Category Archives: Distribution

Digital Distribution issues

Nearly a Year without Television

Well, last February when we moved from the West San Fernando Valley to Burbank, for a variety of reasons we decided to not get a cable or satellite TV service. Since we got cable for Internet there was no over-the-air antenna connected to our apartment either. (The cable is swapped from the Master Antenna for the complex to Charter to provide Internet.) I originally blogged about the experience shortly after we started. The announced release of Appletv is a reason to revisit the experiment to date.

Content has been coming from a variety of sources. Some, certainly, is purchased from Apple’s iTunes Store, but most is coming via a legally gray source: bittorrent, justified in my mind by the experimental nature of what I was trying to do. On the plus side, the quality is great and most shows I’ve wanted has been available. Most of the content is encoded with the DivX combination: MPEG-4 Advanced Simple Profile with MP3 audio in an AVI wrapper. This will not play on an iPod nor on an Appletv (to the best of my reading of the specs). To date Apple have only supported MPEG-4 Part 2 Simple Profile natively and officially that’s what’s supported on iPods and Appletv.

Another “plus” (for us, not the industry) is that we watch less TV. There’s no incentive to “just turn it on and kick back” because it’s a blank screen unless we’ve prepared content to watch. Missing from the bittorrent sites are any contemporary Food Network shows (Good Eats and Emeril were watched sporadically). Full seasons are available but mostly not until they’re published on DVD.

Overall, this isn’t something I’d recommend as a solution for anyone really. It’s not television, because television is easy and this is not easy. I have to find the torrent file, made somewhat easier by the availability of RSS feeds to monitor most of the shows we watch, download the torrent file and then wait for it to download. Shows like Comedy Central’s Daily Show and Colbert Report are usually available within 4 hours of air time on the East Coast (faster than they get to the iTunes Store btw) and are fairly quick to download (occasionally faster than real time, but usually an hour or two).

The shows have to be burnt to disc and played from a DivX/MPEG-4/DVD Player at the TV. All in all, quite clumsy. For the RSS fed stuff I could probably use the Democracy Player which combines RSS with bittorrent but I’d still have to burn to disc.

So nearly 11 months into the experiment, what I really want to do is pay for the content! Seriously, if the pricing was fair (more below) I’d much rather have the convenience of regular release and commercial download, not bittorrent. The trouble is, no-one currently offers what I want and that was the reason for going TV-service-less in the first place!

The sticking points are the lack of content availability (250 shows is narrow head, not even middle tail, let alone Long Tail) and pricing. Putting aside the first for the moment, as there’s nothing we can do about stubborn studios, pricing is a major sticking point.

Prior to the move, we spent $55 a month on a 100 channel Dish Network service, which includes 160 hours a week of Comedy Central, for which Comedy Central got about 60c per subscriber (as near as I can discover – correct me in the comments) but definitely less than $1 a subscriber.

And yet, using Apple’s Season Pass, just two shows – Daily Show and Colbert Report – will cost me $19.95 a month for (no offense) disposable television. We’re currently watching about 40 hours (TV hours) a month of programming. If all were purchased through the iTunes store it would be $59.75. Not much more than the Dish Network purchase, right?

Wrong. For Dish’s $55 a month I get access to (in theory) 640 TV hours a month, not 40. If we watched the average amount of 4.5 hours a day (130 hrs a month) that’s about $180 a month at the iTunes store for what we paid $55 to Dish. Something does not add up.

FWIW, I’d be happy to pay somewhere between 10c and 30c a show for the Daily Show and similar “disposable” (doesn’t bear a second watching) television and 50-75c for content that I’d watch more than once – produced drama and comedy.

The producers are cutting demand by pricing too high to be practical. Get the pricing in line, so my a la carte spend matches (or slightly exceeds, for convenience) my previous bill and I’d much rather pay money for a better service.

The one other place we’re getting content is from podcasts. VH1’s “Best Week Ever” is consistently, easily (and freely) delivered, as is Good Night Burbank, The Show with Ze Frank and some other favorites. But these “true” ISO MPEG-4 files are not supported on the DVD Player (just DivX’s proprietary format incorrectly labeled as MPEG-4) so we have to run cables when we want to watch these. For that alone I’d like the Appletv.

Second thoughts on YouTube

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!

Who’ll buy YouTube?

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.

What’s left for the Labels and Studios, Networks or Channels?

It seems that somewhere along the line we adopted a national culture that embraces the idea of “eliminating the middle man” as a societally desirable goal. Sound fair, unless you’re the middle man. In technical jargon this is called Disintermediation, although that sounds far more cruel than simply being eliminated!

