The present and future of post production business and technology

Seth Godin has written a reprise of an old article of his called Monopolies, seven years later, which I heartily recommend.

The recording industry once had an important role that justified its monopoly, as did Broadcast Television stations and other limited outlet industries. But inevitably the monopoly is broken - by legal fiat in some cases, but by technology in a whole lot more cases.

It’s hard for a monopolist to give up the position because monopolies are very, very profitable. Sad to think that a company that was once raking in multiple millions of dollars every year, for many years, suddenly has to compete on the quality of their offering in a completely changed market where they are no longer a monopoly. This is why the music industry (concert tickets, merchandise etc) is doing very well while the recorded disc business is slowly fading away.

Some of the time monopolists don’t realize what business it is that they are in. Railroad companies apparently thought they were in the railroad business, rather than the transport business, so when their long-haul monopoly was threatened by trucking, they didn’t respond fast enough, and faded in importance to society. Record companies think they’re in the disc business, when they’re really in a promotional business. That’s probably the only role left.

Other times, industries lose relevance because technologies bypass them. This is the position that broadcasters and cable channels are facing right now: they had an effective monopoly (mandated by the government in the case of broadcasters) because they had access to limited resources - broadcast licenses and access to cable distribution. However when we don’t need those limited resources to get entertainment “out there” to the viewer, what role is left? Finance company? There’s lots of competition there.

And finally, industries lose out when they focus on the wrong customer. Broadcasters and cable programmers have the wrong focus. They believe that their customer is the advertiser, and they are correct in an advertising supported entertainment model. However, the producer’s customer is the viewer and is often in conflict with the broadcaster’s customer.

Losing a monopoly is inevitable. You can avoid fading into irrelevance by focusing on the core value of your business to the customers and to keep focused on the customer’s needs. Unfortunately, the more broadcasters do that, the faster they’ll fade from relevance because they are unnecessary in an unmediated marketplace.

On the Digital Production BuZZ show of February 15th the BuZZ in Depth segment (50 minutes into the show or use the chapter mark) was on Competing with Free where I drew heavily from a Techdirt article Saying you can’t compete with free, is saying you can’t compete, Period.

The Techdirt article and discussion on the show revolved around the thought that the price of everything ends up competing at the marginal cost of producing the good. The way to add value, and therefore make profits even when the marginal cost is zero with digital distribution, is to differentiate with branding, convenience or service.

Then today an email list discussion that’s been ongoing about the need/no need for DRM. Naturally opinion is somewhat divided. However one of the examples chosen to highlight the “need for DRM” cited a proposed book in the UK written by chef and personality Jamie Oliver. A draft of the book got leaked by pdf and appeared on the Internet. The entire projected run of 200,000 books was cancelled because bookstore owners cancelled pre-orders because they thought they could not compete with free.

And yet, Cory Doctorow, who is an opponent of DRM, practices what he preaches.

“I’ve been giving away my books ever since my first novel came out, and boy has it ever made me a bunch of money.”

In the Forbes Magazine article he tells of his first novel Down and Out in the Magic Kindom published by Tor Books in January 2003. Since then the book has had six printings - a serious commercial success in a publishing world where few books make it to a single reprint. During this same period more than 700,000 copies were downloaded from his website, free.

Don’t fall into the trap of saying that those 700,000 “freeloaders” would have been potential sales. That would be to fall into the same trap as the IRAA and MPAA! This author is smart enough to realize that an eBook download is not a lost sale.

Most people who download the book don’t end up buying it, but they wouldn’t have bought it in any event, so I haven’t lost any sales, I’ve just won an audience. A tiny minority of downloaders treat the free e-book as a substitute for the printed book - those are the lost sales. But a much larger minority treat the e-book as an enticement to buy the printed book. They’re gained sales. As long as gained sales outnumber lost sales, I’m ahead of the game. After all, distributing nearly a million copies of my book has cost me nothing.

It’s not just books. By the time they released their album Barenaked Ladies Are Me in Q3, 2006 they’d been offering the album as unprotected MP3 files at 196 Kbits/sec. BNL offer the album for $9.99 as an MP3 and $12.99 for lossless quality. And yet, in the week following the official album release, BNL grossed $970,000 from “intellectual property” sales. Selling direct, the artists are getting a much better deal, about $5 an album and much better than the 4.5 cents/download that artists like Cheap Trick and the Allman Brothers reportedly get from each download of their material under their contract with the record company. Nearly a million dollars in gross revenue and yet the same material was available free. (It should be noted that BNL get income other than from digital download sales that would fall into the “Intellectual property” category.)

Also consider the example of The Shins, who had never been higher on the Billboard 200 than 86 prior to the last week of January this year. That week Wincing the Night Away” sold 118,000 copies, a career best for The Shins. What makes this remarkable is that the album had been widely available on file-sharing networks since October, three months earlier!

An independent study by economists Felix Oberholzer-Gee and Koleman Stumpf concluded…

there is likely no effect of downloading on US store sales.

