Change is hard...take advantage

I was at my local bookstore this afternoon, looking at business books on how to get organizations to change. Change is hard. A lot of people sacrifice their jobs, and even their careers, in order to get their organizations to change. However, tens or hundreds of times more people are perfectly willing to go along with the status quo and let those who pursue change get their heads cut off.

Large companies have tremendous resources--big advertising budgets, R&D teams and salesforces--but they often have difficulty getting out of their own way. Many companies suffer from "not invented here" syndrome, where no matter how good an idea is, they won't implement it unless they either thought of it first or a competitor has already proven that it works. Others never seem to have enough information to make a decision. Still others need endless meetings in order to get consensus on a decision and then execute. All these approaches increase organizational inertia--a company in motion tends to stay in motion unless acted upon by a (major) outside force.

These problems become opportunities for smaller, more entrepreneurial companies. Startups (one would hope) don't have the same problems with decision-making and execution as big companies. There are usually far fewer people involved in both making and executing decisions at startups. If they need to change direction, they don't have an internal bureaucracy to dislodge. Startups can move faster and be more responsive to both customer needs and technological changes.

On the other hand, startups should never underestimate the power of established competitors. Netscape moved prematurely to position web browsers as application delivery platforms (and thus replacements for Windows,) and brought the full wrath of Microsoft down on itself. Microsoft eventually paid the price in court, but not before Netscape was eliminated as a competitive threat and forced to sell out to AOL.

Startups have to perform a delicate balancing in order to appear harmless to their entrenched competitors until they have the strength to attack those competitors' markets directly. Google pulled it off by building its search engine and search advertising businesses into entrenched market leaders before Microsoft recognized the threat that the company posed to its operating system and applications businesses. Microsoft's subsequent retaliatory efforts have had little effect on Google.

The key, then, is to take advantage of large companies' inherent inertia while keeping a low profile so as not to be perceived as an existential threat.

Startups: Tentpoles and pollination

One of the most effective mechanisms for creating startups is a successful startup that turns into a big business. eBay is an excellent example of s startup that became successful and made a lot of people rich. Those people turned around and invested their money in their own startups and those of other entrepreneurs, which created a new generation of startups. I call these big, successful startups "tentpoles", the same term used in the movie business for a motion picture that's expected to be wildly successful and to spin off a series of sequels. In Silicon Valley, Hewlett-Packard and Fairchild Semiconductor were two of the earliest tentpoles; Apple and Intel sprung from them, and the current generation of tentpoles includes Google and eBay.

Tentpoles go through their own lifecycles, however. Early in their lives, they tend to attract engineers who are likely to go off and do their own startups. As they get bigger and more bureaucratic, however, they attract employees. Employees don't want to be entrepreneurs. They want a steady paycheck and good benefits with no risk. Employees crush the startup spirit of the tentpole with bureaucracy and hierarchy. Potential entrepreneurs who do join tentpoles by the time they reach this stage either leave quickly or get trampled down in the organization. As the Japanese say, "The nail that sticks up gets hammered down."

There's another model for startup creation, and perhaps its best exponent is Jason Fried, the co-founder of 37signals, the Chicago-based company that offers Basecamp, Backpack, Campfire, Highrise and other web applications, and that developed Ruby on Rails. Fried and Ruby on Rails developer David Heinemeier Hansson recently wrote Rework, a book about creating and growing small, sustainable businesses. Rework has gotten a lot of attention, and Fried often speaks about his concepts to groups of business founders and potential founders.

Companies that apply the concepts in Rework are unlikely to ever become tentpoles, and that's just fine with Fried. He believes that companies should grow organically from their own cash flow, and shouldn't depend on venture capital. Companies following the Rework model are likely to look a lot like 37signals itself--small (almost always under 100 employees), virtually organized (utilizing team members wherever they're located), very efficient, extremely flexible and a little bit opportunistic.

I call this model "pollination", where a set of concepts, or even a single idea or meme, can pollinate startups around the world. It doesn't depend on a tentpole, local universities or an active venture capital community; all it needs are motivated people who want to start their own businesses. The companies that develop out of this pollination are unlikely to ever get big enough to go public and score huge paydays for pre-IPO founders and employees, so they're probably not going to spin off lots of startups themselves. But, if they're successful, they encourage others to follow in their footsteps.

The tentpole model is the way the startup environment has grown for the past 50 years, but when it costs less to start a new technology business today than ever before, and when more resources are available in more places around the world than ever before, pollination makes more sense. It doesn't depend on the existence of a local tentpole to spin off more startups, and it doesn't rely on a local concentration of resources. People have been trying to build Silicon Valleys in their regions for decades, largely without success. Perhaps the Internet and its related technologies have made it unnecessary to replicate Silicon Valley, but it also means that there's not likely to be another concentration of tentpoles in one area like Silicon Valley in the future.

Google TV: Right hand, meet left hand

When Google announced Google TV at last week's I/O Conference, one of the jaw-dropping omissions was that there was no mention whatsoever of support for WebM or the VP8 codec, which Google had announced with a great deal of industry support the day before. YouTube, the world's largest online video site, owned by Google, announced that it would make all its videos available in WebM going forward. At the Google TV announcement, however, YouTube's participation was limited to a strange "we pick the content for you" service that seemed to have no connection to Google TV whatsoever. Yesterday, an Intel executive said that the company might support WebM in the future, "if VP8 establishes itself in the Smart TV space," whatever that means. And, as if that isn't enough, Google TV will be based on Android 2.1, even though the company launched Android 2.2 to great fanfare minutes before the Google TV announcement.

When companies get big, groups stop talking to each other and bureaucracy takes hold. It's clear that the WebM and Google TV teams didn't talk to each other, or if they did, there was no adult supervision applied to insure that they worked together. It also looks like the Google TV and Android teams didn't talk very much, either. If WebM is such an important initiative, why isn't it in Google TV? From Intel's perspective, it may never be in Google TV. Why on Earth is Google planning to release Google TV with an old version of Android? Why did YouTube look like a "bit player" in the Google TV announcement?

