Democracy in Media

Why TiVo is Irrelevant

First of all, I love TiVo. I still use TiVo a lot (although not nearly as much as MCE, simply because I’m at my computer all of the time), and I think that people suffering through the Moto Comcast PVR adventure are tragic figures. I bet big on TiVo for two years and invested myself on that platform to the point of pain. But TiVo is a wonderful device that took so long to gain traction that the market window is going to close before it ever really opened. TiVo will simply never be able to reach scale.

BTW, I’m not gleeful about this. I don’t like to see such a brilliant idea, executed relatively well, fail in the marketplace. As an entrepreneur it reminds me how easy it is to lose in a great segment with great technology and great marketing. This is not fun to think about.

What TiVo lacks right now is a way to grow the number of people (by an order of magnitude or greater) that access video through their interface. They can only monetize through advertising if they control the environment that the video is played within. An order of magnitude would still only net them 15-20 million users (DirecTV boxes aren’t really controlled by TiVo and don’t really count). This would only be the size of YouTube. But TiVo is never going to get there in a way that is relevant. They have been rapidly outflanked by the likes of Apple and Slingbox which will soon be replaced by a plethora of ‘soft’ open applications that run on browser-enabled devices.

To be a bit more detailed, the video access device of the future is one that connects to any screen (or is embedded in the device with the screen), has high speed Internet access and can render a powerful web browser (Flash9+ support). This can be done pretty inexpensively, and will likely wind up built into most modern TV sets and cell phones (or iPhones). These things are not going to come with TV-tuners installed, not at the glacial rate things like CableCard developed and the political wranglings of a few MSOs. I have argued the broadcast is not going to die anytime soon, and that is still the case, but the pace at which it is getting outflanked by IP delivery is astonishing. I mean, look at the CBS syndication strategy to see how quickly this is all happening.

I think the number of devices that ship with my described features above is about to explode. A sandbox in which developers can play has not served TiVo well. Adobe has created a platform separate and apart from the hardware that can do some pretty amazing things. The hardware to replace the TiVo ‘box’ will soon be bundled with tens of millions of devices each of which also carries the ability to display applications written in Flash. 

TiVo is, to quote someone I heard at a Red Herring conference back in the halcyon days of USPower, ‘putting lipstick on the corpse.’ Regardless of what Mark Cuban says, even ‘live’ broadcasts will be delivered over the Web. It’s true that bandwidth is still relatively limited and expensive and that TelCos don’t like P2P networks, but it will eventually happen. The only thing that we are arguing is time frame. And at the pace things are moving right now, that time frame is not long. And if you plot TiVos growth trajectory (even with the Moto roll out imminent), they are going to be reaching scale right around the time the mass market is shifting to Web delivery. And in web delivered content, TiVo is a laggard and has not clear differentiator over any other service.

Babbling a bit, but the point is, TiVo will look more like the 8-track tape than the cassette tape; replaced by something better before the market really produced a positive return on investment. I’ll continue to use TiVo for years, but I will be a member of a rapidly diminishing percentage of the global internet population. Sad, but true.

The Widget as Application

We’ve been working hard to get the latest version of CozmoTV out and as always, we’ve begun to focus on what’s next. As you have seen, we’ve made a pretty fundamental decision about widgets and the role they will play in the future of CozmoTV. In short, we are looking at widgets as our primary delivery platform.

I think that widgets represent a pretty profound change in how people will use the web. I think it represents the visual manifestation of the semantic web that Berners-Lee has been talking about for some time now.  The web is becoming a platform in which different applications and content coexist across multiple sites. I think it is the first glimpse of what the web looks like post webpage. Facebook’s recent API release and the richness of the applications already appearing are a further clue.

In my mind, widgets are simply a distributed application, as simple or as complex as you want to make it. Rather than look at the web as a collection of pages, widgets start to help us see the web as a collection of applications. They are built on standards that easy integration with other applications (RSS being the most obvious example). But they are not intended to be a destination, but rather the encapsulation of functionality and content, or maybe just one or the other. CozmoTV looks at the widget as the destination in and of itself. No need to ever go back to cozmo.tv, just do everything relevant right from the widget.