Clearly you can compete with “free” when the product is differentiated again. The UK booksellers clearly do not believe in the value of their product - the book - and their shopping experience - the bookstore. Had they not blinked Jamie Oliver might have had his best-selling book ever: the opposite to what happened because of a lack of insight.

Edit: Apparently the book did get published and is called Cook with Jamie and it sells in Australia for Au$49.95 (about US$39.25) and is differentiated from the PDF by being in a splash-proof vinyl cover, fabric tape marker and great visual and physical appeal. I’d love to know how it has sold compared with the original prediction.

For those who don’t know Revver.com, at the simplest level it’s “yet another video sharing site” except it has two distinct differences: it has a revenue model based on advertising and it’s entirely driven by an API. Why are these distinctions important? They’re important because they essentially mean that Revver.com itself is irrelevant to their business.

Most “Web 2.0″ websites are built on advertising support - Google Adsense at the simplest level, display advertising if they have an advertising sales force or by sponsorship. YouTube tried the latter - sponsorship of channels by the large content providers, or even “The Brittney Channel” and to are working on recognizing content and sharing revenue from advertising on the same page with the large conglomerates that own the content. Neither are innovative and both require the visitor to actually be on YouTube.com to see the advertising. Trouble is, one of YouTube’s greatest appeals is the embedded player which puts the content on another site (where the site owner could display ads and collect the revenue).

The use of embedded players or more commonly RSS driven technology is a problem for site owners looking to advertising-on-the-website models. As RSS becomes more widely adopted (because of the huge value add to subscribers) that tension increases. A site like creativecow.net or 2-pop.com requires visitors to be at the site to read their forums, tutorials or other content because that’s what pays the sites’ expenses and provides a return to the owners. This is a huge problem for content creators if podcasts/video podcasts, which are RSS driven, takes off.

If RSS/embedded players become successful, as they inevitably will because they provide the biggest payoff to the user/viewer, then the website becomes irrelevant, even dead. That’s why Revver’s model shows they understand the direction the web is taking. Revver provides a very comprehensive API so anyone can set up a full Revver.com clone, or customize content out of Revver’s collection to a subject-specific site. Revver.com is built on the same API and (with few exceptions) anything Revver can do on their own site, can be done on any site, without any “permissions” required from Revver.

This is because Revver serves up ads at the end of the video. The revenue from the ads is shared with affiliates (anyone using the API to drive traffic) who get 20% and the balance is split between Revver and the content provider. Ads are short and unobtrusive and pay on click through, not on ad impression.

So, it doesn’t matter how people use the content, wherever they use the content - either through an embeddable Flash player or through downloads (or even if the content is aggregated into an RSS feed) all parties still benefit and there’s no “must drive traffic to website” model involved.

In my (probably not so humble) opinion Revver is one model that will sustain. The other would be direct payment between viewers and content owners in an RSS-driven (Podcast/Video Podcast like) feed. But that model doesn’t exist until klickTab.com launches.

So, Google bought YouTube in an all-stock transaction. Did not see that coming. In fact if you look back at my last post on the subject, I ruled Google out because it already had  Google Video of its own that seemed a competitor to YouTube. Still, I wasn’t the only one who got it wrong.

So, what of the substantative issues: copyright infringement and potential revenue? Well, it seems that YouTube were already on the way to solving part one of that conundrum, as their recent content agreements have shown. As part of these agreements, ostensibly to put up promotional videos, YouTube has promised to “quickly” develop technology that will search out and identify copyright material, but not to take it down. Instead, what is planned is that YouTube will identify, for example, a video with a Warner Music soundtrack and beside that video, place a Google ad. The ad revenue would then be shared with the copyright owner.

A neat solution to a seemingly intractable problem: YouTube stays in operation, the videos stay up and the copyright owners share in the revenue. Part of the deal is also a “don’t sue us” agreement. If YouTube can do enough of these deals, the copyright problem goes away.

Otherwise, Google is no stranger to copyright litigation and will fight the suits the way they always have. Some have speculated that the reason YouTube will be kept as a separate entity is to keep the suits in YouTube leaving Google untouced.

So, now the deal’s done, what changes? Not a lot really. Chad Hurley and Steve Chen are America’s newest paper millionaires. Since the deal was all-stock they will have to wait to cash out as there is usually a waiting period for these kind of deals. For Google, the $1.65 billion in stock to be issued seems to be handily covered by the short term rise in their stock price after the deal was announced. A rise that added $6 billion to their market capitalization over the week. A handy premium on the deal and one that arguably could be already “in the black”!

So, with 20/20 hindsight do I want to rethink the problems I had with anyone purchasing YouTube? Given that Google CEO Eric Schmidt is not stupid it’s only reasonable that I try and see the value that he sees in the deal. Particularly since with that much money Google could have purchased the New York Times with arguably more valuable advertising real estate and more visitors (if not more page views). In the linked article Susan Mernit puts forward the arguments why Google did not buy the New York Times.