Looking from the outside, this suggests that there are some serious management problems at Google. The WebM product group and YouTube are working closely together, but Google TV is completely out of sync with both WebM and Android, and Google TV is barely talking to YouTube. They're all in the web video business, but they're working at cross purposes. Intel won't adopt WebM unless "VP8 establishes itself in the Smart TV space"? "Smart TV" is what the whole Google TV initiative is about. How can VP8 establish itself if it's not included?

New Apple TV in the works, based on iPhone OS and priced at $99?

Engadget reported today that Apple is working on a next-generation Apple TV that will be based on iPhone OS, will be built for streaming (either from the cloud or an in-home Time Capsule), and will support 1080P HD output. But, the biggest news (if it's true) is that Apple plans to sell its next-generation device for $99. That's virtually an impulse buy, and they're likely to fly out of Apple's stores.

There's no word on whether this device will be compatible with off-the-shelf iPhone apps, and it's very unlikely that it will be announced at the Worldwide Developers Conference on June 7th, but my guess is that (again, if any of this is true) Apple plans to have this out in time for the 2010 Christmas Season, thus thorougly bolloxing up the launch of Google TV. Why? Given the fact that Google TV is based on Intel's Atom architecture, it's very unlikely that Logitech's standalone set-top box is going to come to market for less than $200, and it'll probably be closer to $300.

The big issue for Apple TV is whether Apple will allow access to any web video service, as Google is striving to do, or whether it will be locked down to the iTunes Store, as the current iteration of Apple TV is. If the new Apple TV is still locked down, Google TV will provide a competitive alternative, although not an attractive alternative given its (probable) price.

Will the 2010/11 television season be "do or die" for NBC?

The overnight rating numbers for last night are out, and unsurprisingly, Fox won the night by a huge margin due to the "American Idol" finale. However, I'd like to focus more on the other end of the scale. NBC ended the night in fifth place. "How can they finish in fifth place, when there's only four major TV networks in the US?", you ask. NBC actually finished behind Univision, the Spanish-language network, and that's not been an uncommon occurrence. In fact, Univision actually won the entire night last night in the Los Angeles market. Only CW finished lower nationally than NBC.

We know that NBC started the season with the amazingly stupid tactic of putting Jay Leno on at 10 p.m. five nights a week, thus obliterating its ratings for the 10 p.m. period, chasing away viewers from shows in earlier timeslots, and devastating ratings for its affiliates' 11 p.m. news programs and the following "Tonight Show with Conan O'Brien." NBC changed direction mid-season, but the changes haven't made much of a difference. Switching Jay Leno back to the Tonight Show is unlikely to save NBC in late night. Even though he's still beating David Letterman, Leno's ratings are falling below those of Conan O'Brien.

The network has announced its 2010/11 prime time schedule, and a lot of effort has gone into getting better shows on the air. However, if that doesn't work, NBC and its likely new owner Comcast will be in a very difficult position. Comcast is under heavy pressure from some senior U.S. senators and representatives to not make NBC a cable-only network, but even if the Comcast deal doesn't go through and General Electric keeps NBC Universal, GE would have to seriously consider going cable-only if NBC doesn't improve its ratings substantially.

Comcast would undoubtedly like to get the deal done before the the overall results of the 2010/11 season are clear, so it may have to bet that NBC will dramatically improve its performance, but there's not a lot of positive evidence with which to substantiate that bet. There are, however, some things that Comcast could do to get value out of NBC, even if it can't take the whole thing to cable for a while:

• Create an NBC Sports Network to compete with ESPN. NBC Sports still has a strong reputation due to its many years of Olympics coverage and more recent NFL coverage. Rebrand Comcast Sportsnet as NBC Sports, so for example, Comcast Sportsnet Chicago would become NBC Sports Chicago. This would give Comcast significantly more leverage over Disney in its negotiations for ESPN's carriage fees, as well as the opportunity to generate more advertising revenues.
  
• Get the NBC broadcast side out of the news business. Fox is doing fine without a news component in its broadcast network. Move NBC News' assets to MSNBC and CNBC, and simulcast those networks' programming if necessary.

These two moves would leave an NBC that looks much more like USA Network than like ABC, CBS or even Fox. It would make NBC purely entertainment-focused, although it could always source content from its sister networks to fulfill requirements. If the company decides to continue carrying the Olympics, the NBC Sports Network would become the flagship network for that event.

These may be Plan B or even C options for Comcast, but they have to be considered.

Echolab shuts down, will liquidate; is there an opportunity for Blackmagic Design?

Last week, Echolab, a well-regarded manufacturer of video production switchers, closed its doors and gave notice that the company will be liquidated. All the company's employees have been laid off. Echolab focused on the midrange switcher market--higher-end than the industrial-style switchers from Panasonic and Broadcast Pix, but below the high-end from companies like Ross and Grass Valley.

Echolab's investors are looking for companies to buy its technology and inventory; in a liquidation, all, part or none of the company's assets may be sold. Blackmagic Design comes to mind as a potential buyer of Echolab's technology. Blackmagic has been a leader at driving down the cost of video production technology, and they're revitalizing DaVinci's color correction business. Production switchers are generally far too expensive relative to the price drops for most other video production and post-production equipment, and Blackmagic already makes an inexpensive, well-regarded line of routing switchers. Echolab might have technology and software that they could use to bring the same kind of cost-effective products to the production switcher market.

And yes, I can hear some of you saying that NewTek's Tricaster already fills the low-cost space, but there's plenty of room for competition. NewTek's control surfaces leave a lot to be desired, and by the time you get to their entry-level HD-compatible model, the TCXD300, you're talking almost $15,000, plus another almost $2,000 for a physical control surface. That's pretty close to the price of Grass Valley's Indigo AV switcher/audio mixer.

