Put a Roku in your Cable Set-Top Box

For years, I've doubted the ability of third-party set-top boxes from companies like Apple and Roku to make much market impact. Consumers generally detest adding more boxes and more wiring to their televisions. That's why home theater-in-a-box systems have been so successful, and a big reason why TiVo, which still has the best PVR, has struggled to build a viable business selling hardware. Consumers know that they have to have a set-top box from the cable or satellite company, and they accept two other boxes: DVD players (slowly morphing into Blu-Ray players), and game consoles.

In turn, both Blu-Ray players and game consoles are morphing into Internet digital video players. Netflix's streaming movie service is integrated into many Blu-Ray players, and with Microsoft's XBOX360. Earlier this week, Netflix made official support for Sony's Playstation 3, and support for Nintendo's Wii is right around the corner. However, none of these devices have anywhere near the household penetration of the ubiquitous cable or satellite set-top box.

Cable and satellite set-top boxes have always been closed, monolithic devices--they act as the gateway to the service provider's content, and nothing gets on them or through them without the service provider getting a cut of the action. Even with initiatives like Tru2Way, there's been little progress on opening up service provider STBs. Perhaps now is the time for them to do so.

Network-enabled Blu-Ray Players and game consoles represent the first viable competitors to the service providers' programming hegemony in the living room. The cable and satellite operators can rail against the competition, try to keep their content suppliers from working with them, and try to limit the value of competitor's services with artificial release windows for movies, none of which are likely to work in the long run. Or, they could add network-enabled features to their own set-top boxes and make the competition irrelevant.

Consider a cable or satellite set-top box that allows subscribers to access the same content as Roku. That means Netflix, Amazon, Major League Baseball, and in the near future, YouTube, Hulu, Revision3, Mediafly and a host of other services. You may be thinking, "Netflix? Amazon? Are you out of your mind? Don't the cable and satellite operators have their own Video-on-Demand services that they've spent millions of dollars to build?" Yes they do. But, those VOD systems have limited capacity and are extremely expensive to expand.

According to Comcast, in the first quarter of 2009, over half of its new VOD movies were available the same day as the DVDs. To limit the impact of $1-a-night services like Redbox, the movie studios are pushing to require Netflix and the kiosk operators to get their titles a month or so after the DVDs are shipped to retailers. The way things are going, if you want to see the movie as soon as it's out on DVD, you can buy the DVD or Blu-Ray, or watch it on cable or satellite VOD and pay a premium. If you're willing to wait a month, you can watch it on Netflix.

But, under the model I'm proposing, even if it's from Netflix, you'll still watch it on your cable or satellite set-top box. The service provider will charge Netflix a small fee for access to your set-top box--perhaps pennies per title viewed or a dollar a month. The service provider will get to brand and sell advertising on the interactive program guide and menus that subscribers access in order to find titles. A similar approach would work for other content providers: The cable or satellite operator gets the right to surround the content with advertising, and possibly to even insert advertising directly into the content.

Is the service provider cannibalizing itself? Yes, but it's capturing a chunk of the revenue that it's now losing, and will lose in even greater amounts in the future, from over-the-top (OTT) services that completely bypass the cable or satellite operator's set-top box.

The OTT services also offer leverage that the cable and satellite operators can apply to providers of conventional cable networks. For example, many service providers have long wanted to move ESPN to a premium sports tier, but ESPN demands a fee for every subscriber, even if they have no interest in sports and never watch any ESPN channels. OTT services like Major League Baseball can be integrated into the service providers' offerings to make a premium sports tier more popular and provide negotiating leverage to move ESPN's services into the same tier.

It's time for the service providers to stop trying to prevent the growth of over-the-top services like Netflix, and to start working with them.

Can TV News Do Without Anchors?

Variety reports that local television stations across the U.S. are laying off high-paid anchors, cutting newsroom staffs, consolidating news operations from previously competing stations, replacing salaried reporters with stringers, and even making anchors operate their own teleprompters. Lost in all this is a way to potentially retain qualified reporters and editors while cutting costs--getting rid of anchors altogether.

The role of the news anchor is an anachronism that dates back to the earliest days of television, when live feeds from reporters in the field were impossible and most news stories were either read from wire service copy or films that the anchor narrated. Over time, anchors became the "brands" of local stations and television networks alike. The most popular anchors turned in the best ratings, and at the national level, a change in the anchor chair (Dan Rather replacing Walter Cronkite, Brian Williams replacing Tom Brokaw) was the subject of endless analysis.

Today, however, the news anchor is truly an anachronism that stations should consider doing away with. Stories can easily be introduced and narrated by the reporters themselves, whether in the newsroom or in the field. Wire service stories and stories without video can be reported from a desk in the newsroom. More and more stations bring reporters onto the news set to introduce their own stories and answer questions posed by the anchor, so why not "hand the ball" to the reporters and let them do the whole job? Couldn't they ask each other questions?

