Spring Design: Here’s How Barnes & Noble Turned Our Reader Into the Nook

perry_masonPuzzled by the weird story of the “Alex,” the would-be e-reader that looks something like the “Nook,” the e-reader Barnes & Noble introduced last month? Then this won’t clear anything up: Spring Design’s court case against the bookseller, which it says broke an “implicit promise” and stole its idea for a two-screen device.

Spring sued Barnes & Noble yesterday in U.S. District Court in San Jose, Calif., accusing the bookseller of turning its “Alex” design into the Nook. I have embedded a copy of the complaint below, but here’s the short version:

  • The Nook, which is on sale now and is supposed to ship this month, runs on Google’s Android (GOOG) platform and sports a large monochrome screen and a smaller color screen. The Alex, which doesn’t appear to be in production yet, is also supposed to run on Android and will feature two screens.
  • Spring signed an NDA with Barnes & Noble (BKS) on Feb. 12 this year and says it first met with the company to show off its design for a dual-screen e-reader shortly after that.
  • By May, Spring was showing the design to B&N.com president William Lynch. Spring says Lynch warned it not to work with Amazon (AMZN) because that company would “steal Spring’s unique idea.”
  • The two companies talked a few more times during the summer.
  • Spring says that “up until B&N’s Nook announcement on October 20…it believed that it was disclosing the confidential features of its Alex device in exchange for B&N’s implicit promise that it would seriously consider acquiring Spring’s product.”

Happy to hear from experts who know consumer electronics and/or trade-secret law, but I can’t say I’m convinced by Spring’s argument.

For one thing, Barnes & Noble would have had to work very fast to copy Spring’s design and get it to market in less than a year. Another problem with Spring’s case: As far as I can tell–based on its own complaint–Spring only showed Barnes & Noble some PowerPoint slides, which means there wasn’t much for it to copy.

Eric Kmiec, Spring’s VP of sales and marketing, told me last month that he and CEO Priscilla Lu were brought in this summer to “focus” the Cupertino, Calif.-based firm, which had previously been “playing around in R&D” and had “no real market focus.” It’s hard to believe that the bookseller had made a promise–even an “implicit” one–to buy something that didn’t exist.

Anyone have a different take? Please let me know via email or in comments, below.

nook suit

A Slow-Motion Recovery: Viacom Says Things Aren’t Getting Worse

sponge_bob2Here’s another quick glimpse at the advertising market, courtesy of Viacom. The cable giant says ad sales are still down, but that the rate of decline is slowing. And in the fall of 2009, that constitutes pretty good news.

Viacom (VIA) says Q3 ad sales dropped four percent in the U.S., which is two points better than Q2. Companywide, revenues dropped three percent to $3.3 billion, which is what Wall Street expected, but the company slashed enough costs to produce an earnings surprise: After adjusting for one-time charges, Viacom posted earnings of 69 cents a share, well above the 57-cent consensus.

The company’s overall results do a nice job of illustrating why media companies and investors are so enamored with cable TV these days: Even though ads are slumping, the company was able to wring more out of cable systems providers (and their subscribers), which more or less kept overall cable revenue flat.

Viacom’s movie business is much less meaningful than its TV operations, but in this case it underperformed enough to drag the rest of the business down. Viacom blames a six percent drop on crummy DVD sales, which it says suffered compared to strong results a year ago.

But every studio in Hollywood is grappling with crummy DVD sales: The only real question is whether that’s a function of the economy or something larger.

I’ll  listen in to the 8:30 eastern call and report back if there’s anything else worth noting.

UPDATE: CEO Philippe Dauman mentions the new “Sponge Bob Tickler” iPhone app, which I believe means that at least one Viacom employee has won a private bet. Waiting to hear more about Q4 guidance.

The core question: Are Dauman and other Viacom execs mildly optimistic about recovery because of an easy comparison to a year ago, or because ads are really coming back? A little of both, Dauman says: “Right now the tone is feeling better, but we have to be cautious.”

Don’t Tell a Soul! Media, Tech Moguls Take Manhattan for Semisecret Quadrangle Conference.

don't talkWouldn’t you like to bump elbows with media moguls and hear from the likes of Google (GOOG) CEO Eric Schmidt, Twitter co-founder Biz Stone and News Corp. (NWS) scion James Murdoch? Me too!