My first thoughts were that $1.65 billion was a lot to pay for, basically, a platform to put ads on, because after all Google is an advertising company. It is a lot of money to pay for an advertising platform, but with law suits in a “manageable” position Google may actually turn an operating (as opposed to stock) profit on this deal. When you consider that the three major networks bring in $5-6 billion a year in advertising revenue each there’s a lot of advertising dollars around. A lot of those dollars are going to leak from network television to the Internet and frankly Google has the majority of Internet advertising dollars sewn up.

What’s also important to note is that YouTube has almost zero cost of content, although heavy bandwidth bills and about 65 on staff. YouTube’s content is created by visitors to the site or by the networks themselves, which is why the advertising revenue sharing deals noted above are so crucial to YouTube’s survival. It is plausible that sufficient advertising revenue will come in over the next five years to justify diluting the stock by $1.65 billion worth of shares. (Ironically, the increase in share value this week will reduce the number of shares that are issued to fund the deal as the deal was predicated on the dollar value, not number of shares.)

Getting in bed with Google’s bandwidth deals will lower YouTube’s overall cost of delivery (when existing agreements run out).

So, while I’m still uncertain about the wisdom of the deal, it’s not totally crazy.

It will have very little impact in the distribution of commercial video. Google retains their own Google Video play, complete with commercial video for sale in that store. Although it’s not well regarded maybe they can learn a few tricks from the YouTube folk. YouTube will still be a place to be seen, or to have your video seen and where a viral hit can get you massive exposure, such as people like Judson Laipply (now viewed over 5 million times) or David Lehr who I interviewed on Creative Planet’s Digital Production BuZZ back in April 2006. Getting a break out hit is a definite career builder.

Despite being the new “waitress discovered in a coffee shop” for producers and performers, YouTube has little to offer people who produce video professionally, or who have any hope of repaying investors (beyond posting a trailer, which should be mandatory).  The real developments in that arena are yet to come.

So, on the balance, I still think $1.65 billion, even if it’s only stock, is a lot to pay for a loss-making, two year old (not quite) startup, it seems Eric Schmidt may only be smoking the cheap stuff and not really wacked out!

Now the talk is Yahoo buying FaceBook for $2 billion!

I can’t help but feel we’re in another dot-com-like bubble: MySpace sold to Fox Interactive for $600 million and now YouTube’s founders are being coy saying that they “don’t think it’s worth $1 billion” but that they’re OK with $600 million.

Ok, now I don’t have a fancy MBA, and it could be that I’m a hick from Newcastle in Australia but YouTube, for all its popularity (and it is popular) has absolutely no business model. Apart from a few google ads on their site, they have no income. Conservative estimates are that serving up five million videos a day (or however many it is this week) costs the site over $1 million a month in bandwidth bills alone leaving out server costs, office space and salaries. The $11.5 million they’ve raised from Sequoia Capital in two rounds ($3.5 and $8 million) isn’t going to last long before the business just stops. At least MySpace generates some income to justify its $600 million purchase price - and even that was treated with raised eyebrows at the value.

Now this week, ZDNet’s Russell Shaw posts “One of these six companies will buy YouTube” and I have to explode somewhere. Why the heck would anyone buy an opportunity to spend a million dollars a month for $600 million dollars with no chance of recovering the investment or ongoing costs?

“But Philip”, you say, “you’re missing the point. In a big company there are synergies that will help them make money.” That may be so, but we’ve heard that line before and the “synergies” between Time Warner and AOL don’t seem to have been that useful. That’s just one example - in general the so-called synergies don’t pan out and someone just loses a bunch of money, while the founders walk away rich. I’ve got no problem with Chad Hurley and Steven Chen walking away with a good portion of someone’s $600 million dollars (after Sequoia take their share). People win the lottery every day.

It’s the mindset/lunacy/sheer stupidity of whoever buys it that I just can’t fathom. The six sites that ZDNet thought might be in the market are Adobe, Time Warner/AOL, Sony, Google, News Corp/Fox and Yahoo. Adobe does not need a showcase for Flash when YouTube and Google Video are already doing that for them, and Time Warner just started its own video sharing site on its AOL property with a “community reporter” video upload site at CNN. Google have Google Video and Yahoo just launched Yahoo Video, neither of which is as popular as YouTube but they didn’t cost $600 million either!

The problem that any large company would have, if they purchased YouTube, would be that they either have to kill YouTube as it is, or fight many long and tedious (and expensive) law suits. YouTube today is popular because it’s full of copyright material uploaded by people without rights to upload it. The copyright owners generally do not approve. A couple of shows, like The Daily Show and Colbert Report have said they have no problem, but most networks and program producers have a problem with it. Even with YouTube’s policy of removing copyright material as soon as it’s pointed out to them, they’re still being sued by an LA-based producer for copyright infringement. (That suit is unlikely to succeed but doesn’t really help YouTube’s new owner.)