In any event, Blackmagic may already have all the technology it needs to produce a production switcher, or it may have evaluated the market and decided that it's not big enough to warrant the effort. However, an under-$10,000 HD production switcher from Blackmagic would get a lot of people very excited. Whether or not they pursue Echolab, it could be in the cards.

The LOST finale and most of the movie business explained in 7 minutes

I'm now going to pass a great secret onto you. You don't need to drink any dirty pond water whatsoever, and it has nothing to do with corks or glowing drains. It's the secret of why LOST ended the way it did, and why so many major movies look the way they do.

It's because of Daffy Duck.

Well, not exactly. Daffy didn't do it; he merely explained it, in a cartoon entitled "The Scarlet Pumpernickel." Completed in 1948 and released in 1950, Daffy, having grown tired of doing comedies, pitches a script of a ripping medieval adventure to Warner Brothers' studio head J.L. (Jack L. Warner). The problem is that the script is lousy, it's way too long, and Daffy has no ending.

I will spoil the adventure for you no further. If you can, find a copy on DVD to make sure that you get the original ending.

Pace passes Motorola on the set top, TiVo supplies Technicolor with PVR software

There were two big pieces of news in the set-top box business yesterday. First, CED reported that, based on preliminary numbers from IMS Research, Pace has overtaken Motorola to become the world's largest set-top box supplier overall (aggregating cable, satellite and IPTV shipments). If the final report confirms this finding, it's huge news. Motorola (and General Instrument, the company that Motorola initially purchased to get into the set-top box business) has been number one in STBs for as long as anyone can remember. According to IMS, the top five STB vendors are now Pace, Motorola, Technicolor (formerly Thomson,) Cisco and Humax.

In related news, TiVo will provide PVR software to Technicolor for its STBs. This announcement is potentially a huge win for TiVo, which has struggled in its efforts to get its PVR software deployed on set-top boxes other than its own. (There's a deal in place with Comcast, but the rollout has been incredibly slow.) Technicolor is the leader in supplying STBs to satellite operators worldwide.

Interesting ship date for iPad 3G

I ordered an Apple iPad 3G from the company's online store last Saturday, and was quoted a ship date of June 8th, which is the second day of Apple's Worldwide Developers Conference. I wonder if Apple is holding shipments in order to install iPhone OS 4.0 before they leave the factory?

First WebM (VP8) to H.264 comparison published

Streamingmedia.com has published an initial comparison of Google's VP8 open-source video codec (part of WebM) and H.264, run by Jan Ozer, who's done many such codec and compressor comparisons over the years. In summary, at almost exactly the same bitrate (438kbps for VP8 vs. 439kbps for H.264) and the same resolution (480 x 360), H.264 provided slightly better overall visual quality, especially in clips with higher motion. However, Ozer states that the difference won't be noticeable in most applications.

Keep in mind that the tests were done at SD resolution and at one bitrate, so more definitive testing will be required to understand how the two codecs compare over a range of conditions. However, at first glance, VP8 seems to be well in the ballpark with H.264.

Who will be the next Facebook?

So, what happens if Facebook doesn't change direction and starts taking its members' privacy more seriously? If it keeps talking about the "wonderful gifts" it's giving the web without taking responsibility for the problems that it's causing? If it responds to the current firestorm with a few kind words and empty gestures, and then goes right back to what it's been doing?

Let's be clear: Facebook can be replaced, and it is expendable. MySpace replaced Friendster, and Facebook replaced MySpace; ergo, Facebook can be replaced. There's no major technical challenge to building a social network. Unlike a search engine like Google or Bing, whose value is based on the years of development that has gone into its algorithms, the value of a social network resides in its members. The more members, the more valuable the network is. If Facebook loses its members' trust, they will find alternatives. They're not the "dumb fucks" that Mark Zuckerberg and some members of the press seem to think they are.

I hate to use the "critical mass" cliche, but Facebook doesn't need to lose a lot of members for it to become "last year's" social network. Social networks, almost more than any other institution, live or die on the appearance of momentum. There are alternatives already in the market that could take advantage of the situation, and new ones that are likely in development that have learned from Facebook's mistakes.

Facebook can become MySpace, and it's on the road to doing so unless it makes major structural, not superficial, changes. Investors should keep their chips warm, because the social network business, which has become "Facebook and everybody else", could change dramatically.

Four simple things that Facebook can do to regain its users' trust

There's no doubt that Facebook is in a "heap of trouble" due to changes in its privacy policies, but there are four simple things that the company can do to regain trust and help to prevent future flare-ups:

1. The company has to stop assuming that "what's mine is mine and what's yours is mine" when it comes to personal information. It has to stop making more and more of its members' information public.
2. When the company introduces new features that will expose more personal information, it needs to make the announcement well ahead of implementation, and give its members an easy way to opt-out.
3. There needs to be a way for members to say "I want my information to be made available to friends ONLY" without having to make dozens of selections. The current fine-grained controls are confusing and are leading members to deactivate their profiles or leave altogether for fear of missing some critical settings.
4. Mark Zuckerberg needs to make a public statement that he and the company have heard the complaints, understands them and is taking action, now and in the future, to anticipate privacy issues and protect users' privacy.

Here's the downside: If Facebook does a "mea culpa" and then changes the rules again a few months from now, the company is likely not to survive the firestorm, at least in its current configuration.

Flash 10.1 works well on Android 2.2 (Update: Not so fast!)

The first real-world tests are coming in, and Flash 10.1 seems to work quite well on Android 2.2 (FroYo), which Google has started pushing to its Nexus One smartphones. Engadget has gotten its hands on a video posted by the BBC that demonstrates Flash 10.1 running on a Nexus One vs. Flash Lite running on an HTC Desire. They're both 1GHz Snapdragon platforms, so while it's not an exact comparison, it's pretty close. The second demonstration, that starts around 1:35 into the video, clearly shows that Flash 10.1 performs much better than Flash Lite.

