On a wider-market level, there is good reason for RIM to be hosting a developer conference in Europe: it’s a market where it has had some mixed success of late, but that includes some key wins: data from GfK last week indicated that, in fact, BlackBerry is the most-purchased device brand at the moment in the UK. (Others say Android was the most popular, and still others claim the iPhone ran away with the market.) Thorsten Heins, in his keynote today, noted that 65 percent of the population of Europe, Middle East and Africa are still using feature phones. And that, despite everything, still spells opportunity for RIM.

RIM today said that it now has 60,000 apps in its App World applications storefront—still miniscule compared to the millions that live collectively on the Android Market and Apple’s App Store—but a significant improvement on the 17,000 that were in App World last January. Collectively, the store has seen 2 billion downloads as of last month, with 6 million downloads per day.

The company’s VP of developer relations, Alec Saunders, also repeated a claim we’ve heard before from the company: after Apple (NSDQ: AAPL), AppWorld is the “most profitable” of mobile platforms. This is based on the company claiming to have more paid downloads than Android’s Market, where the vast majority of popular apps are free to download. Part of RIM’s approach has been to enable carrier billing to pay for app downloads—meaning that the apps get charged directly to a users’ bill. That is something that is still nascent on the Market. (Apple handles billing itself via iTunes.) RIM says that it has now enabled carrier billing in 34 different countries

What’s interesting is that Saunders also spelled out a bit of detail on how much money developers are making on the platform: apparently, 13 percent of all app publishers have made $100,000 or more through AppWorld. That detail sparked off some responses:

“On the other platforms, virtually no one covers their investment as anything more than a hobby,” one developer, Matt Baxter-Reynolds, tweeted to me earlier. “That metric is just not believable.” That kind of thinking underscores the idea that apps and app stores are really just there to drive more stickiness to a platform and encourage more hardware sales.

But another raised the point that in fact RIM most likely attracts a different kind of app maker than those who have swarmed to iOS and Android. “I’d say [that is] reasonable,” noted another developer, Shaun Austin. “BB doesn’t seem a platform as likely to attract hobbyists in the way Android/iOS does.”

Of the apps that are selling best, four out of the top 10 on App World are games for the PlayBook tablet, RIM said. You can read that as a vote for engagement for a tablet that has been less than successful against the iPad and Android-based tablet makers.

Last week, RIM released an updated SDK for the BBM Social Platform, a newish area the company has been exploring, leveraging the wide usage it already has for its BlackBerry Messenger service. Today it noted that it now has 50 million people engaging on that platform through various apps, with the most-used of them being the BlackBerry version of Wikitude, an augmented-reality search app.

Looking ahead, it’s products like the BBM Social Platform that are perhaps where RIM should be putting more of its focus: it is, after all, an experience that is unique to RIM and helps set it apart from other handset makers. The company is gearing up for two significant platform updates in the months ahead, with BlackBerry 10 for handsets and PlayBook 2.0 for the tablet, and all eyes will be on how dynamic and easy these will be to use in creating services. RIM has already said that it will be looking for close integration of the BBM Social Platform with BlackBerry 10, which will the see the company doing more in social gaming on the OS.

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For as long as Facebook has been running its Facebook Credits program—the virtual currency that users can redeem on games and other content peddled through Facebook’s network—it has been letting users top up those Credits using their mobile phones. It does this in partnership with companies like (reportedly) Boku and (definitely) Zong, the payments company bought by eBay’s PayPal last year. Users can also top up their Credits via PayPal and credit cards.

It’s not known how much, exactly, is purchased via the mobile channel today, but it is an example of how mobile is actually already driving significant revenue for Facebook. “Facebook Credits make a lot of money through mobile phones,” enough that Zong was “growing very fast last year” because of Facebook purchases, according to Frederic Court, a partner with Advent Venture Parnters, one of the VCs that backed Zong before the eBay (NSDQ: EBAY) buy.

This is because while sometimes the mobile payments were actually more expensive than a PayPal or credit card transaction, they are often a lot quicker to do, especially if you are in the middle of a game. And, as with other mobile-based payment options, they appeal to those who don’t have or want to enter card details.

Commissions on those Credits netted Facebook $557 million in revenues in 2011. (Facebook writes in the S-1 that the “other fees” that it designates on the same line as Payments was “immaterial.”)

At this point, Facebook doesn’t take any commission on Credits that are purchased via mobile: that service—which uses the premium SMS channel to send a code to a user to redeem Credits on the main site, and then charges the amount directly to the user’s mobile bill—already has some other parties taking a cut, including the provider (eg Zong or Boku), the mobile carrier and even another processing middleman. Rather, Facebook’s cut comes in the form of a commission on the payments, similar to what Apple (NSDQ: AAPL) takes for transactions on its App Store. That fee is 30 percent.

Could Facebook eventually take more control of its payments, and potentially cut out some of those middle people? Probably not soon, in Court’s opinion. “Zong brought something to Facebook that it didn’t know how to do, and it became very deeply integrated,” he said. “I don’t see them starting to do what Zong does, which is connecting hundreds of operators.” Then again, he added, “When they have a worth of $100 billion with $10 billion on the balance sheet they can do pretty much anything they want.”

What’s interesting is that as Facebook starts to expand some of the other functionality on its mobile platform, that will also open up a lot more opportunities in terms of mobile transactions as well.

As Facebook enables and opens APIs to get publishers to build apps for its mobile platforms (via the web and apps), “Facebook will make sure those are monetized,” he said. “I have no doubt Facebook will be making money on mobile games and other content given the engagement and scale on mobile. There is an amazing opening there.” Paying for Credits that will actually get used on the device itself, he said, will be “even more natural.”

Facebook in the S-1 said it had 425 million monthly active users accessing the social network via mobile devices, with that number outpacing the growth of overall subscribers.

“Credits is a wallet that you can top up in all kinds of ways,” he said. “Facebook has created its own currency and has imposed that on anyone offering digital goods on Facebook.” If anything, that currency might have a life outside the platform, to to buy things outside of Facebook.

