In a digital success you can count on a few items that are part of that success. A good product at a good price. A product that may have imitators but generally not. The product expands the experience of some other product. And finally has a big following in the user community.

Well that’s the general idea. But sometimes marketing does not get the memo you know? –

An anonymous reader points us to some news concerning the latest skirmish in the battle over used goods in the video game industry. As we’ve noted, various execs have been freaking out over secondhand sales, despite tons of economic evidence that a robust secondhand market increases the value of the original offerings. In this case, it appears that Nintendo is selling a “Wii Speak” microphone that can be used with certain games, but in order to use it, you need to download the “Wii Speak Channel” which can only be downloaded with a code supplied with the Wii Speak. And here’s the sneaky part: that code can only be used once. Effectively, it’s impossible to resell the Wii Speak, because you can’t use it unless it’s been purchased new. This is pretty dumb, as it certainly decreases the value of the device, and will make plenty of folks think twice before committing to it, knowing that it can’t be resold.

Absolutely insane.

Linky.

Circuit City, the big box retailer filed for Chapter 11 protection from creditors. Which you should take note of as a buyer. The rules change when a company goes into bankruptcy. More after the jump —

Circuit City also said it would cut 700 more jobs, after announcing a week ago that it would close 20 percent of its stores and lay off thousands of workers.

“This isn’t a surprise,” JPMorgan analyst Christopher Horvers said, adding that the reorganization could help the company get out of leases for certain bad store locations.

Circuit City, which has had only one profitable quarter in the past year, has faced significant declines in traffic and heightened competition from rival Best Buy Co. and others. It said it decided to file for bankruptcy protection because it was facing pressure from vendors who threatened to withhold products during the holiday season.

“At the end of the day I think it’s really about an inventory position,” Horvers said. “If they can get inventory into the stores, I can think they’ll remain competitive.”

He added, “I think it’s encouraging that they were able to secure financing.” Circuit City said it had lined up $1.1 billion in loans to provide working capital while it is in bankruptcy protection. That replaces a $1.3 billion asset-backed loan it had been using.

So why should you avoid them? Well other than the cruddy ‘I know nothing service’? Well you will get even less service since they are laying off another 700 people in addition to the 150 stores they are already closing. Or how about the possibly reduced inventory? Were I a suppliers I would immediately request cash on delivery which CC will refuse. But probably the biggest reason is returns. You buy a big screen LCD TV and find out it is defective, rather than a customer you are now a creditor (or they could declare you one) and have you line up in the court room for your pittance. The rules of course vary by State. But why take the risk?

I wish them no ill, but I was shafted by CC two years ago and have not been back since. Drive enough customers away from your stores based on ‘policy’ and Chapter 11 is what you get.

Linky

The word is out that the VC’s in the Valley are weaning their puppies and not accepting any more strays for the foreseeable future. Another words folks the well is dry as capital is frozen like honey in a cold January in Vermont. Not likely to change anytime soon –

The so-called “nuclear winter” that entrepreneur Marc Andreessen predicted back in April has arrived. And nobody in the Valley — neither venture capitalists nor entrepreneurs — know when the market will bottom much less when it will recover.

“There’s something going on here other than subprime mortgages,” said venture capitalist John Doerr, while speaking at a VentureBeat-sponsored roundtable discussion on the downturn, in Menlo Park, Calif. “We’ve not only got a debt crisis but a crisis of confidence . . . With the current level of uncertainty, it’s really hard to forecast what’s going to happen going forward,” concluded Doerr, who held his head in his hand for much of the panel discussion.

Angel investor Ron Conway (above) thinks it could be at least two years before “the storm” ends, in which case any company with fewer than 6 months worth of cash, needs to either sell out, get a bridge loan, or “prepare for an orderly shutdown.”

“Don’t put your team through the agony of arriving to work one day and saying, ‘Guess what? We ran out of cash.’ You need to face reality. It’s not easy, but it’s basic,” said Conway, speaking on the panel.

Another words this is not good news.

More here.

Well now, Yahoo and AOL are back to merger rumors — again. Now it is generally known that the merger of the players down field in a business segment rarely get the uplift they expected on market share post merger. –

SAN FRANCISCO, Oct 29 (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) and Time Warner Inc’s (TWX.N: Quote, Profile, Research, Stock Buzz) AOL unit are looking at each other’s books to figure out how much money they could make together and where costs can be saved, a person familiar with the talks said on Wednesday, indicating a merger may finally be on the way.

While noting a deal was not imminent, the source said the two companies have engaged in “meaningful” due diligence about a possible combination for the past couple of weeks.

Talks are focused on how to integrate AOL’s content and advertising business into Yahoo, said the source, who was not authorized to speak publicly because the discussions are confidential.