Update: TechCrunch reported that PocketNow did side-by-side testing of an iPhone, Nexus One with Android 2.2 and the Flash 10.1 application, and HTC's HD2, and found that Flash's performance on Android is a mixed bag. For pages where you're playing a single video or game, Flash's performance is very good, but when you intermix Flash ads, banners and videos onto a single web page, as you see all over the web, the performance is awful. In Adobe's defense, its Flash plug-in is still in beta, and it could improve its performance by the time it ships. However, as of today, Flash is likely to slow down your browsing experience considerably.

An agrarian mind in an industrial world

You're probably seen the recent articles about the spate of suicides (nine this year so far) and working conditions at Foxconn's factories in China. One two-part article, written by a reporter who got a job in a Foxconn factory in Shenzhen, shows the sadness of the lives of the company's manufacturing workers, almost all of whom are no more than 30 years old. Yet, the Foxconn situation is only an extreme case of what hundreds of millions of people go through worldwide. So few of us are satisfied with our working lives. We see our workday as a burden to be endured, rather than a life to be enjoyed. Why are we so unhappy so often?

At least a part of it comes from the fact that factories, offices, hierarchical management and mass production aren't natural to humans. Our natural organizations are families, with hierarchies based on age. When we worked in the fields to raise food for our families, the goals and objectives were very clear, and not arbitrarily imposed by some power figure. Over time, the rise of feudal societies began to decouple us from control over our working lives--we did things because we were told to do them, not because it necessarily made sense.

The industrial revolution and mass production widened the gap between doing work that we had to do in order to earn a paycheck and work that we were fully engaged and interested in. The professional management movement brought hierarchical structure and mass production into the office, and education brought the same practices into the classroom. Is there any wonder why we now have several generations of disengaged students and workers? Decades of being ordered to do things that made no sense, that we knew were counterproductive, but that we did anyway because they determined our rewards and compensation, have taken their toll. We have schools that don't educate and companies that don't work. Students and employees put up with class or work during the week in order to get two days to themselves.

We are missing an enormous opportunity to engage in what we do more fully and with more satisfaction, and I believe the key is to take control of our school or work lives. Whether that means more small businesses, more startups, more cooperatives, more home schooling, or more whatever, I don't know. I do know that the Foxconn situation is only a more extreme case of what the vast majority of people in industrialized nations deal with every day. We've lost control over our lives. It grates at our nature. We want to be free to do what we believe are the right things.

Please note that this has nothing whatsoever to do with capitalism. Capitalism doesn't presuppose or require factories, mass production, hierarchical management or bureaucracies.  You can be capitalistic and believe strongly in free enterprise, but still recognize that we are wasting years of our children's educations and decades of our own work lives doing things that are counterproductive to the personal goals that we have for growth, happiness and satisfaction.

The "secret weapons" for shooting the "House" season finale

It's well known by DSLR fans that the season finale of Fox's "House", which aired earlier this week in the U.S., was shot entirely with Canon 5DMkII DSLRs using Canon lenses. Canon's lenses are designed for still photography, not video, so it's incredibly difficult to pull focus with them without assistance. In a new article in Videography, Gale Tattersoll, the show's DP. revealed that they used Redrock Micro's new wireless microRemote follow focus (which uses an iPhone for its user interface) and microTape camera-mounted ultrasonic rangefinder to enable assistants to pull focus with the Canon lenses.

I haven't seen any published prices for the microRemote yet, but I have seen a proposed price of $500 for the microTape. Zeiss and Leica have both released prime lenses designed for DSLRs that have cinema-style barrel lengths, so that it's much easier to manually pull focus. However, the Zeiss lenses are much more expensive than the Canon equivalents; B&H sells each Zeiss CP.2 prime for $3,900 each, and the family of seven lenses, from 18mm to 85mm, sells for $27,300. The Leica lenses are even more expensive.

microRemote is likely to be a few thousand dollars, and will work with all the Canon lenses. You'll be able to get cinema-style functionality from virtually any Canon lens with a one-time investment in the microRemote and microTape, plus follow-focus gears for the individual lenses. Potential buyers need to see more reports of in-field experience with the microRemote and microTape (and Redrock Micro actually has to price and ship them,) but it's beginning to sound like they could literally save thousands of dollars for cinematographers by allowing them to use still lenses instead of cinema primes.

Three scorpions in a bottle, and a great opportunity for startups

As several writers have pointed out, yesterday's keynote session at Google's I/O Conference was an Apple bashfest. It's increasingly looking like Apple, Google and Microsoft are three scorpions in a bottle, focusing all their attention on each other, with Adobe and Yahoo acting like smaller bugs in the bottle, desperately looking for a ride on one of the scorpions' backs to avoid getting stung.

This represents a great opportunity for startups. The big guys are focusing on each other, rather than customers. They're reacting to each other's moves, and that means that they're even less sensitive than usual to the activities of companies outside the bottle. As Bill Gates said years ago, his biggest fear was two guys in a garage doing something that Microsoft hadn't anticipated. He was right; the two guys were Sergey Brin and Larry Page, and although they were at Stanford, not in a garage, they thoroughly blindsided Microsoft. Now, Brin and Page, along with Steve Jobs and Steve Ballmer, need to watch out for the next "two guys in a garage", who are likely already working on the next big thing.

Tesla and Toyota partner; new Teslas to be built in Fremont, CA

Yesterday, Tesla Motors and Toyota announced that Toyota will invest $50 million in Tesla, the two companies will partner on all-electric automobile technology, and that Tesla will take over the former NUMMI manufacturing plant in Fremont, California. NUMMI was a joint venture between Toyota and General Motors; GM pulled out last year when it went bankrupt, and Toyota, which was building Corollas and Tacoma trucks in the plant, shut it down last month, putting thousands of workers out of business.

Tesla had planned to build its own plant, originally in San Jose, and most recently in Downey, near Los Angeles, but the deal with Toyota will allow Tesla to retrofit an existing plant rather than build a plant from scratch. Tesla will employ far fewer workers than Toyota did; 1,000 when the plant is at full production for the Tesla Model S vs. 4,700 when Toyota shut the plant down. However, the jobs that do come back are auto industry jobs in the San Francisco Bay Area that would likely have been lost forever if this deal hadn't been worked out.

