Speaking on Tuesday at the Cable Show in Washington, Roberts shared his thoughts on the future of the TV industry and showed off new Comcast kit intended to provide a faster, more-connected experience. The technology included cloud service X2, which allows subscribers to customize their experience to a greater degree than previous services, showing recently watched shows, favorite apps and other types of personalized content. Roberts also showed off a 3-gigabit/sec connection capable of gulping down a movie near-instantly (see our take here).

Addressing the current cable viewing experience, Roberts acknowledged that cross-screen consumption through Comcast’s TV Everywhere is far from integrated.

“Guilty as charged that we haven’t made it as easy as it needs to be. We need to make a tablet so it automatically knows it’s you and you don’t need to authenticate,” he said, adding that Facebook would be another sign-in option.

Roberts also acknowledged people’s propensity for “binge-viewing,” which has taken off in response to offerings by Netflix and other non-traditional TV providers. In response, he said Comcast would be repeating its “Watchathon” experiment — where customers can binge on hundreds of episodes of popular shows like The Walking Dead — at least every 90 days.

The Roberts talk was part of an industry event so needless to say, there were no questions about cord-cutting, disruptors like Aereo or breaking up the cable bundle.

In many ways it would seem that the rise of gigabit networks would crush the business of providing pay TV, but in fact, if cable companies play it smart, they may find a way to walk the line as their industry transitions to all-IP content delivery over broadband networks. They may even find new sources of revenue by offering IP services such as home security and automation. To understand what cable firms are dealing with, I spoke with Phil McKinney, the president of CableLabs, the industry standards setting body that is responsible for pushing cable’s access technologies.

CableLabs is the organization behind the DOCSIS 3.0 standard, which has helped cable companies roll out 100 Mbps and faster speeds. Unfortunately, those speeds have a practical limit that won’t help cable providers like Comcast or Time Warner Cable compete with Google’s gigabit networks. And if AT&T or municipalities get aggressive about deploying such networks, cable providers might find themselves selling the equivalent of feature phones in a smartphone world.

Getting cable to a gig

Enter DOCSIS 3.1, the next generation of the cable access technologies. The new standard will allow cable firms deploying D3.1 equipment to deliver up to 10 gigabits per second down and 1 gigabit up. The technology uses OFDM technologies familiar to the wireless industry to cram more bits into a single megahertz of available spectrum used in the cable plants (it’s 11 bits per hertz if you care). Thus, cable providers can then deliver more bandwidth using their existing radio frequencies.

These RF channels are part of cable’s legacy of delivering analog television signals over coaxial cable. In today’s hybrid fiber and coax networks some of the overall transmission is digital, but the coaxial and RF frequency limits remain in some parts of the network.

Cable firms still haven’t gone all-IP, which means that most cable companies are dedicating some of their spectrum to their pay television business and some to delivering broadband. One technology uses IP and the other uses QAMs. But as people demand more bandwidth and higher definition TV channels, cable operators must decide where to allocate their limited spectrum, or lose market share they have gained in the broadband market.

McKinney is also touting new compression codecs like HEVC that help lower the number of bits in a stream but still deliver high-definition quality. It uses half the information that MPEG-4, the current standard, uses. That gives cable companies a little more room on their spectrum to allocate for more broadband channels or more TV channels. McKinney notes that CableLabs is moving faster than it has ever moved in order to get DOCSIS 3.1 out to constituents — achieving in two and half years what it took five to do for previous standards. Comcast says it expects to start deploying DOCSIS 3.1 in 2015.

But what about the business model?

And speed is important, because widespread access to high-speed broadband is threatening the cable industry’s core business — packaging a bunch of channels together and selling it to end consumers, as well as selling some advertising against those channels. On one side there are people cutting the cord — canceling their subscriptions and relying on content from Netflix, Hulu or even just over-the-air broadcasts. On the other side are content companies pushing for higher fees from cable operators, especially for things like live sports, which many analysts believe are the main reason people don’t dump their cable packages altogether.

But the cost of cable is rising, something consumers are fighting as they become more accustomed to picking and choosing their own content on demand. To satisfy those consumers cable companies are offering their own IP-delivered services that bring on-demand content to subscribers’ tablets and phones, even when they are outside their home.

