Digital Media

PayPal's recent service suspension in India, which involves local bank transfers and personal payments to and from the country, was the result of India's revised licensing rules, the company said Tuesday.

In a blog post, Anuj Nayar, director of global communications at PayPal, explained that the incident in India was a response to inquiries that local regulators posed, specifically, on whether personal payments constitute "remittances" into India.

According to Nayar, who also posted a comment on ZDNet Asia's report on the issue, personal payments to and from India will be suspended for at least a few months until the company resolves questions from regulators. In the meantime, personal payment senders will need to find another method of payment.

Read more of "PayPal explains Indian service suspension" at ZDNet Asia.

Facebook's and AOL's instant-messaging systems now can link together. It's a step forward--but one that also shows how backward Net communications are today.

"AIM has teamed up with Facebook, and now you can chat with your Facebook friends--right from AIM!" gushes the AIM beta download site. "After you sign into AIM, click the 'Facebook Connect' button at the top of your buddy list to set up Facebook chat. When you are done your Facebook friends will be added to your buddy list. You can now chat with your friends who are using the Facebook site!"

Maybe I should be happier about this than I am. I can't begrudge Facebook's effort to enrich its members communications' options through its 2008 launch of instant messaging, but I also can't help feeling this is a case of a new-era Internet company making the same missteps as its dot-com 1.0 predecessors.

AOL Instant Messenger and Facebook Chat now can connect.

(Credit: Screenshot by Stephen Shankland/CNET)

Specifically, I hate how, unlike e-mail, instant messaging consists of separate islands of non-interoperable services. The fact that Facebook and AOL had to hammer out a partnership and that AIM had to release new software to take advantage of it reveals just how unpleasant the prevailing system is for users.

I use two primary instant messaging services today: Yahoo Messenger and AIM, both accessed through the multiprotocol Pidgin software rather than the two separate chat applications. I also use Twitter's direct-messaging ability through TweetDeck. On occasion, I also use Google's Gmail Chat, Microsoft's Windows Live Messenger, and Facebook Chat.

There are some partnerships already that tie these services together. If I run Yahoo Messenger, I can chat with Windows Live Messenger contacts. If I run Gmail Chat, I can chat with AIM contacts. And now if I run the new AIM beta, I'll get to chat with Facebook contacts. There was going to be a messaging partnership between Yahoo and Google, too, but apparently that fell apart along with the search-ad deal it accompanied.

So please forgive me if the AIM-Facebook deal reminds me of how unpleasant and complicated this all is rather than filling me with excitement that a barrier has been lowered.

Every service on the Net that's assembled a collection of users and got them to build links to their contacts wants to keep that precious social graph intact. I understand that--no company wants a corporate ally to suck the value out of that network.

But the more fragmented instant messaging remains, the more likely I am to stick with e-mail--the most reliable inbox of the dozen or so I have to grapple with today. That's because e-mail uses a single, neutral standard, not a hodgepodge of company-specific, proprietary technologies.

Google Buzz has some potential interest here--my Gmail address book has my social graph already built in, after all, and Google Buzz can draw in some information from other services. Until it can seamlessly connect both ways to my existing array of instant-messaging and social-networking contacts, though, Google Buzz will be yet another island of non-interoperability.

Efforts such as Mozilla Raindrop have some potential to put control back in the user's domain, but it will only succeed to the extent that all the communication conduits are open.

"In today's online environment, you can't be competitive without being open and allowing partners, developers, and consumers to leverage your technology," Ethan Beard, Facebook's director of platform marketing, told the San Jose Mercury News. Facebook's approach, though, apparently consists more of one-off deals with AOL than something more universally open such as the application programming interface Twitter offers.

The way I see Net communications right now, the industry remains as closed as it is open.

On the same day that Warner Music Group reported lackluster earnings, the third largest music recording company appears to have at least one thing to celebrate: dramatic new interest in the label's YouTube videos.

Something doesn't look right with the way YouTube reports traffic to Warner Music's video clips to ComScore.

(Credit: Greg Sandoval/CNET )

From December to January, the number of unique visitors to Warner's YouTube's clips appears to have more than doubled from 23.3 million to 47.5 million, according to ComScore. What that means is Warner's music videos are now the most popular on the Web. In one month, Warner has leapfrogged the combined YouTube traffic for all three of its main competitors as well as the music units of MySpace and AOL.