Alas, the Foursquare conference, hosted by the Quadrangle PE fund, is an invitation-only affair. And the event, which kicks off tomorrow, is closed to the press except for reporters onstage to interview the stars. And those conversations don’t get released to the public.

That’s a particular bummer this time. Because the Quadrangle guys–who have had a rough year–had the foresight to get a lineup that includes GE (GE) CEO Jeff Immelt, who appears to be in the final stages of selling NBC Universal to Comcast (CMCSA) CEO Brian Roberts, who will also be onstage. Sure would be nice to hear what they say.

Another panel that piques my interest, if only because of the title: “Are Popularity and Profitability Correlated?” It features Twitter’s Stone, LinkedIn founder Reid Hoffman and YouTube co-founder Chad Hurley. And would-be moguls are represented by a start-up pitch panel that includes Dennis Crowley of Foursquare, the superbuzzy mobile service whose name has nothing to do with Quadrangle’s conference.

So once again, here’s the complete list of those you won’t be hearing from this week as they gather at the Plaza in Manhattan. Unless, perhaps, one of my more ambitious colleagues sneaks in–I’m thinking of you, Bobby MacMillan–and gets us a first-hand account.

EMILIO AZCÁRRAGA President, Board of Directors and CEO, Grupo Televisa
DENNIS CROWLEY Co-Founder, foursquare
BARRY DILLER Chairman and CEO, IAC; Chairman, Expedia, Inc. and Ticketmaster Entertainment, Inc.
REED HASTINGS Founder, Chairman and CEO, Netflix
REID HOFFMAN Executive Chairman and Founder, LinkedIn Corporation
CHAD HURLEY CEO and Co-Founder, YouTube
JEFF IMMELT Chairman and CEO, GE
PAUL JACOBS Chairman and CEO, Qualcomm Incorporated
LESLIE MOONVES President and CEO, CBS Corporation
ANNE MULCAHY Chairman, Xerox Corporation
JAMES MURDOCH Chairman and Chief Executive, Europe & Asia, News Corporation
BRIAN PHILLIPS CEO and Co-Founder, Thread
BRIAN ROBERTS Chairman and CEO, Comcast Corporation
PAUL SAGAN President and CEO, Akamai
ERIC SCHMIDT Chairman and CEO, Google
IVAN SEIDENBERG Chairman and CEO, Verizon Communications
BIZ STONE Co-Founder, Twitter
HOWARD STRINGER Chairman, CEO and President, Sony Corporation
DAVID ZASLAV President and CEO, Discovery Communications

MARC ANDREESSEN General Partner, Andreessen Horowitz
KEN AULETTA Author and Writer, “Annals of Communications”, The New Yorker
MARIA BARTIROMO Anchor, Closing Bell; Host & Managing Editor, Wall Street Journal Report, CNBC
JAMES CITRIN Co-Leader, Board & CEO Practice, North America, Spencer Stuart
DAVID FABER Anchor, Reporter, CNBC
MICHAEL HUBER Co-President and Managing Principal, Quadrangle Group
BECKY QUICK Co-Anchor, Squawk Box, CNBC
GEOFFREY SANDS Director & Leader, Global Media, Entertainment & Information Practice, McKinsey & Co.
JOSHUA L. STEINER Co-President and Managing Principal, Quadrangle Group
GEORGE STEPHANOPOULOS Anchor, This Week; Chief Washington Correspondent, ABC News

Apple’s iTunes Pitch: TV for $30 a Month

appletvWould you pay $30 a month to watch TV via iTunes?

That’s the pitch Apple has been making to TV networks in recent weeks. The company is trying to round up support for a monthly subscription service that would deliver TV programs via its multimedia software, multiple sources tell me.

Apple (AAPL) isn’t tying the proposed service to a specific piece of hardware, like its underwhelming Apple TV box, or its long-rumored tablet/slate device. Instead, it is presenting the offer as an extension of its iTunes software, which already has a huge installed base: A year ago, Apple said it had 65 million iTunes customer accounts.

A so-called “over the top” service could theoretically rival the ones most consumers already  buy from cable TV operators — if Apple is able to get enough buy-in from broadcast and cable TV programmers.

