Networking giant Cisco Systems said today it will acquire NDS — an Israeli firm that specializes in software that delivers video and interactive entertainment to TV set-top boxes in a secure manner — for about $5 billion in cash plus the assumption of debt.

NDS is 51 percent owned by Permira, a private equity firm, and 49 percent owned by News Corp. (which also owns this Web site). Word of advanced talks on the deal were first reported today by the Israeli business newspaper Calcalist (in Hebrew), and then summarized by Israel’s English news service Ynetnews.

Cisco shares are getting whacked in pre-market trading. As of 8:33 am ET, the shares are indicating down 22 cents, or more than 1 percent, to $19.98 a share.

NDS had traded publicly on the Nasdaq until it went private in 2009, and Ynetnews says the current talks peg the company at a valuation of about 35 percent north of what it was trading for at that time. Founded in 1988 by a group of scientists, it was acquired by News Corp. in 1992 for $15 million, and first listed its shares on the Nasdaq in 1999. In 2009, News Corp. teamed with Premira to buy out the shares for $3.7 billion, and delisted it from Nasdaq.

Word of the talks also come at an interesting time for Cisco, what with those recent rumors that it has been mulling an exit from the set-top box business. Set-top boxes carry a relatively low margin in the 30 percent range, which doesn’t do anything good for Cisco’s overall gross margin, which is north of 60 percent.

Rumors popped up in various outlets that the business was on the block, fed in no small part by the fact that Cisco sold off its set-top manufacturing operations to Foxconn last year, as part of its larger reorganization. CEO John Chambers slapped that idea down pretty hard during the last earnings call, saying Cisco remained “totally committed to the set-top box business.” Now we know why.

The press release is below:

Cisco Announces Intent to Acquire NDS

Acquisition of NDS Will Expand Cisco’s Ability to Transform How Service Providers and Media Companies Worldwide Deliver Next-Generation Video Experiences to Subscribers

SAN JOSE, CA and LONDON–(Marketwire -03/15/12)- Cisco (NASDAQ: CSCO – News) today announced its intent to acquire NDS Group Ltd., a leading provider of video software and content security solutions that enable service providers and media companies to securely deliver and monetize new video entertainment experiences.

NDS uses the combination of a software platform and services to create differentiated video offerings for service providers that enable subscribers to intuitively view, search and navigate digital content anytime, anywhere and on any device.

The acquisition of NDS will complement and accelerate the delivery of Videoscape™, Cisco’s comprehensive platform that enables service providers and media companies to deliver next-generation entertainment experiences. Acquiring NDS will broaden Cisco’s opportunities in the service provider market, expanding its reach into emerging markets, such as China and India, where NDS has an established customer footprint.

Under the terms of the agreement, Cisco will pay approximately $5 billion, including the assumption of debt and retention-based incentives, to acquire all of the business and operations of NDS. The acquisition has been approved by the boards of directors of both companies.

The acquisition is expected to close during the second half of calendar year 2012, subject to customary closing conditions, including regulatory review in the United States and elsewhere. The net impact to Cisco is expected to be accretive to EPS in the first full year on a non-GAAP basis.

Highlights/Key Facts

Cisco’s open, standards-based Videoscape platform, which spans the cloud, the network and end-user clients, is a key part of the company’s overall video strategy to deliver TV experiences that make access to content more visual, mobile and social for consumers, while protecting and enhancing the value of content for service providers and media companies.
The addition of NDS’s leading software solutions, such as the end-user viewing client and content security solutions, combined with its systems integration expertise, will accelerate the delivery of the Cisco Videoscape platform.
This acquisition reflects Cisco’s increased strategic focus on video, one of its five foundational priorities, and its investment in software and services revenue streams and competencies.
This acquisition underscores Cisco’s commitment to its “build, buy, and partner” strategy to grow through a combination of organic innovation, targeted acquisitions and strategic partnering.
In terms of valuation, on a forward-looking basis, the acquisition is generally in line with the earnings before interest, taxes, depreciation and amortization (EBITDA) multiples paid when NDS was taken private in 2009, and is within the multiples ranges for comparable deals, including Cisco’s acquisition of Tandberg.
A significant portion of NDS’s software, services and content protection business is recurring, with long-term contracts, typically with an average duration of approximately five years.
Prior to the close, Cisco and NDS will continue to operate as separate companies. Upon completion of the transaction, NDS’s global operations, including sites in the United Kingdom, Israel, France, India and China, and its approximately 5,000 employees will join the Cisco Service Provider Video Technology Group (SPVTG), led by Senior Vice President and General Manager Jesper Andersen.
Dr. Abe Peled, NDS Executive Chairman, will be named Senior Vice President and Chief Strategist for Cisco’s Video & Collaboration Group, of which SPVTG is a part. Dr. Peled will report directly to Marthin De Beer, Senior Vice President, Cisco Video and Collaboration Group.

Quotes

John Chambers, Chairman and CEO, Cisco

“Our strategy has always been driven by customer need and on capturing market transitions. Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetization opportunities and service differentiation.”

Dr. Abe Peled, Executive Chairman, NDS

“Cisco and NDS are helping drive the transition that will enable service providers and media companies to offer new revenue-generating video experiences. NDS’s open software video platform and services are highly complementary to Cisco technology, and together we are uniquely positioned to enable service providers to deliver fresh and exciting multi-screen video services to their customers. A key component of NDS’s success has been our open software and services model, working with a wide range of set-top box manufacturers to enable greater choice for our customers; following this acquisition this strategy will continue and expand the choice of hardware solutions available to service providers worldwide.”

Dave Habiger, CEO, NDS

“This is a transformational opportunity for not only NDS and Cisco, but also our service provider customers and their consumers. Together we make the connected vision a reality.”

Investor and Media Events:

John Chambers, Cisco’s Chairman and CEO, Ned Hooper, Cisco’s Senior Vice President and Chief Strategy Officer, and Abe Peled, Executive Chairman of NDS, will host a joint investor call on March 15 at 6:00 a.m. PDT to discuss the proposed transaction. The dial-in number is 517-308-9354 (international) and 800-619-2472 (United States). Conference call replay will be available from 10:00 a.m. PDT, March 15, 2012, to 4:30 p.m. PDT, March 30, 2012 at 203-369-3287 (international) and 800-469-5424 (United States). The replay also will be available via webcast from Thursday, March 15, through April 13, 2012 on the Cisco Investor Relations website at http://investor.cisco.com.