The problem with all that is YouTube's traffic figures are a little hinky.

According to numerous music insiders, the January data YouTube reported for Warner included visits to user-generated clips. Vevo's ComScore figures don't include visits to user-generated clips. YouTube only reports traffic to that site's professionally made music videos.

All four of the labels have licensing agreements with YouTube that allows users of the video-sharing site to incorporate their songs into their homemade videos. But all have apparently decided to count only visits to the "premium" video.

Still unclear is how or why YouTube started tracking hits to amateur-made clips that included Warner music. Andrew Lipsman, a spokesman for ComScore, said he would have to see more data to determine whether any of ComScore's rules were broken.

YouTube appeared to confirm that Warner and Vevo are not reporting traffic the same way.

A YouTube spokesman said: "The latest ComScore report reflects a combination of evolving methodologies and different partners having deals around different kinds of content, including user-generated content and publishing."

A Warner spokeswoman declined to comment.

The stakes in this squabble could be far more valuable than just bragging rights. According to several music industry sources, Warner's rivals fear that by not comparing apples to apples, Warner may grab an unfair advantage in attracting advertisers, who could be misled into believing that Warner's traffic is coming from professionally created clips.

Vevo's main backers--Universal Music Group, Sony Music Entertainment, and EMI Music--have long said they wanted to attract top advertising rates, and to do that they needed to separate professionally made videos from user-generated content.

Many advertisers are supposed to be afraid to put their brands next to wildly unpredictable amateur-made fare.

What is still unclear about the discrepancies in YouTube's reporting is who or what is responsible.

Nobody seems to know whether it was a software glitch or human error, or something else.

Earlier on Tuesday, Warner reported a first-quarter net loss of $17 million, or 11 cents a share, compared with a $23 million profit for the same quarter a year earlier. For the recent quarter, analysts had expected a loss of 15 cents a share.

There has been a lot of commentary following last week's New York Times op-ed by Dick Brass, a former Microsoft executive who claims that the company is bogged down by process and infighting, and has hence lost its ability to innovate.

Apple CEO Steve Jobs announces iTunes for Windows in 2003.

(Credit: CNET)

One of the most interesting follow-ups comes from Groklaw, which dug up some e-mails placed into the public record a few years ago during an antitrust case against Microsoft. (These materials have been a treasure trove of interesting and sometimes-embarrassing internal communications, including then-Windows chief Jim Allchin's 2004 admission that he would have bought a Mac over a Windows PC at that time.)

Almost immediately after Apple launched the iTunes Music Store in April 2003, Microsoft Chairman Bill Gates sent an e-mail to a bunch of folks in the Windows Media and MSN groups praising Steve Jobs' ability to get "a better licensing deal than anybody else has gotten for music." He continued, "We need some plan to prove that even though Jobs has us a bit flat-footed again, we move quick, and both match and do stuff better."

Allchin added his opinion in a follow-up e-mail: "We were smoked."

A bit of history
At the time, the major record labels had built a couple of music stores, as well as online-delivery platforms Pressplay and MusicNet, which were almost universally panned for their lack of usability. Initially, songs purchased through the services couldn't be burned to CD or transferred to any portable device. Other online music stores were similarly hampered.

By the time Jobs struck his iTunes Music Store deal, the labels had loosened these restrictions only slightly, and they still required users to pay a subscription fee for a limited number of downloads or streams. Jobs was able to get consistent (99 cent) single-song download pricing, unlimited CD burning, and--critically--unlimited transfers to the iPod.

As Allchin asks, "How did they [Apple] get the music companies to go along?" Jobs' personal magnetism, as well as status as a Hollywood insider through his founding of Pixar Animation Studios, probably had some effect. But more importantly, the iTunes Music Store was originally Mac-only.

The Mac had less than 5 percent market share at the time, so content owners probably figured that allowing single-song downloads into such a small market would provide a good test bed for Apple's FairPlay DRM system and pricing model.

By the time Apple was ready to launch the Windows version of iTunes in October 2003, Apple had sold 13 million songs through the service, outpacing all other music stores, despite the Mac's small market share. In other words, FairPlay and the consistently priced single-song downloads worked.

Almost seven years later, the iTunes Store is the largest music retailer in the United States, online or offline, and most of the stores based on the Windows Media Platform (including MSN Music) are out of business or have moved to selling unrestricted MP3 files.

