The UpStream

Best Buy Cuts DVD Floor Space, FYE Says They Will Profit from it

posted Sunday Jun 2, 2013 by Nicholas DiMeo

Best Buy has been in the news a lot lately. From cutting its workforce in August along with its retail footprint to posting an $81 million loss this quarter, trouble seems to keep up with the yellow tag store. This week, in the earnings call that the company announced the big loss in, Best Buy also said they will be shrinking the amount of floor space they give DVDs and Blu-ray discs. They, like many people, have discovered that people are buying physical media less and less, and have decided to - albeit a little late - actively do something about losing money in this area. So, who hasn't seen this radical outlook on the current state of the entertainment industry yet? FYE.

Yes, the company FYE, who has been closing stores down nationwide to a point where they don't even exist in some large markets, has decided to go the other route and instead expand its DVD section to cater to the customers who will be potentially ousted by Best Buy. With FYE posting a $1.8 million profit gain, $800,000 lower than the previous year's Q1, along with an almost $30 million revenue drop year-to-year, the company needs to take drastic measures to really stop the bleeding. And, with as many store closures as we've seen from them, you'd think it would be enough, but sadly FYE feels that this move will actually have them seeing more positive numbers moving forward.

Of course there are some stats to look at. FYE has seen a 6.6 percent drop, on average, in sales overall with each passing quarter. This, they say, is due to less foot traffic and very lackluster sales in the music department. For DVDs and Blu-ray discs, sales haven't even gone up a percent, but still make up almost half of the total income for FYE. So why bank on that category providing revenue and profit growth instead of closing 26 more stores? CEO Bob Higgins, said,

Video sales continue to be driven by strong sales of Blu-ray as competitors exit the DVD business, and the strength and depth of our (disc) selection provides us with a competitive advantage. We've always considered (Best Buy) our No. 1 competitor (in packaged media). We didn't get any impact in the last quarter, but I would expect that in the future we will.

I don't know how far into the future FYE will even make it in the first place. Some analysts are thinking FYE is genius for taking this tactic, but even rental services like Netflix and Redbox are seeing a decline in physical disc rentals, especially now that even Redbox has moved to video streaming. What do you make of this? Is this a smart move for FYE? Sound off in the comments below.

Spotify Finds You New Music with New Discover Tab

posted Sunday Jun 2, 2013 by Nicholas DiMeo

Spotify Finds You New Music with New Discover Tab

When Spotify picked up a second round of funding late last year I knew big things were going to be in store for the music-streaming service, and it wasn't just going to be expanding to eight new markets. Instead, Spotify finally introduced something I've been wanting to see for ages now - a "find new music" feature that isn't the current What's New tab of common Billboard hits.

Six months ago Spotify announced the Discover tab in a press conference but, until this week, nobody saw or heard anything else about. Now, using a better system than what Pandora uses to play you your next track based on what you've "liked," Spotify's Discover software uses your current listening habits, artists and playlists to come up with relevant artists that they think you may be interested it. Further, the service also offers curated content from Tunigo, Pitchfork and Songkick, just to add some more options to your music diet.

Even better, there's an option called Audio Preview, giving you the ability to hear a new track without leaving your place in your current music-listening cycle. Simply click and hold on any play button on any song in the Discover tab and you'll hear said song. Let go of the mouse button and you're right back to where you were. Now, if you don't see all of this yet, don't worry, as this is being rolled out to the web player first, and gradually to mobile and the PC software, so some may get it before others.

Overall, I really like the direction of where Spotify is heading. The company has found the right mix of social to include into its offering, and then has extended the option to listen to music the way you want to, in a very natural and unforced way. The only other competitor that has been able to do that somewhat seamlessly is Xbox Music - and that's simply because you have to get used to not calling it Zune anymore. In the case of Spotify, I'm finally able to have new, and in some cases relatively unknown, artists come right to my screen, without having to search out specific songs and hopefully stumble across some new tunes. Oh, on that note, has anyone else heard of the group RAC? They do some fantastic remixes!

Sony Considering Media Division Spin-Off Amidst Sales Target Reduction

posted Sunday Jun 2, 2013 by Nicholas DiMeo

Sony Considering Media Division Spin-Off Amidst Sales Target Reduction

Sony's Kaz Hirai took over as CEO of the company last year and right away announced a revival plan to turn the company around. Sony bought cloud-gaming company Gaikai for $380 million and then a report came out that said the PS3 is the number one player for Netflix streaming. Now, Sony is considering a proposal by Daniel Loeb's Third Point LLC hedge fund, Sony's biggest stockholder, to sell off twenty percent of its media division. This would include some big titles, name and franchises, like the Spider-Man series and platinum recording artist Adele.

Loeb says that this spin-off of sorts would help Sony get out of the red, by giving Sony some extra cash on-hand and potentially giving Sony a 60 percent raise in its stock price. Kaz Hirai said that the "proposal is one that affects a core part of Sony's business and the direction of our management, so the Sony board will give it thorough consideration before replying to Mr. Loeb."

After the company gave its press briefing, the stock price soared to its two-year high, up 5.9 percent in just a few hours, all from the news of a considered semi-restructuring. However, in related news, Sony is seeing a downturn in its camera and smartphone/tablet product categories, and has lowered its target for this fiscal year. The outlooks now stand at $12.7 billion and just over $13 billion, respectively. On the matter, Hirai acknowledged there is still work to be done, saying that, "while there are encouraging signs of change, the revival of our electronics business remains our task."

