August 2009

When Apple insisted on making all its own computers and software a decade ago, it talked up its integrated products so thoroughly that it barely mentioned any allies. Now it can hardly shut up about them: it knows the most important thing about the iPhone is the online App Store, where 65,000 programs (and counting) are available for download. Its debut about a year ago reversed Apple's drive for complete control of its products and services, drawing thousands of partners who see it as an obvious route for reaching consumers with disposable income. But the very success of this new model of co-operation has exposed Apple to interest from regulators and is provoking a backlash in parts of Silicon Valley, where some say the new collective stewardship has turned Apple from outlier to dictator. One big developer frustrated with Apple's opaque review process for applications said this week the company should just allow everything on the store.

TiVo is so well known as the pioneer of digital video recorders that many people mistakenly call any DVR a "TiVo." But if the company has its way, that perception may soon have the support of law, which could dramatically reshape the TV business. In a patent infringement case coming to a head against Dish Network — as well as cases filed last week against Verizon and AT&T — TiVo says that it owns the technology behind processes found in almost every DVR. That includes a function called the "time warp" that controls everything from fast-forward and rewind to the ability to view the beginning of a TV show as the DVR records the ending. Competitors "are pushing (DVR) technology as a competitive differentiator to grab customers," says Matthew Zinn, TiVo's general counsel. "That irreparably harms TiVo, because those customers tend not to switch providers." TiVo has a lot riding on the outcome. It has watched its subscriptions fall 31% since the beginning of 2007, to 3.1 million, as cable and satellite companies marketed less expensive DVRs. If it wins its patent cases, "there's a high probability that (anyone offering a DVR) will have to pay TiVo licensing fees," says Lazard Capital Markets analyst Barton Crockett.

Advertising sales firmed a bit in June at major newspaper chains such as Gannett Co. and New York Times Co., enabling those companies to post unexpectedly strong second-quarter profits. Newspaper stocks rallied sharply -- Gannett shares have rocketed 156% since the end of June -- as some investors bet that aggressive cost cutting has positioned the companies for higher profit once the economy rebounds. Publishers are finally talking seriously about charging for the online content they now offer for free. And small-town daily and weekly papers are holding their own even as many of their big-city brethren struggle. Read between the lines, though, and the news isn't so upbeat. At most papers, profit growth was driven mostly by cost cutting, not higher revenue from selling more ads or increasing circulation. Reaching into the wallets of the 70 million people who visited newspaper websites in June sounds lucrative, but publishers are still debating how to do that without alienating readers. And that stock rally? Despite the recent run, Gannett shares are worth half what they were a year ago, and the U.S. economy is flashing conflicting signals about the prospects for a robust recovery. Failures continue to loom. Freedom Communications Inc., operator of the Orange County Register, is expected to declare bankruptcy this week.

The book publishing industry will have to consolidate if it is to stand up to Amazon, Google and a few other dominant retailers of electronic books, according to the chief executive of Hachette Livre, the world's second- largest publisher by sales. Arnaud Nourry said publishers needed to be big to maintain their pricing power in "brutal" talks with the handful of booksellers that would dominate the digital age. "We are at the beginning of the process of transformation where size and the capacity to impose viable business models will be essential," he said.