When you have an owner with deep pockets - NewsCorp, Sony or Yahoo - the law suits are going to come out of the woodwork and YouTube will have to remove all copyright material without clearances. There goes most of the appeal and value. In order to make some money back, there are two solutions: charge for the download, or add advertising.

Either, or both moves will kill the site’s appeal. What are they going to charge for a 37 second video of some dog biting their male companion in a sensitive spot? It’s not going to be $1.99 that’s for sure. How much advertising can you add to the head, or tail, of a 2 minute video before everyone abandons the site completely?

Personally, I don’t see a way out for YouTube. It’s a temporary phenomena that is too good to be true, because it doesn’t follow the basic tenets of business: income has to (in some way) exceed expenses.

No doubt someone will buy it for some outrageous amount of money - maybe NewsCorp want to add it to MySpace. Sony would want to put root-kit, computer killing DRM around it.

But when they do, I still won’t understand what the business model is nor why it’s being brought.

Seems that I am on a theme where, if a supplier won’t provide the service I want to buy, I’ll go somewhere else. Well, it’s happened again. A website I used to have open most of the time for quick reference to the information finally drove me away tonight. Why? Because they’ve loaded their pages with so much flash-based advertising that having that site open used more than 70% of my processor capacity by itself.

I have nothing against sites that have advertising although I do object to the processor load that Flash ads force on me. Advertising is a given on the Internet, and until this site forced me to act, I was prepared to ignore their, frequently intrusive, advertising for the free weather service they provided. Much more up to date than the OS X 10.4 widget, which is often 2-3 hours out of date when it loads.

I almost reverted to that old standby - walking to the door and opening it - to check the weather when I noticed that ubiquitous RSS feed button on the site. Bliss, joy, glory!!! One click later and my weather is now in my favorite RSS feed aggregator (NetNewsWire Lite). Two items in the feed: weather prediction and current conditions. Exactly what I kept the browser window open full time to get.

Absolutely a reminder to me, and probably anyone in business, that the customer has to come first. The moment we start creating pages that are so heavy in advertising that they become unwieldy for the customer, we effectively put ourselves out of business. It’s not like this site has tremendous overheads - they’re only aggregating and presenting information from the National Weather Service. That the page is taking on advertising that slows my computer is greed, and greed only.

Worse still, the site has no feedback link so I can’t even help them improve by providing feedback. As a serial entrepreneur for more than 30 years, I don’t enjoy negative feedback but I want it and encourage it. I love it when people have positive comments about our products or my presentations. That feeds the ego and helps me know what works. But it’s the negative comment, or the critical opinion, that I can use to improve my presentation and/or product.

And indeed, some of the best improvements to the products have come from critical customers. Thank you. Feedback on presentations helps me improve for future presentations. The subsequent audiences thank you.

In the day of alternate distribution our customers have many ways to get the information we supply like using an RSS feed instead of going to a website, something I’m a huge fan of because of the efficiency. RSS feeds can (and some do) contain advertising and I don’t mind that, because it’s one ad per feed message, generally small and definitely not the processor-hogging flash banners that have become seemingly ubiquitous.

Customers have a choice. If we don’t focus entirely on their need, we’re only in business temporarily. If we’re in post production and don’t focus on the customer’s need for improved communication in the context of their business and message then there are plenty of alternatives. No longer are we the “gatekeepers” to production values because, frankly, anyone can buy or borrow the means of production with quality matching the best broadcasters of just a few years ago. Even HD has no significant barrier to entry.

When was the last time you solicited your customers for how you can improve?

From recent announcements and manoeuvrings, it would seem like there are two content creation industries: the one that sees new forms of distribution as an opportunity to promote and extend brand, and the other that feels every new use, every feature has to be charged for - including, if the MPAA gets its way on Capitol Hill, some that have been free to date.

For the moment I only want to consider what some call “high value” content. Without wishing to denigrate videoblog/RSS subscription content and the important opportunities it opens for non-mainstream content, the industry I’m talking about here is the network/movie company/record company hegemony who make the content that the mainstream enjoy, and pay to enjoy: television, movies and recorded music.

In a week where Apple announced one million sales of videos through the iTunes store in 10 days and NBC said they will be releasing the nightly news free; the MPAA have been working hard in Washington to re-introduce the Broadcast Flag legislation, defeated in May 2005, with super-enhancements. Blu-ray has gained support from more studios because their Digital Rights Management was more draconian than the competing HD DVD camp, and Sony are in trouble for their spyware-based CD DRM. See my recent blog article When a good format “wins” for all the wrong reasons. Another take on the MPAA resurrection of the Broadcast Flag is at the Electronic Freedom Foundation .

Clearly a good part of the mainstream content creation industry considers the only way to protect their content is to lock it up, but even the MPAA has no delusions that they will actually prevent large scale piracy. As quoted in the Cory Doctorow article at Boing Boing above, they believe it will “keep honest users honest” or more accurately, prevent honest users doing what they do now - watch, store, time-shift, space-shift or format shift - without permission and payment in the future. I believe that they are really so caught up in their own world viewpoint that they cannot see how that will drive people to pirated copies that have no restriction. They are surely realistic enough to figure that all DRM will be broken. If you can watch it or hear it piracy can happen.

