Thursday, December 16, 2004


MusicMatch recently released version number 10. This is the first version since Yahoo purchased the company. It is the top rated music media player on the market. The Windows Media player will do more "stuff" including video but MusicMatch is user friendly. For us old geezers, none of the new electronics toys are worth a plug nickel if we can't figure out how to use them.

ROXIO (Napster) was recently down-graded. The stock took a hit. Maybe the deal with Blockbuster is not going so well. Netflix stock has moved up in recent weeks and appears to have the short sellers tightening up. The various alliances and ramifications are impossible to keep straight but I do not like betting Yahoo. Yahoo has been a top performing stock for us. It has moved from $7 to about $39 in about 3 years. We see no end to better than average growth.

My 24 year old highly educated "teenage daughter" helped me to understand a few things today. She informed me that the formats on satellite radio are not proving to be popular among the young folks. These folks do not want to listen to "a bunch of junk" before their favorite song plays again. They down-load their favorite songs, play them over and over and share them amongst each other.

The number of digital players and formats avaible is surprising. The key is that the players are designed to work easily with certain formats. Apple has recently stated that they plan to change their format so that the Realplayer will not be able to play i-tunes.

The real money is in selling the tunes not the players. Apple has jumped into the lead but, as one might expect, Dell is now offering a competitive player for a lower price. As anyone who has followed Dell knows without checking, Dell has picked top rated quality products to sell and will offer them at lower prices. Dell can offer lower prices because their business model is a very low over-head model. They can make money at prices that would cause others to lose. Dell has formed an alliance with MusicMatch and I suspect that Yahoo and Dell share profits from the sale of the music.

I checked with Dell and the first delivery dates available for the DJ 20 and pocket DJ are in late January and early February. Apple has been at this longer and has inventory in stock. I can't argue with Apple's success but Dell and Yahoo have also been very successful too. I am comfortable owning Dell and Yahoo as core holdings.

The cellvolution is still in the works. Vodaphone has been offering cell phone music for a while but, so far, cell phones with built in hard drives, auto-record and other advanced media features are few and far between. Adding hard drives to phones will make numerous features all the more attractive.

For example, the concept of auto-record and auto-archive is really big.

TIVO has raised the question of why not auto-record everything. GOOG has taken the next step. GOOG has demonstrated that the cost of digital space is now so cheap that every email can be auto-saved and auto-archived. GOOG says lets put the entire text of every single book in the world on-line! Why not every phone call? Why not have a radio that automatically records every song you receive? Once you receive it, you can play it back as often as you want. It was not that long ago when a 20G hard drive cost $6,000 dollars and was as big as a computer monitor. The Dell DJ is about the size of a pack of cigarettes and sells for $199 (prices coming down hard).

SBC and Comcast have deals in place with MusicMatch. $7.95 per month may sound like a lot for a music jukebox service. However, if this music was received on your cell phone and transmitted to your car or home stereo when desired, $7.95 would not be a lot. (Accessories to the digital players usually include devices that transmit to an FM channel). $12.95 for a SIRI radio service starts to sound expensive.

I sing (or at least try to sing) in our church's contemporary worship service. Our leader often makes CDs for us. Having the songs on a portable player would be neat. Yes, I could buy a portable CD player, but I would not have it with me when needed; it is hard enough for me to keep track of my cell phone. Besides, when it comes time to load a new tune, I want the director to voice mail it to my phone.

If an old man and his highly educated daughter :) agree that having one device to use as a phone, radio, pocket computer and more is the answer, then a lot of other people agree. It is not clear that XMSR or SIRI will gain much traction in offering their songs over the internet. On the other hand, Yahoo music is available on every computer and Yahoo claims to have agreements with every one of the major cell phone providers.

A few weeks ago, I liked SIRI very much and wrote about it several times. Every time I wrote, a reader would ask another question about SIRI and I would respond. While this endless circle continued, SIRI was in the news and the stock quickly jumped from $3 to $9. I should have sold all at $9. In economics, the majority is always wrong (John Gailbreath)! Too many investors have been willing to buy SIRI at any price. The earnings pie of SIRI compared to the earnings pie of GOOG is on the order of comparing a bath tub to lake Erie. One share of the bath tub water is not even a drip. There are only 1.45 BILLION shares outstanding.

The new local digital radio stations will offer digital music and talk radio for free (minus a reduced amount of commercial time). Prices for music services will be under pressure. SIRI has contents contracts and may win in the long run but the risks seem very high.