The intermediary almost always starts with a useful and well defined role. Once upon a time, access to the airline and hotel booking system was complex, requiring a lot of training. Who needs to go through all that just to book one vacation a year (in a good year)? So we had an intermediary – the travel agent. A skilled professional who’s primary role was to interpret the Byzantine workings of Sabre for mere mortals booking travel! Technology moves forward and a good portion of the travel market is now booked directly by the customer, through those same back-end systems, but with sufficiently customer-friendly interfaces that it’s worth the effort to master it.

I’m not sure if travel agents have completely gone by the wayside – in fact we’re far from that – yet. But it’s inevitable that a travel agent will become a luxury for those who don’t have time to get online. Right now I book 100% of my travel online, but my mother still values the skill of the agent to find a good deal for her. That’s probably a generational thing, so if the trend toward self-booked travel will continue as each successive set of nephews or nieces will trend even further toward self-booking. Simultaneously the reluctance of the mature end of the age spectrum will slowly drop as sites and systems become more and more user-friendly. They’re already heading there.

So, an industry displaced by new technology has to reinvent itself or face extinction. The important thing is that, for many, many years the travel agent provided a valuable service, for which they were deservedly compensated. But when a channel, a middle man or intermediary, faces new technology that disrupts and inevitably destroys their business the choice is to adapt and find a niche to survive in, or die. Such is the nature of life on earth.

Heading the way of the dinosaur are our content aggregators and distribution channels: the Record Labels, the Motion Picture Studios, the TV Networks or even the cable channels.

If the assumption is that every channel or service is in place because it serves a function (or once served a function) that was considered valuable then Record Studios, Motion Picture Studios, Television Networks and Cable Channels (thank you Ted Turner) all all in place because of a valuable service, or services, that they provided. Unfortunately for them, the technology is rapidly making the service much less valuable, if it has any remaining value.

Let’s consider Record Labels as a clear paradigm to follow, mostly because music is much further through this cycle than is filmmaking (including production of entertainment to fill 500 channels with nothing on).

The Record Label performed several valuable services for the artist:

1) The cost of recording was high, so they pre-paid it, on the gamble that it would pay off, and all charged back to the artist’s future earnings, but we won’t go into the politics of it all, right now.
2) The cost of producing a record, physically, was relatively high, because of the up-front costs of producing the first disk, beyond recording the album.
3) Distribution was expensive, paying all the wholesalers and providing for margin at retail, plus those trucks and trains full of vinyl disks.
4) Promotion was expensive, simply getting the word out was expensive, particularly when there were only mass-market channels.

But technology has taken the value out of each of these in turn. First, the cost of recording dropped to the point that every star-struck teen and their friends can produce professional quality audio (even better if they know how to apply knowledge to the accessible toys of production). A purpose-built studio is always going to be better, but even there the cost, at least in this part of Los Angeles, of a recording studio has dropped to be very affordable. But even if the final sound is not at recording-studio-silence-and-perfection, the difference is small. Remember Pareto’s Principle also known as The 80-20 Rule? Even the worst bedroom with a bit of modern recording gear gets a kid 80% of the way to the sound. Like DV, the quality is “good enough” to be accepted in the professional sphere. Strike 1.

So, not long after the cost of recording dropped from the hundreds of thousands of dollars, to thousands of dollars, the cost of producing a CD dropped dramatically – burn individual units with Stomper-labels lovingly applied, or do a run of 1000 for less than $1 each, printed, with bar code and ready for retail. Strike 2.

Strike 3 was the Internet, and digital distribution. The Labels could live with Strikes 1 and 2 because it left them as the gatekeepers to the distribution and promotional channels. Even if you record and press yourself, you would still need the Label for distribution and promotion. But with the Internet with its file sharing and its bittorrents, the Labels really started to get worried. A band could, if anyone had heard of them, distribute their material free, or even sell it direct.

Phew, fortunately, if you never hear about the band or artist, free and direct distribution isn’t going help! The Labels might be down 3 for 3 but they still had a chance of keeping control of promotion.

Promotion. Once you’ve got the cash to spend on a marketing blitz, you can pretty much get your return on the artist back, even if success is moderate. There’ll still be a value-ad for the Labels. There’s nothing to replace that, surely.

Logged on to MySpace anytime? If not, go do it now.

