It’s easy to be on the bleeding edge of the latest technology based in San Francisco, but I tend to be more of a follower in other areas, such as music.

I always seem to be one step behind a friend here, who recommends the latest hot bands and the best way of being educated on and acquiring music.

It was him who first recommended Pitchfork to me for music reviews and eMusic for downloads free of digital rights management (DRM) software.

He was ahead of me in switching back to buying CDs and ripping them to portable media players as we became disillusioned with subscription services and restrictions on the portability of music.

So I took note when he said he was buying a lot of music from Amazon’s DRM-free MP3 service these days.

An album generally costs $8.99, or 89 cents a track, cheaper than regular CDs and the music can be burned to your own CDs an unlimited number of times or transferred to any device.

The service has just gained extra appeal with the news that Warner Music Group is making its catalogue available. It joins EMI, Universal Music Group and a host of independent labels, significantly increasing the choice available.

In contrast, Apple’s iTunes store only offers DRM-free music from one of the majors – EMI.

Amazonmp3 is therefore becoming a strong alternative to iTunes and the iPod universe, which is due in no small part to the majors not wanting to be held hostage to Apple’s pricing policies. And it is finally giving consumers what they really want – music without restrictions on their use of it.

UPDATE: On January 10, Sony joined the other three majors in making its library available DRM-free on Amazon.

… it would crash repeatedly for no obvious reason, refuse to restart until you rebooted the engine, then lock you out until you simultaneously pulled the handle, turned the key and yanked on the radio antenna.

OK, so this was originally a joke told at Microsoft’s expense, but it also points to a truism about a development process widely favoured in the Valley: ship products before they are ready, then rely on rapid improvements to bring them up to scratch. Now it seems that Silicon Valley upstart Tesla Motors is doing its level best to keep the old joke alive.

The electric car company set up by PayPal co-founder Elon Musk (we profiled him earlier this week) has been struggling for some time to produce an advanced transmission for its hotly anticipated sports car. Rather than put off the launch of its first vehicle yet again, it has now opted for a familiar Valley alternative: a beta version.

This is how new Tesla CEO Ze’ev Drori explains it in a blog post this week:

To help speed delivery of cars, we will begin production in 2008 with an interim transmission design. These transmissions will meet high standards for reliability and durability, but the car will not meet the original performance spec for acceleration, reaching 60 mph in 5.7 seconds instead of the promised 4 seconds. When the final transmission is ready, we will retrofit all cars, at Tesla’s expense, to meet the promised performance specifications.

Valley luminaries like Larry Page and Sergey Brin, who top the Tesla waiting list, shouldn’t mind - they know all about putting out products before they are ready (In fact Google Product Search, formerly known as Froogle, is still in beta after more than five years, which must go down as some sort of record.)

Wal-Mart has the shelfspace to make or break a new DVD release, but its attempt to take that power to the Web has just bombed. The mega-retailer quietly closed its video download store in the run-up to Christmas. So underwhelming was the service that its failure is only just getting noticed.

Leaving aside Wal-Mart’s own particular failings, this is another sign that the movie download business has been going nowhere fast. Earlier this week we reported that Apple’s iTunes store will soon be trying out a new approach, offering movies from News Corp’s 20th Century Fox studio for rental.

A second feature of the Apple/ Fox deal looks even more intriguing: besides slotting it into a DVD player, people who buy a traditional movie disk will also be able to rip a (DRM-protected) copy of the movie to their iTunes collection, then watch it on an iPod. For Apple, this is a great way to suck more content into the iTunes ecosystem from what remains the dominant channel for movie distribution. For Fox, it’s a great way to add more value to a DVD ("Watch this film on your TV and your iPod!")

This all highlights once again the lack of appeal for mainstream consumers in movie downloads. Even those who feel comfortable plugging into an online service and paying full DVD prices are left with a digital file that they’ll have difficulty transfering to the TV screen. Without significantly lower prices, it’s an idea that seems to be struggling.

Touch-typing took on a new meaning for me this year as I struggled to hit the right letters with my fingers on the touch-sensitive iPhone.

What was more satisfying was the multi-touch capabilities the iPhone introduced – expanding the size of a photo by the spreading of fingers, stroking through a music collection in Cover Flow mode.

Touch has been a major trend of 2007, from the iPod touch and iPhone and their imitators to Microsoft’s coffee-table Surface PC.

Balda, a German company, was a major beneficiary of the iPhone’s popularity, with its glass screen, whose software can detect several fingers at once, being adopted by Apple.

Synaptics, a Silicon Valley company, has also got in on the act – its touch technology is now in more than 25 phones.

“In devices which give you the maximum visual information and where there’s no room for keyboards, the touch screen becomes your user interface,” Francis Lee, Synaptics chief executive, told me.

Synaptics is better known for its touch pads that replace a mouse in notebook PCs. I rarely click anything on my notebook these days, using “tap zones” on the touch pads to replace a mouse left- or right-click and stroking the pad to scroll through pages or zoom in or out.