John Chambers and Abe Peled will host a joint Web-based video press conference on March 15 at 9:30 a.m. PDT. Members of the media are invited to watch this live webcast by clicking here. Please note that online registration is required. A broadcast replay will be available within 24 hours. For more information on this announcement, please visit newsroom.cisco.com.

RSS Feed for Cisco: http://newsroom.cisco.com/dlls/rss.html

Tags / Keywords:

Cisco, NDS, video, service provider

About Cisco

Cisco (NASDAQ: CSCO – News) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

About NDS

NDS Group Ltd. creates the technologies and applications that enable pay-TV operators to securely deliver digital content to TV STBs (set-top boxes), DVRs (digital video recorders), PCs, mobiles and other multimedia devices. Over 90 of the world’s leading pay-TV platforms rely on NDS solutions to protect and enhance their business.

NDS’ VideoGuard® is the world’s market-leading content and service protection solution, deployed in 125 million pay-TV households. VideoGuard conditional access (CA) and digital rights management (DRM) technologies safeguard pay-TV service revenues exceeding $50 billion. NDS middleware, which enables a host of advanced services for subscribers, has been deployed on 214 million devices. NDS DVR technology, centred around XTV™, is a leader in the global industry with 47 million units deployed. (Deployment figures as of 31st December 2011).

Headquartered in the UK, with over 5000 employees, NDS remains committed to investing in technology and development with over 75% of its employees dedicated to pioneering work at development centres in France, India, Israel, Korea, UK and US.

Cisco and the Cisco logo are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. A listing of Cisco’s trademarks can be found at www.cisco.com/go/trademarks. Third-party trademarks mentioned are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company.

NDS is a registered trademark or trademark in the U.S. and certain other countries. All other trademarks are property of their respective owners.

Vox Media, the Washington, D.C., online media start-up that launched a new tech site called The Verge last fall, is debuting an early version of its expected videogames offering later today.

The site, temporarily called Vox Games, will begin daily publishing today as a section on The Verge, to be followed later by a standalone site under a new brand name.

The company said that “our goal here is to create the premier destination and media outlet for video games news, reviews, video and entertainment.”

As with The Verge, the Vox Games staff is made up of well-known editorial personnel from other prominent sites. It is headed up by former Joystiq Editor in Chief Chris Grant.

Other staffers are former editors in chief of top videogames sites, including Brian Crecente (Kotaku) and Russ Pitts (Escapist).

According to sources close to the situation, Yahoo will announce the impending departure of four of its longtime board members, including chairman Roy Bostock.

The others headed out the door are Hewlett-Packard exec Vyomesh Joshi, Gary Wilson and Arthur Kern.

I had reported in several previous posts that this exact group of directors was leaving, and noted in one yesterday that it was about to happen, and that new board members were also on the way.

And, presto, it is so!

(Update: Yahoo confirmed all in a letter it just released from Bostock, which I have posted separately.)

Yahoo’s two new directors are former Rovi CEO Fred Amoroso and LiveOps Chairman (and former CEO) Maynard Webb, who was once COO of eBay (pictured, left to right).

Rovi does digital entertainment technology, while LiveOps offers cloud-based enterprise solutions.

The Silicon Valley Internet giant will also be adding three more board members, said sources, but those people are not confirmed as yet.

And it is not clear who will be chairman of Yahoo’s board, either. Intuit CEO Brad Smith has a full-time job, and the newly installed Weather Channel CEO David Kenny does, too.

Sources said the news is coming after the markets close, with other updates, including: The news-free status of its ongoing strategery (the Asian deal is coming along — blah, blah, blah — but you read that here yesterday in much more detail); ladling praise on new CEO Scott Thompson (also formerly of eBay); and giving props to co-founder Jerry Yang, who stepped away from the board and from the company several weeks ago.

The moves by Yahoo are designed to thwart a possible proxy fight that might be coming from activist shareholder Daniel Loeb, who has been working on a board slate of his own.

It’s been hard for him, and also for Yahoo, to attract significant names to the board. The two new additions are solid tech execs, although certainly not high-profile appointments.

Yahoo declined to comment.

Here are their bios from the Rovi and LiveOps Web sites, if you want to know more:

Fred Amoroso is a member of Rovi Corporation’s Board of Directors.

Fred Amoroso is a member of Rovi Corporation’s Board of Directors. Fred Amoroso previously served as Rovi’s president and chief executive officer from July 2005 to December 2011. Prior to joining Rovi, Mr. Amoroso served as an advisor to Warburg Pincus, an investment firm from September 2004 to June 2005. From July 2002 to August 2004, Mr. Amoroso served as the president, chief executive officer and vice chairman of Meta Group, an information technology research and advisory firm. From October 1999 until its merger with IBM in January 2002, Mr. Amoroso served as president, chief executive officer and a director of CrossWorlds Software, Inc. Prior to CrossWorlds, Amoroso was a member of the world-wide management committee of IBM, was general manager of IBM Global Services Asia Pacific and held various other executive positions at IBM. Before joining IBM, Amoroso held various positions at Price Waterhouse, now PricewaterhouseCoopers, including lead technology partner.

Mr. Amoroso holds a B.S. in systems engineering and M.S. in operations research from Polytechnic Institute of Brooklyn.

As Chairman, Maynard brings almost 30 years of experience developing and leading high-growth companies to his role at LiveOps. From December 20, 2006 to July 18, 2011, Maynard was also LiveOps CEO. He joined LiveOps from eBay where he served as Chief Operating Officer. At eBay, Maynard directed engineering and technology operations, product development, customer support, trust and safety, global billing, human resources, and legal functions. Prior to eBay, Maynard was Senior Vice President and Chief Information Officer for Gateway, Inc. He has also held management and leadership positions at Bay Networks, Quantum Corporation, Thomas-Conrad Corporation and IBM. A respected member of the Silicon Valley technology community, Maynard sits on the boards of several successful companies, including Salesforce.com, Admob and Baynote. Maynard holds a Bachelor of Arts degree from Florida Atlantic University.

At that size, it claims to have outpaced Rovio’s Angry Birds, which took 20 months to hit 300 million.

If you haven’t heard of Outfit7, it’s probably because it hasn’t raised any institutional venture capital, it wasn’t founded in the U.S., and much of its application usage is spread across 120 countries.

But the company’s franchise of apps called Talking Friends, which are sort of like a modern-day Neopets, is gathering a large base of users.

The characters include Talking Tom Cat, Talking Ben the Dog and Talking Harry the Hedgehog — in other words, many more brands than Angry Birds alone. Of the 14 in existence, Talking Tom Cat is the most popular, having been downloaded 100 million times.

