A few days ago it was “reported”:1 that Toy R Us’ online arm prevailed in a case again Amazon. From the linked story…

bq.. On Thursday, Toys “R” Us said the verdict, which will be rendered today by the Chancery Court in New Jersey, severs the August 2000 agreement, and it expects to provide online access for its customers at www.toysrus.com.

p. This is a *_big_* deal for both companies since…

bq.. Currently, in a normal season, TRUCC products represent approximately five to ten percent in off peak periods. During the peak season, TRUCC utilizes 20% of “the thru put or capacity to process”. Actually during those peak periods the actual physical storage of the product is at 40%. The peak season runs from October to November for receipt of product through the day after Thanksgiving to the first two weeks of December for out flow.

p. And…

bq.. [T]RUCC sold over one hundred seventy seven million products during the year 2005 up to the time of the trial (25% over its 2004 sales).

p. And…

bq.. Mr. Bezos would later candidly testify that TRUCC and AMAZON had done extremely well in the five years the Agreement has been in place and in 2004 was more than profitable.

p. _TRUCC is the online arm of Toys. The quotes above were taken from Judge McVeigh’s opinion (linked below)._

That is, during the holiday season Toys’ sales utilizes 20% of the thru put of Amazon’s fulfillment-center infrastructure and 40% of the physical storage of those centers.

Unwinding this deal will leave Amazon with _a lot_ of idle fulfillment infrastructure and will require Toys to create their own, very expensive web infrastructure, fulfillment system and customer service department. Clearly trying to unwind the profitable relationship with Amazon was a non-trivial decision for Toys. That is, they must have been *_highly_* motivated to remove themselves from the partnership with Amazon.

To get the feel for what motivated Toys, it’s possible to read “Judge McVeigh’s opinion”:2 on the case (in addition to lots of other documents on the trial). Upon reading the Judge’s opinion, one is struck by the blatant deceptiveness of Amazon and their disregard for their business partners — while negotiating with Toys, in their ongoing business practices and even while testifying in court.

Here’s a gem from the Judge’s opinion…

bq.. From the very beginning of this agreement AMAZON was looking for ways to expand the selection of toys sold regardless of what the agreement provided. Repeated efforts were made by in house people to find alternatives to the way items were marketed, how to identify the products and the way items were sold.

p. And regarding Jeff Bezos (CEO of Amazon)…

bq.. Mr. Bezos presented a very complex appearance to this Court. He attempted to convey to this Court, that as the CEO of AMAZON he had a general overview of the Agreement but was not involved in the intimate details of neither the negotiations nor the terms or the language of the Agreement. Mr. Bezos preferred to refer this Court to Rudy Gadre, the in-house lawyer who worked on the Agreement with the key negotiators. However, this Court has no doubt his knowledge and understanding went much deeper than revealed.

p. And more on Mr. Bezos…

bq.. In a rather child like fashion, he tried to convince this Court he was unaware there was a problem between the parties about Merchants@sellers, selling toys until he be became aware of the restraining order entered in this case.

p. And an example of the typical view of the court regarding other Amazon testimony (Jorrit Van der Meulen was the go to person at AMAZON.com with regard to the Toys account from 2001 through 2004)…

bq.. Mr. Van der Meulen’s testimony suggests, if TRUCC would not accommodate AMAZON’s model then, AMAZON was going to find a way around or completely disregard the terms of the Strategic Alliance Agreement. AMAZON was going to interpret language in the Agreement to mean what AMAZON wanted it to mean.

p. From the opinion it is also clear that Amazon’s mistreatment of Toys was not unique..

bq.. However, if TOYS selected a product for sale by a third party, it would not become responsible for inventory of third parties. Mr. Gadre was dismissive in testifying there was no concern on AMAZON’s part as to what happened to a third party if TOYS selected its product. It was a risk the third party sellers accepted. This view is a poor indication of AMAZON’s good faith dealings with merchants.

p. And it goes on, and on, and on.

The main dispute between Amazon and Toys regarded exclusivity in the toys category. The spirit of the negotiations between Amazon and Toys was to make Toys the exclusive seller of toys on the Amazon site. Unfortunately the actual signed agreement between Amazon and Toys was very ambiguous in this key area… so ambiguous that the judge admitted “parole”:3 evidence in this case. However, the court found that…

bq.. AMAZON was aware that TRUCC believed it would be the exclusive seller of these categories of products throughout the ten year term of this Agreement which is also clear to this Court. First, AMAZON concealed that in its negotiations with TARGET. Next, AMAZON developed talking prints to placate TRUCC with regard to the TARGET agreement. (See Exhibit P20, E-mail from Miller to Jenson, Van der Meulen, Kalmbach, Broussard, Britto and “cc” to Curry, Risher, Bezos of 9/6/01.) Why did AMAZON employees including a negotiator go to such an effort to minimize TRUCC’s concerns about TARGET? If third parties could sell exclusive products just let it happen. Id did not happen because no one intended direct third party sales of products in TRUCC exclusive categories. This conduct blatantly demonstrated AMAZON’s pattern of behavior of misleading TRUCC in this exclusive Agreement as long as it was convenient for AMAZON. Whether AMAZON believed it had the right to add third party purchasers, or found a way to get around the Strategic Alliance Agreement — AMAZON was not forthright with TRUCC.

p. In summary, Amazon negotiated with Toys having them believe that they would be the exclusive toys merchant, then Amazon did whatever it needed to do to add more toy inventory to their site — including adding inventory from Toys’ direct competitors — a breach of the spirit of the negotiations and partnership with Toys.