That embrace of technology though, can require tradeoffs for cable providers. For example, Comcast now delivers all of its video on demand content via IP, which means it divides its available spectrum into three chunks. One is for the traditional cable TV that’s broadcast, one is for broadband and one is for delivering the bandwidth for its IP-based Xfinity VoD service. AT&T has done this with its U-Verse services on its copper lines, but Comcast got in trouble for it last year when people questioned if that practice violated network neutrality, since Comcast doesn’t count its Xfinity content as part of its bandwidth cap.

Recouping lost revenue in an all-IP world

With DOCSIS 3.1, Comcast may have more headroom to raise its caps if its network is truly congested at the cable plant, but the business challenge remains. It must also figure out how to keep customers from dumping a $200 monthly charge for both TV and broadband and choosing instead a $50 broadband package. Adding faster speeds and charging more for those speeds might be one way to keep revenue up. And despite cable industry fear-mongering about upgrade costs, McKinney estimates that the upgrade to DOCSIS 3.1 gear should cost cable companies less than the upgrade to DOCSIS 3.0, which analysts put at roughly $100 per home.

Chart courtesy of Stifel.

But aside from charging more for better broadband, cable companies shouldn’t have to give up on pay TV. Already companies like Time Warner Cable are experimenting with cheaper programming bundles in additional to concessions like allowing customers to watch any show, anywhere, on any device. The pay TV providers already have relationships with the content companies, and while they may not be the only path to mass market anymore for the Disneys and HBOs of the world, they still are an important channel.

Cable companies have tools they can use to protect content, they still have relationships with more than 80 percent of the U.S. households and they are aggressive about offering content in a way that consumers want. So, if they can transition to more of an a la carte option, using IP to deliver those choices on demand, they could still provide a service that consumers are willing to pay for. And thanks to new standards described above, the bandwidth is there to do this.

So cable providers just need to walk the line between cannibalizing their traditional pay TV business with IP-delivered services, while upgrading their networks to ensure they can still deliver a quality experience while maintaining their revenue and profits. The big telcos walked this line a few years back when they had to transition people from wireline networks to cellular service without hurting their own profits and revenue.

The cable business is a little tougher because they have the content companies in there demanding more money and seeing new avenues for distribution, but as disruptive as this shift is, I think in a few years we might see an even bigger one once pay TV providers realize they can take all of their content and deliver it over the top. Maybe the internet won’t eat the cable company after all.

Consumers who already use a Comcast-provided set-top box on all of their TV sets don’t have to worry, their service will continue to work as before. But if you have a TV in your den that’s hooked up to your cable outlet without a set-top box, then you’re going to have to get an adapter to keep it working.

Comcast is contacting consumers ahead of the transition, offering them up to two digital TV adapters for free for two years. These adapters are small boxes that come with their own remote control and are connected to a TV set with a coaxial (antenna) cable. Remember the converter boxes that consumers had to buy to receive over-the-air digital TV on old TV sets? It kind of works like that, except the sole purpose of this device is to descramble Comcast’s cable signals.

Comcast confirmed the move towards encrypted basic cable when contacted by GigaOM, and a spokesperson sent us the following statement via email:

“We are beginning to proactively notify customers in select markets that we will begin to encrypt limited basic channels as now permitted by last year’s FCC B1 Encryption Order. While the vast majority of our customers won’t be impacted because they already have digital equipment connected to their TVs, we understand this will be a change for a small number of customers and will be making it as convenient as possible for them to get the digital equipment they may need to continue watching limited basic channels.”

The company is also making a help page available online that goes into some of the details of the offering.

Cable companies have long lobbied for the right to encrypt basic cable channels, arguing that this will prevent cable theft and simplify remote management of their equipment. They succeeded last year when the FCC ruled that they could start to encrypt basic cable, as long as they provide consumers with some help during the transition.

The company also struck a separate agreement with Boxee to provide owners of the Boxee Cloud DVR with access to its encrypted basic feeds — and the new Boxee device also happens to be the first one that’s compatible with a new DLNA-based adapter that streams TV signals via an Ethernet connection.

However, Comcast’s adapters won’t work with Boxee’s old live TV dongle, which the company introduced a little over a year ago to bring live TV to the original Boxee Box. Also left in the dark are customers who use any other kind of digital TV adapter for their PC that are based on coaxial inputs, like the Elgato EyeTV. The last resort for many of these consumers may just be to invest in an antenna.

