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Skype's Sale As Media Feint

Posted by Zonk on Fri Jul 29, 2005 07:31 PM
from the keep-them-guessing dept.
Communications The Internet Businesses The Almighty Buck
ansak writes "Bob Cringely's latest article shows evidence that some aspects of the 90s bubble are indeed back: Why would Rupert Murdoch think of paying $3billion for a mostly free online service like Skype? But his last line shows a keen understanding of Murdoch's skills and methods: 'By putting Skype in play, he distracts for no money at all most of the major media companies. And while they try to figure out how to respond to VoIP, old Rupert will be attacking them on some completely other front. He'll be stealing their shoes.'"
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  • Bob Cringely's latest article shows evidence that some aspects of the 90s bubble are indeed back: Why would Rupert Murdoch think of paying $3billion for a mostly free online service like Skype?

    This is the classic fake left and go right. It has been around as long as competition in business. Why is it that as soon as you throw in a 'net, eThis, iThat, or whatever other technology related slang, people immediately get stupind and forgetful? It's business plain and simple. Make your competitor concentrate on one part of the market and you have free reign in the rest. It's that simple.

    • Re:This goes much further back than the 90's (Score:4, Interesting)

      by timeOday (582209) on Friday July 29 2005, @08:11PM (#13199777)
      Cringely's pretty clever in how he wrote this up, too. If Murdoch buys Skype, Cringely will be hailed as a prophet. And if not, Cringely's "ploy" theory still seems plausible, due (if nothing else) to Machievelian appeal. Either way, Cringely comes off looking good.

    • This sector is really interesting and heating up. Skype is not a standard, so Skype can only talk to Skype and they are trying to create their own version of what they consider internet telephony to be, a bit like MSN in the early days of the net. What the potential valuations of Skype do not look into are what they actually offer. Some here have already pointed out that free messenger services such as MSN and Yahoo! already offer voice, at better quality, so what is it that skype does other than link phone numbers to skype usernames? This is a perfect scenario for an open source application to make use of an open standard such as SIP (Which is compatible with a lot of hardware, and existing voip networks) and to create a multi-platform consumer product that provides zero lock-in (as skype does).



      These telephony apps are the browsers for the voice internet, so nothing less than a full browser war would be expected. Hence the reason why incompatible applications such as skype will die away as newer and better open source applications that can inter-operate are released and taken up. I would even speculate that a voip client ('browser') would be much easier to develop than an open source web browser, and I think it is high time that the open source crowds jumps in to promote and develop the alternatives to these nasty commercial applications.

    • This is the classic fake left and go right. It has been around as long as competition in business.
      One interesting thing about Murdoch's companies is that the money keeps on going round and round from one company to another for no apparent reason, so to the observer it looks like there is a lot more money than there actually is.
  • Fuck I just got new sneakers...

  • Skype quality?? (Score:3, Interesting)

    by Really Wannabe Geek (687062) on Friday July 29 2005, @07:40PM (#13199637)
    I have never understood why Skype is considered good quality VoIP. Perhaps my experience is the only bad one? I tried Skype for an international chat whether the other machine was on a dial up connection (mine on DSL). Skype worked well only the first time and all that I got on later attempts was weird voice quality, long lags, etc. Nowadays, I have settled on Yahoo Messenger which does an amazing job of voice chat - beats the latest MSN Msgr hands down; rarely a lag, excellent quality, near instant call connect. I have uninstalled Skype a long time ago. Did anyone else have a chance to compare Skype with the IM voice chats?

    • Re:Skype quality?? (Score:5, Informative)

      by paulius_g (808556) on Friday July 29 2005, @07:53PM (#13199699) Homepage
      I like Skype and MSN Messenger over Yahoo's voice for several reasons:

      First, Yahoo does not always transmit voice. So there is that weird silence when nobody is talking. I better like hearing the backround noise because it makes you feel more "emersed".