But even with the opportunity for Credits, Court doesn’t see this eventually overtaking revenues from whatever advertising Facebook plans to put on its mobile services “for a very simple reason,” which is down to how those games are played today. “If you look at Zynga, only between two and three percent of people who play actually pay. The rest play for free. Tt will be the same for Facebook on mobile, with only a fraction spending money,” he predicted. “With advertising, 100 percent of the population is exposed.”

Even though Facebook has listed “no mobile ads” as one of its risks on the S-1, it could be playing its cards very close to its chest: the last few days has been a lot of speculation already about how soon Facebook will launch those mobile ads.

Razorfish (via Digiday) says that it is already working on a pilot for rich-media ads for the social network.

The blog Inside Facebook, meanwhile, has put its money down on sponsored stories to be the “most likely” first stab at mobile advertising on the site, with running a mobile ad network the second-most likely option. (That’s one that we explored a bit yesterday as well.)

Update: Razorfish’s VP of mobile, Paul Gelb, has made a correction on how his comments were portrayed in the Digiday story (via Twitter): his agency is not working on any mobile ad buying with Facebook. “In the interview I was referring to rich media featured stories, not paid ads,” he said.

A Facebook spokesperson, via email, added the following: “We want to clarify that we are not working with any agency to create paid ads on our mobile platform.”

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Flaregames of Karlsruhe, Germany, is taking €6 million, led by Angry Bird backer Accel, to “scale” the company, hire new talent and to to market its upcoming series of free-to-play mobile games.

“Our first focus is on getting fun, high-quality games to market, and reaching the mass-market as well as mid-core gamers with our line-up this year,” said founder Klaas Kersting (via release).

“The mobile games business will likely be larger than the social games business,” according to Accel partner Harry Nelis. The firm is planning five games by year’s end.

Separately, Tusjuegos, a Spanish portal for buying and downloading PC and Mac games, is taking €420,000 from Spain’s VentureCap and others, Loogic reports.

Spain is plagued by illegal downloading. Tusjuegos is aiming to ensure game buying, after the box era subsides, remains legal in the online downloading arena.

Jaime Ferrer has been installed as CEO of Tusjuegos parent ITnet.

Docomo says The two devices, available only in Japan, are the first to kick off a new phase for Disney Mobile, as it partners with Docomo on a “Disney Mobile on docomo” venture.

But it appears that Disney Mobile will also continue to work with Softbank: the two announced their own two Android devices in October 2011.

In both the cases of the Softbank and docomo devices, it looks like Disney Mobile has gone down the forked OS route, as so many other device makers in Asia have before it.

In the two new devices launched today, gone is the Android Market, which has been replaced by Docomo’s own dmarket. Mickey and other Disney iconography figures strongly throughout, from the clock and other icons on the homescreen to prioritized links through to Disney mobile content. The services also put Docomo’s mobile payment service, Osaifu-Keitai, front and center.

The content element is particularly eye-catching part of this deal: Docomo says that those who take the devices will get free access to movie services, live wallpapers, puzzles, games and other Disney entertainment. By “free” that means the content itself comes without a charge; users still have to pay for data usage.

Still, you do have to wonder if we will see more brands trying to do something like this in the future as the cost of making customised smartphones becomes even cheaper.

Other benefits include offers for Tokyo Disneyland and Tokyo DisneySea, both of which are already sponsored by Docomo.

Given how consumer-friendly this all looks, it’s surprising that Docomo is launching the devices with pretty clunky names. One device, the F-08D, will go on sale February 17; the equally-catchy P-05D will debut in March. Perhaps those names will change to different brands by the time their debuts roll around.

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“This is a sports service custom built for modern sports fans,” the corporation says.

It is the last main BBC online service to get a refresh, following BBC News and the BBC.co.uk homepage. It is also a dry run for the BBC’s Olympic Games coverage.

Further sport and dedicated Olympics products are due to be launched this year on TiVo (NSDQ: TIVO), connected TVs and as mobile apps, as well as the forthcoming Olympics website, all of which the BBC will use to broadcast every minute of every Olympic event.

The sport site in 2011 set about cutting its budget by 25 percent in line with a wider BBC Online budget cut.

“As (Spotify) got bigger, the annoying adverts started to creep in and, with them, the gnawing sense that it was unfair to get so much use out of a service without paying. So a year ago, I went premium…

“But last week I reverted back ...

“For me, Spotify is a victim of the conundrum that almost all internet industries have yet to resolve — when you can get something so good for free, why pay?”

That is ironic because it is the same argument some onlookers use to suggest The Times’ own payment strategy “won’t work” (you’ll need to be a subscriber to read Ford’s piece).

Let’s compare…

Spotify’s raison d’être is making the listening experience so appealing and easy that people will want to pay for it rather than download illegally or elsewhere for free.

It’s having some success within that. Having racked up three million paying subscribers from an apparent 15 million active users for a conversion rate of 20 percent, it has built the world’s largest music subscription business.

That is at a price slightly more than The Times’ own monthly news package, which does not come with a free trial in the same way Spotify does.

By contrast, The Times website has slipped from around 20 million unique monthly users to 115,000 paying online subscribers - a 0.57 percent conversion.

This, however, is not a like-for-like comparison. Only a minority of The Times’ total, pre-paywall monthly uniques could ever have been considered “active” (ie. core, regular) readers, in the same way Spotify describes them. Current online subscribers as a percentage of this figure are likely far higher.

By the same token, were Spotify to express its subscriber count as a percentage of total users, it would shrink drastically. That is especially so since, lately, its first-time, free user base has been inflated by its Facebook promotion.

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In Q4, its overseas costs doubled to $89 million, while revenue rose by a third to $29 million. International loss came in better than expected at $60 million. But the company is committing to spend more for the movies and TV shows that might attract lucrative recurring subscribers…

Q1 international forecast:

• Loss: $108 million to $118 million
• Subscribers: 2.5 million to 3.1 million (1.9 million to 2.45 million paid)
• Revenue: $38 million to $44 million

The company expanded to Canada and 43 Latin American countries in 2011. Quarterly overeas subscriber additions declined by a quarter to 380,000 in Q4, from the 510,000 added during the big LatAm push three months earlier. Netflix now has 1.86 million overseas subscribers.