That’s a big if: Apple has told industry executives it wants to launch the service early next year, but I have yet to hear of a single programmer that has made a firm commitment to the company, which has tasked iTunes boss Eddy Cue with promoting the idea.

But industry executives believe that if anyone jumps first, it will be Disney (DIS), since CEO Bob Iger has shown a willingness to experiment with Apple and iTunes in the past: In 2005, Disney was the first player to sell its programming on iTunes, via a la carte downloads. And Apple CEO Steve Jobs is Disney’s largest single shareholder, a result of Disney’s 2006 acquisition of Jobs’ Pixar animation studio. Apple didn’t respond to requests for comment.

Network executives I’ve talked to are intrigued with the idea — they are eager to find new revenue streams — but are also wary, for multiple reasons.

Cable networks, for instance, don’t want to threaten existing relationships and subscription fees from cable providers like Comcast (CMCSA). And programmers are also worried about the effect a subscription service would have on advertising revenue: Even if the service didn’t distribute TV programs until after their initial air date, that could cut into ratings, which now measure viewership over the course of several days.

But the move to deliver TV and movies over the Web is already well under way. Netflix (NFLX), for instance, already bundles free streaming movie and tv along with itsdisc-by-mail subscription service. iTunes and Amazon (AMZN) rent movies on a one-off basis, and Google’s YouTube (GOOG) is trying out the same thing. And Hulu, the joint venture between GE’s NBC (GE), News Corp.’s Fox (NWS) and ABC, is figuring out how to launch a paid service that may include rentals, paid downloads or subscriptions.

So Apple’s proposed subscription service, which the company has floated in the past, is no longer a huge stretch. Says one executive briefed on the company’s plans: “I think they might get it right this time.”

Hearst’s UGO Gets New Blood, Still Needs CEO

Hearst’s dude-centric UGO site, which has been without a permanent CEO since June, is still looking for a new boss. But in the meantime, it has some new blood: The company has brought in Hearst veteran Christopher Johnson to run programming and product strategy, and it has hired Julie Shumaker to run 1UP, the gaming site it bought earlier this year.

Shumaker comes to Hearst from DoubleFusion, the “in-game” advertising company, where she ran sales for its core games group, and was at Electronic Arts (ERTS) prior to that. Johnson spent the last three years building Hearst’s magazine sites (Cosmopolitan.com, etc), then took off this summer to run something called Modelina.com; he has also put in time at IAC (IACI) and Time Warner’s AOL (TWX).

UGO is one of many players trying to capture a piece of market for 18-34 who like girls, funny things and video games, and the company, which claims 13 million monthly uniques, is often mentioned as an M&A candidate.

But Hearst says it is still looking to hire a new CEO for the spot that opened up once co-founder J Moses left in June. Hearst Interactive president Ken Bronfin is still running the unit on an interim basis.

Apple Ad Guru: I’m Not Going Anywhere

Lee Clow, who gets credit for a couple decades worth of Apple’s iconic advertising campaigns, wants us to know that he isn’t going anywhere.

His agency, TBWA/Media Arts Lab, is shuffling people around, however. If you’re reading this story on this Web site, you probably don’t care about the details, but you can find them here and here. The takeaway: Clow isn’t retiring, he’ll still have a hand in Apple (AAPL) campaigns, and he’s a bit bemused by the way the Internet has treated his org chart shuffle.

“Look at how the blogosphere decided to make it a conversation about me,” he writes in an letter distributed to his staff.

Psst! Big secret here: The blogosphere doesn’t really care about Lee Clow.

It cares about Apple, Apple, Apple. And if it’s an Apple, Apple, Apple story that gives the blogosphere the chance to embed some Apple advertising, too? Then the blogosphere really likes that!

BusinessWeek’s Future is Cloudy, But Better Than it Could Have Been: The Grim Non-Bloomberg Scenario

clint-escapesBusinessWeek employees are waiting to hear if they’ll have jobs once Bloomberg takes over the publication, and I’m told that staffers expect to hear their fate shortly after Thanksgiving. “Either you’ll get an offer or you won’t”, is the conventional wisdom among the 400 staffers, an employee tells me.

That has to be unnerving, but I can at least offer a little bit of comfort: The worst-case scenario the employees would have been facing had they been purchased by private equity firm ZelnickMedia, who was also bidding for the publication

The short version: Almost everybody gets fired.