Piracy is exploding, and NBC is barely keeping up fighting back: That’s the message of the story, which details the work of the studio’s anti-piracy unit at length. Here’s the thing about that notion: It runs counter to some of the common narrative we’ve seen with regards to piracy in recent years. Piracy was supposed to be on the decline, we’ve heard time and again, with Netflix and others offering legal alternatives that are simply more convenient.

And there’s been numbers to back this notion up: In 2010, 19.2 percent of all residential U.S. Internet traffic during peak times was caused by P2P file sharing, according to traffic management company Sandvine. In the second half of 2012, that number was down to 12 percent. Netflix traffic, on the other hand, exploded during the same time.

So what’s going on here? Is piracy getting worse, is Netflix winning or is it all just business as usual? The answer probably depends on who you ask, but here are a few points worth considering:

• BitTorrent is still growing, just more slowly. Or in the words of Sandvine: “In absolute traffic level, BitTorrent has risen in volume by over 40%, but the application continues to exhibit a steady downward trend in overall traffic share.” That means people are still downloading growing amount of movies and TV shows via BitTorrent, but Netflix and others are just growing faster.
• BitTorrent’s not the only game in town anymore. Pirates have been using one-click file hosters and streaming sites hosted in countries with more legal flexibility for some time now, and streaming sites, especially, are starting to play an increasing role for TV show piracy.
• The world isn’t flat. Sandvine’s numbers in particular have shown a significant slowdown of file sharing in the U.S., but abroad, things look very different. The existence of release windows has in many countries led to a whole generation of TV viewers who watch U.S. movies and TV shows online, something that was echoed by the WSJ piece:

“Rick Cotton, general counsel of NBCUniversal, who oversees the company’s antipiracy unit, said piracy is a particularly big problem overseas. For example, he said that revenue for its Spanish home-entertainment unit declined 62% between 2009 and 2011, mainly because of piracy, and NBC shut it down.”

• Takedowns don’t equal downloads. That’s an important point that was somehow lost in the Wall Street Journal’s story. The number of takedown notices sent out by NBC isn’t exactly the best indicator for actual piracy levels. Sure, one could argue that the growing supply of pirated sources also indicates a growing level of demand for pirated content. However, the fleeting nature of piracy makes it hard to actually quantify any of this, in part because P2P file sharing works without hosted copies of content. It doesn’t really matter whether ten or a thousand sites link to the same torrent, shared by the same number of people — except if you want to send takedowns to all of these sites.
• Curious timing, anyone? The WSJ story remarked that studios hardly ever talk about their own anti-piracy efforts, but went on to say that “NBCUniversal gave the Wall Street Journal a rare peek inside the cat-and-mouse game its security team plays with suspected pirates.” Of course, one should note that NBC’s corporate parent Comcast just implemented a six strikes copyright enforcement scheme on its own broadband service last week. In light of that step, the story reads a bit like a plea for sympathy: Look, we had to step up our game because takedowns alone weren’t working!

So what’s the takeaway from this? For one, piracy is obviously alive and well, and it’s still a huge headache for studios like NBC. But Sandvine’s numbers also show that piracy’s growth can be contained, especially in markets with compelling legal alternatives. However, expanding these efforts is hard work that takes time, money and the will to change up some of Hollywood’s rules. Expect many more stories about piracy whack-a-mole in the meantime.

Image courtesy of Flicker user Steenbergs.

In a statement, Comcast CEO Brian Roberts said that the decision was driven by “our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders.” Roberts also said that he believes Comcast is in a “strong and unique position” to build value in the combined company.

The Comcast deal will not have to be approved by federal regulators, who fined the cable company $800,000 last year for failing to meet some of the conditions it placed on the original purchase. Comcast said it expects the deal to close by the end of March.

As part of the acquisition, NBCUniversal will also buy the buildings that it uses at 30 Rockefeller Plaza in New York and CNBC’s headquarters in New Jersey for about $1.4 billion. According to the New York Times, a “clash of cultures” was partly responsible for speeding up Comcast’s decision to buy the remaining part of the company.

Comcast also announced its fourth-quarter financial results ahead of schedule, and said its earnings climbed by 19 percent from the same period a year ago, while revenue rose by 6 percent to $16 billion and operating income grew 13 percent to $3 billion. The company said it will increase its dividend by 20 percent and will repurchase $2 billion worth of stock this year.