Google TV: Not ready for prime time?

As I write this, the self-congratulatory interviewing of Google's launch partners for Google TV is still going on at the I/O Conference, but the important details of Google TV are now public. First, the details that have leaked over the last month or so are generally true:

• Google TV will be based on Android (Version 2.1, not 2.2, even though the first products won't ship until this fall) and Chrome.
  
• Google has been working with Dish Network for some time, and Google TV will be integrated with Dish's DVRs.
  
• Google's hardware partners are Intel (providing Atom CPUs and chip sets), Sony (providing Internet-enabled HDTVs and a Google TV-compatible Blu-Ray player) and Logitech (with a forthcoming set-top box).
  
• The first distribution partner will be Best Buy.
  
• Amazon and Netflix have agreed to make their sites and content available to Google TV (no big deal, because both companies have policies of making their video content available virtually everywhere).

Some of the details of Google TV:

• It brings the Google search engine to TV, where users can search for content, either from their video service provider (cable, satellite or IPTV) or on the web, using a "Quick Search" bar like Chrome.
  
• It has its own "home page" that can be used for keeping track of favorite series and applications.
  
• It supports (and relies heavily upon) Flash Video for displaying web video.
  
• Google TV-enabled devices will connect to conventional set-top boxes via HDMI and IR Blaster remote controls, which is what allows Google TV devices to display both web and service provider video content.
  
• If conventional set-top box vendors implement Google's control protocol, Google TV devices can serve as their Interactive Program Guides, request future shows to be recorded on their DVRs, and perform other functions.
  
• Google TV can create a home page for a television series "on the fly", linking to available episodes from cable, satellite and IPTV providers, as well as on-demand episodes available on the web from various sources.
  
• Live video can be overlayed on web content in a small picture-in-picture window; this is useful for viewing sports game stats while watching a game in real time, or for doing IMDB lookups while watching a television show or movie.
  
• Since the key user interface for Google TV is Chrome, users can search for and access music, images and other content along with video.
  
• Android applications that don't require smartphone functionality will work on Google TV; applications can also be written to take advantage of Google TV's APIs (one application demonstrated could take closed captions and translate them from English to another language for non-English speaking viewers.)

Those are the positive bullet points. Here's why I think that Google "pulled the trigger" on Google TV too soon:

• Google's partners plan to start shipping and selling compatible hardware this Fall in time for the 2010 Christmas season, but the Android Marketplace, Google TV SDKs and Web APIs needed to develop new applications, integrate other devices with Google TVs and take full advantage of the web platform won't be released until early 2011. The entire platform should be available as open source in Summer 2011. In short, that means that the only source for optimized content and applications for at least six months will be Google, Sony, Logitech and a handful of chosen partners who get early access to the platform. 
• Google has published a list of recommendations for how web video providers can customize their content for Google TV. Much of it is common sense, but when it comes to formats and codecs, Google recommends Flash Video using H.264 1080i. There's no mention of WebM in the recommendations, and it wasn't mentioned anywhere in the Google TV announcement. It sounds like the Google TV and WebM teams haven't been talking to each other.
  
• The standard video I/O for Google TV-enabled devices will be HDMI. If your HDTV is an older model without HDMI, or your set-top box uses component video rather than HDMI, you're out of luck.
  
• Much of Google TV's ability to interact with service providers' set-top boxes depends on those vendors' (and their service provider customers') support of Google's IP control protocol. Today, only Dish Networks/Echostar supports the protocol. Unless Google TV becomes wildly popular, Dish's competitors aren't going to adopt Google's technology.
  
• Most of the power of Google TV requires a full keyboard for doing searches. In fact, they never even demonstrated an on-screen keyboard. It's anyone's guess as to how eagerly consumers will adopt using a full keyboard rather than a conventional television remote.
  
• One of the things that was so impressive about the WebM announcement yesterday was the breadth of industry support for the format--hardware, software and services. Google has been unable to get anyone else beyond the hardware partners first rumored months ago to sign onto Google TV. Whether that's due to the cost of Intel's hardware platform, Sony's "my way or the highway" approach to collaboration with partners, or other factors, is still a matter of speculation, but it's been widely reported that both Samsung and Panasonic were approached to join the consortium and refused.
  
• Google TV will still be subject to the policies of web video providers. Google referenced and showed a number of Fox television shows; they even showed a home page for the series "House" that included icons for getting old episodes from Hulu. Yet, they studiously avoided going to the Hulu website, instead retrieving the episodes from Amazon. Hulu prohibits viewing its content on television sets and goes out of its way to block systems like Google TV that try to do so. It's likely that the cable operators will also block their sites from Google TV.

Google demonstrated a lot of nice capabilities, and I certainly don't want to take anything away from that. A lot of thought has gone into Google TV. However, I think that they would have been better off to have called this a technology preview, rather than try to rush product into the market for Christmas 2010. By waiting, they would have had more time to sign up hardware partners, to bring additional CPU and chipset vendors on board with lower-cost and lower-power platforms, and to enable Google's developer partners to go to market with applications and content at the same time that the platform first reaches customers' homes. And, they could have baked WebM into the architecture as an essential component.

My feeling is that this could turn out much like Google Wave: By the time it actually gets released for general consumption and is fully usable, most people will have lost interest.

WebM might be a big deal after all

Earlier today, I wrote a post that said that Google's announcements at the I/O Conference this morning weren't all that exciting. But, the WebM announcement, might--might--just be a Big Thing. Google not only signed up most of the web browser leaders except for Microsoft and Apple (and after today's announcement, Microsoft said that it would support WebM in Internet Explorer 9 if the user installs the codecs themselves); it signed up just about all the major players in hardware encoders and decoders. They signed up almost all the major players in mobile phone chip sets, including ARM, Broadcom, Freescale Semiconductor, Marvell, MIPS Technologies, Texas Instruments and Qualcomm. They got many of the leaders in high-end video encoders, including Harmonic, Telestream, Digital Rapids, ViewCast, Inlet and Anystream. And, they got both of the leaders in GPUs, Nvidia and AMD.