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The marked up-tick in international spending since Q4 reflects just how much Netflix is investing in its UK and Ireland launch, which began in January, as well as in ongoing marketing and content in Canada and Latin America.

“In future quarters, we intend to continue to increase our investment in the content libraries in each market, just as we have done in Canada since launch,” according to the company’s Q4 disclosure.

“Doing so improves the consumer experience, builds strong word of mouth and positive brand awareness, and drives additional acquisition, all elements of a strong foundation for long- term success. As we improve the service, we grow membership and thus we expect the quarterly international losses to moderate slightly.”

Netflix expects the big international losses to give it a company-wide loss of $9 to $27 million in Q1, with company losses remaining “modest” throughout the year and no further globalisation until a return to profit.

Long-term, there is an opportunity to build one of the world’s strongest home entertainment brands, carved out by new home devices with internet connectivity. Netflix’s challenge is to manage its domestic conversion from DVD to streaming well enough that its core business remains in tact. If it can do so, international expenditure should remain acceptable in pursuit of the global goal.

Netfix Overseas Snapshot

Canada—“The market opportunity in Canada is exciting enough that we continue to invest in the content library, meaning that we’ll run at roughly break even for two quarters, and we expect to return to a positive contribution profit starting in Q3 of this year, two years after our initial launch.”

Latin America—“We are quickly learning what content works best in the region, and are adjusting our content library accordingly ... we’ve found that processing ecommerce consumer payments is quite challenging as compared with North America and Europe. To overcome this challenge, we are working with our local payment partners to optimize our systems, exploring adding new payment methods and testing various trial campaigns to improve conversion.”

UK & Ireland—Unquantified “very successful” launch. No numbers. “Over the coming years, we hope to be able to grow large enough to outbid Sky for one or more major studio output deals, as we did this year for MGM.”

Ayers will examine ways to unlock the BFI’s own archive of classic movies, TV shows and related historical materials, as well as to leverage a large amount of data the BFI keeps about the sectors.

Avenues could include mobile apps for genre aficionados or connected TV apps for examining film information from the sofa.

Ayers will work with existing BFI digital director Paula Le Dieu.

Despite handing over the Manchester City digital reins to Russell Stopford after a year, Ayers remains a part-time digital “playmaker” at the club, where he will advise on innovation on a part-time basis.

The BFI took over the UK Film Council’s functions and funding in 2011.

It publishes the Sight & Sound magazine and FindanyFilm.com, a data-rich web service for locating movies and comparing prices across DVD and digital retailers.

U.S. users are apparently still enjoying desktop streaming with no such limits, if the absence of gripes in social media is anything to go by.

Reasons are not clear, but Spotify is a firm believer in using limited desktop free to drive premium subscriptions. It has been also been experimenting with 48-hour free trials and with free retention periods for cancelling subscribers, as it figures out the most attractive freemium levers to push.

Conversion and adoption

It appears to be working. Speaking during an event at Universal Music Group in London on Thursday, Spotify chief content officer Ken Parks revealed Spotify has now hit three million paying subscribers. That’s up from 2.5 million in November, when Spotify said it had 10 million active users and a 15 percent premium conversion ratio. Now Spotify says it is converting 20 percent to paid; it did not update the active-users count, though mathematics suggests it is 15 million.

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This success, as was already known, is driven by ringfencing mobile for premium-only. “This is the one thing people are willing to pay for,” Parks said. “We don’t think there’s a big willingness for people to pay for streaming to the PC.”

Sitting alongside Parks, Universal’s global digital chief Francis Keeling said: “The one thing Spotify has taught us is the necessity to have a free trial period to get consumers to see how good these services are.” Spotify’s Parks added: “Users who are exposing their listening on Facebook are three times as likely to become paid subscribers.

“The vast majority of customers are paying 120 dollars, pounds or euros every year, which is around twice the amount the average user purchases on a download service every year.”

More revenue streams

Where next? Free is not just a premium conversion tool; advertising to free users makes up a sizeable minority of Spotify’s revenue. But Parks said: “We’ve got at least a couple of different revenue streams. Those won’t be the only ones over time.” He told paidContent e-commerce may become Spotify’s third revenue plank.

Now that Spotify has an in-app platform for third-party services like gig ticket seller Songkick, Spotify could take a cut from transactions third parties process inside Spotify, Parks suggested, albeit only speculatively.

Absentees punishing

Separately, Parks made a pitch to the small number of artists and labels withholding their music from streaming services like his over payouts.

“Withholding a record from Spotify doesn’t mean that it’s not available for streaming,” he argued. “All of this stuff is available on YouTube (NSDQ: GOOG). You’re just pushing them to somewhere it’s not monetisable.

“There’s illogic behind withholding a record. What you really want to do is reward the people who are spending $120 a year, rather than punish them by not making the records available on the platform.”

Most Spotify refuseniks have been cottage-industry, artist-owned labels or artists themselves, citing low payouts from label royalties. But EMI’s Coldplay also withheld its latest album from streaming services for the time being.

Sitting alongside Parks, Universal’s global digital chief Francis Keeling, whose own label - the world’s largest - includes some artists holding out from Spotify, echoed Parks’ comments: “The only thing those artists are doing are alienating their fanbase.

“Our agreements with artists are on a case-by-case basis. Over time, we’re trying to convince our artists that streaming services are the right thing to do and these services should be supported.”

Refuseniks make up just a tiny fraction of Spotify’s total addressable label partner base. Spotify explains that it mostly pays labels, not artists.

In a confidential document obtained under the Freedom of Information Act, lobbying groups for the major rights holders claimed Google and Microsoft‘s Bing are making it “much more difficult” for people to find legal music and films online.

The private document, obtained by the free speech campaigners Open Rights Group and shared with the Guardian, urges the government to introduce a voluntary body that would remove rogue websites from internet search results.