This story was corrected Tuesday evening to clarify that the deal is not subject to federal approval, as originally stated.

Image courtesy of Shutterstock / Cedric Weber

That “world’s leading” tag is debatable, as China Telecom claims more than 90 million broadband subscribers, but this is nonetheless a big deal, taking the combined operation way past the likes of Comcast (18.7 million subscribers). The operation will focus on “the strongest and most strategic markets in Europe”, delivering the triple-play hit of broadband, telephony and digital TV while also pushing mobility and B2B products.

Liberty Global CEO Mike Fries said in a statement:

“Adding Virgin Media to our large and growing European operations is a natural extension of the value creation strategy we’ve been successfully using for over seven years.

“Virgin Media will add significant scale and a first-class management team in Europe’s largest and most dynamic media and communications market [the UK]. After the deal, roughly 80 percent of Liberty Global’s revenue will come from just five attractive and strong countries — the UK, Germany, Belgium, Switzerland and the Netherlands.”

Europe is such a strong focus for the combined company that Liberty Global will “redomicile” from Delaware to the UK, although its headquarters will stay put. The company will continue to be Nasdaq-listed, although it may list on a European stock exchange as well. Virgin will hang onto its brand.

The implications of this deal could be wide-ranging. It will certainly bolster Virgin’s chances in the UK pay TV market against Rupert Murdoch and BSkyB.

Virgin also has a very good hybrid cable/fibre broadband network in the UK that was created out of the merger of NTL and Telewest half a dozen years ago. John Malone’s Liberty, previously a major shareholder in Telewest, had itself tried and failed to execute such a merger, so today’s deal is the culmination of a long-term ambition.

At the same time, it also seems to be about taking advantage of Virgin Media’s tax losses and low interest rates, according to sources referred to by the Financial Times.

On Thursday, DirecTV reported its first net subscriber loss for a quarter, with a net 52,000 U.S. customers bolting the satellite service during the period extending from April 1 to June 30.

Also read: Pay TV model won’t die anytime soon, analyst says

In fact, each of the top four multi-channel video providers — which collectively service more than 60 percent of U.S. pay TV homes — lost customers in the second quarter. Earlier on Thursday, No. 4 service, Time Warner Cable announced a net loss of 169,000 subscribers. That came just a day after No. 1 service, Comcast, reported a net loss of 176,000 cable customers.

Last week, in a pre-Q2-earnings filing with the Securities Exchange Commission, satellite carrier Dish Network, the No. 3 service, revealed a net second-quarter loss of 10,000 users. Collective total for the Big Four: minus 407,000 users.

Many of these lost subscribers continue to migrate to telco-based services, with AT&T U-Verse  and Verizon FiOS  adding 202,000 and 120,000 video subscribers, respectively, during Q2.

Also read: Pay TV growth keeps slowing: 484k users added in Q1

Coupled with satellite additions, the emergence of these two telco video services have more than offset the declines of the cable business and kept the overall pay TV business in growth mode the last few years. But at least for now, satellite has stopped growing.

Also read: For Comcast, broadband subscribers are up, but video subs are down

As for DirecTV, the loss of 52,000 net U.S. subscribers wasn’t a complete surprise, with analysts predicting a loss in the mid-30,000 range due to the company’s efforts to reduce “churn” and keep subscribers around for the long haul, instead of enticing them for short stays with short-term promotions.

DirecTV reported a 9 percent increase in quarterly revenue to $7.22 billion. It’s operating income before depreciation and amortization (OIBDA) — i.e. profit – also increased 9 percent to 2.01 billion. While the satellite company faces stagnant growth domestically, it continues to show ample promise in Latin America, where it added another 645,000 net subscribers.

Also read: DirecTV aims to double Latin American revenue to $10B in five years

And while Latin American expansion continues to be the key to DirecTV’s future, cable companies like Time Warner are banking on the growth of broadband users. The addition of 72,000 net ISP customers pushed Time Warner’s revenue up 9.3 percent to $5.4 billion in Q2. OIBDA increased 10.3 percent to $2 billion.

Comcast, the corporate parent of tape-delay network NBC, lost 176,000 basic video subscribers during the second quarter of 2012, but saw 156,000 net new additions to its broadband subscriber base, which now stands at 18.74 million subscribers. During the same quarter in 2011, Comcast added 144,000 broadband subscribers but lost 238,000 video customers.

