We do — that was that state of digital media when paidContent launched in 2002. Other weird things were happening back then too: People still got much of their news from television and newspapers, and they learned about major events after they had already happened.

There have been some huge shifts since 2002: Tablets and smartphones are now ubiquitous, lots of people read on their digital devices, and just about everyone is part of a social network or three. This summer is the tenth anniversary of our launch. In an effort to gain some perspective on the past decade in digital media, I’ve been reading back through paidContent’s archives — a collection of over 80,000 posts.

Since I was only a freshman in college when paidContent came to life, I often didn’t know, as I read through the stories from the early days, how things had begun or how they turned out. As I watched them unfold, I wanted to grab our readers’ arms and give them advice (“Don’t buy that Zune!” “Invest in Facebook!” “Go for the good Twitter handle now!”). But I also realized how difficult it is to predict success.

Some takeaways from my trip through the archives:  Some companies — AOL and Yahoo come to mind — have been consistently bad at predicting what consumers want. And a couple of companies, namely Apple and Amazon, have been very good at it. Also, being a native digital company helps, but it’s no guarantee of success (what up, MySpace?). And after all these years, it’s still not clear what content customers will pay for, or how much they’ll pay.

Streaming and Moviebeaming

What do analysts, CEOs and bloggers have in common? None of us can predict the future. Roger Ebert joked in 2002 that “on-demand streaming movies on the Web, like HDTV, are five years in the future — and will be for at least another 10 years.”

If Disney’s Moviebeam had been the only game in town, Ebert probably would have been right. When it launched in three cities in 2003, customers paid $6.99 a month to use a device that could hold 100 movies and plugged into the back of a TV set. They also had to pay for each movie they watched– billing was done via the phone line. The company went through various unsuccessful iterations before India’s Valuable Group bought it in 2008. It was never heard from again.

Netflix almost went down the same road. It had a plan to release a Moviebeam-like “proprietary set-top box with an Internet connection that could download movies overnight.” But instead, it decided to forge ahead with streaming — starting with a complicated “quota hours” system in 2007 and moving to unlimited streaming in 2008. By 2010, the majority of subscribers were streaming something, and the company began offering streaming-only subscriptions, though CEO Reed Hastings said that same year that the company would keep shipping DVDs until 2030. (We’ll see about that.)

ABC was the first network to sell episodes of its shows on iTunes, back in 2006, and to stream shows free with ads on ABC.com — and later on AOL. But by the time premium subscription service Hulu Plus launched in 2010, the platforms getting the attention were devices with built-in access, like Internet-enabled TVs, Blu-ray players, and tablets.

Return of the living dead

Speaking of AOL: It’s something of a miracle that the company still exists. In 2000, when it merged with Time Warner, it was valued at $350 billion, and the next year, more than 24 million people in the U.S. were paying for its Internet access service. By the end of last year, that number had dwindled to just 3.3 million subscribers. Here’s a quick recap of some of AOL’s miscues over the years:

• AOL Voicemail ($5.95 per month)
• A teen service called Red (featuring “a talking head—using the image of an actual employee—that uses software to answer users’ questions”)
• A digital music partnership with Burger King
• A reality show called “Gold Rush”
• Social networking site AIM Pages
• Going free
• The hyperlocal Patch blogs

Though AOL was once a high flier, no other company ever liked it quite enough to buy it. Google bought a five-percent, $1 billion stake in AOL in 2005, leading analysts to wonder if Microsoft missed out. That resulted in a $726 million writedown in 2009. Time Warner bought back Google’s stake and finally spun off “the albatross” in December 2009.  AOL is still promising a bounceback. “The executive team expects a profitable content business by next year,” CEO Tim Armstrong said in May 2011.

Yahoo hasn’t fared much better. The company launched Yahoo Platinum in 2003; for $9.95 a month, subscribers got access to audio and videos.  The program was dead by October of that same year. It later tried a Twitter-wannabe microblogging service (“Meme…where you share everything that you find that’s interesting,”). Perhaps the smartest move Yahoo ever made was not buying AOL.

Where did these companies go wrong? In 2010, former Time Warner CEO Gerald Levin pondered that question in an interview with the New York Times . The AOL-Time Warner deal was “undone by the Internet itself,” he said. “I think it’s something that no one could have foreseen, and to this day, whether Apple is going to dominate entertainment or whether Amazon is going to dominate publishing, all the old business plans are out the window. How do you get paid for content?”

Know what’s cool? A billion dollars

In 2006, an RBC Capital analyst estimated that a certain social networking company would be worth $15 billion in a few years, based on “raw, unprecedented user/usage growth.”

