Hattori Daniels & Adrian LLP in Washington. "The greatest chance of settling the case, of ending the Cold War, to use the analogy, is to have the two highest figures there."

Oracle's suit, filed in August 2010, may represent a bigger menace to Google's software than challenges from Apple Inc. (AAPL), which has already won patent decisions against Android device makers. In settlement talks, Page aims to avoid having to pay Oracle licensing fees that analysts at Citigroup Inc. said could be as high as $15 per device. That sum might slow the adoption of the software, which Google gives away.

Ellison is under pressure to wring profit from the acquisition of Sun Microsystems Inc. and its Java software after a report in June showed falling hardware sales, raising concern that Redwood City, California-based Oracle may not be making most of the $7.3 billion deal, which closed last year.

Aaron Zamost, a spokesman for Mountain View, California- based Google, and Deborah Hellinger, a spokeswoman for Oracle, declined to comment.

SAP, AMERICA'S CUP

Ellison, 67, has demonstrated his mettle as an opponent, said Neil Herman, an analyst at Ticonderoga Securities. He prevailed in 2009 after an almost two-year fight against Swiss billionaire Ernesto Bertarelli over who can determine the challenger in the America's Cup yachting competition.

And after a trial where Ellison testified, a federal jury awarded Oracle $1.3 billion in damages against rival SAP AG (SAP), which it accused of stealing software. While a judge ruled this month that the verdict was "grossly excessive," Oracle vowed to pursue "the full measure of damages" it believes are owed.

"Larry Ellison has been masterful historically in his ability to hire good attorneys who give good advice and has been quite successful in the legal battleground," said Herman, who is based in New York.

'WELL-MATCHED CEOS'

Page, 38, who succeeded Eric Schmidt in April, may prove a worthy opponent, said Paul Saffo, managing director at San Francisco-based Discern Investment Analytics Inc., which provides financial tools for institutional investors.

Ellison, who founded Oracle in 1977 and has been its CEO since that year, is known for his blunt manner, Saffo said. Within days of becoming CEO in April, Page shook up the company's leadership, promoting seven of his managers to senior executive positions to streamline decision making.

On Page's watch, Google has also bulked up on patents and the attorneys it needs to defend against allegations of infringement. The company agreed in August to buy Motorola Mobility Holdings Ltd. for $12.5 billion, gaining more than 17,000 patents.

"The only difference between these two men is their age, not their skills," said Saffo, who said he holds some shares of Google. "They are two well-matched CEOs."

'WISHFUL THINKING'

Both executives were "strongly" urged to attend today's session by U.S. District Judge William Alsup, who has been overseeing the case, after opposing sides initially said they would send lower-ranking executives.

Magistrate Judge Paul Grewal in San Jose will oversee settlement talks. Grewal's role is to play devil's advocate to each side, said Paul Janicke, a lawyer and professor who teaches intellectual property law at University of Houston Law Center.

"You try to portray the worst case for each side –'Here's what could happen to you' — so that they will see their down side," said Janicke, who has mediated patent disputes.

Oracle initially estimated that damages from allegedly unauthorized use of Java technology would amount to as much as $6.1 billion. Alsup threw out the tally, calling it "wishful thinking," according to a July 22 order.

In the same order Alsup also took Google to task for what he called "Soviet-style negotiation" in suggesting that a reasonable royalty would be at most $100 million.

ROYALTY FEES

Undeterred by the judge's reproach, Ellison will likely ask for an ongoing licensing fee for each device that sports Android software, said Walter Pritchard, an analyst at Citibank Global Markets. Oracle may seek anywhere from $5 to $15 per device, he said. Richard Windsor, an analyst at Nomura Securities, said Oracle may seek less than $1 a device.

Any amount would add up quickly. More than 550,000 Android devices are activated each day, Page said last month. Introduced in 2008, Android has become the leading software for smartphones, with 43 percent of the market in the second quarter, up from just 17 percent a year earlier, according to Gartner Inc.

Java, the point of contention, has emerged as an industry standard for writing business software and is widely used to create Web-based applications. After buying Sun in January 2010, Oracle said it would make more money from Java than its inventor had. Sun collected just $220 million in Java-related revenue in fiscal 2008.

ORACLE'S DILEMMA

Companies including Research In Motion Ltd. (RIMM), Amazon.com Inc. and Sony Corp. already license Java. Oracle claims that Google's Android relies on technology that infringes Java patents, and that Google should take a license.

Android has proven itself vulnerable in legal battles before. Apple won a U.S. International Trade Commission ruling in July in a patent-infringement case targeting HTC Corp. (2498)'s Android-based mobile phones.

