Ryan Lawler's  Instablog

Don't be fooled by reports that the partnership between Best Buy Co. Inc. and TiVo Inc. (Nasdaq: TIVO) announced today is nothing more than a marketing alliance through which the big box retailer will more heavily promote a dying product in its stores.

The tie-up is actually about Best Buy being able to sell digital content directly to high-definition televisions (HDTVs) and other broadband-connected products -- and now it has all the pieces in place to do so.

As part of the alliance, Best Buy said that it would substantially increase the amount of marketing and merchandising of TiVo digital video recorders, and that the companies would create a co-branded DVR that it would sell in its stores.

But that's not the juicy part. After all, the companies announced that they've entered into this strategic alliance "to transform the digital home entertainment experience" -- and let's face it, you're not going to transform anything by just selling more TiVos.

The interesting part of the deal is the integration of TiVo's user interface into Best Buy's Insignia- and Dynex-branded consumer electronics (CE) devices.

By doing so, the retailer will not only enable TiVo functionality in its HDTVs and Blu-ray disc players [ed. note: because frankly, who cares about buying a TV with a DVR built into it?], but it will be able to sell digital content directly to consumers in their living rooms.

Here's how:

Last month, Best Buy announced a partnership with Sonic Solutions (Nasdaq: SNIC) that will enable the retailer to make thousands of digital video titles available for rent or purchase. The deal gave Best Buy a quick on-ramp to selling digital content online, but it also opens the door for Best Buy to sell digital titles that can be viewed on CinemaNow-enabled devices, like LG Electronics Inc. (London: LGLD; Korea: 6657.KS) Blu-ray players that the retailer has already agreed to promote in its stores.

Meanwhile, Sonic has a standing distribution deal with TiVo to enable paid downloads of its movies on Series 2, Series 3, and TiVo HD DVRs. The implication here is that once the TiVo programming guide lands on Best Buy's CE devices, the retailer will be able to use Sonic's distribution platform to sell CinemaNow titles directly to consumers on their big-screen HDTVs (which they bought at Best Buy!).

Sonic has done this sort of thing before. The company announced a partnership with Blockbuster Inc. earlier this year to power its digital store. Through its distribution deals with both Blockbuster and TiVo, Sonic ported the Blockbuster OnDemand store to broadband-connected TiVo DVRs just two months after the initial Blockbuster deal was announced.

With the digital content (CinemaNow), digital distribution (Sonic), and programming platform (TiVo) pieces now in place, Best Buy is poised to take a huge step into the digital arena. The deals will put Best Buy into direct competition with connected devices in the living room, including Apple TV, Roku, and Vudu.

While Best Buy may be a little late to the game in terms of getting a connected device and distribution platform to market, none of the companies with connected devices has the retail reach that Best Buy has, with 1,100 stores in the U.S.

And there's one final tidbit that could differentiate Best Buy's future digital offering from other direct-to-TV content plays that are likely to emerge over the coming months: Best Buy and Sonic Solutions/CinemaNow content will leverage Widevine Technologies Inc. 's digital rights management (DRM) technology to secure content across multiple devices.

By doing so, Best Buy could enable a consumer to buy a title once, either through its online store or through a CinemaNow-connected device, and watch it on multiple platforms. That means the consumer could, theoretically, choose to watch the title on an Insignia big-screen TV, download it to a PC, or possibly even take it along with a portable DVD player or other mobile device. There are lots of interesting possibilities here.

Best Buy declined to comment on this story.

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 With an eye on extending the company's cable properties beyond the TV, Time Warner Inc. (NYSE: TWX) CEO Jeff Bewkes says the first trial of the company's "TV Everywhere" initiative will begin in the second half of 2009.

With TV Everywhere, Time Warner hopes to allow subscribers of its pay TV and premium cable channels to be able to access the content on PCs and mobile devices, through a "quick and easy" authentication process.

On Time Warner's first-quarter earnings call yesterday, Bewkes said that Time Warner is working with "several distributors" to get the trial running.

To make TV Everywhere work, the trial would implement a "check-in software" that would ping the billing systems of pay TV service providers such as MSOs and satellite companies to ensure that the customer has already paid for the service.

"You've already got a billing system running efficiently through the current providers of video, which would be cable MSOs, a couple of satellite companies, and phone companies that are currently providing multichannel TV networks to over 90 percent of American households," Bewkes said. "So all the billing and all of the authentication is done already, they've all got it -- it's pretty simple."

One example of the plans for TV Everywhere is HBO Go, an online extension of the HBO service. According to Bewkes, the new service will offer more than 650 hours of programming, or about three times as much content as is available through HBO's video-on-demand service.

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During yesterday's first-quarter earnings call, Akamai Technologies Inc. (Nasdaq: AKAM) CEO Paul Sagan might have signaled a shift in describing the company as a cloud computing provider, moving away from dreaded term "CDN" (content delivery network).

According to the transcript of yesterday's call you'll find only about 10 mentions of "delivery" or "content delivery," some of which are tied to the description of what other competitors have to offer. But do a search for "cloud" or "cloud computing" and you'll see that Sagan mentioned those terms 14 times.

More important than the number of times those terms were used is how they were used. Over the call and in the question and answer section, Sagan pointed to the opportunity that the company sees in offering cloud services.

"As our clients evolve more and more to take advantage of cloud computing, we're continuing to invest in even more advanced solutions to help them realize the full potential of network computing over the Internet," Sagan said.

While acknowledging that cloud computing "happens to be the phrase of the day that everyone wants to use," Sagan went on to justify how Akamai and its distributed architecture fit into the market for cloud services.

"It's really about network and distributed computing, and virtualizing infrastructure rather than dedicating a machine, or a license, or a person for each instance of an application or each end-users use of it," Sagan said.

It could be, in fact, that Akamai's always been a "cloud computing" provider. But now that the marketing jargon has become "hot," they are looking to take advantage of that.

In fact, Sagan suggested that Akamai was offering "cloud computing" services long before they were hip. Referring to cloud computing as "the idea of dynamic, adaptive computing capabilities," Sagan said, "This is an idea that we've been talking about at Akamai since we started more than 10 years ago."

Sagan went on to point to the company's edge computing and application acceleration offerings as examples of cloud services"

"We're already delivering on much of the promise of cloud computing with our edge computing offerings, which we introduced almost six years ago," Sagan said. "This is where we host and deliver applications from the Akamai cloud. The tens of thousands of servers we control around the world and manage like one big resource on behalf of our clients.

"In addition, our Application Acceleration Solutions, which we began rolling out in 2005, are designed to offer a cloud-based solution to the majority of enterprises that want to maintain a centralized computing infrastructure and make their applications available to a globally-distributed user base."

While much of the broader CDN market is focused on more commodotized bit delivery for media and entertainment customers, it will be interesting to see if Akamai's new cloud messaging starts to catch on.

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