I think this is a basic evolution in how the web works and how people interact with the web. Increasingly as people look to syndicate content and functionality out across the all of these sites, they are beginning to shape the semantic web. Syndication requires standards, especially in the integration of function. This is going to be good for people like Pageflakes and Netvibes and Facebook, who are all looking to shape what those underlying standards look like.  Rather than build your own social network and chat and everything else, piggyback on the site in which you are embedded to supply context and community...

Anyway, I believe that widgets represent a fundamental shift in how the web is going to function over the next decade. We’re in the very early stages, but over the next 18 months to impact is going to start becoming much more obvious, especially as standards beyond RSS begin to take shape. It’s really exciting.

Narcissism and Fame Are a Little Too Easy

I read an article in the Wall Street Journal about the way in which kids and bloggers are increasingly documenting their entire lives online. The premise is that narcissism was on the rise amongst kids and the lines between public and private lives are evaporating. People are not just documenting and sharing their digital life, they are documenting everything from childbirth to closet cleanings to family funerals.

I’ve been making the point for a while that the reason why people post entries on blogs, create MySpace pages, and generally share personal information with the world online had very little to do with money and mostly to do with a desire for fame. This was the reason why I felt that Revver’s business has suffered while YouTube’s has exploded. My thoughts have evolved a little recently.

I was at a Stanford conference on Wednesday in which Jay Adelson from Digg was on a panel and he said something that made me think a little deeper about my fame belief. I’m paraphrasing, but basically what he said was that the act of conveying information to others is in itself a very pleasant experience for most people. Just the simple act of telling someone else what I know actually feels good. Sharing gives you a buzz, especially when that sharing is acknowledged directly.

This got me to thinking that fame is a little bit of a simplification of this. It plays into the WSJ idea that this is about narcissism. But narcissism is all about excessive self-infatuation and vanity. But I’m not so sure that’s a fair characterization anymore. Many do these things for fame and self-aggrandizement, but I think the reason for most share their lives is that the simple act of sharing information for most humans is a very pleasant activity. 

I think this is an evolutional trait of human beings. We are genetically programmed to enjoy the process of passing along experience and information to others. The web has just enabled this to become a much larger part of many people’s lives. It’s magnified the pleasure of sharing because you can share with so many people at the same time. It’s more subtle and less sinister than fame, but actually more powerful.

It gives me great hope for the future of our emerging civilization.

A Thirst for Authenticity

It’s amazing how many people seem to look at all this user generated video stuff and scoff that it doesn’t live up to the standards set by Hollywood; that it will never be of the quality of ‘American Idol’ or some such.

We have grown up in a culture of perfection. Our cereal box is adorned with a perfect bowl of oats and raisins (part of a balanced breakfast or whatever), our swimsuit models are 110 pounds with D cups, our L’Oreal makeup is applied to skin that clearly doesn’t need the L’Oreal to begin with. Everything has been completely totally artificially false for so long, that there is an entire generation (or two) that finds anything less than perfection somehow unnerving.

All this new stuff is messy, unpredictable and generally boring as hell, but it’s real. I can look at a movie like ‘Crank’ and actually be entertained. But it’s weird, ‘Crank’ is so over the top, so unbelievable and manufactured that I feel entertained only because it is so over the top. I’m an unreality drug addict. We’ve seen so many over the top action films that we literally have to pump ourselves full of adrenaline to feel a pulse.

But at the end of the day, when I watch YouTube it is somehow more enthralling because it is (typically) real.  Thomas Hawk was recapping some predictions, one of which was the importance of authenticity in UGC in the coming year. I’ll go further to say that in UGC, authenticity is everything.

There is some disconnect when I watch an actor breaking the heart of a supporting actress. However good the actor is, I must overcome the boundary of fiction. Somewhere deep in my cortex I know that this is bullshit.  It takes effort of imagination to immerse yourself in unreality. Suspending imagination to immerse yourself in real and uncensored moments is an entirely different and refreshing experience. It’s not glamorous, but it actually happened and that makes all the difference in the world.

Why Peers Are So Valuable

I’ve read quite a few of Mark Cuban’s posts over the past year. There is a lot I agree with and some I disagree with. But I think Mark is actually a very smart guy. One of his rants a while back was about how the Internet is a terrible delivery mechanism for video simulcasts (essentially, broadcasting linear video over the Web to a large audience). This is right on the money and the reason why video is going to drive peer adoption which is in turn going to drive some of the next great business models of the Internet.