In my opinion, anchors are becoming less and less important for drawing an audience as the anchor position itself increasingly becomes a revolving door. As the Variety story points out, the show that precedes the late local news (the "lead-in") is perhaps the single most important determinant as to which news program a viewer will watch. NBC's local stations have lost a scary percentage of their late news audiences due to the weakness of The Jay Leno Show and NBC's overall prime time schedule--for example, KNBC, the Los Angeles NBC station, has lost 25% of its late night news audience.

If stations are replacing high-paid anchors with younger, less-experienced substitutes in order to save money, why not experiment with getting rid of anchors altogether? Use the savings to retain more of the experienced beat reporters and editors who really form the backbone of a successful news organization.

The Atomization of Media

Over the last fifteen years, I've worked on Internet software, streaming media, home video, telecommunications, and most recently, eBooks. Through that experience, it's become clear that the very nature of what constitutes media is changing. Singles have replaced albums as the primary way for people to purchase music. The six-minute short video, whether on YouTube or Hulu, is increasingly replacing the 30- or 60-minute television show (and those shows are increasingly looking like a collection of short videos). Newspapers are being replaced by their web equivalents, and by news aggregators like Google and Yahoo, enabling readers to go right to the topics and stories that they're interested in. 1Cast, a video aggregator that just launched, is doing exactly the same thing for television news.

I call this division of what used to be monolithic media "packages" into smaller, individually-searchable and selectable chunks, atomization. All media are subject to atomization in one form or another. eBooks, my current area of focus, are especially vulnerable...but I think that it's a good thing. The truth is that there are a lot of different book industries, segmented by categories, subjects and target age groups. Reference books and textbooks are particularly ripe for atomization, as are computer and business books, and other types of instructional works. These books are rarely read front-to-back; readers "dive in" at different points to get specific pieces of information. Users of these types of books rely on their indices and tables of contents in order to find what they're looking for. These readers would love to have a robust search engine on top of a collection of books, in order to find the information they need quickly. Some services are providing just such a search engine; after all, that's the idea behind Google Books.

Publishers, on the other hand, sell books, not topics or paragraphs. They're resistant to the idea of atomization--after all, how do you price a topic? Their contracts with writers and third-party content suppliers (image libraries, illustrators, etc.) are written on the basis of revenues from book sales, not sales of chunks of books. Nevertheless, this is the direction that publishing is going in. Books will be "exploded" into bits and pieces, aggregated with other titles, augmented with videos, audio and animation, stored in databases and indexed by search engines. The concept of individual books may eventually go away, to be replaced with databases from publishers focused on a single subject area or category, or from aggregators that combine books from multiple publishers into a single database.

There are, of course, some categories that probably won't be atomized in this way. Fiction and narrative non-fiction are intended to be read front to back, beginning to end. Some publishers and distributors are experimenting with selling these titles on a serialized, per-chapter basis, much like the novel serializations in newspapers of the 1800s, but that's probably as far as atomization can go with these kinds of works.

The point is that we need to stop looking at media forms as monolithic and start asking two questions:  "How can we break this into small, usable chunks?" and "How can we best monetize those chunks?".

Sidekick data lost, Danger may be dead

According to this report from CNet, T-Mobile Sidekick users have been unable to access their data, such as calendars, address books, etc. starting more than a week ago. The Sidekick stores most of its users' personal data on servers, rather than on the device itself. Danger, the company that created the Sidekick and operated the servers, was purchased by Microsoft for $500 million last year. Now, according to multiple sources, T-Mobile and Microsoft have notified Sidekick users that the data have most likely been permanently lost; there is a slim but highly unlikely chance that they can be recovered.

T-Mobile has apparently suspended online (and, one presumes, in-store) sales of Sidekicks, and it's hard to believe that they would put them back on sale, or convince customers that the Sidekicks will be any more reliable in the future than they are now. To the contrary, T-Mobile and Microsoft are probably facing a massive recall and expense as customers turn in their Sidekicks for other phones.

This could turn into an unexpected windfall for Google and the Android platform if customers decide to replace their Sidekicks with Android-compatible phones. (In an ironic twist, Andy Rubin, the father of Android, was one of Danger's founders.) Microsoft might try to steer Sidekick customers to Windows Mobile phones, but since Microsoft was responsible for the failure, it's unlikely that they're going to be able to force anyone to go with a Windows phone.

The handwriting has been on the wall for the Sidekick for some time; it's a dead platform. Key members of the Danger team have left Microsoft, and most of the others are now working on the ever-increasingly less secret "Pink" project. However, the platform still had an active base of users and supporters, at least until today.

If T-Mobile and Microsoft don't announce a replacement program soon, expect to see class action lawsuits filed across the country. (Even with a recall, the lawsuits may get filed anyway due to the loss of personal data.) In any event, the Sidekick platform is dead, and the future reliability of any Microsoft-run cloud-based service is in question.

UPDATE 15 October 2009: According to TechCrunch, it now appears that Microsoft has been able to recover most of the lost Sidekick user data, and will begin restoring the information "soon" (the next status update is scheduled for Saturday, so it may be several days or more before users get their data back.)