Comcast’s growth in broadband subscriptions is in direct contrast with the Baby Bells who are continuing to bleed DSL customers, driving them into the arms of cable companies. Comcast is losing video subscribers to competitors such as satellite and phone companies. It is also grappling with a broader demographic shift that is prompting cord cutting. Nearly 9.7 million households also buy their phone service from Comcast these days.

For Q2 2012, Comcast posted revenues of $15.21 billion, $3.08 billion in operating income, and 50 cents in earnings per share. The video business brought in $5.08 billion for the company while broadband business brought in $2.4 billion in revenues during the quarter.

And once again, U.S. consumers don’t get it. Sure, people are frustrated because they can’t easily stream the Olympics online without a cable subscription, and there will always be sports fans who don’t want the edited version of The Games with the life stories on athletes and dramatic cuts. But frankly, for now, NBC doesn’t really care what those people want.

How dare @NBCOlympics cut the 7/7 tribute from the #Olympics opening ceremony. Disgraceful. ow.ly/czaOk—
Jamie Klenetsky (@jamieklenetsky) July 28, 2012

NBC paid $1.18 billion for the right to broadcast the Olympics and it will be a cold day in hell before it dilutes the amount it can charge advertisers or the value it has to cable providers. In many ways, even though NBC depends on huge audiences to justify the rates it’s charging advertisers, it can afford to alienate some of them. And it’s worth noting that there are probably millions of happy families who watched the opening ceremony last night and had little idea it could be any other way.

In the U.S., people who want to stream are a highly vocal minority, but it’s a minority that is growing. And while NBC may not care that I — as one of the between 3.6 or 9 million cord cutters — couldn’t authenticate to see the opening ceremony via the web or streaming, maybe someone should.

NBC broadcast an edited and time-delayed version of the opening ceremony last night over the air, but I couldn’t see that either. I can’t get over-the-air TV since the switch from analog to digital TV signals in 2009, because my home just doesn’t seem to be in the right location. Even satellites don’t work. The only way I could watch NBC’s broadcast of the ceremony was if I paid for cable, but that’s not something I want to do just to watch a once-every-two-year event. And anyway, I shouldn’t have to buy cable to see the opening ceremony, since NBC is using the public airwaves for free to deliver broadcast TV. Glenn Fleishman via Twitter suggested that the FCC ought to investigate this, and maybe it should.

I believe FCC should look into NBC, which broadcasts over air, restricting Olympics video online to cable subscribers. Fundamentally wrong—
Glenn Fleishman (@GlennF) July 28, 2012

But really what I think needs to occur is a realization that until the business models right themselves in the TV industry, consumers, especially cord cutters, are going to get screwed out of some content. It’s not “fair,” but as the population of people who demand streaming grows, and they in turn are seen a valuable demographic to advertisers, then perhaps the next Summer Games will give consumers more of what they want, where and when they want it.

Image courtesy of Shutterstock user Padmayogini
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We do — that was that state of digital media when paidContent launched in 2002. Other weird things were happening back then too: People still got much of their news from television and newspapers, and they learned about major events after they had already happened.

There have been some huge shifts since 2002: Tablets and smartphones are now ubiquitous, lots of people read on their digital devices, and just about everyone is part of a social network or three. This summer is the tenth anniversary of our launch. In an effort to gain some perspective on the past decade in digital media, I’ve been reading back through paidContent’s archives — a collection of over 80,000 posts.

Since I was only a freshman in college when paidContent came to life, I often didn’t know, as I read through the stories from the early days, how things had begun or how they turned out. As I watched them unfold, I wanted to grab our readers’ arms and give them advice (“Don’t buy that Zune!” “Invest in Facebook!” “Go for the good Twitter handle now!”). But I also realized how difficult it is to predict success.

Some takeaways from my trip through the archives:  Some companies — AOL and Yahoo come to mind — have been consistently bad at predicting what consumers want. And a couple of companies, namely Apple and Amazon, have been very good at it. Also, being a native digital company helps, but it’s no guarantee of success (what up, MySpace?). And after all these years, it’s still not clear what content customers will pay for, or how much they’ll pay.

Streaming and Moviebeaming

What do analysts, CEOs and bloggers have in common? None of us can predict the future. Roger Ebert joked in 2002 that “on-demand streaming movies on the Web, like HDTV, are five years in the future — and will be for at least another 10 years.”