When I look at the Web right now, it’s at an awkward stage of adolescence. We started out with a Web that we very centralized. You had portals and there were some big media companies that were expanding into this new distribution channel. But essentially the Web was just a new version of cable TV. It was ugly and slow and largely one-way in its delivery of content.

What is happening now is that the web has done some serious growing up. Things are becoming much easier for people to understand (much of the whole Web2.0 movement is simply about making Web services easier to use through great interface design.) But most importantly, the social aspects of Web services are exploding. Users are contributing in growing numbers and rich communication between like individuals is accelerating. In many ways, the Web is finally beginning to step into the role of new communications medium rather than a new broadcast replacement.

But the transition hasn’t completed, most content is still stored and distributed from a central located in the cloud. In fact, central storage is actually accelerating. This is because this solution is simply easier for small files and simple communication that requires authentication and other services that are (currently) centralized. And centralized storage is actually great for lots of things like remote back-up, but it’s terrible for things like distributing very large files to lots of people very quickly.

The sheer bandwidth requirements of high quality (or high-def video) put a strain on this type of delivery system that cannot be overcome by simply adding another pipe to the ISP. It simply costs too much (a lesson that YouTube was experiencing before the Google acquisition). The only efficient delivery mechanism for such bandwidth intensive applications as HD video is through peers on a network.

Once everyone gets used to the idea that they can get any video on demand in low-quality streamed through YouTube, they’re going to start saying “Why can’t I watch this is high-def?” And when people start asking that question, any last hope that the studio system had of maintaining centralized control over their assets is going to evaporate (iTV or no). This process will only accelerate as the next-gen broadband networks roll out over the next 24 months and we start routinely seeing multi Mb upload bandwidth.

This is essentially what Sony bought with Grouper. It wasn’t traffic, it was half a million installed peers. That’s a powerful delivery network that someone at Sony seems to understand the strategic significance of (but one that Sony will almost certainly screw up for a bunch of other reasons.) But once these peers gets rolled out, there is a lot of very powerful things you can do with them, and I’m not just talking about redistributing contentJ

Of Shooting Stars and Serialized Snowballs

I’ve seen a number of articles about Revver recently. I was a bit hard on Revver a while back and I haven’t completely changed my mind about their model, but I do respect what they are trying to do as far as compensating content creators. The problem, as I have said before, is that low-quality streamed content is about syndication and not direct monetization. The low-quality stream is the advertisement. And the reason why you don’t see Revver videos all over the place is that those same videos are already available on sites like YouTube. The creator might republish through Revver, but syndicators (MySpacers, bloggers, etc.) are going to YouTube to find and embed the clip. This is a big problem for Revver.

Anyway, the point is that it is in broad syndication across thousands of sites that streamed videos might really generate some views, but it is in sustained syndication that real revenue might start to flow. There are plenty of individuals out there creating shooting stars, videos that explode in popularity and then fade with the creator never having really identified how to reproduce the hit. But by the time these content creators realize they have a hit, it’s all over. People have already watched it as a YouTube embed and moved on to the next thing. This is currently the dominant model for most Web video phenoms; they are one-hit wonders.

The money made through services like Revver will be made on what I would call serialized snowballs (Umair being the source of the snowball part.) These are video assets that are serialized in some way such that the creator or the aggregator can consistently reproduce an audience. (Revver’s example of the Coke/Mentos guys being a classic example.) But in the very near future, anyone that has valuable serialized content is going to look at better ways to monetize that traffic than static post-roll advertising in a low-quality streamed video asset. The problem is that there are better ways to earn really high CPMs and still generate significant syndication. (We think the opportunities lie in the role of the aggregator, but that’s for a separate post.)

Sorry, Revver. I really dig the idea of helping content creators get paid for their work and I think you guys are really bright. Creator compensation is something that is going to become increasingly important and you guys have clearly put the idea on the front burner. My fear is that Revver never quite fully satisfies either audience. It is not that great for the shooting star because the star was launched by YouTube. It’s also not that great for the serialized snowball because the snowball is getting monetized through a dedicated channel or aggregator. I think Revver sits somewhere in between and I’m not sure how big that market is (if it even exists.)