These companies are important because it costs a lot to build hardware encoders and write tight, high-performance firmware. The fact that Google got all these players to sign on indicates that they see real potential in WebM. This represents a big problem for MPEG LA, the consortium that licenses patents related to H.264. Steve Jobs and MPEG LA executives have been doing more than hinting that both Ogg Theora and VP8, which is the video codec in WebM, infringe on MPEG LA's patents. But, I strongly doubt that these companies would expose themselves to potential liability to support an infringing codec. Google may well have agreed to indemnify at least some of these companies should MPEG LA, one or more of its consortium members, or a company with separate patents such as AT&T, takes legal action.

WebM isn't going to have any impact on Blu-Ray, which supports H.264 and Microsoft's VC-1 codec. Nor will it have much impact on cable, satellite or IPTV service providers; they're already heavily invested in MPEG-2 and MPEG-4. It's very unlikely to have a big impact on camcorders, because so many of the major camcorder manufacturers also contribute a large share of MPEG LA's patents and have cross-licensing agreements with each other to keep costs down.

Where WebM is likely to have its biggest impact is on the web, both in desktop and mobile applications. Acquisition--getting video from a camcorder into a digital form--probably isn't going to change, but the chain from encoding video after post-production to decoding it on your PC, tablet, phone or Internet-enabled set-top box can now be royalty-free.

The big "if" is whether or not WebM/VP8  is actually a good replacement for H.264. Is it in the same ballpark as H.264 for video quality, bandwidth efficiency, encoding and decoding speed and CPU utilization? Google claims it is, but we won;t know for sure until there's been third-party testing of a variety of VP8 encoders and decoders. If VP8 can stand up to H.264, it has an excellent chance of becoming the new standard for video on the web.

Google I/O Day 1: Perhaps more excitement in tomorrow's keynote

Anyone who was looking for earth-shaking news from today's keynote presentation at Google's I/O Conference didn't find it. The biggest news had already leaked weeks ago--Google's decision to open-source the VP8 video codec from On2 Technologies. Under the name "The WebM Project", Google will make VP8 available royalty-free and open-source, and will pair it with the Ogg Vorbis audio codec, which has been added to the project by Xiph.org, to create WebM. YouTube has begun to make WebM versions of some of its videos available for testing, and WebM will become a standard format supported by YouTube.

Google, Mozilla and Opera will add support for WebM to their browsers (currently in nightly developer Chromium and Firefox builds, and in a Lab build of Opera). Adobe also announced its intention to add WebM support to Flash within the next year. More than 20 other software, hardware and services companies also announced their plans to support WebM. Not surprisingly, neither Apple nor Microsoft announced support for WebM.

There were a lot of demonstrations of applications built on HTML5, and Adobe demonstrated some ways to use the current Dreamweaver CS5 and CSS to build platform-aware HTML5 content. The company also demonstrated an early prototype of software that can create interactive graphic HTML5 content. Google announced that Google Wave is now open for general use as a Google Labs project (no invitation needed). The company also announced a web app store for Chrome; support for the store will be first available in developer builds of Chrome to be released later this year. Applications available in the store will run in other HTML5-compliant browsers.

Finally, Google spent the last 40 minutes of the keynote discussing and demonstrating application development tools and platforms. The announcements including the Google App Engine for Business, which is not yet available, and significant extensions to Google App Engine itself to make it more competitive with Amazon Web Services.

It's now expected that tomorrow's keynote will focus on Android, Flash and Google's TV initiative with Intel, Sony and Logitech.

AT&T to deploy HSPA+ as high-speed wireless stopgap

It appears that the combination of Verizon's advertising and customer complaints have taken their toll on AT&T. The company had planned to move from its existing wireless architecture, which uses HSPA 7.2 (capable of theoretical download speeds up to 7.2Mbps) but without sufficient backhaul capacity in all locations to support that speed, to LTE, which offers theoretical speeds of 100Mbps down and 50Mbps up, starting in late 2011. (There's a huge difference between theoretical and actual; Verizon achieved LTE download speeds of from 5Mbps to 12Mbps and uploads from 2Mbps to 5Mbps in tests in Boston earlier this year.)

Last week, however, AT&T announced that it will implement HSPA+ in most locations, which has a maximum theoretical download speed of 14.4Mbps, by the end of this year. Customers in areas with limited backhaul capacity will see little or no improvement. What's likely is that AT&T will increase its backhaul capacity during the rest of this year and 2011, and then start implementing LTE late next year. Meanwhile, Verizon will have LTE live in 25 to 30 markets by the end of this year, and will have as many as five LTE phones available for customers by mid-2011. Once again, AT&T's strategy of minimizing its plant and equipment investments with "good enough" technology will keep it at a competitive disadvantage for at least another year.

How serious is Microsoft about HTML5?

A few weeks ago, Dean Hachamovitch, the general manager of Microsoft's Internet Explorer group, went on the record declaring the company's support for HTML5 in Internet Explorer 9. The Internet community generally applauded his remarks, although there was some consternation about his statement that IE9 will only support H.264 video. However, one point was generally ignored: IE9 will only be available for Vista and Windows 7, not for Windows XP, nor for any other desktop platform. It's not even clear that a full implementation of IE9 will be available for Windows Phone 7, which may well become a tablet platform in the future.

Microsoft claims that IE9 won't work on any platform besides Vista and Windows 7 because of the "magical" acceleration features they're using in the operating system. Bulls#!t. Firefox, Chrome and Opera are all cross-platform and all work much better than IE8. The reason that Microsoft will only support Vista and Windows 7 is that, as usual, they want to encourage upgrades to Windows 7. Thus, Microsoft is all for HTML5, but only if you buy Windows 7. If you're running another operating system, they won't support HTML5 at all.