The animals serve as a virtual pet, which responds to your touch and repeats everything that you say. You can pet him, poke him or grab his tail. A popular activity is to record videos of the pet and send them to friends.

The number of users who come back to the app is impressive, with more than 90 million monthly active users worldwide. The company also averages more than 25 million downloads per month.

Executive Chairman Narry Singh believes Rovio and Outfit7 have similar growth trajectories; and like Rovio, which was able to create a strong brand from Angry Birds, Outfit7 is angling to create brands, as well.

Today, Outfit7 has offices in Palo Alto, Calif., as well as Slovenia, Cyprus, London and Seoul, South Korea. Its apps are primarily free, but users can make in-app purchases to buy virtual goods.

The company is also announcing today that it is partnering with Iconicfuture and Digital Artists to bring branded virtual goods to Talking Tom Cat. In a testament to its international pull, the merchandise will represent six of the world’s most popular soccer clubs, from Spain, Italy, England, France and Portugal.

Of course, Outfit7 is not the first company to want to replicate Rovio’s successes.

In the end, it won’t be important which company got to 300 million downloads the fastest, but which one was able to build a more long-term and sustainable company.

When you look at it in those terms, the jury is still out on Rovio, as well.

Much of what we saw at CES relates to things we’ll be seeing 24 months out. In my mind, it’s all good: we’ll be able to target better, we’ll be able to segment better. The ads will be delivered on screens that are sharper, look better, larger, which ultimately provides more effective communication. There’s one last element: in the role that we [media buyers] play, we have a responsibility to ensure that technology develops in a manner that doesn’t shake up the supply-and-demand equation of our business, doesn’t destroy the content amortization business, isn’t disruptive simply for the sake of being disruptive.

If it does alter the supply-and-demand equation, it needs to do so positively, not negatively. When you have the share of the deal volume that we do, you can’t just be passive about it. You have to try and influence it. The technologies and devices that begin to get manifested at a trade show like this needs to be guided, so that it all works out in the best interests of our clients.

– Irwin Gotlieb, Global CEO, GroupM; originally appeared at TVExchanger

We have a responsibility to ensure that technology develops in a manner that doesn’t shake up the supply-and-demand equation of our business.

A bold statement and, it seems, a common mindset for many incumbent business giants in their respective industries; a mistaken belief that they can somehow coax disrupting forces (be they new companies, or larger macro consumer trends) into conforming to their legacy business models and cost structures. As we have seen countless times, the actions of incumbents when faced with technology disruption often is to turn to litigation, legislation or other non-market strategies (i.e., anti-trust investigations, artificial price barriers) in an attempt to delay or block the challenging technology or companies. This perhaps works as a delaying tactic in the short term (Rio MP3 player case, Napster, book publishing agency pricing model with Amazon) but fails in the long term.

Mr. Gotlieb’s apparent belief that he and other advertising agency leaders can “ensure that technology develops in a manner that doesn’t shake up the supply-and-demand equation of our business” is futile in the long run, but perhaps more pernicious is the implicit arrogance of thinking the market force of the Web can be channeled into their bank accounts by sheer force of will. Of the many problems with this way of thinking, paramount is the ability to rationalize away making the hard choices and decisive actions to ensure the GroupMs of the world play a vital role in the new economy as they have done in the legacy one. (Cue Scotty from Star Trek… “You cannot change the laws of physics.”) For GroupM and other incumbents, it’s difficult to fathom, given how entrenched and advantaged they are, that they could drop the ball. But many will, as history has so often shown in times of market transformation.

Technology forces that bring greater efficiency and transparency to markets simply don’t care about privilege, access and rolodexes. They disrupt predecessor markets because of structural problems like price opacity and false scarcity that no longer “work” in the new market. Look at Google: its entire approach to advertising is to remove the middleman — just as, increasingly, the media-buying side of traditional agencies is reliant on the inefficient middleman, marketing up the cost of media to provide their services. Google is now selling $40B of media every year, the majority of it without a middleman (or at least with a different sort of middleman, and in any case, getting far lower margins than in traditional media bought by agencies.)

We watched as the music industry delayed its demise by suing Rio, Napster and literally hundreds of others, delaying the adoption of new business models not based on scarcity. We listen to Jeff Bewkes decry Netflix as the Albanian Army, as he feverishly works to reduce its influence with his content. We observe the movie industry fight with everything it has to protect the windowing strategy and defend limited access to content instead of moving toward open and immediate paid access to their movies. (Fantastic post on this from Rich Greenfield here, “Innovate Don’t Legislate” — registration required.)

And, as a microcosm of this larger conversation, we watched, over a very short period of time in the SOPA/PIPA debate, as the Web demonstrated the disruptive advantages of network effects and scale, as over a period of weeks, legislation that appeared all but ratified was shuttered, up to and including an implied Presidential veto.

Heady stuff. Granted, if we extend the metaphor and use SOPA/PIPA as a microscope, there are extremes on both sides, and it will be messy and require compromise if the big media incumbents and new technology disruptors are to learn how to co-exist. For big media companies and the service businesses that cater to them, this means recognizing the practical realities of changed business models — probably for the most part that their cost of production needs to drop dramatically and they need fundamentally to re-think distribution and customer relationship management to remain profitable and relevant.

On the tech side, it means recognizing that progress requires some level of institutional engagement and political compromise — because like it or not, this is the way our system of government works and how laws get written. This won’t be easy or natural, as it’s anathema to the culture of how new media tech and the start-ups that encompass it conceptualize and operate in our worlds. Facing reality and then demonstrating a bit more collaboration and compromise, however, would go a long way and be better for the customers who, like our democracy, these industries ultimately serve. Because it’s the customers who are in the driver’s seat, and increasingly they know it.

Perhaps it’s pollyanna-ish, but I bet on technology. Big media has the most to lose, because after decades of the game being rigged in its favor, the tables are turning. Of course it’s difficult and painful for media incumbents to embrace digital markets, considering these markets ultimately are smaller and have less attractive economics. That’s presumably why big media executives are so well compensated — if it were easy, anyone could do it. The alternative, however, is to be disrupted by new entrants that don’t have any allegiance to aging business models, and couldn’t care less how out of whack someone else’s cost structure is.