Portable Culture and DRMs Dying Days

I was reading the Reuters article the other day about the issues with DRM and how Apple has used DRM to solidify their position in the music business. This got me thinking about DRM and the reasons why it might fail to survive the next decade.

The arguments against DRM are well understood. Basically, DRM does nothing to prevent piracy, enables multiple standards to emerge that limit content portability, and generally pisses off consumers. (The conflicting standards problem has even been echoed recently by the MPAA’s Brad Hunt, who also managed to acknowledge the pissing off consumers bit.) But in thinking about DRM’s longer-term impact, I’ve come to the conclusion that the underlying reason for its impending failure is more fundamental than some irritated consumers.  This is because DRM is about much more than intellectual property rights, or artist compensation, or studio investments. DRM is about the cultural relevance of media assets and how that cultural relevance is attained. This is about who gets to create memes and determine our culture.

From Wikipedia:

“The term "meme," coined in 1976 by Richard Dawkins, refers to a unit of cultural information transferrable from one mind to another. Dawkins said, Examples of memes are tunes, catch-phrases, clothes fashions, ways of making pots or of building arches. A meme propagates itself as a unit of cultural evolution analogous in many ways to the gene (the unit of genetic information). Often memes propagate as more-or-less integrated cooperative sets or groups, referred to as memeplexes or meme-complexes.”

Over the past thousand years or so we have seen a pretty rapid increase in the rate at which cultural information travels from one place to another. Modern tools of broadcast media, the printing press, followed by the telegraph, telephone, broadcast radio, TV, the Internet… have each resulted in the improved efficiency of the transport and consumption of cultural information. In recent years broadcast media has become increasingly efficient at displacing localized meme evolution to standardize culture across myriad demographic communities. Print, radio and television have become beacons of mass culture, around whose towers everyone huddles into grand tribes of bland consistency to the great benefit of a few content owners and advertisers. They create culture to suit their commercial needs.

But these tribes are now splintering as IP distribution opens up a world of choice that is again facilitated by community. New smaller towers are emerging and causing previously monolithic groups to fracture and begin disassembling into smaller and tighter tribes of like-minded individuals. This process is leading to a cultural renaissance in which thousands of new memes are blooming daily. And these are not manufactured memes, crafted by advertisers or studios and forced down the mouths of consumers who have been forced to pick the least common denominator of cultural affiliation. These are memes born at the hands of other individuals or small groups and grown to success through the merits of their concept. These are our memes created for our benefit.

Anyway, so what does this have to do with DRM?

DRM, at its very core, is about controlling the dissemination of information. In doing so, DRM directly impedes upon the portability of content. And content, whether it is text, audio, or video, is cultural information. It is the signal used to carry the message from one person to another. DRM lies in direct contradiction to person-to-person syndication, which is perfectly fine and dandy when syndication only occurs over a highly-controlled broadcast network. But this is death to a cultural asset that travels the edge of the network.

The problem is that culture in the age of the Internet is no longer being broadcast (well, not for much longer anyway), culture is being passed around from one group to the next, one individual to another. This attribute is fundamental to the way in which memes evolve and propagate in this environment. And while this type of edge distribution of memes has always occurred to some extent, the introduction of the Internet has allowed it to compete against broadcast, and win.

Essential to the ability of cultural information to dominate in an edge distribution model is its portability. In essence, these units of cultural information succeed only because they are viral. They are viral not just because they are compelling; they are viral because they move around with ease. They can travel from San Antonio to Beijing and root in both locations in a matter of hours. Media that is wrapped in DRM or a price tag is not viral and is too easily drowned out by other memes who have no such handicaps (no matter how much marketing money is thrown at it.) Culture wants to be portable and fungible. DRM stands in direct opposition to this, and in doing so destines the protected asset to wallow in cultural obscurity. This is the reason why NBC and ABC and all these other guys keep their videos up on YouTube. Cuban’s right, it is clear infringement. But they don’t take it down, because they have to be part of the conversation. They must stay culturally relevant or they are really in deep shit.

DRM is fundamentally about protecting short-term cash flow at the expense of cultural relevance. This is a trade-off that most in the media business instinctively understand, but don’t quite know how to address. But what should be clear is that without cultural significance your audience will quickly evaporate and your revenues along with it. It may not happen today, but within the next decade the attachment of DRM policies to digital media will all but guarantee that your media assets wind up in a cultural backwater (as in, no audience.) This seems an awful price to pay for a technology that has to date proven totally ineffectual at doing anything to defeat piracy. It won’t be long before this price becomes apparent and DRM dies a quiet death. I don’t think anyone will even attend the funeral.