Getting back to Dick Brass's criticism of Microsoft, I find it fascinating that top Microsoft executives were aware almost immediately of the threat the iTunes Music Store posed to the whole Windows Media ecosystem, but Microsoft was still unable to stop it. This matches what I've seen time and time again in my last 10 years following the company.

Microsoft has some smart executives who can quickly and correctly assess market changes and opportunities. Often, they come up with a good strategy to capitalize on those changes. But somewhere between strategy and execution, the thread is lost. Windows Media and Zune are most relevant to this blog, but you can see it elsewhere: online advertising, search, and mobile phones, to name three obvious examples.

RealNetworks and Viacom plan to spin off the Rhapsody subscription music service, the companies announced Tuesday.

Rhapsody, which has struggled for years to grow its subscriber base, was operated by a joint venture formed by Real and Viacom, parent company of MTV Networks.

At the same time, Real has decided to give up a controlling interest in the music service. The company will no longer own a majority stake in the company and will hold slightly less than 49 percent of the company's shares. Viacom owns a similar amount.

Real agreed to contribute $18 million to the new company. Under Real's control, Rhapsody has never really caught on with music fans. Rhapsody has suffered from what has dragged on most subscription services. Music fans generally prefer to own their songs; they don't want to risk losing their music libraries, should they fail to keep up their monthly fees.

The move comes after a major leadership shakeup at Real. Rob Glaser, Real's founder and former CEO, was pushed out last month, according to reports. The spinning off of Rhapsody appears to be the first significant move made by Robert Kimball, who is interim CEO and is being considered for the position permanently.

Google co-founder Sergey Brin (shown at a previous event)

(Credit: Stephen Shankland/CNET)

Google co-founder Sergey Brin said the team behind Buzz, Google's service that aims to organize your online social life, started out small. But as they tested the system within Google, they "found it so useful for internal communications that we became really motivated to bring this to the world," he said in an interview recorded immediately following Google's announcement Tuesday. (Scroll down to listen to the interview.)

For him, one of the most useful features is the ability "to start typing a thought right off the bat without having to worry about disrupting other people...I can throw something out there and the people who are most interested and most relevant tend to pay attention and reply."

Signal to noise
Brin said that Google's "recommendation systems will tend to surface (posts) to the most relevant people so that I'm no longer acting as a human router of sorts but the back end does that heavy lifting." He added, "Extracting signal from noise is one of our key competencies."

Safety and privacy
In response to a question, he said that the company is concerned about privacy and security because their mobile service "gives you the ability to share where you are." But, he said, it's up to individuals to decide whether to share your location and your posts," adding "people need to be thoughtful with whom they share and with what purpose."

On the other hand, Brin said that "it can really enhance safety and security," suggesting that parents could give a phone to one of their kids "and if something happens to them you can know where they are at the time." In response to a question on whether Google will provide advice on how to use this service safely, he responded, "so far it's clear that the benefits outweigh the cost and as we see people use it more broadly I'm sure we can come up with a set of guidelines."

Disclosure: Google is one of several companies that provide support for ConnectSafely.org, a nonprofit Internet safety organization I help operate.

Blockbuster was once a staple of weekend movie viewing, nearly as much a part of home entertainment as the TV set.

As the beleaguered company once again rethinks its move-rental business, it continues to lose ground to Netflix and Redbox.

Amazingly, Blockbuster's stock is trading at 40 cents a share following the company's announcement that it had undergone another round of layoffs and corporate restructuring. Last month the once dominate video-rental chain informed investors that it would miss revenue expectations for the fourth quarter due to lagging holiday sales. Blockbuster said it expects to report a loss of up to $193 million for 2009.

Jeanine Poggi at theStreet.com last week interviewed Blockbuster CEO James Keyes, who acknowledged that Netflix and Redbox continue to snatch away market share from his company. Last month Keyes said at a conference that Netflix was taking "demand out of the market."

Blockbuster, which in May of 2002 was trading at over $29 a share, said previously that it planned to close 20 percent of its stores by next year. The company is now betting on a multiplatform strategy and plans to replace stores with kiosks and compete online with Blockbuster digital.

There was a time when many on Wall Street argued that Netflix would never threaten Blockbuster or brick-and-mortar video stores. Ordering online was too complicated and nobody would ever want to wait days for the mailman to deliver a film. Nothing meant immediate satisfaction like the local video store, or so they said.