DRM will only cause dissension and force people toward pirated copies of the content. Actions like Sony’s that open holes for worms and viruses to take over the computer, without warning people that it’s installing such problematic software will likely cause law suits that diminish the reputations of the companies. In short, there’s nothing to be gained by excessive locks and controls on content. It will, if nothing more, drive people further from existing sources, to new and developing alternatives. Every failed mainstream movie, opens an opportunity for an independent. Every locked down TV broadcast opens the way for episodic entertainment delivered direct to customers that can be directly charged with micropayments or supported by advertising.#

Apple have established a beachhead with $1.99 television episodes (similar to the cost-per-episode of the DVD release, although not as high quality*); NBC are using a “top and tail” advertisement to support the free nightly news videos. There are new payment alternatives coming that will, in turn, open new production alternatives. It’s time the MPAA, RIAA and their associates stop treating their customers as criminals, and embrace new technology - use some imagination (OK, that’s a stretch for Hollywood I know, at least based on recent movie releases) and find the opportunity. If they don’t others will, and the losers will be the entrenched industry. Who knows, that could be the best possible outcome.

# Further thoughts on these ideas are in my February post.
* The iPod is capable of higher resolution video so I suspect that the 320×240 size was chosen deliberately to not compete with DVD sales. At that quality it’s better than VHS but less than DVD quality for most content.

And finally, just to demonstrate the utter stupidity of the “DRM crowd” - Sony have not only done themselves huge PR damage with their rootkit virus-like protection that opens the computer to other viruses based on the protection installed by Sony, but it will do nothing to prevent piracy as there are 20 million or so Macs that can rip the files off those CDs without any protection: the rootkit protection only works on PCs!

Despite being defeated thoroughly in May this year, the media oligopoly (aka the RIAA and MPAA) are once again trying to reinstate the Broadcast Flag that will take away existing media usage rights and attempt to control every consumer electronic device to be built in the future. The Broadcast Flag, if ever passed into legislation, would allow media companies to control every piece of consumer electronics. In their world, if we’re video recording in the street and a car drives past playing copyright music, the video camera shuts down. Existing Fair Use rights will go out the window.

But, as the Electronic Freedom Frontier points out the Broadcast Flag was soundly defeated and Congress are reluctant to get involved in meddling between the American consumer and their TV, so the industry has encouraged 20 suicidal Representatives to attempt to slip the revised legislation through the “back door” - on the back of a budget bill.

Here’s what they’re attempting to slip through unnoticed:

The Federal Communications Commission –
(a) has authority to adopt such regulations governing digital audio broadcast transmissions and digital audio receiving devices that are appropriate to control the unauthorized copying and redistribution of digital audio content by or over digital reception devices, related equipment, and digital networks, including regulations governing permissible copying and redistribution of such audio content….

Courtesy of Boing Boing

I don’t know why the entrenched media companies think that attempting to lock down media this way is in their best interests. At best it’s a serious lack of vision or understanding that everything changes and the only way they have a future is to adapt. These are the same industries that fought tooth and nail against “Betamax”. Jack Valenti testified to Congress that:

“…’the growing and dangerous intrusion of this new technology’ threatened his entire industry’s ‘economic vitality and future security.”

And yet now, the VHS and DVD sales, the successor to Betamax, is worth more to the movie industry than theatrical distribution, and has expanded the industry dramatically with direct-to-DVD movies.

Why would anyone think they’re any more right this time? Why would they have any credibility? They don’t. This is a case of dinosaurs attempting to prevent an ice age. Attempts at broadcast flag and other DRM will fail, whether they’re implemented or not. DRM will probably kill Blu-ray and HD DVD before they’re even out the door (another blog article there!).

There’s another good article on the Broadcast Flag in Susan Crawford’s Blog.

Even if your Representative is not one of the 20 suicidal ones, contact them now and tell them why supporting the Broadcast Flag (and all DRM) is a bad idea. It’s already been knocked out once, it shouldn’t come back, and it shouldn’t come back hidden in a budget bill. If this is to come to pass, let’s have it out in the open, debated in public, and a reasonable decision made.

And if the Broadcast Flag is not bad enough

If you really want to get a feel for the nature of the established media people, consider what the United States official delegation to the World Intellectual Property Organization proposed. Reporting on an article in the Financial Times BoingBoing.net summarizes it this way:

James Boyle’s latest Financial Times column covers the Webcasting provisions of the new Broadcast Treaty at the World Intellectual Property Organization. Under these provisions, the mere act of converting A/V content to packets would confer a 50-year monopoly over the underlying work to ISPs. That means that if you release a Creative-Commons-licensed Flash movie that encourages people to share it (say, because you get money every time someone sees the ads in it), the web-hosting companies that offer it to the world can trump your wishes, break your business and sue anyone who shares a copy they get from them. This is a way of taking away creator’s rights and giving them to companies like Microsoft and Yahoo, whose representative at WIPO has aggressively pushed to have this included in the treaty.

