Back in March,  I predicted two things were going to happen in publishing:

1. The prices of e-books would rise, approaching that of physical books.  At least for best-sellers and popular authors.
2. The prices of e-book readers would continue to drop, perhaps even through the use of subsidies.

This morning, the Wall Street Journal had a front-page article saying pretty much the same thing.  While the average e-book price has dropped, the pricing of major best sellers has been creeping up, and even exceeds that of hardcovers in a few cases.

The 5-year old inside me is saying, “Nyah, nyah, told you so!”

True, this may not actually be the best thing for publishers, because the wholesale pricing model that has allowed retail prices to behave this way in many cases lowers revenue for them.  Remember, however, that production costs are basically zero.   And publishers are achieving two things they want–expanding the e-book ecosystem, and maintaining a measure of market control, avoiding the Amazonification of e-book prices.

However, as I wrote earlier, the main enabler of this phenomenon  is the inelasticity of demand for popular books.  Unlike in the beginning, e-books now offer more advantages over paper books: bookmarking, definition lookups, sharing, storage, etc.  They are, in fact, a different animal.

Moreover, once people have a reader like the Kindle or Nook, they really don’t have anywhere else to go.  Unless they want to return to lugging heavy hardcovers around, they have to pay the going rate for the e-books they want.  Bits may cost less than atoms, but that doesn’t mean they have to be priced lower.

Yes, the prices of of many less-popular e-books continue to be lower than the paper version.  And yes, people will inevitably begin to sample lesser known and/or self-published authors in an attempt to save money.  Both of these are good things, in my view.

The second part of the thesis is also coming true.  With Nook and Kindle in fierce competition, and tablets going mainstream, prices for e-readers are getting lower all the time.  Only $79 for a basic Kindle these days, though that is an ad-subsidized version.   Low reader prices drives greater adoption, which expands the e-book market, which puts more people in the position of paying high prices for lower cost editions of bestsellers.

Some mornings I just really love reading the Journal.  But not on my Kindle.  At $15 per month, the electronic version from Amazon is more expensive than the print+online subscription price I pay.

Sure is a strange world.  Who’d have thought we’d be paying more for bits than atoms?

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

In addition to the usual candy-coated and breathless quotes from company officials, the NY Times had this comment:  “Cable companies like Comcast have been trying to figure out how to make it easier to chat while watching shows.”  That should have read, “...trying to figure out how to make money from subscribers while they’re chatting during shows.”

May I be among the first to say “Epic Fail”?

People are already chatting while watching shows; some of them on video, surely many on Skype.  For free.  I get using your TV as a large videoconference screen incorporating Skype.  That has value.  But how many are going to pay Comcast a hefty monthly charge so their friend’s face appears next to their favorite show on the TV set , instead of their tablet or iPhone?   Not many, I bet.

Oh, they will undoubtedly snag some consumers who don’t know about Skype already, and who think the idea of chatting with Grandpa over American Idol (assuming you’re both watching live) is cool.  I suspect there aren’t many of those.

Interesting how instead of watching together in one room, the industry vision has become one in which we’re in separate domiciles watching the same thing at the same time, using the Internet to chat about what’s happening on screen.  Looks like Isaac Asimov had it right all along.

Perhaps there are other benefits from a Skype/Comcast hookup.  I’m not holding my breath on this one.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

Time Warner Cable (TWC) has been sued by Viacom (VIA) over an iPad app it recently released.  The app allows TWC subscribers to watch live TV on their iPads within their own home, effectively turning the iPad into a TV.  It streams channels wirelessly to the iPad, typically from a router attached to the subscribers’ internet cable modem.

Cablevision (CVC) has released a similar app, although because it streams directly from the cable box (plus wireless adapter add-on), this one does not require cable subscribers also to be internet customers.

Broadcasters such as Viacom are claiming that TWC and Cablevision have “no iPad video streaming rights.”  Time Warner Cable, for its part, insists it can send TV to any device in the home.

Meanwhile, ESPN (DIS) has taken another tack, releasing their own app that lets properly identified subscribers from Time Warner Cable, Verizon (VZ), or Bright House, to stream its live content to an iPad from any location.  This is an example of the “TV Anywhere” initiative envisioned by the likes of TWC and Comcast (CMCSA) among many others.

And on another front, startup company Zediva is being sued by all 6 major movie studios over its service that “rents” DVDs to consumers and then streams them over the internet.  Each customer has exclusive use of a DVD disc and a DVD player.  Again, the studios are claiming copyright infringement, calling Zediva’s business model a “gimmick”.  All Zediva is really doing is putting a DVD into a player, pressing play, and then sending the customer the output signal directly.  They just happen to be using the internet instead of a wire.