Coming back to Mr. Gotlieb’s view, I offer these thoughts. First, incumbents won’t be able to meaningfully guide the technology juggernaut of more efficient advertising mechanisms, so it’s perhaps better for them to focus their energies and advantages toward thoughtful reinvention. New technologies are bringing actual measurable performance and more efficient means of buying to a large share of advertisers. The challenge for incumbents is to adapt their enterprises to embrace this chaos and profit from it. The good news is, it’s doable. However, to think they can bluster their way out of this disruption is a fool’s errand.

David Pakman has been an internet digital media entrepreneur since 1997. He co-founded the Apple Music Group in 1995, worked at N2K (one of the first online music companies), co-founded MyPlay (pioneer of digital music locker), and was COO/CEO of eMusic for five years. Pakman is now a Partner at Venrock in NYC, investing in early stage internet and digital media companies.

The drop-off in players affected almost all developers, but did not hit all titles equally.

For example, Electronic Arts saw 1.2 million fewer monthly users over the past week for its top title The Sims Social; Zynga’s Empire & Allies game lost one million monthly users, and its newest game, CastleVille, lost 900,000, according to AppData, which publishes such information.

On the flip side, many of the games that performed well were old favorites; these logically would have longer-term, more-committed players, who would make a point of returning during the holidays to take advantage of seasonal promotions.

The games that benefited from the holidays include Zynga’s Words With Friends and FarmVille, which gained 1.3 million and 800,000 monthly active users, respectively, according to Inside Social Games. Other gainers rounding out the Top 5 were Tetris Online’s Tetris Battle; Wooga’s kingdom-building game, Magic Land; and Men vs. Women, a role-playing game by Social Point.

Still, the general direction for the week was heading down.

That contrasts with other game platforms, such as consoles, PCs and mobile, which largely benefit from the holidays and from more free time in general.

Console games often skyrocket in popularity as kids and adults unwrap new titles for Nintendo, Xbox or PlayStation on Christmas morning.

PC gaming also typically surges during the season. EA timed the launch of Star Wars: The Old Republic ahead of the holidays, in hopes of drawing new players who would be sold on sticking around for months, after spending time on the game during their time off.

But perhaps the biggest competitor came from mobile, which benefited from breaking records for the number of new Android and iOS devices that were gifted during the holidays. Flurry reported that more than one billion apps were downloaded worldwide during the last seven days of 2011, breaking the all-time weekly record. Games are often one of the most-downloaded categories of apps.

So the more important question to ask is, why would Facebook be an exception, if other platforms performed well?

Clearly, all of the platforms are competing for a limited number of minutes in the day, and so are other forms of media, like the Internet, TV and the movies. But when it comes to Facebook, a larger driver may be the environment — after all, it’s no big secret that a lot of social networking and social gaming is done in the workplace.

In a study conducted last summer, advertising agency Saatchi & Saatchi found that 47 percent of respondents said they play social games at work during a typical day, and that 28 percent play for at least 30 minutes. Without that dedicated time in front of the computer every day, people may have had the opportunity to be more obsessed with other screens, such as phones or TVs.

Another potential reason that Facebook and social games did not see a lift from the holidays is because they have not yet figured out how to capitalize on the Christmas economy.

For years, console games have been timed with the end of the year, so they could be wrapped up and placed under the tree. More recently, smartphones and gift cards for music and apps have helped mobile prosper. Perhaps there wasn’t enough hype and promotion for social games to compete for people’s dollars.

Regardless of the reasons, the drop may ultimately be a small a blip on the radar screen for most game developers, who also see several spikes in activity during the year.

The bigger impact may be felt at Facebook, which takes a 30 percent cut of all virtual goods sold inside social games, and would feel the cumulative impact across all of the games.

According to the expected year-end box-office data figures compiled by Hollywood.com, the industry raked in $10.1 billion for 2011 in North America.

While that seems like a nice haul, it’s 4.5 percent less than in 2010. While not enough to result a major downturn in limo-riding and Botox, the results are likely to cause entertainment moguls some worry, since they are accompanied by continuing trends, including another year of lower attendance.

And given that the revenue was unusually bolstered by more higher-priced 3-D movie-ticket prices — Hollywood released several dozen 3-D films in 2011, double the previous year’s amount — the latest numbers are even more disappointing.

While some holiday movies did well — namely “Mission: Impossible — Ghost Protocol,” which has taken in about $70 million domestically since its opening less than two weeks ago — it pales in comparison to such digital hits as Activision’s Call of Duty: Modern Warfare 3 videogame, which pulled in $400 million in one day from the much-desired youth market.

It surpassed $1 billion in sales in 16 days, eclipsing the box office of the blockbuster movie “Avatar,” which took 17 days to gross seven figures.

Does that mean that the continued competition for the leisure time of pretty much everyone between digital and analog has gotten worse — an epic battle of the movie industry versus game players, tablets and smartphones?

Or is it because so many movies made in 2011 turned out to be just awful? (If you saw “New Year’s Eve,” you’ll know exactly what I mean.)

One thing is clear: No one is going to pay for poor-quality content, no matter the screen size.

More number-crunching to come, as the industry debates the issue into 2012 (coincidentally, the title of a movie I happened to like, as you can see below!), and at the upcoming D: Dive Into Media at the end of the month, down near Los Angeles, in the belly of the Web-smacked beast.

Until then, let’s hope it does not come to this next year:

That’s in spite of Zynga, the rising star of social gaming, garnering much of the media’s attention last week, when it raised $1 billion in its initial public offering.

In November, Nintendo’s portable handheld, the 3DS, had its biggest single month of sales, representing an increase of more than 215 percent over the previous month; it has now sold nearly 2.5 million units since launch.

The Wii had its biggest Black Friday ever, with more than 520,000 units sold — six years into the console’s life.

The Japanese company also set a software record. Super Mario 3D Land, which was released Nov. 11, is now the fastest-selling portable Super Mario title in U.S. history, and Mario Kart 7 was the fastest-selling Mario Kart game.

In an interview with AllThingsD at the company’s U.S. headquarters in Redmond, Wash., Nintendo’s North America President Reggie Fils-Aime explained what’s driving strong holiday U.S. sales this year, and what’s on the horizon for the maker of games and hardware.

He also left the door wide open for Nintendo to experiment with new business models, including free-to-play or subscription, although he questioned the long-term prospects of social gaming companies, like Zynga.

Here’s an abbreviated version of our chat:

AllThingsD: It seems videogame sales this holiday kicked off with a bang.

Reggie Fils-Aime: We had a strong Black Friday for both our Wii and 3DS business.

The time frame from mid-November until the end of the year is critically important to us, and is driven by a number of software and hardware initiatives.