The proposals were made to the culture minister Ed Vaizey as part of a series of consultations on internet piracy between rights holders, search giants and the government in November last year. The nine-page document was submitted on behalf of the British Phonographic Industry (BPI), the UK body for the music majors, the Motion Picture Association (MPA), the Premier League, the Publishers Association and the Pact, the film and TV independent producers’ trade body.

Privately, rights holders said there is a “spirit of optimism” between the entertainment groups and search engines as they attempt to usher in more legal media sites, including Google’s own fledgling music service.

Google has in the past year stepped up efforts to remove copyright-infringing content, launching a fast-track removal requests form and filtering terms “associated with infringement”. However, the rights holders claim in the document that “as time goes on, the situation is getting worse rather than better”.

“Consumers rely on search engines to find and access entertainment content and they play a vital role in the UK digital economy,” the rights holders state.

“At present, consumer searching for digital copies of copyright entertainment content are directed overwhelmingly to illegal sites and services.“The entertainment groups want Google to “continuously review key search words” and “effectively screen” mobile apps on Android smartphones in an effort to combat illicit sharing.

The document claims that 16 of the first 20 Google search results for chart singles link to “known legal sites”, according to searches by the BPI in September. In an attempt to persuade the government to clamp down on search engines, the groups claim that 41 percent of Google’s first-page results for bestselling books in April last year were “non-legal links” to websites.

“Much of the illegal activity in the digital economy is facilitated and encouraged by money-making rogue sites,” the document claimed.

“Intermediaries, unwittingly or by wilfully turning a blind eye (or in some cases, by encouraging such activity), play a key role in enabling content theft and often even profit from it. Only a comprehensive approach can address this issue.”

The entertainment bodies call for search engines to:

—Assign lower rankings to sites that “repeatedly” make available copyright-infringing material

—Prioritise sites that “obtain certification as a licensed site” for music and film downloading

—Stop indexing sites that are subject to court orders—Stop indexing “substantially infringing websites”

—Improve “notice and takedown” system

—Ensure that users are not directed to illicit filesharing sites through suggested search

—Ensure search engines do not advertise around unlawful sites or sell keywords associated with piracy or sell mobile apps “which facilitate infringement”

The chief executive of BPI, Geoff Taylor,  said on Thursday: “The vast majority of consumers want search engines to direct them to legal sources of entertainment rather than the online black market.

“As search engines roll out high-quality content services, like Google Music, we want to build a constructive partnership that supports a legal online economy. We hope that Google and other search engines will respond positively.”

A spokeswoman for the Motion Picture Association added: “If you look for film or music via a search engine you usually find websites providing access to pirated films or music at the top of the list of results.

“This is confusing for consumers, damages the legal market and legitimises copyright theft. We are in dialogue with search engines, ISPs [internet service providers], advertising networks and payment processors about a code to deal with the escalating problem of online copyright theft which threatens the growth of the entire creative industries sector. This paper is a result of that dialogue and we appreciate government’s continuing efforts to help bring about a more responsible internet”.

Google declined to comment.

Peter Bradwell, campaigner for the Open Rights Group, said the proposal contained “some dangerous ideas”. He said: “It’s another plan to take on far too much power over what we’re allowed to look at and do online.”

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The Incumbent

On the eve of the big Midem music conference in Cannes, Rhapsody today says it is moving in to Europe by acquiring Napster International, the division service the UK and Germany. That is the latest piece of the jigsaw after the company in October announced Napster’s U.S. acquisition from Best Buy.

The company pioneered the unlimited music space in 2001 but, despite turning around customer decline following its spin-out from RealNetworks (NSDQ: RNWK) and Viacom (NYSE: VIA), its subscriber base has been overtaken four-year-old Spotify.

Last disclosed user counts were 750,000 versus 2.5 million. Napster brings an estimated 350,000 extra customers to Rhapsody. The combined figure of over a million, which Rhapsody itself disclosed on Thursday, is still shy of Spotify, but moving in to the big new territory of Europe - just as, vice versa, Spotify has embraced Rhapsody’s U.S. patch - could grow Rhapsody’s customer base further.

In Europe for the first time, Rhapsody will migrate Napster subscribers to its own platform in March, introducing its own web player, but the Napster brand and employees will remain in place in the UK and Germany.

What’s Happening

Rdio, Mog, Spotify, Rhapsody, We7 and all manner of others are jostling for early dominance in a promising new paid content sector that has been ignited by mobile and by music labels seeking new growth after the slowdown of track sales.

Global music subscribers grew by 65 percent to 13.4 million in 2011, according to labels’ IFPI umbrella. But that is peanuts compared to what the sector could become as consumers switch from ownership to access. The opportunity is to create an iTunes beater.

Labels’ support has opened a window of opportunity for new entrants to race to own this new area. Here are the latest…

The Massive Failure: News Corp

Beyond Oblivion, a fatally-named, New York-based unlimited music service invested in by News Corp and Allen & Co’s Stanley Shuman, has filed for bankruptcy, owing between $100 million and $500 million despite having not yet launched.

The company owes Sony (NYSE: SNE) Music Entertainment and Warner Music Group (NYSE: WMG) $50 million each, Reuters reports. News Corp.‘s digital chief Jon Miller is a board director.

Reasons for the collapse are not clear. News Corp had invested just $9.2 million for a 23 percent stake in April 2010.

The Fringe Player: Aspiro

Norway-based Aspiro, which provides its music service WiMP through ISP and white label partners mostly in Spotify’s backyard of Scandinavia, on Thursday announced its latest ISP partner, the Netherlands’ Ziggo. The deal guarantees Aspiro at least nine million Swedish krona ($1.3 million) over two years.

Aspiro is now active in Sweden, Norway, Denmark, Portugal and the Netherlands but wants to expand in to new territories and is in the process of rolling out to Ireland and Germany.

The Radio Player: Pure Music

DAB and internet radio maker Pure on Thursday unveiled its own unlimited-access cloud music service, Pure Music, for £4.99 a month in the UK. Naturally, the service is available on some of Pure’s own radios, but also on web and on smartphones, where music subscription services are getting the majority of their paid custom.