If Disney’s Moviebeam had been the only game in town, Ebert probably would have been right. When it launched in three cities in 2003, customers paid $6.99 a month to use a device that could hold 100 movies and plugged into the back of a TV set. They also had to pay for each movie they watched– billing was done via the phone line. The company went through various unsuccessful iterations before India’s Valuable Group bought it in 2008. It was never heard from again.

Netflix almost went down the same road. It had a plan to release a Moviebeam-like “proprietary set-top box with an Internet connection that could download movies overnight.” But instead, it decided to forge ahead with streaming — starting with a complicated “quota hours” system in 2007 and moving to unlimited streaming in 2008. By 2010, the majority of subscribers were streaming something, and the company began offering streaming-only subscriptions, though CEO Reed Hastings said that same year that the company would keep shipping DVDs until 2030. (We’ll see about that.)

ABC was the first network to sell episodes of its shows on iTunes, back in 2006, and to stream shows free with ads on ABC.com — and later on AOL. But by the time premium subscription service Hulu Plus launched in 2010, the platforms getting the attention were devices with built-in access, like Internet-enabled TVs, Blu-ray players, and tablets.

Return of the living dead

Speaking of AOL: It’s something of a miracle that the company still exists. In 2000, when it merged with Time Warner, it was valued at $350 billion, and the next year, more than 24 million people in the U.S. were paying for its Internet access service. By the end of last year, that number had dwindled to just 3.3 million subscribers. Here’s a quick recap of some of AOL’s miscues over the years:

• AOL Voicemail ($5.95 per month)
• A teen service called Red (featuring “a talking head—using the image of an actual employee—that uses software to answer users’ questions”)
• A digital music partnership with Burger King
• A reality show called “Gold Rush”
• Social networking site AIM Pages
• Going free
• The hyperlocal Patch blogs

Though AOL was once a high flier, no other company ever liked it quite enough to buy it. Google bought a five-percent, $1 billion stake in AOL in 2005, leading analysts to wonder if Microsoft missed out. That resulted in a $726 million writedown in 2009. Time Warner bought back Google’s stake and finally spun off “the albatross” in December 2009.  AOL is still promising a bounceback. “The executive team expects a profitable content business by next year,” CEO Tim Armstrong said in May 2011.

Yahoo hasn’t fared much better. The company launched Yahoo Platinum in 2003; for $9.95 a month, subscribers got access to audio and videos.  The program was dead by October of that same year. It later tried a Twitter-wannabe microblogging service (“Meme…where you share everything that you find that’s interesting,”). Perhaps the smartest move Yahoo ever made was not buying AOL.

Where did these companies go wrong? In 2010, former Time Warner CEO Gerald Levin pondered that question in an interview with the New York Times . The AOL-Time Warner deal was “undone by the Internet itself,” he said. “I think it’s something that no one could have foreseen, and to this day, whether Apple is going to dominate entertainment or whether Amazon is going to dominate publishing, all the old business plans are out the window. How do you get paid for content?”

Know what’s cool? A billion dollars

In 2006, an RBC Capital analyst estimated that a certain social networking company would be worth $15 billion in a few years, based on “raw, unprecedented user/usage growth.”

Six years later, Facebook went public with a valuation of $104 billion. Too bad the analyst wasn’t talking about Facebook but about MySpace. The social networking company that Rupert Murdoch acquired for $580 million in 2005 sold for just $35 million in 2011.

Why did Facebook soar while MySpace — and other social networking services like Friendster — sank? It allowed people to build real connections using their actual personal information, and rolled out a product that was ready to scale and had good technology. Other companies realized sharing was important too — in 2005, Yahoo SVP Jeff Weiner called sharing “the next chapter of the World Wide Web” — but Facebook was able to implement it in a way that kept users coming back. The site surpassed Yahoo and AOL for “stickiness” in 2009, when Nielsen found users spending an average of four hours and thirty-nine minutes a month on Facebook.

Social has already disrupted some industries — witness the rise of Twitter and the way it has changed the way news is reported, with stories like Osama Bin Laden’s assassination breaking there first. In a sign of the importance of these emerging platforms, newspapers like the Wall Street Journal and New York Times are launching “Everywhere” initiatives to deliver news to readers where they are already hanging out.