      Secondly, voice quality of MSN Messenger and Skype depend on your microphone and Internet connection. I recall calling a 56K user and having near-32bit quality. Another time, I've called a radio station (which had an excellent microphone and a decent Internet connection) and the quality was astounding (at a whopping 128kbps)!

      MSN Messenger, only has two quality modes. I call them good and bad. The bad quality will mask some backround sound and transmit at 32bit, while the good quality even goes beyond Skype, many times. Of course, because of Microsoft, proper connection detection fails at multiple times and sometimes the voice simply does not work!

      Now, let's get on a bad side of Skype (uh oh!) Skype uses quite an abundant percent of CPU compared to other programs. On a 800MHz computer, Skype takes up a whopping 80% while MSN remains at a low 5%. This is bad if you're trying to play some FPS game togethor or surf the web. Skype is preservative on bandwidth, though.

      On the alternatives side, we have the usual VO-IP programs used by gamers and communities: Ventrilo and TeamSpeak. I prefer Ventrilo as it's quality can be comparted to MSN Messenger, but TeamSpeak is a bit preservative and goes at a way lower quality. Both these alternatives are excellent when chatting in groups.

      So, to conclude:
            Skype
      Advantages
        o Conference support
        o Great quality
        o Stable and reliable
        o Nice interface
        o Multi Platform --- Yay for Linux support!
        o Low bandwidth consumption
        o Bypasses firewalls greatly (I've tested with many corporate firewalls and Skype knows it's way around it!)

      Disadvantages
        o High CPU usage
        o Not excellent for 56K connections

      Until next time,
      Paulius
      • You missed out some key disadvantages:

        1)Skype isn't open-source. You can't read the source code, therefore you can't necessarily trust it. I'm not naturally inclined to give the makers of kazaa the benefit of the doubt.

        2)Skype is gratuitously incompatible with the rest of the world, and uses a closed protocol. This is unforgivable.

        3)Skype is P2P - which means that in some cases, such as Cambridge University, it cannot be used, because a user of the university network may not grant network bandwidth to non-m
        • "I'm not naturally inclined to give the makers of kazaa the benefit of the doubt."

          The makers of kazaa are not the same people that riddled it with spyware (Sharmann Networks, or whatever it was...).
        • Personally I use Skype to make long distance calls to other people, see I am studying in the UK but all my family and friends are in another country, not everyone [knows how to use/ has a computer] to speak , so I have found Skypeout quite useful.

          I am really looking forward for a service that directly competes with skypeout, that way the prices could go even lower. Although I find the prices right now really good. Imagine, a long distance call from UK to my own country costs less than a long distance call
      • Disadvantages

        Please add:

        - non-distributed servers
        - non-open protocol

        • non-open protocol

          Yes, but the iLBC codec [ilbcfreeware.org] used by Skype is open, right?

          • The codec might be, but the call handling protocol isn't. And that's what's used to setup a phone call.

            • The codec might be, but the call handling protocol isn't.

              Call handling protocols are pretty easy to reverse engineer! That's certainly no big deal. Of course, it is most likely patented... OTOH, if it's a trade secret; there won't be any patent on it (except submarine patents?).

              Hmmm.... I guess, getting an OSS version of skype won't be so difficult. The catch is the central call setup server architecture (not unlike bittorrent trackers), which is under Skype control.

              A trackerless, decentralized SIP

      • What is this "32-bit" you keep talking about? Even in professional hi-fi recording studios, rarely is anything recorded at more than 24-bit resolution (although sometimes the sampling rates go up a fair bit). Standard telephone is typically 8 bit 8 KHz; an uncompressed G.711 VoIP stream at this quality (indiscernible to POTS, and often of higher quality) requires 64 kbps.

        I guess by "32-bit" you really just mean "sounds great".

        -b

      • Re:Skype quality?? (Score:5, Interesting)

        by Knights who say 'INT (708612) on Friday July 29 2005, @07:53PM (#13199707) Journal
        Skype works behind NATs and is available for Linux and OS X.

        There aren't really any alternatives.

