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A number of news and blog sites (NYTimes, Reuters, Engadget, Tai-Pan Way) have noted that Microsoft has agreed to pay a record company, Universal, a certain undisclosed amount ($1.50?) for each Zune device Microsoft sells. They note that this is a major concession by Microsoft, since Apple only pays record companies for each song sold, not for each sale of an iPod device.

The record companies are upset by the deal they originally struck with Apple, since Apple has a tremendously large business with rich profit margins based on iPod device sales, but each iPod has on average only 20 or so songs sold on iTunes. That’s alot of music on iPods that was either legally ripped from CDs, or illegally traded.
Many parties seem to think Universal has done a number on Microsoft by convincing Microsoft to make a payment for each Zune sold. However, to my mind this isn’t so bad for Microsoft either. The true loser in this deal is … Apple.

Microsoft’s Zune has just been introduced, so it doesn’t cost much to Microsoft to make a payment on each hardware device sold to Universal today, and it will take awhile for its sales to ramp up to a point that such payments cost Microsoft much. Microsoft also hasn’t historically put the same emphasis that Apple has on trying to make money from the hardware (PCs, Xboxs, cell phones); Microsoft is content to make money from its software (Windows, Office, Xbox games, Windows mobile).
Apple already has a huge number of iPods it sells every month. And Apple’s contracts with the record companies are going to expire in a year. If Universal insists on the same deal from Apple that they got from Microsoft, in both dollar amounts and in business model structure this is going to cost Apple alot more than it costs Microsoft.

Microsoft is therefore using Apple’s strength (the massive lead in devices sold) against Apple, a neat act of business model judo.  …and since record company contracts often contain a provision that states if you give another record company a better deal you will give me the same deal as well, it’s not just Universal that will get this payment from Microsoft, or demand this type of payment from Apple…  all of the record companies will.
Of course for Microsoft to truly succeed, and for the record companies to obtain some real type of leverage against Apple, the Zune and its successors must still be great products. The early reviews indicate the Zune is a promising device… but time will tell.

Steve Perelman, the cofounder of WebTV and founder of Moxi, has led a team that has invented a device that accurately captures very small movements of an object, including an actor’s face. As the NY Times states,

The system could change the nature of cinematography in several ways, according to leading Hollywood producers and technologists who are planning to use the system. For example, it will make it possible to create compellingly realistic synthetic actors by capturing the facial movements of real actors in much greater detail than is currently possible.

One remarkable thing about the system is its relatively low-tech components. Rather than using super expensive lasers, it uses makeup, relatively cheap cameras, and fluorescent lights…

The Contour system requires actors to cover their faces and clothes with makeup containing phosphorescent powder that is not visible under normal lighting. In a light-sealed room, the actors face two arrays of inexpensive video cameras that are synchronized to simultaneously record their appearance and shape. Scenes are lit by rapidly flashing fluorescent lights, and the cameras capture light from the glowing powder during intervals of darkness that are too short for humans to perceive.

The captured images are transmitted to an array of computers that reassemble the three-dimensional shapes of the glowing areas. These can then be manipulated and edited into larger digital scenes …

The difference offered by Mr. Perlman’s technology is in the detail. Standard motion-capture systems are generally limited in resolution to several hundred points on a human face, while the Contour system can recreate facial images at a resolution of 200,000 pixels. The digital video images produced by the system are startlingly realistic.

For more, see http://www.nytimes.com/2006/07/31/technology/31motion.html?ex=1154577600&en=7ca93170fc84af3d&ei=5087%0A

The sharing of digital information contained in large files is done by two basic methods: by electrons, and by atoms. Electrons are shared over wires or wirelessly, and the single most popular place to share them is the Internet. Atoms are shared on a wide scale by truck, and the single most popular place to share them is rapidly becoming the postal service.

As electronic networks have gotten better, the amount of information shared electronically has become vast. Yet for the most pricey content, the advantage of the truck is that the legal issues that often curtail sharing electronically have not applied. That’s because copyright law hates copying, and while electronic transmissions have been interpreted to by their nature copy, atom transmissions have been interpreted as moving, not copying.

The electronic version of sharing started with local area networks, progressed to bulletin board systems, had a few intermediate stages, but didn’t really take off until Napster. If you wanted a music file, just start up Napster, search for the name, and download. It got shut down by the courts, because it had the ability to control the copyright infringment occurring on its system and didn’t prevent it. BitTorrent based networks, Grokster, eDonkey, Morpheus, and countless other software programs, which unlike Napster didn’t store information on what files were being traded centrally, took over where Napster let off.

The commercial companies involved in such software often got shut down by the courts, for copyright infringement, although the networks themselves often live on. New forms of file sharing, like AllPeers, and FolderShare, are just now starting to obtain traction, and are more focused on enabling sharing between people who know each other.

Sharing between people who don’t know each other still exists, but rather than rely on the wire, to find shelter from the outcries of the copyright owners it relies on the truck. The most significant example is Netflix, which allows multiple users to share a DVD. For music, the latest innovation is LaLa.com, which allows people to look up who has the physical CD they want, and then trade CDs for about $1.

Some people seem to think it’s just a matter of time before copyright law catches up to this divergence, and electronic sharing becomes the norm. Particularly promising is the funding of such content via advertising.

If sharing by electron does become lucrative due to advertising, given the economic stakes involved, will the purveyors of atom sharing be allowed to continue? Or will their source of content run dry…