Oracle's efforts could be more damaging to Android, said Jack Gold, an analyst at J. Gold Associates LLC in Northborough, Massachusetts.

"It strikes the foundation of Android," Gold said. "What Oracle is saying is, 'No, Android is fundamentally flawed in that it's based on our invention and you've copied our invention.' It much more goes at the core of Android."

A royalty fee would increase the cost of using Android and may cause some handset makers to consider alternative operating systems. Still, Google, with its $39.1 billion in cash and short-term securities, could absorb some of the fee charged to partners that make the devices, said Will Stofega, program director at IDC. While giving away the software, Google aims to make money through advertising that it puts on the smartphones.

If Oracle does score a victory against Google, it won't want to extract too high a fee, said Ray Valdes, an analyst with Gartner. Android needs to be successful for Oracle to get any royalties from the devices, he said.

EBay vs. Craigslist Lawsuit Heats Up.

Bloomberg News
by Karen Gullo
Sept 16, 2011

EBay Inc. (EBAY)'s lawyer said Craigslist Inc. may have "lobbied" for a criminal subpoena issued in a federal probe into allegations the online auctioneer stole confidential information from Craigslist.

The criminal subpoena issued last week and served on EBay means the exchange of documents and information in Craigslist's lawsuit against EBay should be put on hold, EBay lawyer Mark Lambert said at a hearing yesterday in state court in San Francisco.

The online classified company claims in the lawsuit that San Jose, California-based EBay used proprietary information from Craigslist to start a competing online ad site when the two companies were negotiating over EBay buying a stake in Craigslist. After winning two rulings that the case can proceed, Craigslist is seeking to move ahead with discovery, where the two sides exchange documents and interview witnesses.

"We believe they lobbied for" the subpoena and put it in newspapers yesterday, Lambert said at the hearing. "It names lots of individuals and creates tremendous uncertainty."

"This is something that they took to the authorities, it's of their making," Lambert told Superior Court Judge Richard Kramer, who is presiding over the civil case. "It's a game changer."

'ALLEGED CRIMINAL ACTIVITIES'

The Sept. 7 grand jury subpoena to Craigslist seeks information pertaining to "incidents where EBay employees engaged in alleged criminal activities and misconduct focused around the misappropriation of proprietary/confidential information from Craigslist."

It lists a February 2005 incident in which EBay founder Pierre Omidyar allegedly requested information from EBay and instructed employees to use Craigslist metrics to compare its growth rates with those of EBay's competing website called Kijiji.

Anyone named in the subpoena may want to hire a lawyer and may be unwilling to respond to civil subpoenas in the case, Lambert said.

Michael Clyde, an attorney for Craigslist, told Kramer that the criminal subpoena should have no impact on the civil case.

"There's no reason why we can't finally get started with discovery in this case," he said.

The subpoena "will not cause complete cessation of anything," Kramer said. It will be taken into account in fashioning a discovery plan, he said. The judge scheduled the next hearing in the case for Oct. 18.

EBay said Sept. 13 that the company is cooperating with the U.S. Justice Department investigation.

"We will cooperate with any inquiry related to the disputes between EBay and Craigslist," Amanda Miller, an EBay spokeswoman, said in an e-mail. "EBay believes that Craigslist's allegations against EBay are without merit."

Anti-virus firms push security software for mobile devices.

USA Today
by Byron Acohido
Sept 18, 2011

The prospect of consumers and employees physically losing information-packed mobile devices, or getting them hacked, is driving a red-hot sector of the tech industry: supplying mobile security.

Research firm IDC says global spending on mobile security is on track to balloon to $1.9 billion by 2015, up from $407 million in 2010.

PC anti-virus companies Symantec, McAfee, Trend Micro and Webroot, among others, are stepping up efforts to market their mobile security services to consumers.

A subscription, which typically costs about $30 per year, includes anti-virus protection, backup data storage and technology to locate a lost or stolen mobile device. Some offerings also include safe browsing, parental monitoring and the ability to remotely lock a missing device and even wipe clean all the sensitive data it contains.

"Security is not just about anti-virus anymore," says Kevin Mahaffey, chief technical officer of Lookout Mobile Security, which specializes in security services for Android and BlackBerry handsets. "Security involves everything that could go wrong with your mobile device."

The threat was highlighted last week after someone hacked into Scarlett Johansson's text messages to steal and circulate nude photos of the actress.

Other players are moving to cash in. AT&T recently announced a partnership with Juniper Networks to develop a mobile security platform for businesses and consumers. New software services, delivered over the Internet, are expected to be available later this year. The idea is to integrate mobile security services into the wireless Internet connection supplied by AT&T, then sell annual subscriptions for different packages of security services.