• Guys, third rule of the boardroom is if you are going to do a merger for cover you do so BEFORE the fecal matter hits the financial oscillator. Not after
• Yahoo is already in a modus survicus on their own accord. To drop merger money on top of that would be crazy. In the current environment I don’t think Time-Warner is going to push a lot of cash to Yahoo just to eliminate a weak property.
• Were this a year ago under the current situation Yahoo would be ripe for a leveraged carve up on the cheap. Their data center - content hosting and the ad revenue could be sold off. The balance trashed. The only thing holding off something like that is tight money supply at the current time.

Bottom line — perish the thought Yahoo. Time-Warner, just let AOL sink. Its business model is passe’.

Linky.

Google about 18 months ago started a service that provided excerpts of books for your viewing pleasure. Now technically they had the whole book digitized, but only permitted you to see a given number of pages. Now I assume they were invoking ‘fair use provisions’, but even I can see this steps over the line. Part of the fair use clause is that of intent. It gets very tricky for a business to utilize fair use over that say of a college professor using the same content. –

The Authors Guild, the Association of American Publishers (AAP), and Google have announced a settlement in a 2005 lawsuit over its book-scanning project.

Google will pay $125 million to resolve claims by authors and publishers and to pay legal fees, as well as create a Book Rights Registry where copyright holders can register works to get a cut of Internet ad revenue and online book sales.

The agreement will also make many in-copyright, out-of-print books available for readers in the U.S. to search, preview and buy online. And instead of small snippets, copyright protected books will now have 20 percent of the content available for preview.

That is a really big stab at folks like Safari Books who use the same model. Google has more presence than Safari so they win as a consequence.

The big news ” as well as create a Book Rights Registry where copyright holders can register works to get a cut of Internet ad revenue and online book sales.”, is offered almost in passing. This is huge. Under current Copyright law, I can produce a work, and I don’t have to register with the Copyright office unless I want to. Just state that the work is under Copyright in the work itself and you have standing. Well that leads to the orphan works problem that is talked about from time to time. A user of that work, gets caught in a catch-22; they can’t find the author to work a renumeration deal, they use it then get sued. Many good works go unused as a result.

With Google stepping up to the plate to provide such a registry service the orphan works problem is now limited to how stupid or lazy the author is to not register. Google’s win in this? Well hey if go to them to validate the ownership, might you also go THROUGH them to swing the deal or purchase a copy of the work? Sure you will. Even at 20% take rate that’s huge numbers folks. I don’t need to say Kaching do I?

Linky.

Well WalMart has fired one across the bow of Amazon and Apple on MP3 cost per track. A DRM free track is now 74¢ at their online store –

Walmart today made an aggressive move against Amazon and Apple by lowering the prices of its MP3 Music Downloads store. The service now offers per-track downloads as low as 74 cents versus the 89-cent minimum of Amazon MP3 and iTunes’ fixed 99-cent price. Normal tracks are 94 cents, Wal-Mart says. The retailer also plans to drive users to the store through a tie-in with CD sales: starting from mid-November, those who order physical copies of albums either online or in stores get a free MP3 song from any artist or album.

The company has also made key moves to open its previously Windows- and Internet Explorer-centric web store to more platforms. The new version works with any operating system, including Linux and Mac OS X, and supports more standardized browsers such as Firefox and Safari. It also synchronizes more directly with users’ collections and will copy both the songs and their artwork to Windows editions of iTunes or Windows Media Player.

Folks this sets some very interesting things in motion. If a price war gets fully engaged we could see 50¢ track pricing by June ‘09. As a consumer I say yea! But even at 74¢ it sets a floor of about $8 for a CD. The typical CD has anywhere from 10-15 tracks. At the current time maybe half those tracks are what I would consider filler. [Sorry Britany you have not issued an CD equivalent to the Beatles White Album in your entire career.] So $8 is probably a reasonable cost model using the individual track pricing.

It also says something of the RIAA suits going around. Some smart judge is going to look at 74¢ pricing, realize that is the floor price of the music and adjudicate accordingly, applying given restrictions in law. So one could see math like this 75¢ X 100 tracks x 10x for award = $750. At that level the RIAA lawyers can’t have drinks at Sardi’s. [We need to see an appeal to 1st appellate to set it in motion.]

It does one other thing gang. There is no excuse NOT TO PAY for your music anymore. If you budgeted $250 annually for music entertainment you have enough to buy ~350 tracks. Roughly the best of 70 albums per year. Throw in some freebies from various artists and one can collect a pretty decent music cache and not worry about the RIAA anymore. Our recommendation is to follow that lead and be smart about it. Pay for it and support the artists you like. They will make more as a consequence. A win-win.

Linky.

eBay the worldwide auction house has changed over the years. Early on there was a considered parity supported by the company. That has shifted over time to the seller is at the mercy of the buyer in any resulting transaction, good or bad –

After returning his purchase and receiving a refund from the seller, Joel Jones, he used the online auction website’s feedback section - which can be read by other people - to give his honest opinion of the transaction.