        • Re:Skype quality?? (Score:5, Informative)

          by pmazer (813537) on Friday July 29 2005, @08:32PM (#13199850)
          Gizmo [gizmoproject.com] is trying to compete... we'll see how that pans out.
        • Jeff Pulvers Free World Dialup [freeworlddialup.com] came before skype, does what skype does AND will forward your calls to your asterisk server using the IAX protocol.

          For that reason I will be using FWD and cannmot use skype. FWD is not open as much as I would like, but I least I don't have to use their client software to take a call.

          I don't know if IAX will let you originate an FWD terminating call.

          Sam
        • you forgot windows ce (2003 version)
          skype and skype out + wireless networking = mobile skype
          in your pocket (your coverage may vary).
          free calls in the urban jungle maybe:)

          I don't know how well skype would work over gprs or how cost effective either
          i think my provider will let me have 3 meg download for £5 if i buy as a bolt on
          £7.50 a meg if i just use it.
          • 1. Gizmo is NOT OPEN SOURCE. It runs on Linux, sure.* So does Skype. But how can you call it FOSS if it's closed-source? Just because it uses an open protocol? HTTP is open but you don't call MSIE 'FOSS'.

            2. SIP does not 'annihilate' VoIP. SIP *is* a VoIP technology. If anything, SIP *furthers* VoIP. But not so much as Skype, which removes much of the frustration of firewall traversal.

            3. Michael Robertson (MP3.com, Lindows, Gizmo) is the guy who thinks all Linux programs should be run as root. I would not to

  • Why buy Skype? (Score:5, Interesting)

    by hotspotbloc (767418) on Friday July 29 2005, @07:44PM (#13199654) Homepage Journal
    Why would Rupert Murdoch think of paying $3billion for a mostly free online service like Skype?

    $3b is a lot but Skype has a large and loyal user base. They could tie in a lot of things like: legal online music sales, expanding SkypeOut and SkypeIn and banner ads in the software. With Skype expanding out of the PC (like how Motorola is adding Skype to some of their phones) it has a lot of potential.

    It's a little like someone looking at buying Apple. While they have good hardware and software they are so much more. Maybe that's what Murdoch sees for the future of Skype.

    But is it worth $3b? I don't know.

    • Unless they can drastically improve quality, I don't see SkypeOut being a big factor. Yeah, I used it for a while and put up with the shitty quality, constant downtime, and high prices. Then I found out that I could get toll-quality calls for next to nothing using a service like voxee.com or nufone.net, not to mention use it with Asterisk or any SIP or IAX device.
    • They could tie in a lot of things like: legal online music sales, expanding SkypeOut and SkypeIn and banner ads in the software.

      I am a loyal Skype user. It has kept my girlfriend and me in contact despite being on two separate continents for a year. However, I would drop Skype in a heartbeat if there were banner ads.

  • Lachlan Murdoch quits News Corp (Score:5, Interesting)

    by SpaceLifeForm (228190) on Friday July 29 2005, @07:46PM (#13199660)
    links [google.com]

    Perhaps there is a connection.

  • Why buy Skype? (Score:4, Funny)

    by doyen2000 (879584) on Friday July 29 2005, @07:50PM (#13199675)
    To call his son when he moves to Australia.
  • >> Bob Cringely's latest article shows evidence

    HAHAHAHA! Evidence, oh, that's funny. I take Cringely articles as "evidence" of the exact contrary of what they claim.

  • The Murdoch Internet Rope-a-dope. (Score:3, Informative)

    by Ohmster (843198) * on Friday July 29 2005, @07:55PM (#13199715) Homepage Journal
    Great Cingely post. Rupert has been "feinting" on Internet matters with his peers for over a decade. Notable is his speech to his peers a few weeks ago. See http://mp.blogs.com/mp/2005/04/ss_15.html [blogs.com] His recent announcement of a Fox Internet unit also has these elements. More here: http://mp.blogs.com/mp/2005/07/on_news_corp_cr.htm l [blogs.com]

  • Bubble Spinners *Heart* Feint (Score:3, Insightful)

    by Doc Ruby (173196) on Friday July 29 2005, @08:01PM (#13199737) Homepage Journal
    I watched that Bubble blowhard, Kudlow, yelling into the camera yesterday about how Skype (not VoIP itself) "destroys the Baby Bells". Even though he mentioned that Skype is free only among Skype PCs, and they charge for connections to the PSTN - which can't scale. Murdoch's already got Kudlow fainting.
  • I for one welcome our new shoe stealing overlords!