"Everyone recognizes that mobile devices have gone from being a convenience to being a necessity," says Ed Amoroso, chief security officer at AT&T. "As the value of the asset increases, attention to security increases, as well."

Mobile devices are "uniquely more sensitive than PCs" since "the device is with you all the times," says Trend Micro's Tarek Alawdeen.

And because of their size, "smartphones and tablets are easier to lose or have stolen than laptops and notebooks," adds Webroot's Chad Bacher.

Corporations have special concerns. Many must comply with federal laws for safekeeping of financial and health records. Sensitive company records circulating via an array of mobile devices puts some companies at risk of violating record-keeping rules, says Chenxi Wang, principal security and risk analyst at Forrester Research.

"If you look at AT&T and Juniper's announcement it's not just about anti-malware and anti-theft, it's more about helping enterprises maintain compliance and enforce security policies," says Wang.

Many of the new mobile security services are built around defending users of Google Android smartphones and touch tablets from malicious software designed to steal data and take control of the device. "Very often we see malicious apps disguised as legitimate games, music, and ringtones which, if downloaded, can gain root access to your device in order to take control of your apps, transmit personal information from your device, control search results, or send texts and SMS messages to premium numbers." says Bacher.

Several security firms have issued reports this year showing that Android devices are increasingly susceptible to attack. McAfee, for instance, found that Android devices faced 76% more threats from April through June than in the first quarter of this year.

The "Android Market is an open app store, where anyone can freely publish Android Apps, and it is up to the community of Android users to flag malicious or fraudulent apps," says Trend Micro's Alawdeen. "The end user has no way of knowing which apps are safe or malicious."

Google spokesman Jay Nancarrow declined to comment.

Apple devices need added security too, security experts say. McAfee recently began selling an app via Apple's iTunes store that backs up iPhone- and iPad-stored photos and videos, locates lost devices and can remotely wipe information from a missing device. Apple provides a free app, called Find My iPhone, that provides basic functions for finding or locking down lost iPhones and iPads.

Several other independent app developers supply similar apps, and anti-virus giant Symantec is developing security offerings for Apple iOS, the operating system that runs iPhones and iPads.

"You stand to risk losing much more than contact information. You would lose personal, sensitive photos, like so many celebrities have," says Symantec's David Cole. "The person who finds your phone might have access to any of the websites you log into."

Results of a recent Symantec survey of 12,704 respondents in 24 nations found that only 16% installed the most up-to-date security on their devices, while 10% reported being the victim of a mobile-related cybercrime.

The security companies are banking on a rising percentage of consumers and businesses finding value in spending about $30 a year on a subscription service to protect each of their mobile devices, says Stacy Crook, senior research analyst at IDC.

"Consumers are going to have to start seeing this as a must-have and be willing to pay for it," says Crook. "We'll have to see how the market shakes out. It could be a very good business to be in, especially if users have to pay for it every year."

Heidi Klum 'most dangerous' celeb to search on Web.

USA Today
by Brett Molina
Sept 16, 2011

Internet surfers might want to use caution before conducting a Google search for Heidi Klum.

The Project Runway host and former model has been ranked the "most dangerous celebrity" to seek out on the Web, according to a report from McAfee.

What makes Klum so dangerous? The computer security firm says one in 10 searches for the celebrity lead to a malicious site capable of adding malware or other viruses to a computer.

"While slightly safer than last year, searching for top celebrities continues to generate risky results," said Paula Greve, director of Web security research at McAfee, in a statement. "Consumers should be particularly aware of malicious content hiding in 'tiny' places like shortened URLs that can spread virally in social-networking sites, or through e-mails and text messages from friends."

Last year's "most dangerous celebrity," Cameron Diaz, dropped to No. 2 on this list. CNN host and Larry King replacement Piers Morgan was third.

Here's a look at the top 10:
1. Heidi Klum
2. Cameron Diaz
3. Piers Morgan
4. Jessica Biel
5. Katherine Heigl
6. Mila Kunis
7. Anna Paquin
8. Adriana Lima
9. Scarlett Johansson
10. Emma Stone, Brad Pitt, Rachel McAdams (tie)

Customers Angry Over Revamped Pricing Are Deserting Netflix.

The New York Times
by BRIAN STELTER
Sept 15, 2011

Some of Netflix's popularity lies in its simplicity — in its ability to serve up films and TV shows and renew subscriptions automatically, without any thinking on the part of the customer.

Until now, that is.