Six years later, Facebook went public with a valuation of $104 billion. Too bad the analyst wasn’t talking about Facebook but about MySpace. The social networking company that Rupert Murdoch acquired for $580 million in 2005 sold for just $35 million in 2011.

Why did Facebook soar while MySpace — and other social networking services like Friendster — sank? It allowed people to build real connections using their actual personal information, and rolled out a product that was ready to scale and had good technology. Other companies realized sharing was important too — in 2005, Yahoo SVP Jeff Weiner called sharing “the next chapter of the World Wide Web” — but Facebook was able to implement it in a way that kept users coming back. The site surpassed Yahoo and AOL for “stickiness” in 2009, when Nielsen found users spending an average of four hours and thirty-nine minutes a month on Facebook.

Social has already disrupted some industries — witness the rise of Twitter and the way it has changed the way news is reported, with stories like Osama Bin Laden’s assassination breaking there first. In a sign of the importance of these emerging platforms, newspapers like the Wall Street Journal and New York Times are launching “Everywhere” initiatives to deliver news to readers where they are already hanging out.

Fast food and music don’t mix

Hard to believe it now, but there was real skepticism that iTunes’ 99-cent songs would be able to compete with peer-to-peer file-sharing services. “According to academics who’ve studied the economics of digital music distribution,” we wrote in 2003, the year iTunes launched, “the cost still seems too high to attract users of peer-to-peer file trading services.” The piece cited an economist who believed “the appropriate price of a downloaded song is 18 cents.” In fact, Real Networks dropped its song prices to $0.49 in an attempt to compete against Apple.

In the end, consumers choose selection and convenience over P2P networks. We called iTunes “a kickstart for the micropayments industry.” Was it? While Steve Jobs said in 2004 that Apple wouldn’t hit its one-year, 100 million songs downloaded goal, global digital music sales crossed $1.1 billion in 2006. In April 2008, Apple surpassed Walmart  as the largest music seller in the United States.

The company that arguably started the digital music revolution — Napster — didn’t survive. Once it no longer offered “free,” it was done, though it tried to reincarnate itself: launching a mobile music service, “Napster To Go,” with AT&T in 2004 (the one smartphone that supported it could hold up to 6 songs), partnering with Circuit City on a digital music store, getting itself acquired by Best Buy in 2008 ,and then being bought back by Rhapsody in 2011. Unfortunately, Rhapsody was already losing out to newer (and free) streaming services like Pandora and Spotify.

The partnerships with Circuit City and Best Buy, though, were probably the kiss of death. One of the big trends of the past 10 years has been brick-and-mortar retail stores’ consistent failure to compete effectively against digital-native companies. Best Buy wasn’t the only retailer to try to crack the digital-content business — and fail: Target and Sears both took a shot. And McDonald’s sold digital content over its WiFi network and even tried DVD rentals in its restaurants.

Do you like the feel of paper?

Just as digital music didn’t really take off until Apple introduced the iPod, the ebook revolution didn’t take place until the arrival of the Kindle. In paidContent’s early years, ebooks were written off as a failure in part because publishers couldn’t figure out what to do with DRM. (In 2003, “temporary electronic ink” that would disappear after a few months was floated as a possible solution.) Barnes & Noble decided to stop selling ebooks in 2003, and Yahoo stopped selling them in 2004.

Meanwhile, Amazon and Google were pushing forward. Google launched Google Print – now called Google Book Search, and still besieged by lawsuits seven years later. Amazon tested two now-defunct programs: Amazon Pages, which allowed customers to buy access to digital copies of select pages from books, and Amazon Upgrade, which bundled print books with online access to the complete work.

Customers weren’t biting. Then Amazon came out with the Kindle in 2007 for $399. Less than two years later, Amazon was selling more Kindle books than print books, and ebooks now make up over 20 percent of some big-six publishers’ sales. Barnes & Noble has had some success with its Nook e-reader and digital bookstore, but bankrupt Borders shuttered all its stores in 2011. Meanwhile, the Department of Justice suit against Apple and five big publishers for allegedly colluding to set e-book prices drags on.

Good thing Steve Jobs looked beyond ringtones

A Forbes survey back in 2002 found that “business professionals” would be willing to pay for “news content to be delivered to their cellular devices,” and some media companies tried early mobile experiments. Verizon offered a cell phone version of the Yellow Pages — which, at $19.95 per year, gained 15,000 subscribers in three months. But starting in 2004, everyone decided the future was in ringtones. A $4 billion global business by the end of the year, one company projected.