  • Don't forget GizmoProject (Score:4, Informative)

    by havaloc (50551) * on Friday July 29 2005, @08:44PM (#13199894) Homepage
    GizmoProject [gizmoproject.com] uses SIP, which makes it a little bit more open.

  • I'd sell for $3 billion, (Score:5, Informative)

    by spisska (796395) on Friday July 29 2005, @08:55PM (#13199931)

    I like Cringely's articles because they are always insightful, always look at things from a different angle, and almost always feature a prediction that I find very unlikely but compelling enough to make me look at the given topic in a different light (which is strikingly different from Dvorak articles, which are always inept, look at things from the same angle as everyone else but with cracked bifocals, and prove the adage that even a blind squirrel finds a nut from time to time).

    That having been said, Skype is a very dangerous thing for the big telecom providers. As Cringely points out, the big phone companies can't buy it to kill it because something else would take its place. But he misses that this also holds for cable companies.

    I use Skype Out regularly to call internationally, and I know that nobody calls to PSTN networks for less unless they own the switch on both ends.

    Comcast et al want to sell VoIP on top of broadband, but Skype (or its successor) is free with broadband -- which brings up the whole bit about synergy and technical capabilities and whatnot.

    Since the whole Skype backbone is P2P there really isn't a whole lot of infrastructure involved, other than the database for paying customers. There's no real physical infrastructure because the users are the network. As I understand it, Skype only has a few dozen employees (but I may have read that a while ago, before they had 20 million regular users).

    The fact that there's basically no infrastructure means that it will be hard for a big incumbent operator to leverage its network size to take advantage of something like Skype. The whole Skype network costs its operators next to nothing to run right now, so how is MegaCableTeleCom, Inc (with all its buildings and employee unions, and executive bonuses, and specialized equipment, and miles and miles of plain-old-copper/coaxial/fiber lines, etc) going to keep it cheap enough to compete with free without losing?

    Cringely's right -- Murdoch won't pay $3 billion, but somebody probably will. Only what's for sale is not the network but the customers. And those customers will flee in a minute if whoever runs Skype starts acting like a phone company -- cryptic bills, mystery charges, line-carrier fees, connection charges, etc. After all, something better and cheaper will come along any day now. For $3 billion, I'd sell.

  • Ditch the landlines... (Score:4, Insightful)

    by Anonymous Coward on Friday July 29 2005, @08:57PM (#13199942)
    I've been thinking about VOIP as a way of ditching my landline. Switch from

    $80/mo for landline, local calls, and DSL/ISP

    to

    $20/mo for cable modem
    $16/mo for most basic cable
    $16/mo for Vonage VOIP
    Total $52/mo, and I get more TV than I got before,
    have a phone line in the house (I use my cell more anyway), and prepare myself for the next great thing....Netflix trickle download to TiVO in about 6 months.

    Really, I've paid WAY too much for DSL for the last 5 years, in about a week I'm gonna tell the bells I don't need their landline. Its gonna be an interesting phone call to say the least.

    But this comes back to the value of Skype...my Italian colleague here in the states talks to his Dad for free every morning at 5AM (our time). That is an unreal technology. Now, he wouldn't talk to his old man so much if it was not free, but it is, and his phone usage would be over $100/mo on landlines, free on Skype.

    My other colleague (a Canadian/Israeli double citizen) uses Skype as her landline. Her laptop goes everywhere with her, and she is on broadband about 3/4 of the time, reachable on her Skype phone line.