A new pricing scheme is forcing Netflix's 25 million customers to think about which service they want — access to online streams, access to DVDs by mail or both — and some have decided to rethink the monthly splurge entirely.

On Thursday, the company said that customers were canceling their subscriptions in greater numbers than it expected, about a million in total, causing a projected quarterly loss in customers for only the second time in its history. The company did not signal a shift in direction or a change its financial guidance for the quarter; still, its stock dropped almost 19 percent in heavy trading on Thursday, closing at $169.25 and worsening a season-long selling streak. In July, the stock peaked at $304.79.

The downward revision reflects the negative reaction to Netflix's decision, announced in July and adopted this month, to separate its DVD-by-mail service from its faster-growing Internet streaming service. Before, DVD-by-mail was a $2 add-on for some streaming subscribers; now, each service now costs $8.

Like many customers, Steve LoGiudice, a health care analyst from Wooster, Ohio, re-evaluated his Netflix spending this summer when the change was announced. His 6- and 9-year-old children watch TV episodes through Netflix, so he kept the streaming service, but he stopped paying for DVDs by mail.

"If they didn't radically change their cost structure," Mr. LoGiudice said of Netflix, "we probably would have just kept paying the old rate without much thought or review."

Netflix's subscriber base had been on a reliably upward trajectory since its founding more than a decade ago, with one slight exception in 2007. The company — widely praised for making it easy to stream films and some TV shows via the Internet — had 24.6 million customers at the end of the second quarter of the year, when it last reported figures to investors. Back then, it expected that it would end the third quarter with 25 million, three million of whom would opt only for the DVD service.

But early Thursday morning it lowered its subscriber estimates for the third quarter, which ends in two weeks, to an expected total of 24 million, a quarterly decline of 600,000.

The decline is due in large part to customers who were unhappy about the price changes. Netflix now expects that 2.2 million customers will opt for DVDs by mail only.

Investors and the Internet video-consuming public have been paying close attention to Netflix as a leader in the growing over-the-top video industry, a reference to the fact that Netflix piggybacks on other companies' Internet connections.

Netflix has proved that many people will pay for a premium selection of films and shows online, helping to create a new revenue stream for media companies and sparking competition from Hulu, Amazon and other competitors. But Netflix also has shown that customers can reject what they perceive as an unfair deal.

Netflix knew that some customers would drop out when the changes were instituted. It had previously cautioned investors that the change would benefit the company, but not until the fourth quarter. "Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice," the company wrote in a letter to shareholders on Thursday.

The splitting of the services, the company said in July and again Thursday, will give it more money to spend on content for its streaming service, which is widely recognized as the future of the company.

Some analysts backed Netflix. While noting the short-term uncertainty, Anthony DiClemente of Barclays Capital said in an analysts' note Thursday that Netflix "remains among the best user experiences for watching video online" and credited it for remaining "disciplined on costs" and pursuing international opportunities.

Earlier this month, Netflix started new streaming services in Brazil, Mexico and many other Latin America countries. Previously the service was available only in the United States and Canada.

Netflix faces the same hurdle in every country it opens up shop: a need for compelling content. That fact was reaffirmed in the United States earlier this month when the premium cable channel Starz, which supplies Sony and Disney films to Netflix, said it would stop doing so in February when its contract expires.

The films from Starz helped to jump-start Netflix's streaming service several years ago, but according to Starz, the two companies could not come to terms on a new contract. Netflix said it would acquire content from other sources, essentially spending its subscribers' money elsewhere.

Potential Buyers Renew Their Interest in Yahoo.

The New York Times
by EVELYN M. RUSLI AND VERNE G. KOPYTOFF
Sept 15, 2011

With potential buyers circling above, Yahoo, the once-mighty online empire, is preparing to sell.

The technology giant, which is weighing a sale of all or parts of its business, has attracted the attention of several buyout shops and strategic investors, including the private equity firm Silver Lake, which has already approached Yahoo about a potential bid, two people close to Yahoo said.

Silver Lake, which is working with the venture firm Andreessen Horowitz, has been quietly studying a possible bid for the last six months, one person said. Other potential bidders for Yahoo or its assets include Microsoft and the Alibaba Group.

The renewed interest in Yahoo comes as the company faces a critical juncture.

The sprawling Internet media company, which rose to prominence in the late 1990s for its popular portal, has fallen behind in recent years. While rivals like Google and upstarts like Facebook have boomed in the new Web, Yahoo has struggled to keep pace with the shifting digital landscape.