Netflix proved otherwise. At the same time that Blockbuster's stock trades for less than the price of a postage stamp, Netflix's stock and revenue are soaring. Netflix shares were trading at over $61 on Tuesday and last month the company reported that profits rose 36 percent to $30.9 million while revenue grew 24 percent to $445 million.

As for the future, it's hard to see how Blockbuster will ever catch Netflix. After striking partnerships with dozens of set-top box makers, Netflix enables subscribers to stream movies from the Web to TV sets at no additional cost to their monthly fees.

And with Redbox boosting the number of its automated video-rental kiosks, the traditional video-store business model appears doomed. At this point, Blockbuster appears headed for the same fate as Movie Gallery. At one time, Movie Gallery was one of Blockbuster's biggest brick-and-mortar competitors, but last week it filed for bankruptcy protection for the second time since 2007.

Despite job layoffs and other cost cuts, Electronic Arts is still struggling to dig out of its current financial hole.

The game maker reported Monday that its fiscal third-quarter net loss narrowed to $82 million, down from a loss of $641 million in the year-ago quarter. Its quarter ended December 31.

EA was on a tear last year to slash expenses--laying off staff, closing down studios, and trimming its product line. But sluggish game sales, especially in Europe, took their toll on fiscal third-quarter revenue, which fell 25 percent to $1.24 billion from $1.65 billion in the year-ago quarter.

Revenue was also affected by a smaller number of titles released for the 2009 holiday-shopping season compared with 2008, the company said. Sales were driven mostly by a few new games, such as Dragon Age: Origins, Left 4 Dead 2, and NBA Live. But older standbys FIFA 10, Madden NFL 10, and The Sims 3 helped too.

The poor results didn't surprise analysts as Electronic Arts had already announced in January that its fiscal-third quarter would be weaker than expected. But the company also warned Monday that the current quarter's revenue will likely be lower--between $925 million and $1 billion--than had been anticipated. The news sent its stock down around 9 percent in Tuesday morning trading.

Despite the weak outlook, EA is pinning some hope on less-traditional business markets and a couple of new game titles.

"EA is growing share in our packaged goods business, and our digital businesses continue to grow rapidly," Chief Executive Officer John Riccitiello said in a statement. "Mass Effect 2 is the first blockbuster of 2010 and we are looking forward to the launch of Dante's Inferno and Battlefield Bad Company 2."

In particular, the company is eyeing the online game market as a potential source of more revenue. In its third quarter, EA's online game subscribers reached 1.9 million. As players buy fewer CDs in stores and increasingly hop onto the Internet for their game fix, Electronic Arts is trying to capitalize on that trend.

The company noted that its Playfish social gaming unit, which it bought in November, scored two of the top 10 Facebook games for the quarter. Reports have also surfaced that EA will launch a Facebook version of its popular Madden NFL franchise.

Still, many analysts remain pessimistic about Electronic Arts' near-term future, noting that the cost cuts aren't doing enough to turn the company around.

Put yourself in their shoes.

They are twins. It's the morning of their 20th birthday. So they log on to Facebook, expecting to find messages from well-wishers.

Instead Angela and Maryanne Vourlis discover posts that read "RIP Chris Naylor" and "RIP Bobby." It took more than a few seconds for them to realize that their 17-year-old brother was the "Bobby" to which the posts referred.

According to the Sydney Daily Telegraph, the twins saw the RIP posts and tried to call their brother.

They then called their mother.

(Credit: CC Benstein/Flickr)

"I rang Mum and said: 'Chris Naylor must have died--I just read it on Facebook. But where's Bobby? People are writing 'RIP Bobby' too," Angela Vourlis told the Telegraph.

But Mrs. Vourlis knew that Bobby had been out with Chris Naylor. The family then called the police in order to discover the truth.

Bobby was one of three teens who died when their car smashed into a pole in heavy rain on the Great Western Highway at Colyton, near St. Marys in Sydney, Australia.

Bobby's uncle Peter Matelis told the Telegraph: "It's every parent's worst nightmare to lose a child in a car accident, but to have to hear it on Facebook, then have to chase up the police yourself, is just horrifying."

The police claim they had trouble identifying the victim. But the family saw the Facebook posts six hours after his death around 3 a.m. Sunday.

While everyone has now come to expect that social networks have become the most immediate and regular ways in which many people communicate, there are some experiences that no-one ever imagined would play out through sites like Facebook.