Pure has the device capability to make an impact in music on radio, but customers may already be more excited about unlimited music on new-wave “radio” devices like Sonos and through AirPlay than conventional “radio”, even internet radio, per se.

Related

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Half of 7digital’s 2011 downloads came through smartphones and tablets, thanks to new carriage on gadgets from Samsung, RIM (NSDQ: RIMM), Sony (NYSE: SNE) Ericsson (NSDQ: ERIC), Philips and Toshiba. But the new feature is being added through a HTML5 upgrade to its website, which had been neglected for three years, CEO Ben Drury tells paidContent.

The upgrade is not about a switch from ownership to unlimited access but, rather, about giving greater access to owned content. “7digital Player allows people to stream what they’ve purchased,” Drury says. “When you purchase a song from us, you really own it.” Previouly, 7digital’s web locker would let users re-download but not stream their songs directly.

HMV acquired half of 7digital for (appropriately) £7.7 million in 2009, when the company was loss-making. Now Drury says 7digital was in the black in 2011.

“We’ve moved a long way from that time,” he told me. “Since HMV bought their stake, our revenues have nearly tripled. We’re no Spotify, but financially we’re in a pretty good state relative to a lot of companies in digital music.”

Now 7digital is supporting the digital ambitions of a HMV which is seeing its core - retailing entertainment on plastic discs - diminish fast.

To compensate, HMV is selling more hardware like tablets and uses 7digital’s platform to power its own-brand digital music retail website. But it only avoided breaching bank covenants this month when record labels took HMV equity instead of money owed for supply.

“It was not a short-term fix - it was a substantive longer-term plan to support HMV,” Drury tells paidContent.

“There is obviously going to be the continued physical to digital transition over time. It’s shaping up to be a generational thing. It’s going to take a long time.”

For its part, 7digital, which maintains its core interest in selling music for ownership rather than renting access like Spotify, says it wants to to help HMV front up by “networking” rivals to iTunes Store and Amazon (NSDQ: AMZN) MP3…

A single 7digital account can be used on HMVDigital.com as well as 7digital’s roster of white label sites. “You will see those things coming closer together,” Drury says, referring to the HMV and 7digital sites.

“I actually think we’re entering the age of video now…some people think we’re already there but I think we’re just getting started,” he told an audience at the DLD digital media conference in Munich, Germany.

He predicted that digital video consumption will “rise for the next many years” as bandwidth to the home continues to grow, and new devices make it easier to consume more content than ever before.

News Corp. like many other TV producers, has long been preparing itself for a time when that TV content is watched on anything but a TV, with the launch of online video and apps for new screens like those of tablets and smartphones. “TV is no longer a device,” he said. “It is a concept, and people go where the best screen is.”

And rather than simply ramping up the amount of content that News Corp.‘s video properties produce—they include broadcasters like Fox as well as the film studio 20th Century Fox—Miller says that it is turning to News Corp. businesses that are traditionally more tied with written content, in what sounds like a very decentralized, try-everything-and-see-what-works approach to the space.

“We’re producing everything across the board now,” said Miller. “[Because] we’re focused on video…we’re trying to move our print publications into video, too.” That includes training Wall Street Journal reporters to “take videos on their iPhones,” as well as write.

And gaming site IGN, which originally started life as a collection of titles reviewing games, is running a dedicated channel on Microsoft’s Xbox, as well as the YouTube (NSDQ: GOOG) channel dedicated to gaming. “We won the bakeoff for the YouTube channel last year,” said Miller, referring to YouTube’s strategy to launch 100 new premium content channels covering a variety of interests.

He also noted that through IGN News Corp is once again looking at how it might develop its own gaming content—this is something that it had tried to do through its old subsidiary Fox Mobile, although that content division, including the production studios, was sold off last year to Jesta Digital. The company seems to be taking a more cautious approach than in the past: “We are putting our toe into the water with casual games,” said Miller. “Playing games is a bedrock so we want to learn and earn our way into that.”

Miller was interviewed on stage by DLD’s chairman, Yossi Vardi, who noted that he once worked with Miller for four years, and also that DLD had been trying to get Miller to speak at the event for the past three years.

These two hooks might be part of the reason why Miller was thrown quite a few softballs in the interview. In other words, no questions about how News Corp. can avoid another MySpace or Fox Mobile investment (both written off and sold off) in its search for the next big revenue stream.

Nor were there any questions at all about the best business models for delivering that new material: News Corp has been strong on paywalls for its written content so far—with paid subscriptions required for much of the Wall Street Journal and The Times in London—would Miller and News Corp consider extending that to more of its video content?

One area where Vardi did press Miller a bit was on the Megaupload closure and how content companies are going after the “little guy” in their pursuit of copyright protection. Aren’t you ashamed your industry is chasing small kids who want to have some fun, asked Vardi.

“I think you’re confusing us with the music industry. We don’t do that,” answered Miller. “What you’re getting at is what is the proper way to protect copyright….There has to be a way for freedoms to be respected and for copyright to be respected.”

That is an issue that has yet to find a definitive solution from many of Miller’s peers, and perhaps Miller himself. “The industry takes a while to embrace new technologies,” he said. “We’re doing it as an industry but it’s a different world.”

That world, in Miller’s view, has discounted content to almost nothing, in order to shift value to other parts of the ecosystem—a complaint often heard from those in the content industry in the face of juggernaut’s like Apple (NSDQ: AAPL) and Google, which respectively are more interested in pushing hardware sales and advertising for their own business models, offering easy and cheap access to content as part of the deal for consumers.

“Distributors have different businesses now,” he explained. “It’s not just to make money on the content as before.” “[Those who make hardware, or sell advertising] would like to keep the value of content low.” He said that this will eventually need to get “rebalanced” in the future. Whether that means more moves to paid content, or more advertising initiatives—or even partnerships on devices—remains to be seen.