How Apple Recreates Broadcast Scarcity with the iTunes Pricing Model

In the interest of maintaining simplicity for users (and tight control over the labels and studios), Jobs mandates certain prices for content. In doing so and not allowing prices to adjust for demand, Jobs essentially recreates distribution scarcity online. For example, if I’m looking to gain distribution for a new show, I might price it inexpensively or (gasp) free to attract growth. As that video or series becomes more popular I can charge more for it. By eliminating this price graduation in iTunes, Jobs commoditizes all content and assigns equal value to it. It has the same effect as limiting shelf space, even though no shelves actually exist.

This is another reason why Apple’s strategy is going to follow AOLs growth trajectory. Simplicity wins at first, but as your customer base becomes more sophisticated, choice becomes more important that simplicity.

The New TV Affiliate

I read a WSJ article a couple of weeks ago that spoke of the problems that local TV affiliates are facing. I also just noticed a recent announcement about Fox redeploying local TV affiliate sites under a blanket brand of MyFox. All of these efforts are in response to local affiliates watching their revenues and margins begin to plateau (and in some cases decline.) These businesses have traditionally been cash cows, reliably turning out substantial earnings for their stakeholders with little variance (except for 4-8% growth) year over year. But all of a sudden this nice protected enclave is being disrupted. It started with newspapers and radio before hitting television, but it is happening at an escalating rate and the local affiliates don’t really know what to do about it. (WOOD-TV, the affiliate in the WSJ article, even spoke about taking classified money away from the local newspaper, like that’s a strategy for growth…)

My original thought late last year was that these businesses were doomed to obsolescence. Back in the days when a tower was needed to broadcast signal to all those rabbit ears, the local affiliate served a valuable role. But the rabbit ears are gone (or at least in the process of disappearing) and the broadcast tower is disappearing along with them (unless Wi-Max brings them back). But my general feeling was that they were a middleman in a world that is getting rid of unnecessary middlemen (or at least automating the function of the middleman upstream or downstream in the supply chain.) “Local affiliates are doomed!” I used to say. “iTunes, Google and Yahoo are going to crush them,” or some such derivative would follow.

Well, I’ve changed my mind. The role of a television affiliate is not just that of physical broadcaster, the role of the affiliate is also that of an aggregator. Local affiliates essentially take nationally syndicated content from their affiliate (say ABC) and combine it with locally syndicated content that they have produced (largely local news, sports and advertising.) They then “broadcast” this content over the air and, due to carrier regulation, over cable and satellite. But they serve a very specific constituency, the local market. And regardless of how the Internet works to drive efficiency in this model, relationships with constituencies that are organized around physical location are still very valuable. These are all things that the big 5 portals don’t do very well right now.

The problem that the affiliate has is that they are limiting their aggregator role to broadcast content (or largely anyway.) You’ve seen some local affiliates begin to explore the (re-)release of assets via streamed video within their websites, but these have been experiments with repurposed broadcast content. These efforts still position the affiliate as content producer, not content aggregator. This is a dated strategy, doomed to marginalization in the world of edge production and distribution.

Aggregators must stop looking at user-generated content as a threat and start looking at it as an opportunity. (Hey, cheap free content guys, just waiting for a channel/brand to call home!) The affiliate’s role as aggregator in the broadcast world was relatively easy. Pick which stories to cover that are important to your local constituent and do not piss off any advertisers. Plug in the national stuff and you’re done. The filtering process was straight forward. But the role of the video aggregator is expanding and becoming more complex as the quantity of content explodes. They don’t just have to select which stories to cover and send out the crew; they now have to begin filtering thousands of outside video sources for those stories that will most appeal to their local constituency. They have to begin allowing their constituency to select the stories and contribute to the dialogue (shocking, right?) This is a difficult job, especially for those that have grow up hogging the microphone, but the role of filter is where the value is now accruing in a big way.