Microsoft's corner of the universe keeps getting smaller and smaller, largely through the company's own actions.

New Media Financing, Part 3: Controlling the Costs

More than a decade ago, I was working on a project that involved producing original 30-minute in-studio television programs. The cost of the shows had to be low enough to allow them to be bartered (given to stations free), or even aired through paying the stations for the time. I approached a number of producers in Los Angeles and said, "Here's an outline for the show, our budget is $300,000 per half hour, can you do it?" Not a single one would touch it for anywhere close to that budget, even though the series wasn't going to be technically difficult to produce and wouldn't require "name" talent.

It costs a lot of money to produce a network television show--according to The Hollywood Reporter, between $2.5 and $4 million per episode for an hour-long drama, while half-hour comedies are significantly less expensive at around $1 to $1.25 million per episode. For those costs, you get professional union talent both in front of and behind the camera, the best equipment, first-class music and sound, excellent post-production, and so on.

At the other end of the spectrum are user-generated videos like "Keyboard Cat" and the "Numa Numa" guy, shot and edited by a single person with a camcorder or webcam. The cost is virtually nothing, and sometimes, very rarely, a huge number of people watch them. But could you get a million or two people to watch the "Numa Numa" guy for 30 minutes a week, for 13 weeks?

Network television shows are very expensive to produce, but if they catch on, people will watch them over and over for years. They generate advertising revenues from day one. They can be sold to other countries and syndicated to local television stations, even while the original run of the series is still on the network. They can be packaged into DVD collections and resold. They can run on Internet sites like Hulu and generate more advertising revenue. The entire network series production system is based on creating these kinds of shows. The series that don't make it, that last a season or less, are a sunk cost, never to be heard from again. It's a little bit like the venture capital business, except that even a failed venture might have valuable intellectual property that can be licensed or sold, while a failed television series has virtually no residual value.

But what if the production model reflected reality? What if costs were based on the expectation that a show will fail? What if producers put real money into a show only once it was proven to be a hit? You'd see a very different model for funding series production, the model that I think needs to be applied to the Internet.

In the "Look out, she's about to blow!" model, everyone gets paid Union scale, not X times scale, until the show is a proven hit. DSLRs replace 35mm film; multicamera shooting techniques replace single-camera, decreasing the number of setups and saving both time and money. Teams are light and shoot fast. Sets go virtual; why make huge investments in practical sets when you can create them digitally and then build them once you know you've got a hit? Also, you don't have to tear down virtual sets. Editing and post-production are done on the desktop.

I can already hear a chorus of network executives and producers saying "That will never work! The production quality of our shows will be diminished, and we'll never get them to the point where they'll be hits. It'll be more expensive to upgrade production standards midstream than it would be to set high standards from day one."

But just because network executives and studios would find this an unacceptable way to approach production doesn't mean that it's unacceptable. For the Internet to take off as a platform that can generate its own hits, it has to be able to deliver compelling programming that will bring viewers back again and again. That requires more than a camcorder and an idiot jumping off a roof. It means operating as "close to the bone" as possible in order to keep costs in line with potential revenues, and to only ramp up costs once revenues can support them.

New Media Financing, Part 2: Who pays the bill?

At the dawn of the commercial radio era in the U.S., radio stations were established to sell radio receivers. Pittsburgh's KDKA, generally accepted to be the first commercial radio station in the U.S., was an experiment funded by Westinghouse in order to sell radios: People bought more radios if they had more things to listen to. NBC was established by RCA primarily in order to sell radios. The equipment sales-network relationship survived well into the television era; the reason that NBC's symbol is a peacock is that RCA used the network to sell its color television sets. People bought more color TVs if there were more shows to watch in color.

That concludes our history lesson for today, with the point being that business models evolve over time. Advertising wasn't the first, or the only, business model for broadcasters. The Internet is at a stage of commercial development similar to that of radio in the late 1920s and early 1930s, with a bunch of models but no clear path to profitability.

Companies and individuals are pursuing a variety of business models, alone or in a myriad of combinations:

• Subsidized: The content is provided by an Internet Service provider at no additional charge. Comcast's Fancast service is a good example of this model. Fancast is available only to Comcast subscribers, and is a part of the company's high-speed Internet service.
  
• Advertising: The content distributor sells advertising, and the content is usually (but not always) made available to consumers for free, in return for exposing them to the advertising. This is today's dominant business model.
  
• Subscription: Consumers pay a monthly or annual fee for access to content. The Wall Street Journal and Financial Times are examples of subscription-based content providers.
  
• Pay-per-View: Consumers pay a one-time fee to access content, usually for a single viewing or for a limited amount of time. This model is often used for high-value content such as movies, concerts and other special events.
  
• In-Game Transactions: Consumers get access to the basic game (or other content) for free, but to take full advantage, they have to buy virtual property and services within the game (everything from clothing and livestock to spacecraft and weapons.)
  
• Carriage Fees: I'm not aware of anyone using this on the Internet, but it's very common in cable television. Typically, well-established cable networks charge a per-subscriber fee to cable operators for the right to make their channels available to their subscribers. Those fees are then passed on as part of subscribers' monthly charges. There are also reverse carriage fees, which are paid by new cable networks in order to get carriage on cable operators' systems. As those networks grow and succeed, they can move from paying for to being paid for carriage.

There are other models, such as the "tip jar" approach where consumers pay whatever they want to a content producer, but these models are rarely sustainable.

The fact that none of these business models has clearly established itself (with the exception of search advertising, which is a special case) could indicate that we haven't yet found the right model, no such model exists, or we're following the right models but implementing them in the wrong ways.

New Media Financing, Part 1: The McDonalds Conundrum

The annual Cable Show ended last week in Los Angeles, and it's apparent that the status quo before the conference (the set-top box is the primary target device, and everything else gets TV Everywhere) is still the status quo. But why do a relative handful of companies have so much power over what people watch and how they watch it? The reason is what I call the "McDonalds Conundrum".