[Next, I imagine, it will be illegal for me to stand outside my neighbor's house and watch a DVD on his TV through the window.]

Logically, Zediva and the cable providers seem to be on reasonably solid ground.  Legally, who knows?

Regardless, the notion that this has anything to do with distribution or copyrights is beside the point.  What’s really being fought over is the ability to make money in new ways by using the Internet.  Or as the late Senator Ted Stevens of Alaska laughingly called it, “a series of Tubes.”   Time Warner Cable’s app does in fact use IP to move video around, though it is exclusively on its own cables.  And while Zediva uses the open internet, there is precedent in the form of virtual circuits to think of that transmission channel as being private and dedicated.

In a way, these links are functionally no different than wires.  Perhaps Senator Stevens was more right than his detractors thought.  Companies are using the internet just as if it was a series of private pipes, or tubes.  So why wouldn’t these distributors have the right to send video this way?

Because it interferes with the content owners and networks from getting two things they dearly want:  (1) unfettered control over using the internet to sell content directly to consumers, and (2) ownership of customer information for marketing (read: monetization) purposes.

Every movie Zediva rents and shows is one that a studio can’t derive its own rental income from.  When people watch Mad Men or Survivor from the dining room on an iPad, that’s one more episode that can’t be monetized through iTunes or Netflix (NFLX), or viewed on ad-supported Hulu.

What’s worse, when an iPad,  smartphone, or netbook is used to view video streamed through a cable or satellite provider, the content sellers have no information about the end user.  If they could sell or rent directly, they’d gain valuable demographic and other information that could be used for marketing purposes or monetized via ad networks.

They know that content is not king; the customer is king.  Networks and studios would love to be able to eliminate the middle man if they could.  And they don’t want to be beholden to Apple (AAPL), the way music publishers are now and magazine publishers are quickly becoming.

To own the customer is to be prepared for the day when consumers “cut the cord” on cable.  And when they use tablets and smartphones instead of a TV.

In 1993, Nicholas Negroponte (the founder of MIT’s Media Lab) made a prediction that became known as the “Negroponte Flip.”  He said, in essence, that what was wired would become wireless, and vice-versa.  When you consider that our phones are becoming wireless, and over-the-air TV is increasingly via cable or fiber, Negroponte seems to have nailed it.  We have a similar flip occurring with centralized mainframe computing moving to distributed (PCs) and then back to centralized (the “Cloud”).

Could it be that just as we’ve reached the point where most TVs are flat, and no longer have tubes, we are moving to a time  when the “tubes” are what’s important, and video is no longer watched on TVs?

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

A few weeks back I attended a TalkNYC event on TV Apps, social TV, and Interactivity.  More recently, the Connecticut Digital Media group hosted a similar panel covering online video.   Quite a diverse set of speakers representing interests that spanned the spectrum of content owners, creators, advertisers, and technologists.  Because of the multiplicity of viewpoints it’s not clear anybody really had answers to any of the above questions.  Frankly it’s just too early to say with any certainty how everything will turn out.  However, that’s not stopping many companies, investors, and other stakeholders from trying.

Nor will it stop me from sticking my neck out.

Interactivity is not new. It just jumped networks.

People have watched TV together, talked about it, and read about it, nearly since the time when television sets replaced the family campfire (radio).  Discussing the popular show of the day at school, or over the back fence, is a time-honored tradition.  I’m not sure which was invented first, the TV or the office water cooler, but they seem to always have been linked.

The difference now is that this interactivity, this social connection about video, has gone online.  That means it’s no longer geographically bound.  And technology has allowed viewing habits and preferences to be accessed, measured, monitored, interrupted, shared, and influenced, in ways that nobody dreamed possible.

In effect, social interactivity over video is now at scale.

The interesting question is whether that scale has come at the cost of depth.  Are we now more involved with our TV, or less?  Are we more deeply connected with those we share it with, or are our relationships numerous but more shallow?

If there’s nothing to watch on TV, maybe we don’t care

I see this as a massive tradeoff, because in the end attention is a finite resource. Teens and tweens are increasingly watching TV while at the same time reaching out over social networks, looking up facts, tweeting about what they’re seeing, and controlling what they watch.  (Even digital immigrants like me sometimes embrace this multitasking.)

On the one hand we’re more involved with each other, as we converse over our portable, miniaturized water coolers, make an online purchase of the purse some actress is carrying, and signal an advertiser we like the blue convertible more than the red.  On the other hand, how much attention are we really paying to the TV show now?

Are we seeing a move from long-form content to short-form video just because we require time between clips to text each other about it?