Even if we publish under a Creative Commons license, or even just publish our own content through an ISP, the ISP owns copyright in our work for 30 years. Fortunately this didn’t get saluted this time but that’s what’s being pushed. Is this what you want? It’s certainly not what I want. Does it protect the rights of the artist as copyright is intended in the US Constitution? I think a resounding “No way” is the only possible answer. Well, does it serve the public good - the other provision in the Constitution? I sure can’t see how.

Follow up note added October 13: The delegation to the WIPO conference, a.k.a. “the forces of radical protectionism” were seeking a “diplomatic conference” in Q1, 2006, which is the last step before a treaty is ready for signatures. Instead they were denied and the proposal will be dissected in at least two more WIPO meeting before a diplomatic conference gets discussed again, allowing for time to make sure this level of protection for carriers is never enacted. /addition

Make your opinion known to your Congressional Representatives now. Otherwise we’ll end up with these things in law, just like the reviled Digital Millenium Copyright Act. Most probably Unconstitutional, but who’s going to “stand up for pirating” and stand against established legislation?

Soon I’ll write on why Digital Rights Management, as it’s planned for Blu-ray, HD DVD and the “Trusted Computing” initiative will stifle creative endeavors and end up killing promising technologies. And why it’s bad for the MPAA and RIAA, if only they had a little vision.

A disruptive technology is one that most people do not see coming and yet, within a very short period it changes everything. A disruptive technology will become the dominant technology. Rarely are they accurately predicted because predictions are generally extrapolated from the existing understanding. For example, there’s no doubt that the invention of the motor car was a disruptive technology, but Henry Ford is often quoted as saying “If we had asked the public what they wanted, they would have said faster horses.”

It’s almost impossible to predict what will become a disruptive technology (although the likelihood of being wrong isn’t going to stop me) but they are very easily recognized in hindsight. Living in Los Angeles it’s obvious the affect that Mr Ford’s invention has had on this society. Although some would argue that it wasn’t so much the invention of the motor car that made the difference, but the assembly-line technique that made the motor vehicle (relatively) affordable.

In fact I think it’s reasonable to believe that a disruptive technology will have a democratizing component to it, or a lowering (or removal) of price barriers.

Non-linear editing on the computer - Avid’s innovation - was a disruptive technology but initially only within a relatively small community of high end film and episodic television editors. The truly disruptive technology was DV. DV over FireWire starting with Sony’s VX-1000 and Charles McConathy/Promax’s efforts to make it work with the Adobe Premiere of the day, paved the way for what we now call “The DV Revolution”.

Apple were able to capitalize on their serendipitous purchase of Final Cut from Macromedia and drop the work that had been done to make Final Cut work with Targa real-time cards and concentrate on FireWire/DV support. (It was two further releases before we saw the same level of real-time effects support as was present in the Macromedia NAB 98 alpha preview.) I think, at the time, Apple saw Final Cut Pro to be another way of selling new G3’s with built-in FireWire. The grand plan of Pro Apps came about when the initial success of Final Cut Pro showed the potential. But that’s another blog post.

DV/FireWire was good enough at a much lower price, with all the convenience of single-wire connection. We’ve grown from an industry of under 100,000 people worldwide involved in professional production and post-production to one almost certainly over 1 million worldwide.

Disruptive technologies usually involve a confluence of technologies at the right time. Lower cost editing software wouldn’t have been that disruptive without lower cost acquisition to feed to it. Both would have been pointless without sufficient computer power to run the software adequately. Final Cut Pro on an Apple IIe wouldn’t have been that productive!

In a larger sense DV/FireWire was part of a larger disruption affecting the computer industry - the transition from hardware-based to software-based. We are, in fact, already through this transition with digital video, although the success of AJA and Blackmagic Design might suggest otherwise. However, the big difference now is that the software is designed to do its job with hardware as the accessory. Back in the days of Media 100’s success, Media 100 would not run without the hardware installed, in fact without the hardware it was pretty useless as everything went through the card. Then when they rebuilt the application for OS X they developed it as (essentially) software-only. This paved the way to the current HD version (based on a completely different card) and a software-only version.

Ultimately, all tasks will be done in software other than the hardware needed to convert from format to format. In fact much of the role of today’s hardware is that of format interface rather than the basis for the NLE as it was in the day of Media 100, Avid AVBV/Meridien and even Cinéwave. Today’s hardware takes some load off the CPU but as an adjunct to the software, not because the task couldn’t be done without the hardware. This has contributed to the “DV Revolution” by dramatically dropping prices on hardware.

Disruptive technologies are hard to predict because they are disruptive. Any attempt to predict disruptive technologies is almost certainly doomed to failure, but like I said, that’s not going to stop me now!