The new TV affiliate must now carry Desperate Housewives, the Giants game, and the YouTube video of a random guy interviewing a city councilman about proposed zoning changes to a street in the Mission. It is no longer good enough to draw arbitrary boundaries around what video is deemed acceptable or unacceptable for broadcast. The boundaries must now be drawn around what is relevant and irrelevant to some portion of your constituency (even the small ones who may draw them for you). This is a much more difficult proposition, but this is precisely why those that do it well will be enormously valuable to their local constituency. Do this well and watch your brand and customer base grow.

If they can overcome the cultural issues, the advantage of the affiliate is substantial. Most importantly, they already have a very big megaphone. I can’t tell you how many times a potential investor has asked me how CozmoTV is going to get our audience. The older guys ask about marketing dollars and the younger guys ask about viral strategies, but they all ask. The problem with all Web 2.0 businesses is that they are not working with large marketing budgets, they must build killer product and wait for the buzz to build through word-of-mouth. But even with the best product this can take time, and time is a scarce commodity today. But TV affiliates already have the audience. It may be getting older, but it’s huge. All they need to do is release good new product and extend their brand in directions that feed viral growth and you’ve got a monster success. Viral growth strategies work that much better and faster when you start with a large base.

The bottom line is that TV affiliates must start aggregating content beyond broadcast, beyond what the nationals are syndicating, beyond the same tired newscasts. They can do it through new relationships (CozmoTV?:), or they can do it on their own, but they must figure out a way to do it fast. The choice is new growth or a slow death while some hedge fund holds your hand on the left while they dig the pit with their right. Many of these guys will choose death, but I think a lot have aspirations for new growth. But they better get their asses in gear or someone else is going to start doing it first and in 12 months those millions of captive customers won’t look so impressive anymore (they also won't be so captive.)

UPDATE:  Terry has a great essay out about the idea that TV affiliates have to sell against themselves in order to make this transition.  It's similar to the push back I heard from CBS about polluting their brand (which I'll talk about in a post in the next day or so.)  I think these guys need to set up separate Web properties where they can experiment with the brand without necessarily altering their existing Web properties.  As Terry says, they sometimes need to create children that are willing to kill the parent.  Brutal but sage advice.

Get Ready for 100 Megapixel Movies

I saw a post about Cinevision and their 5000 x 2000 pixel depth screen (16 megapixles is in development). Their focus is obviously on the theater market to begin with, but it would appear that their efforts are part of an inexorable march towards ever higher resolutions in capture and display technologies. For decades the shift from one level of video quality to another has been agonizingly slow. But the shift to an all-digital video supply chain is going to unleash forces that will drive video display resolutions to dizzying heights very quickly. Four major limitations have kept this growth in check, but each is about to fall away in a very short period of time.

The first limitation has been the difficulty in upgrading production equipment. Cameras and video editing equipment could only handle certain resolutions and upgrading this equipment has been enormously costly. But as storage prices and digital camera prices drop precipitously, these economic factors are becoming far more manageable, even for the amateur. Just look at digital camera megapixel counts; they continue their steep climb long after most assumed that optimal resolutions had been reached.

The second limitation has been in the horsepower of the editing and production equipment. But again, storage and processing power is dropping rapidly enough that within a few years, a very high-end video editing suite will cost under $1,000. Additionally, multi-core processors that can devote significant resources to multimedia rendering will drive massive improvements in computational efficiency. 

The third limitation has been the inability to move these large files around. Limitations on storage capacity within portable media formats have set natural boundaries on the resolution of video. DVD and now HD-DVD/Blu-Ray have been logical steps forward, but it will be IP and portable HDD delivery technologies that finally begin to eliminate these boundaries entirely. 

The last limitation has been displays. Existing LCD and Plasma technology provides pretty strict limits of overall resolution with current manufacturing techniques. But as OLED and other more exotic display technologies emerge, screen resolutions will explode as prices plummet. Given the state of these technologies it would appear that within a decade, purchasing multi-meter sheets of ultra-high resolution displays will begin to become affordable reality.

I have this argument with Jason all the time. He believes that resolution is nearing a point of being ‘good enough.’ He actually didn’t see why HD would be that big a deal given the relatively small improvement over existing SD screens until he began regularly watching shows in HD. But HD is still heavily limited by legacy production, distribution, and display technology. As each of these limitations falls, expect resolutions to grow rapidly. It might take 10-15 years, but 100 megapixel movies are coming and they will provide a viewing experience that will rival reality.