I’m sure it’s not the only site like it. Social Networking online – the hot new growth area of the Internet – is the biggest word-of-mouth market, with viral capability, ever invented. And there’s no publicity like word-of-mouth publicity. It’s going to be a lot more credible because it’s from one of your Friendsters. You get a couple of million MySpaceCadets telling each other how great those free tracks were, and the profit from the next tour and sales of your CD at the venues are likely to be better than they were going to be before! Concerts have been the long term profit center for the artist.

In fact, in this deal, the artist is going to end up with a much bigger cut of the dollar take. Even if they don’t make a cent off the music they give away, artists signed to Labels don’t often see a lot back for their CD sales after the Label charges them, against any advance or royalty, for all that Production, Pressing and Promotion – every dollar of it.

Now the music industry is way further down this path than any other sector, but all parts of their story are in place. It is inevitable that there is no future role for Record Labels as they have been known. (I hear they’re thinking of retraining as travel advisors to the super-rich.)

This isn’t going to play out to the end game in 2006, but the trend is well underway and the conclusion is inevitable.

The movie industry is heading down the same sequence. The cost of producing a “film” (be it on chemical film or digitally ) has also dropped. The cost of producing entertainment Television to an acceptable quality standard is now entirely based on the cost of the content. Rocketboom demonstrates that it’s possible aggregate an audience without spending traditional amounts of money on production. And have you seen their ad rates? $40,000 for 8 ads tacked on the end of an episode thanks to an eBay auction. Starving artists live another year. Even more relevant – this is “consumer generated media” right outside established genres.

Given the relative ease of aggregating a mass (enough) market at relatively low cost, what role is left? The word-of-mouth through the social networking sites will be what’s important. I’m taking a poll on which studio or label will be caught red-faced manipulating or attempting to manipulate a social network. (I’m also expecting that someone will comment and demonstrate where that’s already happened.)

In the television realm, do people want to watch channels or do they want to watch programs? I would contend that the value of TV Networks, and subsequently the explosion of channels is that viewers got choice of programs. With the exception of, maybe, the Shopping Channel and Soap Channel, few people sit and watch “a channel’ all the time. They jump from channel to channel to choose the programs they want to watch. People want to watch programs, not channels and both advertisers and program producers will be better off without the intermediation (middle man) of the channel or network, just like musicians will be better off without the Record Labels.

Let’s consider a case study. The Daily Show with Jon Stewart has, according to wikipedia one million viewers a night, although other sources have it as high as 1.3 million. Let’s stick with the one million mark for the moment, it makes the numbers easy. Unfortunately I couldn’t find anything definitive on either the cost-per-episode nor ad rates for the Daily Show but let’s run some numbers.

If the show sold for 10c per episode and kept the same audience (What, this entertainment isn’t worth a dime?) then each episode brings in $100,000. Cost to the viewer per month (assuming all new episodes), something like $2. And we know that’s more than Comedy Central are getting as a basic cable channel, per subscriber to a cable or satellite system. For “disposable television” – view it once but it has little or no repeat value – like The Daily Show or Daily News – about 10c a program is what I’d like to pay, and 25c is the maximum I’d pay for that type of programming. Prime Time type programming would likely lever 50c out of my pocket per episode, and maybe for Monk I’d go to $1 an episode. Applying that directly to the production company… In this case we have 5.4 million viewers, most of whom would go to 50c an episode, the producer would get $2.6 million an episode. I think those numbers stack up.

The other model is to consider it from an advertisers point of view. Who is it worth being the exclusive sponsor of The Daily Show, or Las Vegas? It’s probably a more cost-effective buy for a car company to directly finance the production and be the only advertiser in the show, probably with a little product placement action going on. In parallel with the low-cost-to-buy-but-no-ads version at 50c (say). This concept is carried forward in an article by Mark Pesce called Piracy is Good? How Battlestar Galactica Killed Broadcast Television

Whichever way you cut it, the middle men – the channel aggregators – look like being disintermediated progressively in the coming years. And there’s not much they can do about it. There are better, new models, like Mark Pesce’s. There are new micropayments systems coming that will charge through an RSS feed, only for what’s downloaded – pay for what’s interesting – in parallel with advertising supported content. Everything old is new again: back to the days when “Soap Operas” were indeed sponsored by a soap company.

Do I really need a TV service?

A recent move across the Valley (San Fernando) to Burbank left us with a dilemma – having closed our Dish Satellite account (don’t ask, lousy customer service) we discover that DirectTV won’t work off our balcony, the only location the community will allow. Charter cable would be available, but for some odd reason they don’t offer a DVR in our area (even though they offer digital cable – go figure, it’s just a box requiring nothing on the service side.) So, since they won’t “sell” me what I want to buy, I don’t want to buy. (The fact they promise to respond to email queries within 24 hours and I’m waiting three days later is another negative.)