We are headed for a disruptive change in distribution of media, both audio and video content. I wish I could see clearly how this is going to shake out, so I could invest “wisely” but it’s still too early to predict exactly what will be the outcome 5-7 years down the track. I feel strongly that it will include RSS with enclosures, in some form. It will have aspects of Tivo/DVR/PVR where the content’s delivery and consumption will be asynchronous. Apart from news and weather, is there any need for real-time delivery as long as the content is available when it’s ready to be consumed? Delivery will, for the most part, be via broadband connections using the Internet Protocol.

There is a growing trend to want to merge the “computer” and “the TV”, either by creating media center computers, by adding Internet connected set-top boxes (like cable boxes) or by delivering video content direct to regular computers. Microsoft’s Media Center PCs haven’t exactly set the world on fire outside the college dorm where they fit a real niche; Apple are clearly moving slowly toward some media-centric functions in the iLife suite where it will be interesting to see what’s announced at MacWorld San Francisco in January; and there are developments like Participatory Culture’s DTV and Ant is not TV’s FireANT for delivering channels of content directly to the computer screen. Both DTV and FireANT are based on RSS, with enclosures, for their channels, just like audio podcasting does.

On the hardware box front, companies like Akimbo, Brightcove and DaveTV are putting Internet-connected boxes under the TV, although DaveTV is having a bet both ways with computer software or set-top box.

Whether any of these nascent technologies are “the future of media” as they are touted by their developers, whichever way this shakes out it has important implications for our industry. No-one foresaw that the Master Antenna and Community Antenna systems of the 1950’s would evolve into today’s dominant distribution networks - the cable channels, which have now (collectively) moved ahead of the four major networks in total viewership. The advent of cable distribution opened up hundreds, or thousands of new production opportunities for content creators. This time many people foresee (or hope) that using the Internet for program distribution will take down the last wall separating content creators from their audience.

In the days of four networks, any program idea had better aim to appeal to 20-30% of the available audience - young, middle-aged or old - to have any chance of success. In an age where the “family” sat down to watch TV together (and even ate meals together) that was a reasonable thing to attempt. As society fragmented we discovered that there were viable niches in the expanded cable networks. Programs have been artistically and/or financially successful that would never have been made for network TV because of the (relatively) small audiences or because the content was not acceptable under the regulations governing the networks. The development of niche channels for niche markets parallels the fragmentation of society as a whole into smaller demographic units.

Will we see, or do we need, more channels? Is 500 channels, and nothing on, going to be better when it’s 5,000 channels? Probably, because in among the 5,000 (or 50,000) channels will be content that I care enough about to watch. It won’t be current news, that’s still best done with real-time broadcasting, but for other content, why not have it delivered to my “box” (whatever takes this role) ready to be watched (on whatever device I choose to watch it)? (Some devices will be better suited to certain types of content: a “video iPod” device would be better suited to short video pieces than multi-hour movies, for example.)

If the example of audio podcasting is anything to go by, and with just one year of history to date it’s probably a little hard to be definitive, then yes, subscriber-chosen content delivered “whenever” for consumption on my own schedule is compelling. I’ve replaced the car radio newstalk station with podcasts from my iPod mini. Content I want to listen to, available when I’m ready to listen. Podcasts have replaced my consumption of radio almost completely.

Ultimately it will come down to content. Will the 5,000 or 50,000 channels be filled with something I want to watch? Sure, subscribing to the “Final Cut Pro User Group” channel is probably more appealing than (for me) many of the channels available on my satellite system. Right now, video podcasts tend to be of the “don’t criticize what the dog has to say, marvel that the dog can talk” variety. Like a lot of podcasts. Not every one of the more-than-10,000 podcasts now listed in the iTunes directory is compelling content or competently produced.

But before we can start taking advantage of new distribution channels, for more than niche applications, we need to see some common standards come to the various platforms so that channels will discovered on Akimbo, DaveTV, DTV and on a Media Center PC. About the only part of this prediction I feel relatively sure of, is that it will involve RSS with audio and video enclosures, or a technology derived from RSS, like Atom (although RSS 2 seems to have the edge right now.)

In a best-case scenario, we’ll have many more distribution channels, aggregating niche markets into a big-enough channel for profitable content (particularly with lower cost production tools now in place). Direct producer-customer connection, without the intermediation of network or cable channel aggregators improves profit potential on popular content and possibly moves content into different distribution paths. Worst case scenario is that nothing much changes and Akimbo, DaveTV, Brightcove, Apple or Microsoft’s Media-centric computers go the way of the Apple Lisa - paving the way for the real “next big thing”.

The confusion and furor surrounding Apple CEO Steve Jobs’ announcement at the WordWide Developers Conference that future Mac, after Jun 2006, will use Intel processors inside is totally unfounded. Nothing changes now, very little changes in the next year and longer term the future for the Mac got a little brighter. Although the decision caught me by surprise, as I thought about it, and listened to what was said in the keynote, I could see why it made sense.