    The phone company landlines are challengeable by VOIP, for a tiny fraction of the cost since the user provides the "last mile" access over broadband. Its a great business model, and I expect Vonage and Skype to make a mint - those two Scandanavians that started Skype are gonna be even richer....
    • People are actually doing that in my city; that is to say, our local cable company recently started offering phone service along with 'net connection. It comes with free long distance anywhere in Canada. When it was first offered half a year ago it was quite buggy, strange interference issues, but it's now quite fine and one my my friends' family has switched entirely over to it, cut off their phone lines completely.

      (if anyone's interested, the company in question is Shaw Cable....the reason behind the
  • I have a counter theory, which I explain at some length here [blogspot.com]. To sum it up, Comcast and the mobile phone companies won't want to buy Skype any more than the telecoms. It will be either Intel or Microsoft.

    Why? Click the link.

  • Huh? (Score:2, Informative)

    by sunspot42 (455706)

    Why would Rupert Murdoch think of paying $3billion for a mostly free online service like Skype?

    I dunno, but a better question might be, why would /. editors pay any attention to a known fraud [wikipedia.org] like Cringely?

    • any attention to a known fraud like Cringely?

      From an article linked above: "To the best of my knowledge, I was doing so with the title of acting assistant professor," Cringely said.

      In the land where high school teachers get to call themselves professor it isn't much of a stretch - the rest of the world knows not to take anyone from the USA that uses that title quite so seriously.

      We all know that if he really did have an important position at Stanford he would have already had a reputation and would be wr

      • He claimed to have a PhD. He didn't and he still doesn't. Why should anybody pay attention to a word this clown writes? He's no more qualified than many of the people posting here on /.

        Actually, there are probably plenty of people here I'd trust over Cringely. I'm sure most of them aren't lying about their credentials.
  • Well, that explains the full-page article in Australian NewsCorp-owned newpapers this morning touting VoIP as the way of the future for phone calls. And of course, the article mentioned Skype several times as if it were the only service of its type available!
  • The guy behind Skype on an interview on June 17: [bbc.co.uk]

    "And now we're also very much focussing on moving away from the computer into mobile devices, so you can use Skype for free wirelessly."

    They (Murdoch and Zennström) were already talking back then. Deals worth 3 Gigadollars are very well studied by both parties, and they've done their homework. Murdoch sees the niche that he can jump into after leaving News Corp. and Zennström makes it just plain clear that he's talking with wireless carriers tha

  • I can't believe (Score:3, Interesting)

    by mpapet (761907) on Friday July 29 2005, @10:51PM (#13200369) Homepage
    Someone else hasn't realized that he'll make people pay for VOIP and push it through cable boxes everywhere he can.

    In taiwan it's called the triple play. (Media, Internet, Telephone)

    He really doesn't care about the "free." He cares that it's a proven system that works.

    Michael
  • Skype needs revenues to get anywhere. Those revenues will primarily come from either SkypeOut or SkypeIn. Unlike the virally and self-spreading nature of a the original Skype (which is a pure IP play), these services require charging, billing and customer support. certainly not something that can be done by clever marketing and adding a codec to kazaa. they will need to re-orient themselves to be customer responsive, regulation compliant, service oriented business. which is going to be difficult for zenstor
    • "these services require charging, billing and customer support. certainly not something that can be done by clever marketing and adding a codec to kazaa."

      Its perfectly OK to issue invoices electronically now (e.g. via a website now) so how they do now is fine and scales well. Google bills huge numbers of businesses for its adsense and that works well given the small number of employess dedicated to it.

      Telcos pay a lot for customer support because they sell physical services which break down (telephone lines
  • it's the international and cross platform aspects of skypes service which sell it to me.
    calls i couldn't afford are affordable.
    but

    skype out is a bit random with its success rates like throw a 6 to talk for anything from a minute upwards and expect for the connection to break at any time and need to redial.

    skype in buys you a national number for your friends to call. (send me a text I will call you back and use the free minutes i get on my mobile phone contract).

    my mobile is a pda phone (blue angel, mda III,

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