So, so many ringtones. You could buy them from Rolling Stone or from an ATM-like device called E2Go. A fall 2004 marketing campaign let you mix your own ringtones on Levi’s website. Billboard launched a top ringtones chart.

Could ringtones “prove to be a passing fad”? we wondered late in 2004. Luckily, yes — a new technology came along to shake up the mobile market. No, it wasn’t the $500 ESPN phone, but the iPhone, which came out in 2007. And by opening its platform up to third-party app developers, Apple got users ready for its next ecosystem-changing device, the iPad, in 2010.

Monetizing mobile

Advertising has always been a fuzzy business — how exactly do you measure engagement and success? Well, that’s still the big debate about advertising in the digital era.  ”If here’s anything that’s really holding back ad spending on the web, it’s the lack of good measurements,” Tim Armstrong, then Google’s VP of national sales, said in 2007.

Mobile advertising has also faced obstacles. In 2006, mobile carriers began allowing advertising despite fears of annoying customers. Customers were indeed annoyed – 79 percent of them found mobile advertising annoying, according to a 2007 Forrester study — but they could “see the potential benefits of mobile advertising and marketing to themselves,” particularly if they could get a useful special offer or coupon.

Further complicating matters for advertisers: The smartphone market is fragmented among different brands — marketers don’t want to spend the money to create different ads for Android and iOS — and there are two mobile ad universes: mobile browser and apps.

Nevertheless, mobile advertising has gained ground, crossing  $1 billion in the U.S. for the first time in 2011, according to the Interactive Advertising Bureau, totaling $1.6 billion for the year.

The next opportunity is social media advertising. And once again, it will be a challenge to figure out some standardized metrics. What’s a retweet worth, anyways?

Back to where we all began

Though micropayments worked well for music when Apple launched iTunes, the path to payments for written content has been rockier. In 2004, we wrote that “micropayments today are still characterized by a large number of competing transaction types” – including direct-to-bill, merchant aggregation, prepaid accounts and direct transfer – and “each of these face the current incumbent in digital content distribution: the flat-fee subscription model.”

Eight years later, it appears that the subscription model has won out. The iPad opened the door for magazine and newspaper publishers to create new revenue selling content on that platform, but the results have been mixed. When Rupert Murdoch’s “The Daily” iPad newspaper launched in early 2011, the company called it “the model for how stories are told and consumed.” We wrote, “The bet here is that while consumers are less and less likely to reach into their pocket for a few quarters to buy a newspaper, they might not care about the 14 cents on their credit card for a copy of an e-newspaper.” A year and a half later, The Daily has over 100,000 paying subscribers — but it’s living on borrowed time and may not get through the five years its publisher has said it needs to break even.

Writing for the web, of course, has been around for awhile. At the beginning of the decade, blogging was called “nanopublishing,” and the question was how blogs could support themselves doing it. All sorts of models have arisen. For example, Gawker tried a licensing deal with Yahoo, but that relationship ended a year later. The deal “garnered way more attention than we expected, but less traffic,” Gawker CEO Nick Denton said in 2006.

Some bloggers have stayed independent and make a living from advertising (or from their day job); others write their blogs under a newspaper, website or larger magazine’s umbrella — see the Dish’s Andrew Sullivan, FiveThirtyEight’s Nate Silver, WaPo’s Ezra Klein. Or, they go to work for the Huffington Post!

Magazine companies have grappled with whether to bundle digital editions with print subscriptions or charge for them separately. Time Inc. — which first put digital editions of its magazines behind AOL’s paywall in 2003 — started out charging separately, but today Time Inc. and Condé Nast print subscribers get the digital edition free. Hearst, meanwhile, is charging separately, and it said its digital business in the U.S. became “solidly profitable” for the first time in 2011.

Could there ever be a Netflix for magazines? Time tried it for print versions with its 2008 Maghound service. It failed, due to a lack of marketing and reader interest. Magazine publishers are trying again with joint venture Next Issue Media.

Many newspaper publishers, most notably the New York Times, tried paywalls at the start of the decade and then abandoned them – only to return to the model in the past couple years.  In its most recent earnings report, the NYT said it has 454,000 digital subscribers. Is that enough to sustain the newspaper in its 21st-century transition?  Probably the best answer to that came from  Vivian Schiller. But it was in response not to the NYT’s recent digital subscriber numbers, but to the NYT’s decision in 2004 to close the paper’s first paywall, known as TimesSelect. Schiller, then the SVP and general manager of NYTimes.com, was asked whether TimesSelect had worked.  “It did work,” she said. “It’s just a matter of as compared to what.”