If we look short term, the decision makes little sense. Right now a G5 (Power PC, aka PPC) PowerMac has very similar performance to the best workstations on the PC/Intel platform running Windows and the G5 will cost less than a similarly performing PC workstation. At the low end the Mac mini is competitively priced to a cheap Dell or other name brand. (Macs are not price competitive with off-brand PCs, the so called “white box”.) So, why put the developer community, and developers within Apple, through the pain of a processor shift?

For the future (”we have to do it for the children”) and because it’s really not that painful for most developers.

Right now a G5 PowerMac is very performance competitive with the best offerings from Intel. What Apple have been privy to, that rest of us haven’t, is the future of both Intel processors and PPC processors. Based on that future Apple decided they had no choice but to make the change. In the future, the performance-per-watt of power of a PPC chip will be “15 units of processing” according to Mr Jobs. The same watt of energy would give 70 units of performance on an Intel processor. Without knowing exactly how those figures were derived, and what it means for real-world processing power it seems like a significant difference. It was enough to push Apple to make the change.

Not that there’s anything wrong with the PPC architecture: IBM continue to develop and use it at the high end and PPC chips (triple core “G5″ chips) will power the Microsoft XBox360. The sales of chips to Microsoft will well and truly outweigh the loss of business from Apple. It is, however, a crazy world: next year will see a Microsoft product powered by PPC and Macintoshes powered by Intel!

Steve Jobs demonstrated how easy it will be for developers to port applications to OS X Intel. In fact, he confirmed long-term rumors that Apple have kept OS X running on Intel processors with every development on OS X - Mr Jobs demonstrated and ran his keynote from an Intel Macintosh. For most applications a simple recompile in the Xcode developer environment will suffice - a matter of a few hours work at most. Moreover, even if the developer does not recompile, Apple have a compatibility layer, called Rosetta, that will run pure PPC code on an Intel Mac. Both platforms are to be supported “well into the future”.

During the keynote Mathematica was demonstrated (huge application, 12 lines of code from 20 million needed changing, 2 hours work) as were office applications. Commitments to port Adobe’s creative suite and Microsoft’s Mac Business Unit software were presented. Apple have been working on Intel-compatible versions of all their internal applications according to Mr Jobs. [Added] Luxology’s president has since noted that their 3D modelling tool modo took just 20 minutes to port, because it was already Xcode-based, and built on modern Mach-0 code.

Remember, these applications are for an Intel-powered OS X Macintosh. No applications are being developed for Windows. In fact, after the keynote Senior Vice President Phil Schiller addressed the issue of Windows. Although it would be theoretically possible to run Windows on an Intel Macintosh it will not be possible to run OS X on anything but Apple Macintosh.

Apple’s Professional Video and Audio applications might not be as trivial to port although most of the modern suite should have no problem. LiveType, Soundtrack Pro, DVD Studio Pro and Motion are all new applications built in the Cocoa development environment and will port easily. Final Cut Pro may be less trivial to port. It has a heritage as a Carbon application, although the code has been tweaked for OS X over recent releases. More than most applications, Final Cut Pro relies on the Altivec vector processing of the PPC chip for its performance. But even there, the improvement in processor speeds on the Intel line at the time Intel Macs will be released are likely to be able to compensate for the loss of vector processing. At worst there will be a short-term dip in performance. However with Intel Macintoshes rolling out from June 2006 it’s likely we’ll see an optimized version of Final Cut Pro ready by the time it’s needed.

[Added] Another consideration is the move to using the GPU over the CPU. While the move to Intel chips makes no specific change to that migration - Graphics card drivers for OS X still need to be written for the workstation-class cards - Final Cut Pro could migrate to OS X technologies like Core Video to compensate for the lack of Altivec optimizations for certain functions, like compositing. Perhaps then, finally we could have real-time composite modes!

Will the announcement kill Apple’s hardware sales in the next year? Some certainly think so but consider this: if you need the fastest Macintosh you can get, buy now. There will always be a faster computer out in a year whatever you buy now. If your business does not need the fastest Mac now (and many don’t) then do what you’d always do: wait until it makes sense. The G5 you buy now will still be viable way longer than its speed will be useful in a professional post-production environment. It’s likely there will be speed-bumps in the current G5 line over the next year, as IBM gets better performance out of its chips. We are waiting for a new generation of chips from Intel before there would be any speed improvement. If Apple magically converted their current G5 line to the best chips Intel has to offer now, there would be little speed improvement: this change is for the future, not the present.

So, I don’t think it will affect hardware sales significantly. As a laptop user I’m not likely to upgrade to a new G4 laptop, but then there will be little speed boosts available there in the next year anyway. But as a laptop user, I’m keen to get a faster PowerBook and using an Intel chip will make that possible.

Although I have to say I initially discounted the reports late last week because, based on current chip developments, there seemed little advantage in a difficult architecture change. With the full picture revealed in the Keynote as to the long term advantages and the minimal discomfort for developers, it seems like a reasonable move that will change very little except give us faster macs in the future.

How could we have any problem with that?

[Added] Good FAQ from Giles Turnbull at O’Reilly’s Developer Weblog