We all know that McDonalds' food is bad for you--it has too much salt, sugar and fat. Nevertheless, millions of people eat at McDonalds every day, because they like how the food tastes, and there's a McDonalds just about everywhere. Television today is much the same as McDonalds--there's tons of crap, but it's enjoyable and easy to find. Turn on your TV, and it's there. It's on your DVR. It's everywhere.

For all of YouTube's power, it never would have gotten off the ground if it didn't have a steady flow of content from television and cable. Hulu wouldn't exist if it didn't have NBC's and Fox's programs. People like to watch the television shows from the major networks and studios. They can find those shows incredibly easily. That gives the suppliers the power to limit access and to set terms for consumption.

There is nothing available on the Internet that has anywhere near the reach or ease of access of broadcast or cable television...unless it's broadcast or cable television shows that have found their way to the Internet. So, a critical step toward building a sustainable business model for Internet video programming is to make it incredibly easy to find and consume.

The Primate School of Management

I often think that business students would be better served if they had to take more courses on social sciences--sociology and anthropology. They'd have a better grasp of how businesses actually operate and consumers actually think. Homo Sapiens are primates. We're not computers.

Most economists view humans as rational beings who will always make decisions that are in their best interest. The reality is much more animal-like. Humans make emotional decisions and then rationalize them. There's no better example of this than the automobile industry. If humans truly were rational beings, there would be only a handful of car models available, and people would buy the model with the lowest overall cost that best suits their needs. They'd keep their cars until the exact point that it would cost less to buy a new one than to continue to fix and insure their existing one. But, if that were the case, we'd have no auto industry to speak of.

People buy cars because they like how they look, or they "fit their lifestyle", or they project some attribute of their personality that they have (or wish they had.) There's nothing rational about those decisions; they're driven by emotion. People regularly trade in cars that have years of life left, even if they'd be thousands of dollars ahead by keeping the car rather than trading it in, because they have "new car fever."

If people are that emotional about a simple appliance, a device that enables them to get from Point A to Point B, why do we assume that they make purely rational decisions about their investments? What statistical model validates the concept that when you group thousands or millions of emotionally-based transactions together, they become rational?

Companies are groups of people. They constitute societies with mores and values. There are in-groups and out-groups. And, like people, they act emotionally and then rationalize their decisions. How else do you explain the thousands of bad decisions that are made by companies, large and small, every day? Is it that they don't have "perfect information?" No one does, yet they'll spend millions of dollars trying to get it. How do you justify spending months working on annual business plans that everyone knows will be obsolete before they're completed?

Expecting rational behavior to spontaneously emerge from groups of emotionally-driven individuals is itself irrational. We'd be better off if we assume, and allow for, emotionally-driven decision making, instead of assuming that economic decisions are always rational and then being shocked when we find out that they're not.

We're taking pictures! (Slap!) Wardriving! (Slap!) Taking pictures! (Slap!) Wardriving!

Forgive the gratuitous "Chinatown" reference in the title, but Google just got caught with its own privacy scandal. It seems that its Street View cars aren't only taking pictures of streets; they're also refining Google's maps and other geolocation services. There's nothing wrong with that, of course, but one of the techniques that the company has been using has been to detect Wi-Fi networks along the way and map their locations to GPS coordinates.

There's nothing wrong with that, either; Wi-Fi access points and routers broadcast their MAC addresses, which are usually (but not guaranteed to be) unique for each device. Map a MAC address to a pair of coordinates, and as long as the access point doesn't move, if you can pick up the access point, you're near those coordinates. However, that wasn't all that Google was doing. For some reason that completely escapes me, Google has been collecting not just MAC addresses and locations, but actual data being broadcast by open (unencrypted) access points, possibly for as long as four years. They've been doing this everywhere in the world where Google has Street View cars.

The company says that it has temporarily stopped collecting data with Street View cars and will permanently stop using Wi-Fi network data, and that it will delete the collected Wi-Fi data "real soon now." Google claims that, since its Street View cars were constantly moving, it only collected a small amount of data from any access point. Also, it's been known for years that running an open access point is a lot like taking the drapes off all your windows and keeping the lights on 24 hours a day. But that neither explains not excuses why Google has been collecting this data since 2006. They don't need it for geolocation. Shouldn't someone have caught on when Street View cars went out empty and came back full of spurious data, say, four years ago?

Google's been violating privacy laws and laws against interception of transmissions in the U.S., Europe, and probably everywhere else Street View goes. This is likely to have very serious consequences for the company worldwide. Further, between what's been going on with Facebook and now Google, I wouldn't at all be surprised to see action taken in the U.S. to strengthen data privacy laws, much along the line of the EU's rules.

If you haven't already locked your Wi-Fi access port down with WPA encryption, now would be a good time.

It takes successful startups to build more startups

There's a number of elements that are generally accepted as essential for a city or region to have a successful startup culture:

• Good colleges and universities, preferably with strong engineering programs, in order to provide an ongoing supply of qualified young talent
• A good quality of life that encourages graduates to stay in the area rather than relocate after graduation
• Availability of venture capital

There's another element that's less-discussed, but possibly the most important of all: Local, successful startups that get big enough to spin off other startups. This is one of the reasons that Silicon Valley has been able to maintain its lead for several generations now. Shockley Semiconductor begat Fairchild Semiconductor, which begat Intel, National Semi, Signetics and others. Those companies spun off other semiconductor companies, and the chain continues today. Hewlett-Packard employees founded Apple, Tandem and many other companies, and those companies have spun off countless other startups. Yahoo and Google have each spun off many startups. eBay acquired PayPal, and now the ex-PayPal team has built a new generation of startups. Twitter (which spun off from Google) has already sprouted Square, and many other companies will bud off over time. Facebook will have the same effect.

It takes a big success to first recruit and then spin off the founders of future startups. In Chicago, where I'm located, Groupon looks like it has the potential to spin off more startups. It's too early to tell whether that will be the start of a sustainable startup culture in Chicago, but it's a big move in the right direction.