Last week, in a moment that starkly portrayed its troubles, the board dismissed its chief executive, Carol A. Bartz, by phone. Ms. Bartz, well known in Silicon Valley for her brash attitude and comfort with expletives, joined Yahoo less than three years earlier.

Yahoo's board discussed Silver Lake's approach during its meeting on Wednesday and hired Allen & Company as its investment bank for a continuing review of Yahoo's business. The board also talked about Yahoo's Asian assets, which include a 40 percent stake in the Alibaba Group, a Chinese e-commerce company, and a stake of about 35 percent in Yahoo Japan. In addition to Allen & Company, Yahoo is working with UBS, which already advises the company on its options for its stake in Yahoo Japan.

The Asian investments complicate any buyout of Yahoo.

The board has yet to decide whether to keep those assets, sell them or spin them off, the individuals said. Many analysts consider those holdings the crown jewels of its portfolio, collectively worth more than the sum of the rest of its operations.

The relationship between Yahoo and Jack Ma, Alibaba's chief executive, is strained over a number of issues, most recently the fate of the online payment service AliPay. Last year, Alibaba spun off AliPay into a separate company that Mr. Ma controlled. Yahoo learned of the transfer only after the fact and complained that it had been done by Mr. Ma without the approval of Alibaba's board.

Alibaba and Yahoo reached a deal in July that settled their disagreement. But the relationship between Yahoo and Mr. Ma, who has long said that he wanted to buy back Yahoo's stake in his company, remains strained.

Yahoo, Microsoft, Silver Lake Partners and Andreessen Horowitz declined to comment. Individuals close to the matter spoke on the condition they not be identified because the talks were confidential.

For Yahoo, which rejected a bid from Microsoft in 2008, the crowd of suitors is a familiar one. According to two people with knowledge of the situation, Providence Partners and Peter Chernin, the former chief operating officer of the News Corporation, also are studying a possible bid. This year, Mr. Chernin approached Yahoo about a possible deal, according to one person. But he was rebuffed. Meanwhile, Silver Lake, which recently profited from the sale of Skype to Microsoft, has long been said to be a potential buyer.

Any deal, analysts say, will require substantial financial backing. Yahoo's market capitalization currently stands at $18.8 billion. Yahoo, according to two people, is considering hiring a third bank which could help provide financing. Although analysts have described the company as a "deteriorating asset," it is still one of the Web's largest properties.

"Yahoo is still very important to the ecosystem," said Scott Raney, a partner with Redpoint Ventures. "It has significant scale and it has some of the more interesting advertising technology out there," he added.

Yahoo is facing intense pressure from investors to do something. Daniel Loeb, the founder of Third Point, a hedge fund that owns a 5 percent stake in Yahoo, called for the removal of Roy Bostock, Yahoo's chairman, and of other board members.

AllThingsD earlier reported the list of potential buyers for Yahoo.

Judge Sets Schedule in Case Over Google's Digital Library.

The New York Times
by JULIE BOSMAN
Sept 15, 2011

Google's plan to build a huge digital library remained stalled on Thursday when a federal judge set a proposed schedule for a lawsuit against the giant search company that could take the case to trial next year.

But Google and the publisher and author groups who are suing it all said they would continue to negotiate on an agreement.

"The bottom line is, we're making good progress toward a settlement," Tom Allen, the president and chief executive of the Association of American Publishers, said after the hearing on Thursday. "We would hope to resolve the issues we have left."

In March, Judge Denny Chin of the Federal District Court for the Southern District of New York rejected the original $125 million proposed settlement among Google, the Authors Guild and the Association of American Publishers, leaving the case in limbo. The case began in 2005 when publishers and authors filed lawsuits against Google over its plan to digitize millions of books.

Judge Chin had given the groups all summer to revise the settlement, twice granting extensions when lawyers for the groups asked for more time, citing the complexity of the issues. In the hearing Thursday morning, Judge Chin, rubbing his face with exasperation, noted that "this means we will be litigating this case for another year, at least."

Daralyn J. Durie, a lawyer for Google, told the judge that the parties had made "substantial progress" in talks and welcomed the opportunity to continue.

Michael J. Boni, a lawyer representing the authors, said that the authors "would like very much to continue a dialogue."

The publisher plaintiffs hinted that they were closer to an agreement with Google than were the authors. Bruce P. Keller, a lawyer for the publishers, said that his clients had no objection to the proposed schedule.

"One of the reasons we have no objection to it is that we think we've made enough progress in our discussions with Google so that the schedule may not matter," Mr. Keller said. "If we adopt the dates that are being proposed, we hope that those dates will become moot."