Do you trust Amazon?

P.S. One of the best lines from the opinion…

bq.. During closing arguments counsel for TRUCC actually brought into the courtroom a four foot stuffed Geoffrey the Giraffe, arguing that “Geoffrey cannot find his home” and therefore came to Court to ask the Court to help him find it.

p. Clearly, Geoffrey does not belong in the Amazon.

[3(On parole evidence)]http://www.cba.uri.edu/Faculty/overton/MGT423/Parole.htm

[2(Judge McVeigh's opinion)]http://www.judiciary.state.nj.us/toysrus/index.htm

[1(Yahoo! New on the story)]http://news.yahoo.com/s/cmp/20060303/tc_cmp/181500441

So I go to log onto my bank’s website, and they inform me that I have to enter in a new password. Never mind the fact that I doubt that this is going to “improve” my security… if someone had obtained my password before, why can’t they just use the same method again?

Anyway, I enter in a password using a “hash” that I can remember that would be relatively hard to crack via common methods like a dictionary attach or using personal information (that is, it’s not a function of my street address for example). However, here’s what came back from the bank…

bq.. The new password must include at least 1 letter AND at least 1 number AND at least 1 character that is not a letter or a number.

p. What? Why don’t they just say something like, “Please create a password so cryptic that you will never remember it, so you will have to write it down, so that someone can easily find it.” Fark!

Long, non-memorable password make things _less_ secure, not more.

Personal security in general is just a joke. With just the flimsiest amount of someone’s personal information you can obtain access to just about anyone’s financial accounts. In addition, I’ve found that financial institutions don’t really take security seriously at all. For example, as part of a “security upgrade” a while back, I learned that I could have one of my financial institutions ask for a verbal password before any phone-based transaction could proceed. Sounded good to me. I called them up, set up a password with them, but found that upon calling back a few weeks later, I was able to proceed with a phone-based transaction without the prompt for the password. This was not unique; I tried something similar with my credit card company only to have a similar “security measure” disappear from their system too. Whatever.

Personal financial-institution security is an oxymoron… but at least no one will be able to crack my bank’s new password… including me.

I finally got around to watching the entire presentation that “Will Wright”:1 gave on the upcoming video game called Spore. Frickin’ amazing. Spend an hour and watch the thing to see how far video games have progressed.

You can watch it below, or go “here”:2 to see it on Google Video (or download it from Google Video for a much higher quality screening).

[2(Homepage on Google Video for Wills presentation)]http://video.google.com/videoplay?docid=-262774490184348066&q=spore

[1(Wikipedia on Will Wright)]http://en.wikipedia.org/wiki/Will_Wright

Here’s a couple of videos of a “Kitewing”:1. The first is a “demo” video showing all the cool stuff you could never possibly hope to do with it, and the second is a video instruction manual. An interesting way to show off your products and offer customer support.

Zoinger says, Kitewing gets it.

[1(Kitewing homepage)]http://www.kitewing.com

There’s been a lot of talk for a long time about the convergence of the PC and the living room. Even back in the early 90s it was thought to be just around the corner. Remember back in ‘94-’95… Time Warner’s “Orlando”:1 project?

Well, a lot has changed since the early ’90s, so I’m feeling a little bold and will say that this time convergence is really just around the corner. Why?

* Digital TV Screens (e.g., LCDs and Plasmas) — Computing actually looks good… erh, no *great*, on a digital flat screen. Computing on an old-school analog CRT?? You’re just wasting your time.
* Broadband — Broadband is making video on the net a reality. Just go exploring on “Google Video”:2 or “You Tube”:3, and you’ll see what I am talking about.
* Streaming — Video streaming now works. The server software is much more mature, lots of people have broadband and sites know how to scale (most of the time). In addition, things like the Flash player (found on Google Video and You Tube) eliminates the need for any add-on viewing software.
* Personal Content — Digital cameras and camcorders (which are getting closer to merging all the time) give people a wealth of content to share with friends and family.
* PVRs –Tivo is just a computer disguised as a consumer-electronics device. Not that PVRs have been at all that successful, but for the people that have them there is no going back. PVR owners are used to hooking up a “computer” to their TV monitors.
* Vista — Microsoft is serious about “owning” the PVR space. This is just going to make PVRs a lot better and more ubiquitous.
* Apple — Sooner or later they will really get into this space. If Apple doesn’t release a PVR or PVR software soon, I’d be surprised.

That’s just a few points that I can think of off the top of my head. I’m sure there’s lots more.

There is at least one place where convergence has taken place — my TV room. I’ve now got a PC hooked up to a “Samsung LN-R268W”:6 that I am borrowing from a friend. At 1360×768 resolution computing looks awesome on it. Such a big improvement over my CRT TV.

What was on “TV” last night in the picture above? I had two streams going side-by-side. On one side I had the ASP Pro surf event streaming “live from Australia”:5, and when things got slow, I had a “presentation”:4 that Will Wright (the designer of The Sims video game series) gave streaming from Google Video.

Zoinger says, this time it’s for real.

[6(Amazons page on the Samsung LN-R268W)]http://www.amazon.com/gp/product/tech-data/B0009612GQ/104-7862414-0324726

[5(ASP Pro from Snapper Rocks)]http://www.aspworldtour.com/quikpro/

[4(Will Wrights Spore presentation on Google Video)]http://video.google.com/videoplay?docid=-262774490184348066

[3(You Tube homepage)]http://youtube.com

[2(Google Video homepage)]http://video.google.com

[1(Wikipedia on Orlando)]http://en.wikipedia.org/wiki/Full_Service_Network