Fast food and music don’t mix

Hard to believe it now, but there was real skepticism that iTunes’ 99-cent songs would be able to compete with peer-to-peer file-sharing services. “According to academics who’ve studied the economics of digital music distribution,” we wrote in 2003, the year iTunes launched, “the cost still seems too high to attract users of peer-to-peer file trading services.” The piece cited an economist who believed “the appropriate price of a downloaded song is 18 cents.” In fact, Real Networks dropped its song prices to $0.49 in an attempt to compete against Apple.

In the end, consumers choose selection and convenience over P2P networks. We called iTunes “a kickstart for the micropayments industry.” Was it? While Steve Jobs said in 2004 that Apple wouldn’t hit its one-year, 100 million songs downloaded goal, global digital music sales crossed $1.1 billion in 2006. In April 2008, Apple surpassed Walmart  as the largest music seller in the United States.

The company that arguably started the digital music revolution — Napster — didn’t survive. Once it no longer offered “free,” it was done, though it tried to reincarnate itself: launching a mobile music service, “Napster To Go,” with AT&T in 2004 (the one smartphone that supported it could hold up to 6 songs), partnering with Circuit City on a digital music store, getting itself acquired by Best Buy in 2008 ,and then being bought back by Rhapsody in 2011. Unfortunately, Rhapsody was already losing out to newer (and free) streaming services like Pandora and Spotify.

The partnerships with Circuit City and Best Buy, though, were probably the kiss of death. One of the big trends of the past 10 years has been brick-and-mortar retail stores’ consistent failure to compete effectively against digital-native companies. Best Buy wasn’t the only retailer to try to crack the digital-content business — and fail: Target and Sears both took a shot. And McDonald’s sold digital content over its WiFi network and even tried DVD rentals in its restaurants.

Do you like the feel of paper?

Just as digital music didn’t really take off until Apple introduced the iPod, the ebook revolution didn’t take place until the arrival of the Kindle. In paidContent’s early years, ebooks were written off as a failure in part because publishers couldn’t figure out what to do with DRM. (In 2003, “temporary electronic ink” that would disappear after a few months was floated as a possible solution.) Barnes & Noble decided to stop selling ebooks in 2003, and Yahoo stopped selling them in 2004.

Meanwhile, Amazon and Google were pushing forward. Google launched Google Print – now called Google Book Search, and still besieged by lawsuits seven years later. Amazon tested two now-defunct programs: Amazon Pages, which allowed customers to buy access to digital copies of select pages from books, and Amazon Upgrade, which bundled print books with online access to the complete work.

Customers weren’t biting. Then Amazon came out with the Kindle in 2007 for $399. Less than two years later, Amazon was selling more Kindle books than print books, and ebooks now make up over 20 percent of some big-six publishers’ sales. Barnes & Noble has had some success with its Nook e-reader and digital bookstore, but bankrupt Borders shuttered all its stores in 2011. Meanwhile, the Department of Justice suit against Apple and five big publishers for allegedly colluding to set e-book prices drags on.

Good thing Steve Jobs looked beyond ringtones

A Forbes survey back in 2002 found that “business professionals” would be willing to pay for “news content to be delivered to their cellular devices,” and some media companies tried early mobile experiments. Verizon offered a cell phone version of the Yellow Pages — which, at $19.95 per year, gained 15,000 subscribers in three months. But starting in 2004, everyone decided the future was in ringtones. A $4 billion global business by the end of the year, one company projected.

So, so many ringtones. You could buy them from Rolling Stone or from an ATM-like device called E2Go. A fall 2004 marketing campaign let you mix your own ringtones on Levi’s website. Billboard launched a top ringtones chart.

Could ringtones “prove to be a passing fad”? we wondered late in 2004. Luckily, yes — a new technology came along to shake up the mobile market. No, it wasn’t the $500 ESPN phone, but the iPhone, which came out in 2007. And by opening its platform up to third-party app developers, Apple got users ready for its next ecosystem-changing device, the iPad, in 2010.

Monetizing mobile

Advertising has always been a fuzzy business — how exactly do you measure engagement and success? Well, that’s still the big debate about advertising in the digital era.  ”If here’s anything that’s really holding back ad spending on the web, it’s the lack of good measurements,” Tim Armstrong, then Google’s VP of national sales, said in 2007.