Birthday cake photo courtesy of Shutterstock user [Robyn Mackenzie].

TV photo courtesy of Shutterstock user [Somchai Buddha].

Zombie hand photo courtesy of Shutterstock user [lineartestpilot].

Piggybank photo courtesy of Shutterstock user [cardiae]

Fast food photo courtesy of Shutterstock user [Sergio Martinez].

Book photo courtesy of Shutterstock user [TrotzOlga].

Ringtones and apps photo courtesy of Shutterstock user [violetkaipa].

Cash register photo courtesy of Shutterstock user [titelio].

Magazines photo courtesy of Shutterstock user [bernashafo].

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The Incumbent

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

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

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

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

What’s Happening

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

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

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

The Massive Failure: News Corp

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

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

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

The Fringe Player: Aspiro

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

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

The Radio Player: Pure Music

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

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

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ClipSync Moments gives viewers the ability to share videos with friends on social networks. But instead of sharing a link to the entire video and having their friends search for the part it refers to, ClipSync attaches comments to a specific moment in time. Once connections on social networks click through a ClipSync Moments link, they’ll be taken to the video moment — and comment — in question. That helpspublishers to achieve a viral effect that can increase viewership of their videos through social sharing.

But the product isn’t just for drawing viewers in from other networks: It can also increase engagement among viewers that choose to watch a video that their friends have already commented on. When choosing such a video, users will be able to see their friends’ comments pop up during the course of the film, and can respond to those comments, adding to the conversation about particular moments.

ClipSync Moments is similar to social sharing implementations that some publishers have already rolled out. Most notably, it’s like Hulu’s Facebook Connect integration, which lets viewers share videos and comments with their Facebook friends, with links pointing to a specific moment in the video when clicked. But by making Moments available to multiple third parties, ClipSync is hoping to standardize the way this sharing happens.

ClipSync has signed up a few of its existing customers as launch partners for the new product. Epix, IFC, RealNetworks and Major League Gaming will all introduce ClipSync Moments as part of their online viewing sites. ClipSync CEO Itzik Cohen told us in a phone interview that the company has more customers on tap to take advantage of the product, which will be announced in the coming weeks.

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In an interview with paidContent, Glaser didn’t specify what kinds of products the board is hoping to see from Nielsen, saying that it will be up to Nielsen once he fully starts. “We’ve decided not to comment on the strategy,” Glaser said, adding that he had been more involved in the company as part of managing the search to replace Lunsford. But now, he’ll step back a bit. “I’m taking the Goldilocks approach,” Glaser said, adding that he’s not completely stepping away from overseeing the company, but not being involved on a regular basis either. “In other words, ‘just right.’”

Lunsford has been with RealNetworks since 2008 and will continue to on at the company “in a senior capacity, reporting to Nielsen,” RealNetworks said.

While RealNetworks is a pioneer in online video and audio, with both a consumer side and an enterprise side, but a lot has changed in the streaming media space since the company opened its doors in 1995. For one thing, the increase in the amount of internet radio providers, including Pandora (NYSE: P), Last.fm and Spotify. While RealNetworks jettisoned subscription music service Rhapsody last year, the company has lately been looking to connect with other streaming services instead of simply offering direct competition.

For example, it’s looking to get some mileage from Apple’s delayed iTunes Match cloud service, which allows users to store their entire music library in the cloud for listening on their various devices. Whenever Apple (NSDQ: AAPL) is ready to launch the service, RealNetworks has released a software called “Rinse,” which promises “to clean up their music collections” before using iTunes Match. The service fixes misspellings of song titles and artist names, identifies songs without titles and remove duplicates.

Nielsen, 41, most recently served as VP of the Digital Imaging Group at Adobe Systems (NSDQ: ADBE), which includes Photoshop, Elements and Lightroom, in addition to mobile, web and tablet solutions. Prior to his seven years at Adobe, Nielsen spent five years at Microsoft (NSDQ: MSFT) in the media segment. Release

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ClipSync provides technology that allows multiuser viewing and interaction with online video. In the past, it has been tapped by companies like Myspace and Epix  to create social viewing rooms for videos through their online platforms. It’s also been used over the past two years for RealNetworks’ live broadcast of video feeds during the taping of CBS’ Big Brother.