And this doesn’t even address the move to content-on-demand.  What will there be to talk about when nobody is watching the same thing at the same time?  Are we then simply interacting with databases?  Or will we instead find ways to queue up our shows in synchronization with our friends?

Does Interactive TV even require a TV?

Watching “lean back” media like television still tends to be a shared experience.  Conversely, using a screen on a computing device has typically been a solitary activity.  You might be communicating with others over a social net but you’re likely to be physically alone.

This disconnect might explain past failures at “interactive TV”, and seems likely to limit the amount that televisions themselves can become interactive, despite the claims of some that want to build apps and widgets right into the device.  Or—heaven forbid—turn your TV into a large screen PC.

I certainly wouldn’t want someone in the room updating their Facebook profile on screen and interfering with my enjoyment of whatever I’m watching.  Or expanding an app that eats up screen real estate.

This means the TV isn’t going to get very smart, despite manufacturers ramping up production of internet-connected sets.  Oh, there will be some small, useful, unobtrusive apps or “bugs” that will get built in, but for the most part widgets will be D.O.A., and the TV itself will remain passive.

Interactivity will be a multi-device experience. And the smarts will be—as they already are—in the other gadgets.

Whether via a laptop, an iPad, a smartphone, or some combination resembling a remote control, such connected devices will allow viewers to interact with shows, products, celebrities, ads, and each other.  We will “check in” to the shows we’re watching, vote on outcomes, rate shows, comment on what we’re seeing, buy items, and share everything.

We will control the horizontal. We will control the vertical.

More importantly, our external devices will allow us to efficiently find content we want to watch, and then control how it gets to our TVs or other viewing devices.  And even move it between devices.

These last two interactions—filtering and directing video—represent the stickiest problems.   It’s clear that consumers are increasingly demanding a migration from strict linear programming (TV shows on a set network and schedule each week) toward a video-on-demand world.  And the ability to move their content to any device they want, often in the midst of watching it.

But how do we find anything?  What replaces the filtering function the old style networks performed for us?   To what extent is passive profiling by content providers and marketers, and active participation in social networks, going to keep us from sinking in a sea of video dreck?

Even if we find the things we really want to watch, will we be allowed to access and consume them the way we want?

There is a lot of experimentation going on in the marketplace around these questions.   Set top boxes, iPad apps, content aggregation sites, changes in theatrical windows, new DVR functionality, smartphone integration, and more.   Precious little standardization and no agreement on business models, though.

Because of conflicting corporate interests, differing technical approaches, content licensing agreements, regulatory quagmires, and general resistance to change, it will take years for common approaches and standardized technology to make them a reality for a majority of us.

But many are trying, and a few will succeed.  It will happen.  Because after all, we humans are interactive creatures.  And we still want our MTV.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

I think Dan’s wrong on this one.

True, an e-book should be priced lower than the hardcover.  It’s certainly cheaper to produce.  But cost doesn’t drive price, demand does.  Cost simply determines how much profit there will be, if any.

People buy e-books (and e-book readers–more on that in a minute) for a lot of reasons.  But most of them are related to convenience.  The ability to download books, a large and growing selection, the ability to carry an entire library with you, low weight, getting a new book the day it debuts without fears it will be sold out.   And yes, they’re almost always cheaper.

Consumers have always been willing to pay for convenience.

If people really like e-books, why wouldn’t they pay more for the convenience?  Now that they’ve shelled out good money for their Kindle (or Nook, or whatever) they’re sort of stuck, aren’t they?  Are they really going to go back to buying hardcovers–and trashing their e-readers–just because the book price went up?

Let me get a show of hands.  How many of you walked back into the bank to use a real teller once they started charging a few bucks to withdraw money from an ATM?  Not many, I bet.  Remember when there were hardly any commercials on cable TV, because you paid a subscriber fee for it?  Did you cut the cord because ads started showing up?  Nope.

Publishers aren’t stupid.  They’re going to charge as much as the market will bear for an e-book.  But they have to be deliberate in how they go about it.  For this to work they need two things:

1. Enough separate e-book outlets so they maintain a measure of pricing control (no iBook store to monopolize distribution), and
2. Enough e-book readers on the market so they have a critical mass of customers.

It’ll happen gradually, but e-book prices will drift up.  They may never exceed hardcover prices–perhaps they’ll end up somewhere between that point and retail paperbacks.  Whatever the level, it’s clear publishers will be raising prices on more titles in the future–particularly popular authors and hot books.

Which brings me to my second point.  If publishers and sellers require lots of e-book devices in the market to maximize profits from e-book sales, what do you think will happen to the price of e-readers?