Global revenues for touch-screen technologies will nearly double from 2006 to 2012, rising from $2.4bn to $4.4bn, according to the iSuppli research firm.

It lists eight leading technologies – resistive, surface capacitive, projected capacitive, infrared, surface acoustic wave, optical, bending wave and active digitizer – and eight emerging ones - photo sensor in pixel, polymer waveguide, distributed light, strain gauge, multi-touch, dual-force touch, laser-point activated touch and 3D touch.

Resistive products are currently the cheapest and most common types of touch screen and revenues should increase at a compound annual growth rate of 3.1 per cent to 2012, says iSuppli. In contrast, multi-touch revenues, helped by the iPhone and expected adoption by handheld game consoles and map browsing systems, are expected to grow at a rate of 31 per cent.

  During their most important sales period of the year, ecommerce companies like Amazon and eBay rely disproportionately on the latest must-have gadget, movie or game.

As John Donahoe, head of eBay’s marketplace division, explained at the start of this holiday shopping season: "When they’re new, we sell a lot on eBay and the average selling prices are huge." Last year the Wii had that new-scarce-and-expensive mix, the year before it was the Xbox 360. Elmo has also leant a hand.

So while activity on the ecommerce sites this year has apparently been running high (this is Amazon’s characteristically vaguely worded statement today) the lack of a new knock-out product could be telling. As Donahoe summed it up:

This year, interestingly, there have been no toys or consumer electronics launched in the fourth quarter that have created that effect. We knew that in the summer. We knew the iPod launched this summer was the last thing that was going to create that kind of scarce mentality.

Since he spoke, the Wii has once again been drawing the crowds. Will that be enough, in the absence of new blockbusters, to save Christmas for the etailers? According to Amazon, big sellers alongside the Wii have included Garmin navigation devices and KitchenAid food mixers. Falling prices help to account for the popularity of the last two of these. In the absence of revenue numbers it’s too soon to say how strong a season it turned out to be, though Wall Street, which today pushed Amazon’s shares back towards their heady 12-month high, clearly wants to believe the best.

Imagine playing Halo 3 with a lot more at stake than losing a virtual life. What if, every time you were injured by an opponent, your bank account took a hit as well?

That’s the idea behind Kwari, a "first-person shooter skill-based cash-for-kills" online game, set to debut in the New Year.

Players of Kwari will suffer automatic deductions from their bank accounts when they are hit in a game, as well as deposits when they strike their opponents. The amounts can be anything from one cent to one dollar per hit depending on the stakes for the game.

There is also a fractional cost if they pick up additional weapons or health packs, with the money being pooled into a jackpot.

In 16 to 64 player match-ups, jackpots are shared between the gamer in possession of a smoking sphere called the Pill at the end of the game and the player who had held it the longest.

Kwari is the idea of Eddie Gill, a former games producer for Activision and Konami, and the company of around 20 employees is based in London.

It is a more sophisticated take on cash-for-gaming than winner-takes-all services such as Tournament.com, which went offline last month, and SkillGround.

"We have engineered the game around the exchange of cash from the ground up," says Clive Hibberd, chief executive.

He says the challenge has been to record the millions of mini-transactions in the game in a huge database and carry out double-entry book-keeping as money is transferred.

Kwari will be released in Europe first, due to uncertainty about how it will be viewed by the authorities in the US, where internet gambling is banned. Kwari argues it should be classified as a skill-based game as opposed to gambling, where luck is more involved.

Kwari will make money by selling ammunition to players. Mr Hibberd anticipates 5,000 bullets costing $5 and lasting a player for one or two hours.

Hard-core gamers are the target audience and 12,000 have signed up for a closed beta of the game.

"There’ll be weekly, monthly and annual jackpot prizes and we expect to have our first gamer millionaire by 2009," says Mr Hibberd.

Chess and Scrabulous are perhaps the most popular games being fought through Facebook profiles, but more sophisticated contests and environments are now beginning to appear on social networking sites.

At Bebo’s launch of its Open Application Platform last week, an executive from Gaia Online showed how users could step with their avatars into its virtual world from within Bebo to dance in a night club or chat with friends in many other virtual urban environments.

Now PlayFirst has partnered with widget supplier RockYou to distribute its Wedding Dash game on social networks.

“We’re looking to grab a new audience and extend our brand footprint into social networks,” says Heidi Perry, head of marketing, on the move.

Wedding Dash, a wedding planning contest, has evolved from the San Francisco casual game company’s Diner Dash franchise, which has recorded more than 200m downloads.

Diner Dash has also been benefiting from add-ons to its game, with more than 35 per cent of PlayFirst’s transactions coming from the sale of virtual goods. Players have been paying to dress their waiters, acquire new themed restaurants and accessorise them.

PlayFirst also announced $16.5m in third-round VC funding this week, led by DCM and including original investors Mayfield Fund, Trinity Ventures and Rustic Canyon Partners. PlayFirst raised $10m in its first two rounds.