SuperPass subscribers can pay $14.99 a month or $39.99 for three months of access to live, multicamera feeds from the Big Brother house. With the subscription, they also can chat with other fans, vote in polls and participate in trivia contests and games through the ClipSync platform. The social player and live feeds basically enable reality TV producers to profit from content that wouldn’t have been seen by broadcast TV audiences.

“This gives them new revenues for content they would have just thrown away,” ClipSync VP of Marketing Spencer Chen said in a phone interview. “Reality shows are recording everything, so they end up with a lot of content… that they just can’t monetize.”

San Francisco-based ClipSync has been around since about 2006, with investment from KPG Ventures and Draper Fisher Jurvetson. The company has 25 employees globally, with offices also in New York City and (coming soon!) Los Angeles.

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RealNetworks Founder Glaser Becomes a VC at Accel; the founder of RealNetworks is joining Accel Partners as a part-time venture partner at the firm that backed him 15 years ago. (AllThingsD)

More Movies Available on Demand on DVD-Release Day; since last year, Verizon FiOS has more than doubled the number of day-and-date releases that are available on demand. (Verizon at Home blog)

46% of Web Users are Ready for HTML5; almost half of all Internet users are already using HTML5-compatible browsers, according to online ad network Chitika. (ReadWriteWeb)

Consumer Adoption Remains Key to 3-D; consumer adoption still has a very long way to go before the emerging technology comes close to approaching critical mass. (Multichannel News)

Fusion is a platform that the company says will let developers add social functionality like tournaments, trophies leaderboards and more to their games. The Facebook app is pretty much what it sounds like — a portal on the popular social network that offers a place to play more than 1,000 games. The Facebook app was built using the Fusion platform.

Real announced earlier this year that it plans on sharpening its focus by separating the games division. As the specifics of that news roll out, GameHouse is already doubling down on the social games phenomenon. Some highlights from Robinson’s talk include:

• Within five years, there won’t be a distinction between social and non-social games — all games will be social.
• Robinson believes that the notion of a game as a solitary experience is an advent of the digital age. Games, he says, are inherently social.
• Social gaming will evolve beyond leaderboards and challenges to more synchronous and asynchronous game play as well as more data collected about what and how people are playing games.

For more, read the in-depth piece, How the Next Zynga Could Reinvent Social Gaming over at our subscription research service, GigaOM Pro.

mSpot’s Mobile Movie Streaming Service Expands to the Web; mobile entertainment startup is extending its Mobile Movies site, which will let users stream full-length movies on their mobile phones, to the web, allowing users to enjoy mSpot’s online streaming movie service on your computer. (TechCrunch)

Vivox Lets You Drop Voice Chat Into Any Social Media App; the startup is announcing the Social Voice Partner Program, which makes it easy for developers to integrate voice into any social media application with a small amount of effort. (VentureBeat)

Panasonic Is Winning the First Round of the 3DTV Wars; the CE manufacturer’s 3DTVs have already sold out at Best Buy, despite having launched as recently as March 10. (Ars Technica)

ViaClix Joins Rush To Get Online Video to TV; the startup offers a home router, called TV-Link, that sends Internet content directly to televisions via WiFi for viewing. (Fierce Online Video)

Dish Files Countersuit Against DirecTV Over HD Claims; the slugfest between DirecTV and Dish Network over marketing claims continued, as Dish filed a countersuit charging the larger operator with falsely advertising its HD services. (Multichannel News)

The case revolved around RealDVD, a DVD-copying software package that RealNetworks introduced in late 2008. The software allowed users to copy entire movies from DVDs onto PCs, external storage drives or flash drives, which Real argued was legal because it didn’t alter or compress the original file. RealDVD also added an encryption layer so that users could only play back a movies on licensed computers.

But after being pressured not to release the software, RealNetworks filed a preemptive lawsuit in September 2008 against the major motion picture studios, guessing (correctly) that they would file suit to halt sales of RealDVD. And it was all downhill from there: the studios countersued, the court stopped sales of the software, and RealNetworks ended up losing both cases against the Hollywood studios.

RealNetworks had appealed the decision while Glaser was in charge, but now it appears that cooler heads have prevailed. In addition to paying $4.5 million to settle legal fees, RealNetworks has agreed to withdraw its appeal and to halt distribution of RealDVD or “any other technology that enables the duplication of copyrighted content protected by the Content Scramble System, ARccOS, or RipGuard.” Real has also agreed to turn off the metadata service that feeds cover art and movie information to the lucky 2,700 customers who were able to snag a copy of RealDVD before the court barred its sale, and will refund those poor souls the money they paid for the software.

Related GigaOM Pro content: Making Movies Mobile (subscription required)