If you answered “they’ll drop like a stone”, go to the head of the class.  When you expect to make most of your money from the blades, why in the world would you charge people for razors?

Sure, e-readers might not actually become “free”.  Perhaps they’ll be subsidized like cell phones by the operators whose networks are used to download the e-books.  Sign up for AT&T service (NYSE:T) for 2 years, get a starter cell phone, and we’ll even throw in a Kindle.  Or agree to buy 2 e-books a month from Barnes and Noble (NYSE:BKS) over the next year, and your Nook costs you nothing.

Consider this:

• The number of available e-readers has grown significantly
• You can already read e-books on other (multi-purpose) platforms like PCs or tablets
• Apple (NASDAQ: APPL) has sold more than 8 million iPads already, while Kindle sales are at best less than half that
• Entry-level e-readers have dropped dramatically in price since they premiered (though new ones with more features still command a premium).

E-reader prices will trend downward to the point where they’ll be as cheap as, well, firewood.   And as that happens, e-book prices start to rise.

This all maximizes publisher profit .  It also increases revenue for distributors like Amazon (NASDAQ: AMZN) and Barnes & Noble who provide the devices.  They will more than make up the cost of e-readers with increased profit on e-book sales.

The real beauty of this strategy is that it effectively takes the cannibalization of physical book sales completely off the table.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

In particular, Allow, Ltd. , a London firm, is featured.  Like others in this space they act as an intermediary on your behalf.  First, they help you remove your information from marketing lists.   Then second, they broker transactions between you and various marketing agencies.  You fill out some personal information and also list purchases you are planning to make in the near future, and this forms the basis of one’s appeal to specific marketers.

For instance, let’s say you are in the market for a car, or a credit card, or refrigerator.  By allowing a marketer who is selling one of those things to serve you appropriate ads, you might be worth as much as $10 to them, because of the tremendous specificity of the targeting.  For their effort, Allow takes a 30% cut of your revenue.

Not too dissimilar to paying directly for one’s attention.  Perhaps that will be the next step in the evolution of online privacy and data mining.  In any event, the rest of the article provides a nice overview of how this space is evolving, and is worth a look.

Would you sell your personal data for a few extra bucks?

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

[In my view, Firefox is the iPhone of browsers, with the most extensive number of apps that can be added on to customize and increase its usefulness.]

Even though this addition by Mozilla will require the cooperation of advertisers and ad networks–which may be meager at best–it is a welcome step in the right direction.  Anything that gives more control to users over information that is important to them is an improvement.

True, people are often far too cavalier about how they share personal information on the web.  See Facebook or MySpace for examples.  On the other hand, some companies continue to skirt the edge of ethics in capturing and using this information.   See Facebook again, which frequently changes its privacy features in such a way that personal information is shared unless users opt out.  Then it conveniently (and intentionally) “forgets” to inform them clearly about the implication of such changes and how to reverse them.

Other companies simply capture site visit and click information to build de facto profiles of users, and then sell this to ad networks.  While this information is arguably less critical (we’re not talking phone numbers, a child’s school address,  or the hair color of old girlfriends here), the gathering of it is totally under the radar–most users are completely unaware it’s even going on.

In any event, I’m an avid Firefox user, so I’m happy to see them taking this step.  But it doesn’t go far enough.  Through online tacking, companies are continually pursuing that advertising holy grail–a “demographic of one” that lets them perfectly target ads to individuals based on their unique interests and tastes.  If this is truly valuable to advertisers, and really helps them save money in the process, then I say let them pay for it.

I propose to “opt in” to personal tracking if ad networks will pay me for it.  Why should they get info on my habits for free?  If nobody is willing to pay me, I’ll opt out of tracking altogether and they get nothing.

This is just a precursor to an idea I’ve floated before:  Pay for Attention.  Why should Google (NASDAQ: GOOG) and other middlemen make all the money for “delivering” me to advertisers?

It’s my attention that advertisers want.  Let them pay me for it directly.  Disintermediation is a time-honored web practice, after all.

If you want your banner add to show up next to my Facebook feed, pay me.  If  you want your ads to show up in my search results, pay me.  My attention is worth a lot, and in today’s environment of continual distractions I have no intention of simply giving it away.

You think this power doesn’t already exist?  Try this

• Clear your browser cookies daily
• Clear your browser cache every time you close the browser
• Install an add-in such as Adblock Plus to your Firefox browser.

You’ll be amazed at how bad the “targeting” becomes, and in fact how few advertisements you see at all.  Some months ago a friend commented to me that he loved Facebook but hated the ads.  I realized I had never seen an ad on Facebook before.  I fired up Internet Explorer (not equipped with my ad blocker) and was appalled at all the banner ads being thrown at me.