DCM seems to have been attracted by PlayFirst’s expansion into virtual goods: “The company’s initial success with microtransactions this year has demonstrated that PlayFirst is among the smartest, savviest and most visionary companies in casual games,” said DCM partner Peter Moran.

Full marks to Larry Ellison (not to mention Credit Suisse and WR Hambrecht) for their management of the Netsuite IPO, but it seems that sometimes you just can’t plan for Wall Street’s apparent irrationality.

This had all the makings of one of those headline-grabbing IPOs that leaves a company’s early shareholders with an uncomfortable feeling that they have somehow been short-changed. The bankers come up with a price that is meant to give the stock a comfortable ride in the after-market, only to see trading go through the roof. Initial investors are left to wonder how much money was left on the table (this summer’s VMware IPO was the most glaring recent example.)

It seemed that the Dutch auction format used for the Netsuite IPO was going to iron out that effect. In recent days the indicated price range was raised twice, from an initial $13-16. The shares were eventually priced on Wednesday at $26 each. This is a company that is far smaller than Salesforce.com, which has grown far slower than Salesforce.com, and which has yet to prove its business model works - yet the pricing was at a significant premium to Salesforce.com on any measure you care to take.

It looked as though Ellison, CEO of Oracle and controlling shareholder of Netsuite, had called the IPO traders’ bluff. If they wanted to bid up the auction to a dizzy level to assure themselves of an allocation, he was not above hitting the bid and taking the money. When the shares opened on Thursday they settled just above the issue price, despite very heavy trading. Any premium had seemingly gone to the company and its early investors.

So how to account for what happened in the last two hours of trading? Netsuite’s shares eventually drifted all the way up to $35.50, to yield a significant first-day "pop." It seems that, with a shortage of shares in the IPO, there’s just no way to handle the weight of money looking for a home in the "software-as-a-service" sector (Salesforce was also up 8 per cent Thursday.) But when the lock-up ends and Netsuite insiders get to unload more of their shares it should be a different story.

The lights have gone out for MovieBeam, a set-top box service that failed to grab a significant slice of the movies-on-demand market.

The service closed at the weekend after its parent company Movie Gallery went into Chapter 11 bankruptcy in October.

MovieBeam was launched by Walt Disney in 2003, closed down in 2005 and then relaunched as a spin-off in February 2006 in which Disney, Intel, Cisco and three VC firms invested $48.5m.

Movie Gallery picked it up in March this year for just $10m.

MovieBeam’s $199 set-top box used part of the broadcast spectrum to download up to 100 new movies to its hard drive that could then be rented and watched on the user’s TV.

Its problem was too much competition appearing and too little consumer buy-in to the concept.

MovieBeam competed with video on demand offered by cable companies. Then there were other digital download services such as MovieLink and CinemaNow. These allowed downloads to PCs or laptops, which could be hooked up to a TV.

A whole range of networking devices have also been appearing such as Apple TV and D-Link’s Medialounge player with MediaMall TV channels, which allow content to be readily moved from the PC or internet to the TV screen.

A second wave of services also arrived in the past year – Amazon Unbox on Tivo, Netflix’s free online movie viewing service and Xbox Live’s impressive collection of high-definition material for the TV-connected 360 console.

Akimbo, a similar set-top box service to MovieBeam, has also failed to gain traction. In September, a Silicon Valley start-up launched the $399 Vudu box, which can stream its database of 5,000 movies to a TV over a broadband connection and charge $1 to $4 rental for each movie.

Whether any standalone set-top box service can succeed is questionable, given it has to fight for a place with games consoles and cable and satellite boxes under the TV that can have the same capability.

The television itself is moving towards becoming a device with its own direct connection to the internet, where consumers may prefer to pay for a web-based service, rather than connect up yet another piece of hardware.

Facebook appears to be readying the next phase of its application platform - a payments system that would allow application developers to conduct transactions through the Facebook site, according to a announcement unearthed on Tuesday by Valleywag.

When he launched the Facebook platform strategy in May, Mark Zuckerberg, Facebook’s founder, hinted that some kind of payment system could be in the works. Such a system would expand the revenue streams available to application writers by allowing them to charge users for premium services, or even sell items through Facebook outright, rather than relying on advertising to make money. Facebook could also benefit if it worked out a way to pocket a piece of each transaction run over its payments system.

Facebook faces an interesting choice in deciding how to proceed. It can go it alone, partner with a company with more experience in online payments (Ebay’s PayPal springs to mind), or offer a mix of payment options. Working with an experienced partner could soothe the nerves of users concerned about privacy in the wake of Facebook’s poor handling of its new Beacon advertising service.

Still, Mr Zuckerberg is nothing if not ambitious. If he sees an opportunity to create and dominate a huge new online marketplace on his own, he may well take it. Facebook itself is not completely lacking in payments experience: It already features a "gift shop" where users can pay to send each other $1 electronic knick-knacks. This service could easily form the basis of a broader payments push.

Partner or not, if done well, a Facebook payments service could open up a world of new possiblities as established online vendors begin to conduct business not just through their own web sites, but through proxy sites on Facebook.