So, no supplier wants to sell me what I want to buy and I was under the very mistaken belief that the US was the “country of service”. Apparently only where a tip is involved. So, what’s the alternative? Don’t buy. But there are some programs I want to watch and my partner is addicted to “Project Runway” so absolutely no TV isn’t a desirable option either. Mmm.

Jump ahead a week and we’re cheerfully watching most of our regular shows and many of them look much better than they used to off the Dish Network receiver. We have our a la carte television – the brave new world.

Big downside is that I have to run cables from my laptop to the TV – VLC player puts the playback on my extended desktop on the extended desktop. VLC player plays a wider variety of file types and has no borders on three sides during playback so it gets lost into the overscan. (Tip, set the extended TV desktop to 800×600 so the pixels of the header on the player are relatively smaller.)

So how does the experiment go? It takes a few minutes a day to set up downloads of the shows I want to watch. But they’re mostly easy to find and quick to download. But so far I’m not missing “regular TV”. I can easily see how the whole oligopoly of networks and cable could fall apart with a little disintermediation. They are the reason I tried this experiment and it could really be a precursor to their demise. Networks and Cable systems/channels don’t add value any more. Once they did but now the technology is there to do without them. And, as much as the gatekeepers will fight it, when the technology is there for choice, choice will happen around the gatekeepers: they’re gatekeepers of a gate in a fence with holes in it.

One correspondent thought that I might miss the “serendipity” of finding new material, but because my viewing pattern was almost exclusively off the PVR in the Dish receiver, they tended to be only shows I knew anyway. New shows generally got picked up because someone I knew recommended them. In fact, while I write the blog I’m watching a documentary I found while searching for something else – the very definition of Serendipity.

If either DirectTV or Charter will offer me what I want to buy, I’ll buy it. If the cost of a disposable TV show, like, for example The Daily Show were under 50c I’d be happy to use the convenience of the ITMS to buy, but that sort of TV does not justify $1.99 an episode ($40 a month for the one show is not realistic or competitive). For shows that bear multiple viewings or are exclusive in some way, the $1.99 is not unreasonable.

All I really want now is a device like the Airport Express that lets me stream my video from this laptop across to a box near the TV to get rid of these unsightly cables!

Bottom line, the theory of disintermediation is not so much theory any more. Some of what I wrote about back in March last year is closer than even I thought. Not for my mom yet, but for some.

A podcast is not the same media form as a video podcast a.k.a. vlog

I’m totally on board with audio podcasts. They have effectively replaced the car radio for all but the shortest drives. Perhaps that’s because I prefer "talk radio" in the car and the podcasts I subscribe to are most akin to talk radio and on business related subjects.

I’ll put up with inconsistent quality in an audio podcast – after all, it’s only taking up part of my attention. That is the crucial point with audio. We can listen to podcasts and drive the car, or go to the Fitness Center or Gym (and I should listen to more podcasts there) or do housework. The audio is only taking up part of my attention span.

But add video to it and you’re now demanding 100% of my attention while the video is playing. I can’t drive and watch a video; I can’t watch it while moving around the fitness center because the screen needs always to be in front of me; I can’t watch it while I go for a walk or do housework. Video assumes I’m going to give it, if not 100% of my attention, my primary attention.

If it’s not necessary to watch the video portion to get the value from a program, then dump the video and just go with audio.

I don’t normally subscribe to the highly regarded and very popular This Week in Tech a.k.a. TWiT, but a friend recommended a specific episode and suggested I get the video version. That one hour program has sat on my hard drive for six weeks waiting for me to have time to watch it. In that time I’ve listened to more than 15-20 hours of very similar programming. I’m still wondering why my friend had me get the video version: it’s just four guys sitting around a table in an infinite black set recorded by three cameras.

The video adds nothing. Apart from a short glimpse at an iPod Nano (is it really that old?) there were no props; no visual aids; no graphics; nothing that justified all my attention. Put the four faces in the artwork for the feed and I’d have had the same benefit.

Just because we can deliver video as enclosures in an RSS file, doesn’t mean we should. Bad video is easy. Good video is hard, and consistent regular production is very hard to do. I was talking with Scott Sheppard of Inside Mac Radio and Inside Mac TV about the difference in what he’ll have to carry to a trade show to get interviews for his iPod video show, compared with his weekly and daily audio shows. For audio: Marantz solid state recorder, microphone. For video: video camera, tripod, a basic lighting kit, microphone, radio mics, receivers… Instead of fitting in a shoulder bag or backpack with his laptop he’s now wondering whether he’ll need a custom cart to lug around – or an intern. This is, of course, because he’s trying to make the show up to something that uses the video well. You can find more ranting on this subject in an earlier post of mine: What makes good visuals

There are some programs, like Tiki Bar TV – always high in the new subscribers ranking in iTunes – that really try. While it may not be scripted in detail, it has good production values and I think I see some Apple LiveType and Motion effects in there – appropriately edited in the Final Cut Studio.