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The discussion started with a little tour de table, in which everyone had to explain his/her view of the law. I used the standard Alcoholic Anonymous introduction: “I’m Frederic, and I’ve been downloading for several years. I started with the seven seasons of The West Wing, and I keep downloading at a sustained rate. Worse, my kids inherited my reprehensible habit and I failed to curb their bad behavior. Even worse, I harbor no intent to give up since I refuse to wait until next year to see a dubbed version of Damages on a French TV network… I can’t stand Glenn Close speaking French, you see…” It turned out that everybody admitted to copious downloading, making this little sample of the anti-Sarkozy media elite a potential target for HADOPI enforcers. (Since then, parliamentary filibuster managed to emasculate the bill.)

When it comes to digital piracy, there is a great deal of hypocrisy. One way another, everyone is involved.

For some large players — allegedly on the plaintiff side — the sinning even takes industrial proportions. Take the music industry.

In October 2003, Wired ran this interesting piece about a company specialized in tracking entertainment contents over the internet. BigChampagne, located in Beverly Hills, is for the digital era what Billboard magazine was in the analog world. Except that BigChampagne is essentially tracking illegal contents that circulates on the web. It does so with incredible precision by matching IP numbers and zip code, finding out what’s hot on peer-to-peer networks. In his Wired piece, Jeff Howe explains:

BigChampagne’s clients can pull up information about popularity and market share (what percentage of file-sharers have a given song). They can also drill down into specific markets – to see, for example, that 38.35 percent of file-sharers in Omaha, Nebraska, have a song from the new 50 Cent album.

No wonder some clients pay BigChampagne up to $40,000 a month for such data. They use BigChampagne’s valuable intelligence to apply gentle pressure on local radio station to air the very tunes favored by downloaders. For a long time, illegal file-sharing has been a powerful market and promotional tool for the music industry.

For the software industry, tolerance of pirated contents has been part of the ecosystem for quite a while as well. Many of us recall relying on pirated versions of Photoshop, Illustrator or Quark Xpress to learn how to use those products. It is widely assumed that Adobe (NSDQ: ADBE) and Quark have floated new releases of their products to spread the word-of-mouth among creative users. And it worked fine. (Now, everyone relies on a much more efficient and controlled mechanism of test versions, free trials, video tutorials, etc.)

There is no doubt, though, that piracy is inflicting a great deal of harm on the software industry. Take Microsoft (NSDQ: MSFT) and the Chinese market. For the Seattle firm, the US and the Chinese markets are roughly of the same size: 75 million PC shipments in the US for 2010, 68 million in China. There, 78 percent of PC software is pirated, vs. 20 percent in the US; as a result, Microsoft makes the same revenue from the Chinese than from… the Netherlands.

More broadly, how large is piracy today? At the last Consumer Electronic Show, the British market intelligence firm Envisional Ltd. presented its remarkable State of Digital Piracy Study (PDF here). Here are some highlights:

—Pirated contents accounts for 24 percent of the worldwide internet bandwidth consumption.>

—The biggest chunk is carried by BitTorrent (the protocol used for file sharing); it weighs about 40 percent of the illegitimate content in Europe and 20 percent in the US (including downstream and upstream). Worldwide, BitTorrent gets 250 million UVs per month.

—The second tier is made by the so-called cyberlockers (5 percent of the global bandwidth), among them the infamous MegaUpload, raided a few days ago by the FBI and the New Zealand police. On the 500 million uniques visitors per month to cyberlockers, MegaUpload drained 93 million UVs. (To put things in perspective, the entire US newspaper industry gets about 110 million UVs per month). The Cyberlockers segment has twice the users but consumes eight times less bandwidth than BitTorrent simply because files are much bigger on the peer-to-peer system.

—The third significant segment in piracy is illegal video streaming (1.4 percent of the global bandwidth.)

There are three ways to fight piracy: endless legal actions, legally blocking access, or creating alternative legit offers.

The sue-them-untill-they-die approach is mostly a US-centric one. It will never yield great results (aside from huge legal fees) due to the decentralized nature of the internet (there is no central servers for BitTorrent) and to the tolerance in countries in harboring cyberlockers.

As for law-based enforcement systems such has the French HADOPI or American SOPA/PIPA, they don’t work either. HADOPI proved to be porous as chalk, and the US lawmakers had to yield to the public outcry. Both bills were poorly designed and inefficient.

The figures compiled by Envisional Ltd. are indeed a plea for the third approach, that is the creation of legitimate offers.

Take a look at the figures below, which shows the peak bandwidth distribution between the US and Europe. You will notice that the paid-for Netflix service takes exactly the same amount of traffic as BitTorrent does in Europe!

US Bandwidth Consumption:

Europe Bandwidth Consumption:

Source : Envisional Ltd

These stats offer a compelling proof that creating legitimate commercial alternatives is a good way to contain piracy. The conclusion is hardly news. The choice between pirated and legit content is a combination of ease-of-use, pricing and availability on a given market. For contents such as music, TV series or movies, services like Netflix, iTunes or even BBC iPlayer go in the right direction.

But one key obstacle remains: the balkanized internet (see a previous Monday Note Balkanizing the Web), i.e. the country zoning system. By slicing the global audience in regional markets, both the industry (Apple, for instance) and the local governments neglect a key fact: today’s digital audience is getting increasingly multilingual or at least more eager to consume content in English as it is released. Today we have entertainment products, carefully designed to fit a global audience, waiting months before becoming available on the global market. As long as this absurdity remains, piracy will flourish. As for the price, it has to match the Average Revenue Per User (ARPU) generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yielding an advertising revenue that matches the $34.99 Apple is asking for the purchase of the entire season IV. Maintaining such gap also fuels piracy.

I want Netflix, BBC iPlayer and an unlocked and cheaper iTunes everywhere, now. Please. In the meantime, I keep my Vuze BitTorrent downloader on my computer. Just in case.

Based in Paris, Frédéric Filloux is the GM of the French ePresse consortium. He also edits the Monday Note, where this was first published. It is posted here with his permission.