In the meantime, Sony has brought on Morgan Stanley and Citi to review the spin-off proposal before the company will respond or reply to Loeb. In ending the call this week, Hirai closed with,

It's not going to be an overnight change but I think we're heading in the right direction.

For Sony, it is on its most crucial turning point of the company's existence, with this holiday pitting the PS4 against Microsoft's Xbox One. Sony's future could definitely rely on how well the console sells through the end of the year. If spinning off the media division helps Sony stay afloat with some extra cash, this might also help by giving them some money to spend on advertising the PS4.

DISH Network Challenges Sprint on Two Fronts

posted Saturday Jun 1, 2013 by Scott Ertz

DISH Network Challenges Sprint on Two Fronts

It has only been 2 years since DISH Network bought Blockbuster and did absolutely nothing with it. Now, DISH is interested in picking up two more distressed companies, hopefully with a different fate. Even though Sprint has entered into a tentative deal with Softbank, DISH has offered $25.5 billion, as opposed to Softbank's $20.1 billion.

This week, as the Softbank deal gets initial government approval, DISH made a bold move, taking out a full-page ad in The Washington Post, questioning the security issues with a Japanese company having majority control of a US wireless carrier. Of course, we know that T-Mobile International AG owns T-Mobile US, but that one is alright. He does have a point, however, as foreign interests might want in on our wireless carriers for nefarious reasons.

Immediately following the ad, DISH Network also upped the ante on their bid to purchase Clearwire. Sprint had originally offered $2.97 per share to take compete ownership of the company, which DISH countered with $3.30 per share less than a month later. This week they offered $4.40 per share, countering Sprint's own increased offer of $3.40 per share. After the Sprint increase, the Clearwire board of directors recommended to the shareholders to accept the offer.

DISH Chairman Charles Ergen said,

The Clearwire spectrum portfolio has always been a key component to implementing our wireless plans on delivering a superior product and service offering to customers.

So, does that mean they will continue to compete, possibly with themselves, to own the company? Is DISH so focused on competing in the incredibly rough wireless industry that they will cost themselves extra to purchase a company that could be owned by a company they also want to purchase? Only time can tell, but Ergen is playing an interesting game of poker against a competitor who doesn't know they are playing.

Atari Landfill to be Excavated by Film Crew

posted Saturday Jun 1, 2013 by Scott Ertz

Atari Landfill to be Excavated by Film Crew

It has been 20 years since Geraldo Rivera found a stop sign on live TV, opening a vault he believed belonged to Al Capone. In the spirit of tradition, a film crew from Canada has gained approval to dig up a landfill where they believe they will uncover millions of unsold copies of the disaster known to the world as Atari's E.T..

In 1983, Atari released a game so bad it affected the industry by almost ending videogames forever. Legend has it that the company dumped the remaining cartridges, along with extra consoles and additional items in a landfill in Alamogordo, New Mexico. While the landfill and Atari dumping are entirely confirmed, the contents still remain a mystery... kind of.

Last year a book entitled Atari Inc.: Business is Fun was released covering this exact topic. The author, Marty Goldberg, spoke to employees of the company, dump truck drivers, city employees as well as local press from the time, all confirming that the myth of 3.5 million copies of E.T. being dumped is nonsense. In fact, everyone involved claims that the content dumped was related to manufacturing being moved from the US to China, requiring cartridge parts, console parts and other equipment to be disposed of.

Of course, the fact that the landfill was sealed and later covered with concrete is a bit odd and certainly suspicious. Suspicious, however, does not equate to interesting. My guess is, when this site is dug up, all that will be found is exactly what everyone involved has claimed for years is contained there: garbage. That does not prevent me from feeling a little excitement about the possibility of artifacts of the beginning of the videogame industry being uncovered, terrible game cartridges or not.

Google Ordered to Turn Over Warrantless Data Requests

posted Saturday Jun 1, 2013 by Scott Ertz

Google Ordered to Turn Over Warrantless Data Requests

In the time after the Sept. 11 attacks, a hasty bill was passed, known as the USA Patriot Act, which opened all kinds of capabilities for the government to spy on its citizens without having to worry about that pesky Constitution. One of the easy ways of collecting information about people is with national security letters. These letters come from the FBI, asking for certain information with a few caveats: they require no judicial review and the recipients are not allowed to talk about the request.

Google has received 19 of these letters and refused to respond positively to any of the requests. In fact, Google filed suit against the federal government, claiming that the requests are unnecessary and unconstitutional. Last week U.S. District Court Judge Susan Illston ordered Google to comply unless it can prove that the letters were sent without proper process. Google can still appeal the ruling, but has had no comment on the matter.

Illston currently believes that 2 of the letters could have been processed incorrectly, but currently believes that the other 17 are proper. Unfortunately the ruling and suit did not indicate what kinds of information the government was seeking, but with services like Google Search and Gmail being a big part of many people's lives, there is a lot of information about a lot of people that could be at jeopardy here.

This ruling comes as a bit of a surprise based on a previous ruling from Illston in March. In a case between the Electronic Frontier Foundation and the FBI, Illston ruled that the demand that recipients cannot speak of the request was unconstitutional, violating free speech rights. Kurt Opsah, counsel for the EFF, said of the ruling,

We are disappointed that the same judge who declared these letters unconstitutional is now requiring compliance with them.

This trend of the government asking for information without judicial involvement is a frightening one, but it is nice to see someone fighting against it, even if it is surprisingly from Google.

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