Mobile advertising has also faced obstacles. In 2006, mobile carriers began allowing advertising despite fears of annoying customers. Customers were indeed annoyed – 79 percent of them found mobile advertising annoying, according to a 2007 Forrester study — but they could “see the potential benefits of mobile advertising and marketing to themselves,” particularly if they could get a useful special offer or coupon.

Further complicating matters for advertisers: The smartphone market is fragmented among different brands — marketers don’t want to spend the money to create different ads for Android and iOS — and there are two mobile ad universes: mobile browser and apps.

Nevertheless, mobile advertising has gained ground, crossing  $1 billion in the U.S. for the first time in 2011, according to the Interactive Advertising Bureau, totaling $1.6 billion for the year.

The next opportunity is social media advertising. And once again, it will be a challenge to figure out some standardized metrics. What’s a retweet worth, anyways?

Back to where we all began

Though micropayments worked well for music when Apple launched iTunes, the path to payments for written content has been rockier. In 2004, we wrote that “micropayments today are still characterized by a large number of competing transaction types” – including direct-to-bill, merchant aggregation, prepaid accounts and direct transfer – and “each of these face the current incumbent in digital content distribution: the flat-fee subscription model.”

Eight years later, it appears that the subscription model has won out. The iPad opened the door for magazine and newspaper publishers to create new revenue selling content on that platform, but the results have been mixed. When Rupert Murdoch’s “The Daily” iPad newspaper launched in early 2011, the company called it “the model for how stories are told and consumed.” We wrote, “The bet here is that while consumers are less and less likely to reach into their pocket for a few quarters to buy a newspaper, they might not care about the 14 cents on their credit card for a copy of an e-newspaper.” A year and a half later, The Daily has over 100,000 paying subscribers — but it’s living on borrowed time and may not get through the five years its publisher has said it needs to break even.

Writing for the web, of course, has been around for awhile. At the beginning of the decade, blogging was called “nanopublishing,” and the question was how blogs could support themselves doing it. All sorts of models have arisen. For example, Gawker tried a licensing deal with Yahoo, but that relationship ended a year later. The deal “garnered way more attention than we expected, but less traffic,” Gawker CEO Nick Denton said in 2006.

Some bloggers have stayed independent and make a living from advertising (or from their day job); others write their blogs under a newspaper, website or larger magazine’s umbrella — see the Dish’s Andrew Sullivan, FiveThirtyEight’s Nate Silver, WaPo’s Ezra Klein. Or, they go to work for the Huffington Post!

Magazine companies have grappled with whether to bundle digital editions with print subscriptions or charge for them separately. Time Inc. — which first put digital editions of its magazines behind AOL’s paywall in 2003 — started out charging separately, but today Time Inc. and Condé Nast print subscribers get the digital edition free. Hearst, meanwhile, is charging separately, and it said its digital business in the U.S. became “solidly profitable” for the first time in 2011.

Could there ever be a Netflix for magazines? Time tried it for print versions with its 2008 Maghound service. It failed, due to a lack of marketing and reader interest. Magazine publishers are trying again with joint venture Next Issue Media.

Many newspaper publishers, most notably the New York Times, tried paywalls at the start of the decade and then abandoned them – only to return to the model in the past couple years.  In its most recent earnings report, the NYT said it has 454,000 digital subscribers. Is that enough to sustain the newspaper in its 21st-century transition?  Probably the best answer to that came from  Vivian Schiller. But it was in response not to the NYT’s recent digital subscriber numbers, but to the NYT’s decision in 2004 to close the paper’s first paywall, known as TimesSelect. Schiller, then the SVP and general manager of NYTimes.com, was asked whether TimesSelect had worked.  “It did work,” she said. “It’s just a matter of as compared to what.”

Birthday cake photo courtesy of Shutterstock user [Robyn Mackenzie].

TV photo courtesy of Shutterstock user [Somchai Buddha].

Zombie hand photo courtesy of Shutterstock user [lineartestpilot].

Piggybank photo courtesy of Shutterstock user [cardiae]

Fast food photo courtesy of Shutterstock user [Sergio Martinez].

Book photo courtesy of Shutterstock user [TrotzOlga].

Ringtones and apps photo courtesy of Shutterstock user [violetkaipa].

Cash register photo courtesy of Shutterstock user [titelio].

Magazines photo courtesy of Shutterstock user [bernashafo].