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• That was the first year the growth rate increased since IFPI records began in 2004. Previously, growth rate of 10 percent in 2009 had sunk to five percent in 2010.
• Globally, digital is now 32 percent of labels’ income, up from 29 percent (that is 52 percent in the U.S. and 71 percent in China). Download volume grew 17 percent to 3.6 billion.
• Adoption of subscription services grew 65 percent to 13.4 million consumers. Remarkably, in Sweden, subscription contributes an impressive 85 percent of digital music revenue generally, thanks to its local hero Spotify.

All this gives the IFPI some cause to be bullish. “At a time when other creative industries - in particular film, newspapers and book publishing - are only now rapidly shifting to online and mobile channels, the music industry’s level of digital penetration still dwarfs that of all other comparable sectors, except games,” its report says.

The group also cites “important progress” on piracy including France’s Hadopi law and similar measures tabled in South Korea, New Zealand and the U.S.. But, as usual, it does not let the year pass by without warning: “Widespread piracy is the biggest factor undermining the growth of the digital music business.”

Nielsen research for the IFPI says 28 percent of consumers globally use unauthorised music services each month, with Spain and Brazil seeing especially high and disruptive levels.

“The result of this activity is effectively a rigged music market,” the IFPI says. “Legal services, whatever their model, incur the business costs of being authorised and paying rights owners, as well as investments to develop secure payment methods and good quality services.

“This model is unsustainable when facing competition from infringing services that have greatly reduced costs and circumvent the normal rules of commercial business.”

The IFPI’s report did not break out total music industry revenue figures.

The company’s core work is producing TV bulletins for ITV (LSE: ITV), Channel 4, Channel 5 and video footage for others like CNN, NBC (NSDQ: CMCSA) and PBS. But it has been launching its own branded web video channels as well as producing online video series for web-native clients, much of it through YouTube.

That diversification has meant ITN’s ad sales operation has been fragmented across each new syndication platform. So it is now taking on Rightser to manage its content and sell its ads across the whole of the footprint.

The news underscores a trend for more scale in online ad sales around video, and is also perhaps a sign that ITN’s online audience has grown big enough to merit the investment.

The new digital strategy, called One ITN, will see Rightster become the new platform provider for ITN Productions to serve all of its online content across different portals such as Facebook and at least two YouTube (NSDQ: GOOG) channels (ITN News and The 411 entertainment news channel) and its own portal, ITN.co.uk.

These are channels where ITN already gets good traffic: it says that it currently ranks as the biggest news provider in the UK on YouTube in terms of views.

Financial terms of the deal have not been released. But key to the deal is the hope that this will bring in more ad revenue for ITN, which does not have any paywalls around any of its online content at the moment.

A lack of scale in many long-tail content plays is one reason why digital advertising has continued to play second-fiddle to other advertising mediums like TV, which, for all its faults, at least has large, concurrent audience numbers that media buyers for large brands need when justifying ad investments.

We have also seen other industries, like publishing, make moves to tackle this as well: earlier this month, AOL (NYSE: AOL) announced that it would be selling ad inventory for Bonniers’ Parenting.com by putting it together with its own parenting content channels—a move that Bonnier hopes will get more big-name advertisers buying into ad space on its site.

The deal being announced today is an extension of an existing relationship between Rightster and ITN. The two were already partnering together for specific live event coverage that the broadcaster expected would get spikes of traffic: the two worked together to livestream the Royal Wedding to 20 countries via Facebook; Rightster is also providing the backbone for ITN’s streaming of the Leveson inquiry in the UK into media practices and ethics in the wake of the phone-hacking scandal.

Another aspect of the deal is that Rightster runs what it calls a “multi-cloud” system, meaning that if content delivery fails at any one point, the system will switch to taking it from another to keep the streams flowing.

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Separate complaints were filed to the UK’s Advertising Standards Authority (ASA) against movie studio Lionsgate (NYSE: LGF) for advertising around two of its latest releases.

The cases centre on an interesting challenge to regulators, and a nightmare for parents in the internet age - how do they control what their children can see when the internet, unlike UK television, has no watershed?

In the first case, the post-11pm scheduling for the Conan ad was enough to get Lionsgate off a negative ASA ruling. But services like YouTube do not operate temporal age windows.

Regardless, ASA case research went on to skewer YouTube with its self-contradiction of its own terms of service…

“Information YouTube provided indicated to potential advertisers that, based on US figures from 2010, they understood seven per cent of unique visitors to be aged two to eleven, and a further nine per cent to be aged 12 to 17, with those audiences described as having 39% and 61% “Reach of Online Universe” respectively,” the ASA says.

“We acknowledged that data was relevant to a different market but considered it nevertheless indicated that children were likely to view footage, and therefore ads, on YouTube.

“We noted YouTube offered advertisers the option of ‘age-gating’ their marketing material, whereby the ad was targeted via the date of birth registration held for users; (but) only users who were logged in and met the relevant age criteria would see such an ad.”

“The … clip during which the ad appeared was likely to appeal to children and … was served in such a way that it could be viewed by all YouTube users, even if they had not logged in. Because it included scenes that were unsuitable for younger children and it could be viewed by all YouTube users, we considered the ad was inappropriately targeted.”

The ASA therefore found that the ad breached two rules in its advertising code and must not be run again (the movie promoted by the ad was from September 2011). It has also reminded Lionsgate to target its ads appropriately. YouTube was not complained about.

But the ASA stopped short of opening a wider discussion - the ongoing quest for an online equivalent to the TV watershed.

The report, from its IHS Screen Digest division, notes that in-app purchases accounted for about 39 percent of app revenues in 2011, and it predicts that in 2012 that proportion has gone up to 49 percent. By 2015 it will account for 64 percent of all revenues.

In terms of actual value, IHS says that in-app payments were worth $970 million in 2011, and will be worth $5.6 billion in 2015. (Sound too big to you? Please comment below.)