Here’s the longer version of the plan, provided to me by a person familiar with the ZelnickMedia’s bid. It sounds like a plausible idea for a PE group that specializes in turning around distressed assets — and a chilling one for anybody who draws a paycheck at BusinessWeek:

  • Wind down BusinessWeek’s print business “as profitably as possible” — the company would have to honor existing subscriptions, and could still sell ads in the magazine. But the focus would be on building up BusinessWeek’s web site, which has a decent-sized footprint, though not a huge one.
  • Dump almost all of the company’s newsgathering staff, and outsource most almost all of that work to ThomsonReuters (TRI).
  • Employ a small handful of editorial employees — perhaps 20, down from the 200-plus that are there now.  Some of them would run a Huffington Post-style aggregation site that produces no original content, and some more expensive hires would produce a smattering of high quality reporting and writing designed to burnish/sustain the BusinessWeek brand. “Just to give it uniqueness and sizzle”, my source tells me.
  • Dump most of the existing business side, as well, but overhaul and bulk up the sales force.

The insult-to-injury kicker: Under ZelnickMedia’s proposal, it wouldn’t pay a dime for the publication it intended to rebuild. Instead, McGraw-Hill would pay the fund to take the publication off its hands. If that sounds implausible, consider that McGraw-Hill just announced that it will save up to $25 million next year by not owning the title.

Given the above terms, it’s easy enough to see why McGraw-Hill ended up going with Bloomberg. For starters, the winning bidder actually paid cash for the magazine, and McGraw-Hill will end up netting a $5.9 gain, after taxes, on the deal.

Also important: McGraw-Hill won’t have to anguish as it watches one of its flagship properties get dismantled.

So what will happen to BusinessWeek now that Bloomberg owns it? Nothing nearly as drastic, at least in the short-term. For now, Bloomberg is talking about bulking up the title, not shredding it, so that’s a good sign for both employees and readers.

Alas, Bloomberg can’t take on all of the magazine employees looking for jobs, and that pool is only going to get bigger.

Forbes slashed deep into  its staff this week, and next week Time Warner’s Time Inc. (TWX) will lay out some of its layoff goals. I’ve heard Time Inc. employees refer to layoff plans as “tree-trimming” or “surgical”, but I think they’ll feel much blunter to the folks who lose their jobs. The publisher’s cost-cutting plans include hundreds of layoffs — something likely similar to the cuts the publisher went through last year, I’m told.

The New York Post’s Keith Kelly reports today that Time’s News and Finance unit, which includes Time, Fortune and Sports Illustrated, will be particularly hard hit, and I’ve confirmed that myself.

UPDATE: No surprise here — BusinessWeek publisher Keith Fox is stepping down. Mild surprise: He’s staying on at McGraw-Hill. Here’s his memo:

When we announced that McGraw-Hill was exploring strategic options for BusinessWeek, I promised to communicate with you as openly and often as I could. In this spirit, I wanted each of you to know that I will be remaining with McGraw-Hill after the deal with Bloomberg is closed. I will continue to play a role in the integration post-close and plan to take on a new role at McGraw-Hill in 2010.

During this process, our collective goal was to find the best buyer for BusinessWeek. I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine. I am committed to the transition and helping in any way that I can.

It’s been a privilege to be the President of BusinessWeek. I thank Terry McGraw for his confidence and trust in me and Glenn Goldberg for his support, direction, clarity, and sense of humor. I’ve also been a member of an amazing team which has navigated the transformation of the media environment with agility, focus, passion, and integrity.

The team – Steve Adler, Jessica Sibley, Tania Secor, Linda Brennan, Roger Neal, and Carl Fischer – is the best in the industry. Like BusinessWeek, they have bright futures ahead of them. I will miss the daily interaction, but I am wiser (and a little grayer) because of their collaborative spirit and desire to make BusinessWeek the global leader in business that it is today.

I also have a special thanks to Patricia Hipplewith, my assistant, who juggled my calendar, protected me from solicitors, and kept me on schedule and well fed! She is the personification of commitment and integrity.

I am humbled by BusinessWeek’s 80-year history. Thank you for allowing me to play a small part in it.