For the 3DS, we launched Super Mario 3D Land in November. It had the fastest sell-through for a handheld Super Mario game. That gave us a lot of momentum going into Black Friday, and right after Black Friday, we launched Mario Kart 7, which ended up being the fastest-selling Mario Kart, as well.

Together, that propelled our 3DS business. We’ve sold through more 3DS’s in eight months time than the original DS sold in the first 12 months. Our handheld business has a lot of momentum right now.

But it took awhile to get there?

What’s interesting is that we had a very good launch. The first week sales [of the 3DS] were fantastic. The initial rush of sales was really strong. But what happened after that in the spring and early summer time frame is — that’s when sales slowed down a little bit.

It was driven by not having great first-party software, and we were late in bringing some of the online functionality to the 3DS, and that’s when sales began to fall.

That’s when we took drastic action to reduce the price, right after the launch of The Legend of Zelda: Ocarina of Time 3D. Our bet was to regain momentum and make the holidays strong. We are having a strong holiday.

A lot of retailers were concerned that we would see a Black Friday rush and then things would trail off after that. Is that what you are seeing?

We haven’t seen that. We have seen things accelerate as we’ve gotten closer to Christmas Day itself. We are anticipating this week, across all of our businesses, will be the strongest sell-through week of the year.

What about the Wii?

The Wii had a strong Black Friday, too, driven by strong retailer promotions. This was our sixth Black Friday, and it was the best Black Friday week we’ve seen to date, so we’ve had very positive results.

It’s driven by software, and in this case, a new Legend of Zelda: Skyward Sword. It’s a game that’s been recognized by the gaming press to be one of the best games of the year.

The momentum continues for our Wii business, and sales are right on objective.

How does it continue to break records six years in? That’s baffling.

It’s because, even today, the Wii provides a family experience that you can’t get anywhere else. I love the stories I hear of grandparents playing with parents and with the grandkids.

Those are experiences that you can’t get elsewhere. That’s why we continue to break records. Plus, this holiday is the first holiday that it’s available for $149 or below. It’s reaching a whole new demographic that’s wanted to buy in, but couldn’t do it before.

And for consumers, there’s over 1,000 games that have been published, so the breadth of the gaming experience is extremely wide. The Wii continues to be the fastest-selling home console ever in the history of the gaming industry in the U.S.

Does that change as we get closer to the next-generation console, the Wii U?

The market is going to continue to differentiate based on the types of experiences that consumers want. As an example, if I’m the head of a household of a family of four, and my disposable income is $50,000 to $60,000, I’m going to continue to look at the Wii because of the software, and it’s a great entertainment device. For consumers who want to have the latest gadgets and have a higher disposable income, that’s for the Wii U.

We haven’t announced pricing or availability or any other details, but given the current pricing of the Wii, it’s not going to be there.

We’ve been very clear, the market is going to decide how long these products will coexist side by side. Our goal is to launch the Wii U and drive it into the marketplace, but it will speak to a different consumer than the one that is buying the Wii today during the holidays.

What about the other consoles? Both Sony’s PlayStation and Microsoft’s Xbox are about the same age.

All of the competitors haven’t talked about what’s next for them, and given the investments they’ve made in their technologies, for them to move to new systems — at least on the same timing we want to move at — would probably be pretty challenging. But in terms of what they are going to do, when they are going to do it, you’ll have to talk to them.

What do you think of Microsoft’s move to make the Xbox the entertainment hub of the living room?

In the end, the consumer decides what equipment to have in the living room. The interesting thing we’ve found — because of the family entertainment we provide, and the inclusion of Netflix — the vast majority of Wiis are set up on the main TV in the living room.

Are you considering adding more content like live TV or movies?

If the consumer wants live TV, they can get it through the options they have today. We always ask the question, ‘What can we do that’s new and provocative?’ And we will continue to think of new and provocative experiences for the user.

I’ve spent the past week covering Zynga’s IPO. What’s your perspective on social gaming?

What’s the share price? It will be interesting when it breaks below $9 … I have a couple of thoughts on social gaming.

Consumers want to be entertained in a variety of ways, like watching TV or reading a book. The thing about entertainment — as consumers have a range of experiences — their desires for what’s new continues to be pushed out. So delivering the same experience all the time … consumers will move on.

So when I look at gaming experiences on social networks, there’s a variety of entertainment value. Some are strong, some are not. But in the end, how will they evolve? Doing the same thing over and over again is no longer fine.

Is that really fair when you have Mario Kart 7 coming out?

We continue to evolve the experience by providing a level of customization that’s new, or different ways to race with a sail and a propeller that allows you to drift under water. What we’ve done with Mario Kart 7, for some of the tracks, you can actually win when you go off the track, which never existed before. We’ve continued to make it more fun and add more enjoyment for the consumer.

You don’t see that innovation happening in social gaming?

The companies that will win in the social gaming space need to show an ability to provide the new and different experiences, and a way to monetize it. In the end, these are businesses that need to make money.

Is that your comment on the free-to-play model? Will you experiment with free-to-play?

I have two comments on that.

First, we make games for Nintendo devices, and that is a competitive advantage for us. You can only play Mario on a Nintendo device, so from that standpoint, I wouldn’t expect to see our franchises on other platforms, and I would argue Facebook is a platform.

My second point, on whether we will experiment with other forms of monetization?

Certainly.

How that comes about, or which ones we do first, that’s all experimentation that’s going on right now in our various studios.

That last annual tradition may be dying off, thanks to changing technology habits. More people now watch TV while simultaneously using second screens like tablets, laptops and smartphones. A recent Nielson study showed 70% of tablet owners and 68% of smartphone owners said they use their devices while watching television.

I, too, find myself watching TV in this multi-tasking mode. This week, I’ve been testing three free apps that aim to get viewers more engaged in shows as they watch them on TV. Ironically, these apps require people to look away from the TV and at their second screens, but in my experience, this actually worked. I tried Yahoo’s IntoNow, which runs on iPhone and iPad and Android smartphones; Showtime Social, which works on the iPad; and Shazam, which works on nearly all mobile platforms, including Apple, RIM, Android and Windows Phones.

I had fun with these apps, and each uses a different method to draw in users. IntoNow and Showtime Social poll viewers during shows, Shazam displays behind-the-scenes footage, and IntoNow displays related social-network updates and live discussions. The apps virtually introduced me to fans of shows I liked, reminding me of my freshman year of college when I piled into a dorm room with 20 people (many of whom I didn’t know) to watch the series finale of “Felicity”: The show got more interesting in the company of other fans.