Update: More on why those revenues will be so big. Ian Fogg, head of mobile for IHS Screen Digest, pointed out to paidContent in an email that the $5.6-billion figure “is driven by the vast numbers of new smartphones that will ship over the next few years. As the number of smart devices is so great, the app market revenues will grow greatly, and hence so will the in-app revenues.” He also noted that many pay-to-download apps also feature in-app purchasing options; that will additionally contribute to the total size of in-app revenues. [original article continues]

This represents a big opportunity for app store operators like Apple (NSDQ: AAPL) and Google (NSDQ: GOOG), as well as mobile payments companies like Boku, Zong and PayPal to manage these payments.

And it also represents something of a success, too, considering how much opposition there was to in-app billing when it was first launched by Apple with requirements to pay it 30 percent of each transaction.

“Apple has nailed the mobile gaming and mobile app payment business,” noted Wilhelm Taht, marketing director for mobile social media service Flowd, earlier today. “It’s super frictionless.”

Strangely, the report does not take account of mobile advertising as a route to making money from an app. That could be because the only apps that can actually make any significant money from advertising are those that get the very highest amount of traffic—other long-tail apps that lack scale will face a challenge in trying to use advertising as their main business model.

Today, free apps already have significantly more traffic than paid apps: Nielsen last week noted that consumers mainly use a mixture of these, or a free-only selection of apps; those who only opt for paid apps account for low, single-figure percentages in different categories (around two-three percent). Ironically, paid apps today remain the main way that many of the most successful apps (such as games) are making money.

Free-to-download apps that come with in-app purchasing—so-called “freemium” apps—represented 45 percent of all top-grossing iPhone apps, and 31 percent of the highest-earning Android apps in the U.S.

IHS Screen Digest estimates that some 68 percent of all top-grossing apps had at least some form of “additional content or functionality” available through in-app purchase, which could mean features like extra levels in games, virtual currency to continue playing or extra editions of a publication.

Virtual currency, it says, is the most common form of in-app paid content available today, accounting for 63 percent of all revenues made from in-app purchases.

But while we hear a lot about newspapers and magazines, and increasingly video-based apps looking to in-app payments as a way of getting their users to buy mobile content, overall, this represents a very small part of revenues today: in the UK in Q3 2011, publications accounted for only five percent of in-app payment revenues (no figures for the U.S.), while video accounted for only two percent of in-app revenues in the U.S. and none in the UK.

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UK-based Michael Ohajuru, who on Twitter describes himself as a “sales and marketing specialist, art blogger, communications evangelist, art historian, communications philosopher [and] geek social networker,” among other things, notes that, after starting to use SkyDrive to store and share photographs with a closed group of contacts, he discovered one day that his account had stopped working.

When he appealed to Microsoft for an explanation, a representative, Kayla, sent him an example picture that led to his account getting frozen. It was a “Reclining nude,” a painting by Amedeo Modigliani from 1917, from the permanent collection of the Metropolitan Museum of Art, a picture he took in London. Apparently, it violated Microsoft’s Code of Conduct, which forbids any image that “depicts nudity of any sort.”

The case echos a recent a mini-kerfuffle when Google (NSDQ: GOOG) removed the avatar of one well-known blogger because, in his picture, he was giving us “the finger.”

Ohajuru was confused about whether it was actually that one picture, or others like it. So he took to his photographs, discovering not only other paintings with nudity, but photos from beach holidays (lots of skin) and at least one other graphic work of art, piece of decorative art called the “Warren cup” with two men in an embrace (also naked, or are they nude?).

Were all these pictures also unacceptable to Microsoft, or just the one Modigliani? Pondering the question, Ohajuru—being of both artistic and technological inclinations—thought of an ironic parallel: “What Kayla and Microsoft have done, today, in 2012, was a almost an exact repetition of what happened when Amedeo Modigliani first exhibited his now acclaimed nudes in 1917, according to Modigliani’s Wikipedia entry.” He continues:

“Then:

  On December 3, 1917, Modigliani’s first one-man exhibition opened at the Berthe Weill Gallery. The chief of the Paris police was scandalized by Modigliani’s nudes and forced him to close the exhibition within a few hours after its opening.

Now, to paraphrase Wikipedia

  On January 8, 2012 Modigliani’s Reclining Nude, 1917 was uploaded by me to my SkyDrive. Microsoft was scandalized by Modigliani’s nude and forced me to delete the file within 48 hours.”

Rather than delete all those other pictures, Ohajuru took a calculated risk, and took away just the “Reclining nude,” replacing it with another image (this is a bit of classic art censorship protest, and also reminiscent of MG Siegler taking away his middle finger, and adding in a cute Google+ logo):

It worked, and now the account is up again.

Does that make sense? It doesn’t to me. Ohajuru’s conclusion, “The more things change the more they stay the same,” is certainly the case here—as is the fact that, as he notes, “Microsoft’s Code of Conduct policy confuses naked with nude.” One being objectifying, and the other being artistic.

But shouldn’t we expect a bit more from technology today? Given how many other images there were in Ohajuru’s SkyDrive that didn’t make Kayla and Microsoft flinch, the incident highlights not only the question of whether whether automatic image systems can be honed to differentiate between art and porm—but also the inconsistencies of such systems. If they work like this, they’re simply just ridiculous and pointless.

He is replacing former Trinity Mirror (LSE: TNI) and Tiscali director Richard Ayers, who is leaving as planned after a year in the interim post.

“I’ve got a family in London and we thought it was important to have someone Manchester-based, so I happily filled the role till we could find the right person,” Ayers writes. “And now we have. Russell has an excellent pedigree.”

The pair previously worked at TV producer Magic Lantern, where Stopford was creative director. Stopford remains chairman of online production house Glow Labs.

Ayers retains a relationship with City as “digital playmaker”, working on digital business development, new products and innovation.

Under Ayers, City, whose owner Sheikh Mansour bin Zayed Al Nahyan has spent an estimated £1 billion on the club since acquiring it in 2008, has turned previously paid digital content free and built out new video, mobile and location initiatives to ensure the business can build up fan relationships.

“It genuinely feels to me like a startup. We’re running as fast as we can, but under the umbrella of a very sensible ‘VC’,” Ayers told paidContent when I interviewed him in August 2011.