In his ruling in March, Judge Chin cited concerns over copyright, antitrust and other issues in Google's plans to make millions of books available online, saying it would give Google a "de facto monopoly," but he suggested that a revised settlement addressing the obstacles might pass legal muster. The incentive for authors and publishers to reach agreement would be to tap a new source of revenue from digitized books.

Negotiations between the Authors Guild and Google were damped by the announcement on Monday that three major authors' groups, including the Authors Guild, had filed a lawsuit against a partnership of libraries and five universities, contending that their efforts to digitize books violated copyright. Nearly all of those scanned works were provided by Google.

AOL, Yahoo and Microsoft Reportedly in Ad Deal.

The New York Times
by TANZINA VEGA
Sept 14, 2011

Yahoo, AOL and Microsoft, three major technology companies that have traditionally competed for digital advertising revenue, have created an unusual partnership in which they will sell ads for one another.

The move represents an effort to challenge Google, which dominates the search advertising market and has increased its efforts in display advertising.

The plan was discussed at a private meeting in Manhattan on Tuesday night among officials from the three companies and executives from the advertising industry, according to an agency executive who attended but who would speak only anonymously because the meeting was private. AOL, Yahoo and Microsoft declined to comment on the plan.

The companies also hope to entice other online publishers to join their partnership. And by joining together and selling for one another, they hope to reduce the need for third-party ad networks that often sell some of the less desirable ad space on their sites.

The plan was first reported Wednesday morning on AllThingsD, the technology Web site. The report said the deal was focused on selling remnant inventory, or the lower-priced ads that typically run at the bottom of Web pages or on secondary pages. Remnant ads are generally sold by third-party networks, usually for lower prices, and feature products or services like weight-loss or teeth-whitening treatments.

The move would signal another step by online publishers to rely more heavily on so-called private exchange technology, which allows them to deal directly with ad agencies without having to use third-party networks. Selling the space could allow the publishers to earn more revenue and gain more control over the data they collect on their users. It would also give media buyers and agencies a one-stop shop for buying advertising space on each of the three companies' sites.

"What they are trying to replicate is the growth of private exchanges," said David Hallerman, a principal analyst for eMarketer, a digital market research firm. The exchanges, he said, "offer a buyer accurate targeting, brand safety and good pricing for good reach."

The companies' plan would most likely require them to overcome several obstacles. The technologies they use to sell and place ads on their sites are not immediately compatible. Yahoo has an ad exchange called Right Media, and AOL has Advertising.com, which makes much of its revenue from selling remnant ads. Last winter, Microsoft began selling remnant ads through AppNexus's exchange.

Other issues could include figuring out how to coordinate sales efforts and determining which sales team sells which ad space.

Google dominates the search advertising marketplace, with nearly 76 percent market share, according to data from eMarketer, and the company is aggressively pushing into online display advertising as well. It accounts for about 9 percent market share in display, with projected revenue of about $1.1 billion, according to eMarketer. The projected display advertising revenues for Yahoo, AOL and Microsoft combined would total $2.7 billion, eMarketer reported.

Yahoo Hears From Potential Bidders.

The Wall Street Journal
by AMIR EFRATI And JOANN S. LUBLIN
Sept 16, 2011

Yahoo Inc. has been contacted by potential bidders for some or all of the Internet company, even as it focuses on stabilizing its executive ranks and bolstering its online-ad business, people familiar with the matter said.

Executives at private-equity firm Silver Lake Partners are among the potential bidders that have called Yahoo directors about a possible deal, but Yahoo hasn't met with the firm, one of the people familiar with the matter said. It wasn't clear precisely what Silver Lake proposed.

Media executive Peter Chernin has had recent discussions with Yahoo about a deal where a consortium of investors would take a stake in the company, according to people familiar with the matter. But the conversations are still at an early stage, according to these people, who said that Mr. Chernin is talking to private-equity firm Providence Equity Partners about being part of a deal.

Yahoo has signaled potential suitors that it isn't under pressure to make a deal quickly, a person familiar with the situation said.

Silver Lake and Yahoo spokeswomen declined to comment.

Yahoo directors discussed the suitors at a regularly scheduled board meeting on Wednesday, people familiar with the situation said. The firing last week of Yahoo Chief Executive Carol Bartz, has triggered questions about the Internet company's strategic direction and whether it will survive as an independent entity.

Directors have put a priority on evaluating selling all or part of the company, rather than on a CEO search, one of the people said. The board made no major decisions about Yahoo's future, however. The company's openness to a sale reflects recognition that Yahoo faces numerous long-term growth challenges amid the growing popularity of social networks like Facebook Inc. and of mobile devices and applications for them.