The Showtime Social iPad app polled ‘Dexter’ viewers to gauge reactions to the show.

Unfortunately, some aspects of these apps aren’t designed to work with pre-recorded shows—and more viewers, especially the ones likely to use a second screen, are recording their TV these days. Showtime Social must be used as a show airs. Shazam works with pre-recorded TV shows, but to work with commercials, it must be used live or for as long as an ad campaign is still running. And though IntoNow will work with a pre-recorded show, discussions and related Twitter content aren’t live when you use the app after the show airs.

I started with Yahoo’s IntoNow app on the iPad. It has a green TV icon in the top left corner that, when I tapped it, listens to whatever is playing. Using its patented SoundPrint technology, IntoNow figured out what was on by matching it against a database of over 160 million hours of TV.

I hesitated to use IntoNow while watching my pre-recorded shows, especially the season finale of “The Amazing Race,” for fear of accidentally seeing something that would spoil the ending. The app asks users who contribute to discussions to mark their comments with a spoiler alert symbol, but I didn’t want to take any chances.

While watching a football game, IntoNow provided expanded statistics and other team news.

IntoNow was a real help while watching football: Statistics showed up in Game Info, and other team news appeared in an Around the League section. It also brought in Twitter updates from the @NFL_Football Twitter account. But when I paused the game for 20 minutes to fold laundry, I didn’t want to look at the app because it showed the live score.

IntoNow failed when I turned on CNN for news of Kim Jong Il’s death. The app thought I was watching the regularly scheduled program, a show called “Black in America.” IntoNow’s vice president said the app has trouble with unplanned programming, something the company is addressing.

The Showtime Social iPad app only works when a show is airing, and it prompts viewers to share their reactions to the show. I watched an episode of “Dexter” with this app opened, and questions popped up every so often, polling the audience. These questions were playful enough that even someone like me, who hadn’t watched “Dexter” in two years, could answer them. More thought-provoking questions delved into symbolism and future predictions.

When Showtime Social wasn’t asking polling questions, it prompted me to comment on how the show made me feel. I tapped on an icon under the “I am…” description and chose from happy, shocked, sad or angry. A drop-down menu within each emotion offered several iterations; the “angry” category had 13 emotions to choose from.

Viewers using Shazam could buy things that they saw on USA Network’s ‘Covert Affairs.

Shazam is an app known best for identifying songs as they play, but it also works with movies, TV shows, ads and music videos to display extra features. To use it with TV, the Shazam logo appears on screen during shows to remind users that they can use the app with a tablet or smartphone; in the case of short commercials, this moment passes quickly.

Since many shows are on hiatus around the holidays, it was hard to find live examples for testing this app. But past examples include the Shazam logo appearing in an Old Navy commercial, and people who used Shazam while watching could get a free pair of jeans. It also worked with Oxygen’s “The Glee Project,” showing viewers the full version of judge’s deliberations if they tapped the Shazam button. And when Shazam was used with USA Network’s “Covert Affairs,” viewers could buy things that they saw on the show.

Instead of just watching TV, these apps help you get a lot more out of a show—as long as you’re watching live.

Write to Katherine Boehret at katherine.boehret@wsj.com

Corrections & Amplifications

The Shazam app works with pre-recorded TV shows throughout the show. An earlier version of this column said Shazam only works when its logo appears on a TV screen.

]]> http://allthingsd.com/20111220/using-another-screen-to-interact-with-the-tv/feed/ 0 http://allthingsd.com/20111206/major-xbox-software-update-is-facing-slight-delay/ http://allthingsd.com/20111206/major-xbox-software-update-is-facing-slight-delay/#comments Tue, 06 Dec 2011 18:33:20 +0000 Tricia Duryee http://allthingsd.com/?p=150822 Microsoft’s big Xbox refresh, slated to be released today, is facing a few last-minute hiccups.

In a statement to All Things D, Microsoft said: “We are still working to get the release out. Stay tuned, we’ll have an update this afternoon on when it will begin rolling out.”

(Update: By late afternoon, Microsoft said the rollout would begin gradually in a few hours.)

The free over-the-air software update was due to hit the Xbox this morning.

As part of the update, the Xbox is getting a major face-lift that would give users the ability to control the interface with the Kinect using voice and gestures.

It also aims to turn the game console into an entertainment hub for the living room through the addition of several new content deals that will provide access to more movies and TV.

The delay was first reported by Xbox employee Larry Hryb, who goes by @majornelson on Twitter. At roughly 7 am PT, he tweeted: “FYI: The timing for Xbox 360 dashboard update has been slightly delayed. I’ll have a status update later today.”

In a follow-up tweet, he added: “I’ll share additional details when I have more to share. Until then, thanks for you patience.”

]]> http://allthingsd.com/20111206/major-xbox-software-update-is-facing-slight-delay/feed/ 0 http://allthingsd.com/20111204/heres-how-microsoft-is-adding-voice-control-and-gestures-to-the-xbox-video/ http://allthingsd.com/20111204/heres-how-microsoft-is-adding-voice-control-and-gestures-to-the-xbox-video/#comments Mon, 05 Dec 2011 05:00:29 +0000 Tricia Duryee http://allthingsd.com/?p=150015 Microsoft is planning a massive software update on Tuesday for the Xbox, beginning the game console’s transformation into an entertainment hub for the whole family.

The free update will allow users to control the console using their voice and gestures, or even their Windows Phone (if they have one).

In addition, Microsoft will begin to add more than 40 content providers to the console to increase the catalog of live and streamed TV, movies and music.

Microsoft has announced nearly all of these details previously, including some of its content partners, so today’s announcement serves as a reminder now that the final product is ready to go.

Last week, I met up with Michael Suraci, Xbox’s director of marketing, to get a preview of the updates.

According to Suraci, Kinect, the motion sensor that launched last year, is a central part of the update. When it was introduced, it seemed that all it was good for was dance games, but clearly Microsoft had much bigger plans for the camera and the microphone.

Now users can speak naturally to the Xbox, which tears down a number of barriers to family members in the household that weren’t comfortable with the clunky controller. If Microsoft pulls it off, it could teach people that televisions are meant to be talked to, just as Apple has taught people that screens are meant to be touched.

An unknown subset of the nearly 60 million Xbox owners worldwide that have purchased Kinect will be able to use all the new features in the update.

But everyone will have access to many of the updates.

One major improvement is in navigation. For example, the old interface required the user to decide which category they wanted to go into. For example, games, video or music. Then, they had to choose the application, like Netflix, ESPN or Zune.