So take control of your profile until such time as ad networks are willing to pay you for it.  And if you are a startup looking to commercialize this idea of Pay for Attention, contact me, I’d love to help you get it off the ground.  I think the concept has commercial legs.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

• Large customer base and high growth
• Low cost structure
• Excellent management team
• Outstanding market niche

As mobile networks grow, the interconnections between towers and switching hubs (backhaul) requires faster and faster connections.  Putting in microwave solutions such as those Ceragon (and Nera) provide is signficantly cheaper than replacing pokey copper T-1′s with optical fiber.  And in the parts of the world where growth is fastest (China, India, etc.) there isn’t even any copper to replace.  Moreover, in many regions (e.g Africa, South America) the topology precludes wired backhaul.

Ceragon, with its roots in the Israeli military, has long been the technology leader in this segment.  The addition of Nera’s complementary product line and customer set (particularly in South America) will provide a significant boost to its prospects.  It also reduces reliance on Nokia-Siemens, Ceragon’s biggest customer.

But the biggest advantage coming from this consolidation is that it will ultimately make Ceragon a much more attractive takeover candidate than it already is.  Potential acquirers are the large, diversified telecoms like Alcatel-Lucent, Nokia-Siemens, NEC, or Ericsson.

This has been a long-term buy-and-hold recommendation of mine for years, and that’s even more so now (though I’d probably wait a quarter or two for a lower price as Ceragon absorbs some losses from the acquisition and rationalizes Nera’s cost structure).

I would expect it’s even more likely to see Ceragon taken out itself, perhaps within 2 years or so.  I plan on holding shares when it is.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

Recently I noted how badly Clearwire’s numbers looked (NASDAQ: CLWR).  But long before that, I made the point that WiMax was overhyped and that founder Craig McCaw had a history of building up large wireless enterprises and exiting at the top–with as much coin as possible.

I got flamed from many for both opinions, largely from non-technologists who seemed more in love with their portfolio than they were well-versed in wireless telecom.

Today it was announced McCaw is practically sneaking out the back door, right after CLWR announced large layoffs amid doubts about its survival, and more important, right after a large $1.1B debt offering.

The smartest rat seems to have just jumped overboard.

Anybody wanna buy a deck chair on this puppy?

Disclosure: I hold no position, either long or short, in any stocks mentioned here.

Location, location, location.  That’s the mantra of what drives value in the real estate industry.  However, the modern version might well be, “Location, just less of it.”

Today, Barnes & Noble (NYSE: BKS) announced it is putting itself on the block, looking for a buyer as it struggles to survive in a world of digital books.

[Frankly, I'm not so sure it's digital books that are causing the problem so much as online purchases.  Certainly, digital books are growing wildly, but off of a very small base--according to Publisher's Weekly, they amount to only about 1% of the market.  So maybe not a short-term catastrophe, though it's certainly a future threat.]

Either way, the problem with Barnes & Noble is real estate.   One of the key ratios by which they are measured is return on assets–and with their large number of expensive stores, the fewer pricey books they sell, the more the operating metrics plummet.   It’s almost like reverse leverage.

For years now, booksellers have sought other means to drive traffic into their retail outlets, peddling music and videos, opening in-store cafes, offering reading areas, etc.  All to generate a higher return on their store  “assets”.

I have this strange feeling of deja vu.

Blockbuster (BLOKA.PK) now trades on the Pink Sheets  for exactly the same reason.  They too were fixated on driving traffic to their stores.  They too operated under the assumption that their true competitive advantage was their locations, and they had to keep earning a return on those assets.  This caused them to make some rather odd decisions, such as enticing people to drive to their stores just to fill up a media player with movies to take home.  Meanwhile, Netflix ate their lunch shipping discs (and now simply bits) directly to customers.

Similarly, Amazon (and others) killed Toys R Us, who had a similar problem with too much real estate and the accompanying high overhead.  Why drive your car to the crowded store (along with acquisitive children badgering you for every bright and shiny thing they see) when you could have Christmas delivered to your door?  And cheaper too.

It’s really a shame, as I still enjoy browsing in bookstores. Checking up on favorite writers to see if they have something new.  Finding an unfamiliar author to take a chance on.  But there’s no question they are struggling.

Probably some private equity firm will buy Barnes & Noble, and turn it around, as was the case with Toys R Us.  Perhaps even Blockbuster will survive.  Stranger things have happened.  However, one thing is for sure:

There will be a lot fewer locations.

Disclosure: I hold no position, either long or short, in any stocks mentioned here.