While Yahoo's revenue hasn't increased in recent years, the company continues to turn a profit.The company's executives are pursuing strategic initiatives, such as bidding for video site Hulu LLC and reaching a new advertising partnership with Microsoft Corp. and AOL Inc., an effort by the three companies to better compete with Google Inc., people familiar with the matter have said.

Directors also discussed the possibility of making other strategic acquisitions or changing the type of investors holding Yahoo's stock, a person said. The board also discussed the company's internal operations under interim Chief Executive Tim Morse, people familiar with the matter said.

Yahoo's Asian holdings—a 40% stake in China-based Alibaba Group Holding Ltd. and a 35% stake in Yahoo Japan—are a focal point of the board's discussions, people familiar with the matter said. Those holdings represent one-third to one-half of Yahoo's roughly $18 billion in market value, according to analysts from B. Riley & Co. and Stifel, Nicolaus & Co.

Some private-equity firms that are considering whether to pursue a deal for Yahoo have indicated privately they wouldn't make a play unless its Asian assets were sold, making Yahoo smaller and easier to purchase.

But Yahoo's board believes some potential suitors would be interested in acquiring the entire company, a person familiar with the matter said.

Directors have ruled out a spinoff of Yahoo's Asian assets into a separate holding company because the Securities and Exchange Commission would likely oppose such a move since Alibaba's finances are largely undisclosed, a person familiar with the matter said.

Yahoo has spent months looking at ways to increase the value of its Asian assets or a sale of its stakes, people familiar with the situation have said. Such discussions have been complicated by the tax consequences of a sale and disagreements with Alibaba over the value of the Yahoo's stake in the Chinese e-commerce company, among other things, the people said.

Activist investor Daniel Loeb, whose Third Point LLC hedge fund last week disclosed holding more than a 5% stake in Yahoo, continued to blast Yahoo's management this week, calling for Yahoo's directors to step down. The company's board isn't worried about such agitation and won't try to block Mr. Loeb from obtaining more shares, people familiar with the matter said.

IPO pipeline backs up as companies wait to dive in.

USA Today
by Matt Krantz
Sept 15, 2011

The pipeline is clogged with companies waiting to go public — and there's no sign of the blockage being removed.

There are more than 200 IPO hopefuls in the deal pipeline, the first time in a decade that so many companies have been waiting for their turn to tap the public markets, Renaissance Capital says.

The fate of these companies in waiting is critical because many need new capital to grow, expand and hire new employees. Whether investors will digest such a huge slate of companies will be a big test of the resilience of the stock market, which is still trying to find its footing after the summer sell-off.

"Companies keep filing for IPOs, but also waiting (for the deals) to get done," says Richard Peterson of Standard & Poor's Capital IQ.

There are a number of reasons for the IPO market's major case of constipation, including:

• The stock market is stalled. Given the broad stock market's woes, investors haven't had much appetite for IPOs. Just four IPOs began trading during the market's turbulence in August, Renaissance says, down from 13 IPOs in August 2010. And no IPOs have started trading in September.

Many companies have delayed their deals, and some IPOs just appear to be gummed up. Online social-networking site Facebook and online gaming site Zynga are reported to have put off deals. High-profile offerings of Toys R Us and GameFly have been stuck in the pipeline for months. And other IPOs are waiting for an opportune time to make their debut. "Given the volatility in the markets, many are still interested in going forward with IPOs, but waiting for more favorable pricing," says Stephanie Chang of Renaissance.

• Companies keep filing. While the IPO market appears stuck, that's not stopping companies from being hopeful. So far this year, 210 companies have filed plans to go public, exceeding the 204 that filed during the first nine months of 2010. This supply of deals keeps the pipeline filling up.

The fact bankers are still so willing to file IPOs shows they expect the market to turn, says John Fitzgibbon of IPOscoop.com.

• Recent deals have performed poorly. Investors remain skeptical of companies since the recent track record hasn't been great. The FTSE Renaissance Capital IPO index is down 18.3%, trailing the S&P 500's 3.9% decline. Meanwhile, 38% of the 72 recent IPOs to report second-quarter earnings have missed expectations, Peterson says. That's well above the 21% of S&P 500 companies that missed forecasts.

Yet, IPO investors tend to have short memories. Once the broad stock market starts to behave better, investors will be more willing to take a flyer on the new companies in the pipeline hoping to go public, Chang says. If the broad market perks up more, expect a deluge of IPOs in a month and a half, Fitzgibbon says. "It'll be a hell of a November if it works out," he says.

EBay targets mobile users, hoping to seem hip.