In the new user interface, the person can search across all of the categories and apps.

As Suraci demonstrates in the video, a user can say: “Xbox: Bing, ‘Fast and the Furious.’”

The results show all of the content that matches that criteria across games, music, video and other categories. The style of the user interface will be recognizable to anyone using a Windows Phone. The format will also be carried over to the upcoming Windows 8 update.

During Suraci’s demonstration, the software got confused a couple of times, but still, searching by voice will be much faster than typing in a string of words, letter-by-letter, using the controller to scroll through the alphabet.

Going forward, the Xbox could replace the need for a second set-top box in the household, but as Peter Kafka has mentioned before, it’s not a service for customers looking to cut the cord. In order to stream live TV, or watch movies, you’ll either have to pay for a subscription — like Verizon FiOS or Comcast’s Xfinity — or pay a la carte.

On Tuesday’s launch, the amount of content that will be available in the U.S. will be somewhat disappointing. But later in December and in early 2012, you will start to see integrations with Verizon FiOS, YouTube, HBO GO and Xfinity On Demand, TMZ, UFC, Wal-Mart’s Vudu service and others.

]]> http://allthingsd.com/20111204/heres-how-microsoft-is-adding-voice-control-and-gestures-to-the-xbox-video/feed/ 0 http://allthingsd.com/20111117/peter-chernin-on-hollywood-asia-growth-and-not-yahoo-the-full-asiad-interview-video/ http://allthingsd.com/20111117/peter-chernin-on-hollywood-asia-growth-and-not-yahoo-the-full-asiad-interview-video/#comments Thu, 17 Nov 2011 22:34:20 +0000 Kara Swisher http://allthingsd.com/?p=145420

We are now posting the full videos from the recent AsiaD conference, which took place in Hong Kong in October.

We’re following the schedule of the actual event. Up now: Hollywood mogul Peter Chernin.

The much-respected entertainment exec, who was the longtime president of News Corp. (which owns this Web site), now runs his own production company in Santa Monica, Calif.

Chernin Entertainment has had some big early successes, including the hit movie “Rise of the Planet of the Apes,” and the adorkable television show “New Girl.”

But Chernin has always been much more Internet-curious than the average Hollywood mogul. He was deeply involved in the creation of the Hulu premium video service, and now serves on the board of the Pandora online music site. He’s also been giving the troubled situation at Yahoo a look-see with some private equity firms.

Chernin declined to talk about this deal in an onstage interview with Peter Kafka, but he does discuss the prospects for the old media world in the digital age, and the giant opportunities in Asia:

]]> http://allthingsd.com/20111117/peter-chernin-on-hollywood-asia-growth-and-not-yahoo-the-full-asiad-interview-video/feed/ 0 http://allthingsd.com/20111114/exclusive-disney-acquires-hipster-mommy-blog-platform-babble-media/ http://allthingsd.com/20111114/exclusive-disney-acquires-hipster-mommy-blog-platform-babble-media/#comments Mon, 14 Nov 2011 14:45:42 +0000 Kara Swisher http://allthingsd.com/?p=143631

Disney, which has been busy reorganizing its interactive group, is buying Babble Media, a New York-based parenting platform that features several hundred mom bloggers.

The entertainment giant declined to provide the purchase price for the New York-based start-up, which was founded by aiming at urban hipster parents and has garnered more than $6 million in funding since it was spun off from Nerve Media several years ago.

Babble’s venture investors include Greycroft Partners, Village Ventures and iNovia Capital.

Co-founders Rufus Griscom and Alisa Volkman and the rest of the 40-person Babble staff will join the Disney Interactive Media Group unit as part of its Moms and Family portfolio, Disney said in its official press release (see below).

Disney described Babble as the “premier blogging platform for a new generation of connected parents.” To me, that roughly translates into Brooklyn-living, Bugaboo-pushing, organic arugula-eating, yoga-calm moms and sensitive New Age dads.

But don’t take my word for it — today’s front page features on Babble include “15 Vegan Recipes for Thanksgiving” and “Is It Selfish to Have One Child?” (Yum and kinda!)

The next obvious stop for its audience, after the kids get a little bigger: Gwyneth Paltrow’s fabulously twee and irksomely addictive GOOP.

But Brooke Chaffin, who is SVP of Moms and Family in the Disney Interactive Media Group, said in an interview that the highly interactive content site with a definite “sophisticated” editorial voice has become mainstream, and is actually where the whole category is going.

“Babble is sharing the experience and stories on a daily basis through the parents lens,” she said. “And it brings in a blog network that is so important to this audience, because it’s by, for and about parents, and that’s far more important for them than experts.”

There will be that, too, said Chaffin, who noted the site has grown 100 percent year over year. It is now up to four million unique monthly visitors.

Disney plans to add its more evergreen family-focused content to Babble, to give it more heft to compete with other similar parenting sites, such as Johnson & Johnson-owned BabyCenter, NBC’s iVillage, Parents.com and CafeMom.

Interestingly, Disney had taken a gander at buying CafeMom a while back.

Chaffin, who came to Disney earlier this year after a stint at Auditude and a long time at Yahoo, said Babble has carved out a unique niche in combining content with social — the current gold ring for a lot of publishers.

“What Babble is doing is best of breed … it is just a different approach to blogging,” she said. “It felt like we at Disney are about storytelling and Babble does an amazing job doing just that.”

Added Jimmy Pitaro, co-President of Disney Interactive Media Group: “Disney has a long legacy of storytelling, and no mom-blog platform empowers storytelling better or more powerfully than Babble. Babble is a strategic complement to our Moms and Family portfolio of sites, which together make up a business that is critical to Disney Interactive’s mission of delivering world-class products and content and growing engagement among our guests.”

In other words: Mainstream and hipster!

Here’s the Disney official press release:

THE WALT DISNEY COMPANY ACQUIRES LEADING ONLINE PARENTING PLATFORM BABBLE MEDIA, INC.

Burbank, California — November 14, 2011 — The Walt Disney Company, through its wholly owned subsidiary Disney Online, has acquired Babble Media, Inc., a leading online parenting platform featuring more than 200 influential mom bloggers. The acquisition of Babble further strengthens the position of Disney Interactive Media Group’s Moms and Family portfolio as a leading online resource for moms and families.

Disney Interactive’s Moms and Family portfolio is a trusted resource for parents today, giving them the online tools and information they need and the ability to share their experiences. Through the acquisition of Babble, Disney Interactive’s Moms and Family business gains a blogging platform that elevates the first-person stories of parenthood.