Related articles by Zemanta

• T-Mobile: All Your Sidekick Data Has Been Lost Forever (mashable.com)
• T-Mobile: we probably lost all your Sidekick data (engadget.com)

It's Not the Tools, It's the Talent

If you're at all interested in video production, one of the most exciting developments in years has been the introduction of digital SLRs (DSLRs) with first-rate video capabilities, especially the Canon 5D MkII and 7D, and the Panasonic Lumix GH1 (which technically isn't an SLR, but fits into the category in every other way.) For the cost of a mid-range professional camcorder from a few years ago, you can buy any of these cameras, a nice support rig from Redrock Micro or Zacuto, and a case full of Zeiss Prime lenses. The 5D MkII and 7D were used to shoot the new opening title sequence for Saturday Night Live, so keeping the cameras' limitations in mind (primarily their rolling shutter/"Jello" image problems with motion), they're "ready for prime time."

The tools cost less than they ever have, and provide superb image quality, so it therefore means that more people than ever can produce professional videos and motion pictures. Perhaps, but you can't buy talent at B&H. It takes more than a nice camera and great lenses to shoot compelling video. You have to know how to frame a shot, how to light, and how to pull focus. You have to know how to break down a scene into a sequence of shots, and how to get those shots under changing conditions. You have to know how to work with talent and how to communicate what you're looking for.

The point is that the ever-decreasing cost of tools is democratizing video production, just like the Internet is democratizing video distribution and promotion, but it takes talent (and training) to know how to use the tools to their best advantage. Talent can't be bought and isn't getting any easier to acquire. So, as excited as I am about these new tools, I'm also afraid that we're going to get even more schlocky videos, albeit with really great bokeh.

Building a National Local News Service on the Cheap

Clay Shirky gave a talk at the Shorenstein Center at Harvard last week, where he performed a physical "biopsy" on a copy of his hometown newspaper, the Columbia (MO) Daily Tribune. Let's get out of the way the fact that this is one newspaper and an unscientific study, but the analysis that he did was very illuminating. He found out the following facts for the issue that he dissected:

• Less than a third of the paper was locally-created content; the majority came from the Associated Press and other syndicated sources.
• Less than half of the locally-created content (not including sports) was written by the paper's hard news reporters; the rest came from columnists, covering topics such as cooking, travel, etc.
• The paper has only six hard news reporters, out of a staff of 59. Every reporter filed at least one story that day; three of the six filed two stories.
• The paper also has 11 sports reporters, including one dedicated only to high school sports.

Shirky points out that there are also a variety of editors, but hardly enough to fill out the remaining 42 positions (and you don't need 42 editors for 17 reporters.) So, you've got six hard news reporters and 11 sports reporters, handily covering the events of a city of 100,000 people.

The core function of the newspaper for its readers is fulfilled by the 17 reporters and the editors assigned to them. If you want to provide a local, web-based news service, you'll need those 17 reporters and their editors. If you've got several of these local services, you can have a centralized team that adds content from syndicated services, lays out and populates the websites, and manages the IT infrastructure.

If you're someone like Comcast that already has a national local advertising sales team (Spotlight), you can handle local and national advertising sales for the news service through the salesforce you already have. Thus, you can build a local news service on the cheap using experienced, professional journalists, and with national reach.

Are TV Stations Worth More Dead Than Alive?

Tom Wheeler of Core Capital Partners has written an interesting article on how the U.S. broadband bandwidth crunch could be solved. He points out that at current market prices, Sinclair Broadcasting's 30 television stations are worth less than $100 million, or $3.3 million per station, and there are 100 bankrupt stations that, by definition, have no market value.Why not take some of those stations' bandwidth and apply it to either Hulu-like offerings or common carrier-style data services?

The idea is seriously worth considering, especially when mated to the "white space" data service proposals made by Microsoft, Google, HP, Philips and others. Microsoft in particular has had significant technical success experimenting with two-way WiFi-like data services and devices that can work within the "white spaces" between television channels, without interfering with the adjacent channels. However, there's a lot more bandwidth available within a channel than between channels. If a television channel is converted to a data service, the "white spaces" will do what they're supposed to do, which is protect other channels from interference.

The FCC is going to have a lot to say about this, of course. It issues (essentially free) licenses to broadcasters for television, not data. It won't allow the only television station serving a community to become a data service. The U.S. Congress could also get involved, because if free television bandwidth is repurposed into a paid data service, the Government could resell tha licenses and make money from them.

However, converting some television stations to data services would be very appealing. Broadcasters in markets with converted stations would see competition for advertising sales go down and revenues go up. Existing "white space" users such as public safety and wireless microphones wouldn't have as much competition for their frequencies and would have far fewer problems with interference. Even cable and IPTV operators, who would naturally oppose the entry of new competitors, would benefit, because their "must carry" obligations for the stations converted to data usage would end. They could then use those channels to add more cable networks, add more bandwidth to their own data services, or both.

A company like Microsoft or Google could pick up Sinclair for pocket change. They would then have the ability to offer high-speed wireless data services in 30 cities, if the FCC approves. This could turn virtually worthless television stations into very valuable properties indeed.