USA Today
by Rachel Metz, Associated Press
Sept 14, 2011

SAN JOSE, Calif. – EBay's name is synonymous with auctions, but that's created an image problem for the online marketplace.

These days, most of the things people purchase on the site aren't sold through auctions; they have fixed prices. And, the majority of items for sale are new — not musty antiques or old collectibles.

Richelle Parham, eBay's chief marketing officer, says plenty of people see eBay as an auction-focused marketplace, despite the reality.

"We need to change that perception," she says.

The company wants to be seen as an e-commerce innovator, rather than a staid auction site. To promote that image, eBay is embarking on a major ad campaign aimed at consumers who shop on smartphones. At the same time, eBay hopes it will change consumers' misperceptions about the company.

The campaign, eBay's first big marketing effort in several years, comes in the midst of a multi-year effort to improve the buying and selling experience on eBay.com. It's the 16-year-old company's first campaign to focus on mobile shopping — a still-small, but rapidly growing revenue source. The company was one of the first to offer an iPhone app through Apple's App Store when it opened in mid-2008, and in the last three years, eBay's various smartphone and tablet apps have been downloaded more than 50 million times.

People aren't just using the apps to browse. They're buying. In 2010, the value of goods purchased from the site using mobile devices totaled $2 billion. This year, eBay predicted that figure would double, and mobile vice president Steve Yankovich says the company will unquestionably top its $4 billion goal.

Mobile apps are bringing in new users, too. Between January and July, nearly 500,000 new eBay shoppers joined up and made their first purchase via mobile.

"We're seeing more people on their mobile devices," says Parham. "More people are shopping anywhere."

Given this, eBay is emphasizing the idea that people can shop on its site at anytime, anywhere, for anything. The TV commercials and other ads eBay will start rolling out on Wednesday are geared toward three types of mobile-happy shoppers it identified through market research: the fashionista, the electronics junkie and the auto parts and accessory fan, all of whom are in different situations when shopping inspiration strikes.

Parham says these three kinds of consumers were chosen as the focus, in part, because they tend to own smartphones (eBay believes 60% of the people that it considers "fashion enthusiasts" and 65% of "electronics enthusiasts" are so equipped, for example).

In one commercial, for example, a man named Pete attends a meeting where co-workers mock him for being the only person in the board room without a tablet computer. One colleague, to show how out-of-date Pete is, cries out, "Me Pete, me use pen!" Another arrives late saying, "Sorry I'm late — I was in the 16th century looking for Pete's pen."

Pete deals with the criticism by whipping out his smartphone and buying a tablet on eBay, and the commercial ends with his pen leaking blue ink all over his shirt pocket.

EBay, which is based in San Jose, worked with San Francisco-based advertising agency Venables Bell & Partners on the campaign, which will be unveiled over the next 11 weeks, to coincide with the holiday shopping season. In addition to commercials, the campaign includes print, online and outdoor ads. There will also be movie theater ads, many of which will air as one of the last commercial spots before the familiar announcement urging moviegoers to turn off their cell phones.

Forrester analyst Sucharita Mulpuru says it makes sense that eBay is concentrating its campaign on mobile shopping, since the market is still pretty small and the shopping experience is generally bad. Also, Mulpura notes: there are not yet a lot of products that people feel comfortable buying on their phones.

"They're one of the strongest players in mobile commerce. They want to continue to ride that wave a little more," she says. "It's a growth engine for the marketplace. They may as well double down on it." She's not sure if the campaign will change how people see the company, however.

It could be risky to roll out shopping-oriented ads at a time when consumer confidence is at its lowest point since the last recession. But Deirdre Findlay, eBay's head of consumer marketing, says the company didn't see it as a concern since eBay sells so many different things at different prices.

Rather, the company thinks consumers will see the spots and think of eBay as more hip and relevant, Findlay says. Right now, 20% of people who already use the site say "auction" is the first thing that pops into their heads when they think about eBay, she says.

"Obviously we want to drive sales during our heavy holiday period, but of equal importance is making sure the perception of eBay in the marketplace is the appropriate perception," she says.

So how will eBay know if its efforts are working? In order to test the campaign's success, Findlay says eBay plans to survey users' views of the site a few weeks after launching the ads, and then again after the campaign ends.

The heightened focus on mobile doesn't mean eBay believes marketplace sales will happen mainly over cellphones in the future. Indeed, the campaign includes a commercial involving shopping on eBay from a computer. EBay isn't taking such a leap yet, and Findlay says the main eBay.com website is still critical to sales.

"We just want them to be a part of the community and whatever channel they use to get there is up to them," Parham says.