Since its inception in 2006, Babble has become one of the most celebrated parenting sites on the web, named by Time Magazine as one of the 50 Best Websites of 2010 and by Forbes as one of the Top 100 Websites for Women. Its stable of bloggers contribute daily to parenting topics including pregnancy, child care, health, food, family activities as well as lifestyle topics such as home, fashion and family products. As the premier blogging platform for a new generation of connected parents, Babble has created a vibrant community of parents who support, encourage and celebrate the highs and lows of raising children.

Babble attracts a broad and engaged audience with its nearly constant stream of posts, written for and by moms. Disney Interactive will infuse its Moms and Family evergreen content into Babble, thereby enriching the Babble user experience and extending the best of what Disney has to offer to today’s parents.

“Parents’ relationships with Disney are founded in stories, and Disney’s best stories are about families. We believe that Babble and Disney can harness the power of storytelling to inform, entertain and empower parents everywhere,” said Brooke Chaffin, SVP of Moms and Family, Disney Interactive Media Group. “With more than 3.9 million mom blogs in the US alone, Disney Interactive recognizes and values the important and powerful role moms have taken on in new media.”

“We can’t imagine a better next step than joining the world’s leading media company for families, The Walt Disney Company, and look forward to bringing together Babble’s resonant voice and community with Disney’s expansive family audience, wide range of content and multi-media platform,” said Rufus Griscom and Alisa Volkman, Co-Founders of Babble.

Babble will remain headquartered in New York. Rufus Griscom and Alisa Volkman will join the Disney Interactive Media Group.

]]> http://allthingsd.com/20111114/exclusive-disney-acquires-hipster-mommy-blog-platform-babble-media/feed/ 0 http://allthingsd.com/20111109/adobe-admits-its-saying-buh-bye-to-flash-for-mobile-devices/ http://allthingsd.com/20111109/adobe-admits-its-saying-buh-bye-to-flash-for-mobile-devices/#comments Wed, 09 Nov 2011 18:15:30 +0000 Kara Swisher http://allthingsd.com/?p=142353

In a blog post by one of its execs, titled “Flash to Focus on PC Browsing and Mobile Apps; Adobe to More Aggressively Contribute to HTML5,” Adobe said what had already been reported: That it would no longer be developing its well-known Flash for mobile devices.

Here’s the key graph:

“Our future work with Flash on mobile devices will be focused on enabling Flash developers to package native apps with Adobe AIR for all the major app stores. We will no longer continue to develop Flash Player in the browser to work with new mobile device configurations (chipset, browser, OS version, etc.) following the upcoming release of Flash Player 11.1 for Android and BlackBerry PlayBook. We will of course continue to provide critical bug fixes and security updates for existing device configurations. We will also allow our source code licensees to continue working on and release their own implementations.”

Last night, reports surfaced that the high-profile software company — whose Flash technology has been a flagship product — was halting development on the mobile version of its browser plug-in.

Now, Adobe will focus its PC Web browser business on tools that allow Flash developers to create mobile apps by packaging their code to run on Adobe’s AIR platform.

The move has big implications for Adobe going forward and also for mobile device makers, such as Google and Research In Motion. But not Apple.

As Ina Fried wrote:

“The move, if true, would be a major blow to Android device makers, who have long touted Flash compatibility as a key competitive advantage over Apple’s iPhone and iPad.

It would also mark a posthumous vindication for former Apple CEO Steve Jobs, who took a controversial stand by not supporting Flash on Apple’s mobile products.”

Turns out Jobs was prescient, as usual.

Here is the full version of the Adobe blog:

Flash to Focus on PC Browsing and Mobile Apps; Adobe to More Aggressively Contribute to HTML5

POSTED BY DANNY WINOKUR, VICE PRESIDENT & GENERAL MANAGER, INTERACTIVE DEVELOPMENT AT ADOBE ON NOVEMBER 9, 2011 5:59 AM IN BUSINESS PROFESSIONALS, CREATIVE PROFESSIONALS, DEVELOPERS, VIDEO

Adobe is all about enabling designers and developers to create the most expressive content possible, regardless of platform or technology. For more than a decade, Flash has enabled the richest content to be created and deployed on the web by reaching beyond what browsers could do. It has repeatedly served as a blueprint for standardizing new technologies in HTML. Over the past two years, we’ve delivered Flash Player for mobile browsers and brought the full expressiveness of the web to many mobile devices.

However, HTML5 is now universally supported on major mobile devices, in some cases exclusively. This makes HTML5 the best solution for creating and deploying content in the browser across mobile platforms. We are excited about this, and will continue our work with key players in the HTML community, including Google, Apple, Microsoft and RIM, to drive HTML5 innovation they can use to advance their mobile browsers.

Our future work with Flash on mobile devices will be focused on enabling Flash developers to package native apps with Adobe AIR for all the major app stores. We will no longer continue to develop Flash Player in the browser to work with new mobile device configurations (chipset, browser, OS version, etc.) following the upcoming release of Flash Player 11.1 for Android and BlackBerry PlayBook. We will of course continue to provide critical bug fixes and security updates for existing device configurations. We will also allow our source code licensees to continue working on and release their own implementations.

These changes will allow us to increase investment in HTML5 and innovate with Flash where it can have most impact for the industry, including advanced gaming and premium video. Flash Player 11 for PC browsers just introduced dozens of new features, including hardware accelerated 3D graphics for console-quality gaming and premium HD video with content protection. Flash developers can take advantage of these features, and all that our Flash tooling has to offer, to reach more than a billion PCs through their browsers and to package native apps with AIR that run on hundreds of millions of mobile devices through all the popular app stores, including the iTunes App Store, Android Market, Amazon Appstore for Android and BlackBerry App World.

We are already working on Flash Player 12 and a new round of exciting features which we expect to again advance what is possible for delivering high definition entertainment experiences. We will continue to leverage our experience with Flash to accelerate our work with the W3C and WebKit to bring similar capabilities to HTML5 as quickly as possible, just as we have done with CSS Shaders. And, we will design new features in Flash for a smooth transition to HTML5 as the standards evolve so developers can confidently invest knowing their skills will continue to be leveraged.

We are super excited about the next generations of HTML5 and Flash. Together they offer developers and content publishers great options for delivering compelling web and application experiences across PCs and devices. There is already amazing work being done that is pushing the newest boundaries, and we can’t wait to see what is still yet to come!

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