‘Item was scratched, chipped and not the model advertised on Mr Jones’s eBay account,’ he wrote, assuming it was the end of the matter…
Chris Read

Chris Read is facing a court battle after leaving negative feedback on eBay for a mobile phone he bought on the auction site

But he has now received an email threatening him with libel action. And it will be a legal first if the case reaches court.

Mr Jones claims the unfavourable comments have damaged his business. The legal missive goes on to warn Mr Read that if he fails to retract his comments he will be dragged to court where he faces costs, lawyers’ fees and damages.

Father-of-five Mr Read, 42, said: ‘I can’t believe someone can be so petty. All I had done was left an honest opinion and everything I said was true. I thought that was why the feedback service was there. It’s not like I wrote anything malicious or called him a conman.’

He added: ‘If it has to go to court then so be it. Hopefully it won’t go that far but I’m prepared to fight my corner.’

Now it appears that in this particular case the buyer had a legimate beef with the outcome of the transaction. Nor does it seem that the assessment by Mr. Read was untoward in his rating in this case. But that does not resolve the bigger problem. Lacking a return to parity by eBay, sellers may more and more resort to the courts. In the UK, the concept of libel is a lot broader than it is here in the US. But regardless, not every buyer is a saint or every seller a Grinch. Without a return to normalcy of some sort the system just might collapse.

Linky.

In a society where there is a rich wireless infrastructure, the concept of domicile makes less and less sense. Not that most people don’t want a place to call home, nesting is an instinct in humans. But wonderlust is in our nature too. Sometimes we just need to heed its siren call.

So follow the article over at WebMonkey about Nathan Swartz and Olivia Meiring as they web work their lust for a little travel. Given that if the US had a better wireless network this could be a possibility for many rural communities. Essentially the Gateway experience writ large.

Well looks like the Fat Lady is strolling to center stage. She isn’t singing yet but I have to tell you it looks like the deal that M$ offered earlier this year was probably the sane thing to do. –

Yahoo Inc. is lowering its revenue estimates for the remainder of the year. The move reflects mounting concerns about a downturn in online ad spending as the economy unravels.

In a revision made Tuesday, the Sunnyvale-based company projected its 2008 revenue will range from $7.18 billion to $7.38 billion — down from a forecast of $7.35 billion to $7.85 billion issued three months ago.

Like most Internet companies, Yahoo relies on advertising for most of its profits. Online advertisers, though, are cutting back as they brace for what’s expected to be the worst recession in a quarter-century.

The tough times promoted Yahoo to draw up plans to fire at least 1,500 workers after a 64 percent drop in its third-quarter profit.

Taking M$ money at $37/share would not have eliminate the change in projections. But management would have had merger coverage and conversion write offs to shield them from any scrutiny. As it is now the board really can’t justify their continued management under the current circumstances. Fully expect along with the 1500 employees laid off, that a few upper management types might follow before the next quarter comes neigh.

Linky.

[Update]:

Analysts on Wednesday cut their estimates on Yahoo Inc. for 2008 and next year after the Internet company reported a 64 percent drop in third-quarter profits and said it would cut at least 1,500 jobs.

ADVERTISEMENT
After the market closed on Tuesday, Yahoo reported profit of 4 cents per share, down from 11 cents per share reported in the year-ago period.

Revenue rose 1 percent to $1.79 billion. After subtracting commissions paid to advertising partners, revenue was $1.32 billion — about $50 million below the average forecast of analysts polled by Thomson Reuters.

Yahoo also lowered its 2008 revenue estimate to a range of $7.18 billion to $7.38 billion from a previous forecast of $7.35 billion to $7.85 billion.

and….

“With Yang’s turnaround efforts likely to take several quarters (if not a couple of years) to yield the desired results, management faces increasing challenges to justify (or) defend its refusal to accept the Microsoft offer,” he said in a research note.

He said Yahoo would be “classic value trap” without catalysts such as the regulatory approval of the deal with Google, a Microsoft transaction and recapitalization.

Squali cut his 2008 revenue estimate to $5.42 billion from $5.58 billion, and his 2009 forecast to $5.73 billion from $6.12 billion. He also reduced his earnings estimates for both years.

Looks like it may take years for Yahoo to turn around in the current economic climate.

Not that this is a surprise considering the state of the economy, funding is down for the quarter. I might expect that trend to continue for several quarters as well. Nothing more than the overall belt tightening that happens in a recession. –

It will probably come as little surprise to anyone to hear that the amount of - publicly disclosed - money invested in open source vendors in the third quarter was down on the same period last year. $76.5m was raised by open source vendors in Q3, down 12.2% on $87.2m in the same quarter of 2007.

The decline is not exactly unexpected. The overall market was down nearly 6% according to figures from The National Venture Capital Association and Thomson Reuters, while there was bound to be some hangover for open source following the most successful quarter ever in Q1 and solid growth in Q2.

Meanwhile it also worth noting that the figures for open source funding are prone to larger swings than the overall market as the total value is much smaller and the failure of one deal can have a significant impact.

More detail over at 451 CAOS.