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

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