Bad video is easy. Good video requires considerably more equipment, effort, talent, skill and, most importantly, the need for video. Because if we don’t, we’re going to bore the market to sleep before they adopt any form of non-mainstream content as being valuable.

So, even though audio and video podcasts are superficially similar by their use of RSS and enclosed media files, they are not the same medium. Video requires a much higher commitment from the viewer than audio does from the listener.

Here’s a question for all the budding video podcasters out there: Is your content so valuable, compelling and well produced that I’d be happy to pay $100 an hour to watch it? If you wouldn’t, consider that is exactly what you’re asking me to do. OK, I don’t pay that to watch a "Hollywood" movie (but then again, I rarely watch them) but my time has a value and you’re asking me to give up that value to watch your program. With audio, it adds value to my time – redeeming time that would otherwise be wasted.

One media adds value to my time; the other robs me of it. That’s why they’re not the same.

Yahoo and TiVo hook up, world shakes a little

Although it doesn’t seem like a big announcement, Yahoo users who own a TiVo can now program their TiVo from the Yahoo TV guide. No big thing because TiVo owners have been able to do that for years, so it’s only a minor additional convenience until we read some of the fine print and plans for the near future.

And in the coming months, possibly before the end of the year, Yahoo’s traffic and weather content, as well as its users’ photos will be viewable on televisions via TiVo’s broadband service and easy-to-use screen menu.

So now Yahoo content (pictures, traffic and weather for now) is available on the television with television/PVR/DVR ease of use. Remember TiVo already have many components of the digital home experience with TiVo to go to take digital material from the TiVo drive to PCs, DVD-R and portable media players.

Where it gets interesting is to project forward. Yahoo consider themselves a media company evidenced by the formation of the Yahoo Media Group back in January 2005 and an orgy of hiring media executives for the division since then. The purpose of the Yahoo Media Group is to “significantly strengthening our content pillar”. In April they hired Shawn Hardin, who, according to ZDnet, “Hardin has previously worked in television and the Internet, holding executive positions at NBC and Snap.com.”

Although Yahoo has been vague about its plans for the Media Group, it’s built a team with a strong balance of “Hollywood” and “Web” backgrounds and it’s perfectly reasonable to expect that it has some big plans…

Oh, let’s not forget Yahoo Video Search. In competition with Google video Yahoo are building connections to a library of independent content. I’m sure the Yahoo Media Group are building a library of mainstream content: Santa Monica is not that far from Hollywood!

Now to my conjecture. TiVo has about 3 million subscribers. TiVo is linking with Yahoo to display Yahoo content via the TiVo device, direct to the living room. Aren’t there many people planning/desiring to bring Internet-delivered “TV” into the living room, right where the TiVo box is already sitting? Akimbo, DaveTV, Brightcove all seem to be going down that path with a dedicated box and service. Apple with its FrontRow and Microsoft with its Media Center PC are approaching it from the other direction.

But none have the penetration in the living room that TiVo does right now.

If the relationship with Yahoo goes just a little further then what’s to stop Yahoo delivering video content direct to the TiVo under some form of pay-for-view or subscription model? It seems self-evident to me that this is really about a much bigger play for the living room and part-and-parcel of the Yahoo Media Group’s efforts. Yahoo could launch with 3 million subscriber boxes already in place. A number that would bring much cheer to Akimbo, DaveTV or Brightcove’s investors if they ever achieve anything close to that. Apple and Microsoft (and its partners) have to get the computer moved into the living room, although don’t be surprised to find Apple taking a page from TiVo’s book and integrating a tuner, program guide and simplified iTunes into a future “Mac mini” with video output to sit under the TV. When they’re ready, of course.

Given that TiVo are somewhat struggling right now, it’s not far fetched to consider Yahoo buying TiVo? With a market capitalization of around $300 million TiVo wouldn’t be hard for Yahoo to swallow, or even Apple (as rumored earlier in 2005). Only time will tell, but when Yahoo buys TiVo, remember, you heard it here first!

An industry divided

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!

Broadcast Flag (again) and WIPO

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.

The power of disruptive technologies

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”.