Here Comes Everybody

According to this article from OneTRAK, Verizon has begun construction (overbuilding) that will enable the company to introduce its FiOS service into two Texas cities (Frisco and Allen) already served by AT&T's U-Verse service. This announcement could also have implications for the five other states (Florida, California, Indiana, Washington and Oregon) that Verizon shares with either AT&T or Qwest.

Historically, overbuilding phone systems simply wasn't done; each city had one and only one telephone franchise. However, now that local franchising is no longer an issue, the decision about whether or not to overbuild is driven by economic and technical issues. It's a lot less expensive to overbuild when you already have a telephone network built in an adjoining city, and that's what's enabling Verizon's encroachment into AT&T territory in Texas. (Why is Verizon in these states, you ask? The company was formed by the merger of Bell Atlantic and GTE, and it's some of the old GTE systems that are in play for expansion.)

By and large, AT&T has three video competitors in every market: The incumbent cable operator (Comcast, Time Warner, Cox, etc.), DirecTV and Dish/Echostar. The last thing they've expected is head-to-head competition with Verizon, but they're going to get it, and in their home state (Texas). Verizon apparently believes that in FiOS, it will have a superior product to U-Verse for the foreseeable future, thus justifying the capital investment necessary to compete on AT&Ts turf.

In the past, I've talked about how Verizon's big bet on fiber to the home is turning out be much more "future-proof" than AT&T's smaller bet on fiber to the node. That's great if you live in a Verizon territory, but meaningless if you're an AT&T customer...until now. Here's an example: I live in Campbell, California, just north of Los Gatos, a Verizon city. FiOS isn't in Los Gatos yet, but once it is, one could easily envision Verizon expanding from Los Gatos to Campbell and San Jose, and from there throughout the southern part of Silicon Valley. Other Verizon outposts in Northern California could also expand, until the entire San Francisco Bay Area, or at least the most profitable parts, are covered.

This possibility has to scare AT&T silly, since the company needs those same highly profitable customers in order to pay back its capital expenditure on U-Verse. Verizon's first moves in Texas likely presage a battle that will take years to play out, but it's entirely conceivable that Verizon could end up as the sole national wireline (or "fiberline") carrier in the U.S.

Snow Leopard: Apple's "Big Bang" for Next Year's Developers' Conference?

(Revised June 16, 2008) Yesterday, Apple announced its next version of OS X, but it did it so quietly that the announcement seemed more like compensation for a mistake (a premature press release from Apple Canada) than a planned event. The new version, named Snow Leopard, is intended to improve performance and stability rather than introduce lots of new features. However, a new feature appears to be "priming the pump" for some major new hardware announcements at Apple's 2009 Worldwide Developers' Conference next June.

It's called "Grand Central," and it appears to be a rewrite of those portions of OS X that aren't multiprocessor- (or multicore-) aware. The issue is that we've gone about as far as we can go with increasing clock speeds in order to get better performance, so the approach favored by Intel, AMD and just about everyone else is to add more cores to each processor. However, unless the software is designed to take advantage of multiple processors/cores, you don't get any performance advantage. Even in those cases where the software is fully multithreaded or multiprocessor-aware, the performance doesn't scale linearly as more processors are added; typically, the second processor or core only improves performance by 80%, and adding more processors results in even smaller incremental gains.

Apple claims that Grand Central will make all of OS X fully multiprocessor-aware (in essence, fully multithreaded,) and it will also make it significantly easier for application developers to write fully multithreaded software. Intel's Nehalem family of processors is scheduled to be released in Q4 2008, starting with four-core/eight-thread models for servers and high-end desktops. The performance kick from Nehalem over Intel's current Penryn generation of processors is expected to be big--approximately 20-30% overall, but closer to 70-80% for multithreaded applications.

I expect to see a dramatically refreshed, or possibly even completely redesigned Mac Pro at or prior to the Worldwide Developers' Conference next June, released concurrently with Snow Leopard. Apple should be able to stay with its existing two-processor/eight-core designs, but get big performance boosts at lower power consumption with Nehalem. At this point, unless you need to get a Mac Pro in the six months, you're probably wise to wait until next June for a Nehalem-based system. Snow Leopard will provide significant performance advantages even on current-generation systems, but it will need Nehalem in order to take full advantage of what it will be able to do

The Real News from Apple

Today's announcement of the iPhone 3G at Apple's Worldwide Developers' Conference has been rehashed and dissected by reporters and news anchors all day. However, the iPhone announcement itself was fairly anticlimactic; the new features had been well-covered in leaked reports prior to the announcement. (In fact, the lack of new features beyond 3G and GPS was somewhat surprising.) Even the dramatic price drop had been foreshadowed by widely-publicized reports.

I think that the real news wasn't the iPhone announcement, but what came before: A slew of application demos, plus the announcement of Apple's MobileMe service. Let's take the applications first: While they were being demonstrated, some of the live bloggers griped that they were tedious and just went on and on, but that was the point: In just a few months, Apple has built a bigger, more productive developer ecosystem than Symbian has been able to do in years, and no one else (including RIM, which just recently launched its own developers' program) is even in the same ballpark. Even Microsoft's smartphone platform can't deliver applications with the quality of experience of those designed for the iPhone.

Over and over again, the story was: "We've covered all the bases." Enterprise applications? Check. Exchange integration? Check. Desktop application support? Check. Location-based applications? Check. Games? Check. All of this was on top of the basic capabilities of the iPhone, now fortified with sufficient 3G speed to make heavily data- and media-centric applications work.

The other part of the story is MobileMe. At its heart, MobileMe is a centralized storage and synchronization application that allows iPhones, Macs and PCs to be synced to a single, central database that's managed by Apple. Now, all of the capabilities of MobileMe are available in some form from a variety of vendors, but they don't necessarily work very well. As a long-time ActiveSync user, I can tell you that getting my PC notebook to stay in sync with my old Windows Mobile PDA and current Windows Mobile Smartphone (let alone my MacBook) can be an exercise in frustration.

MobileMe is aimed at two targets: The large body of Windows Mobile users who are frustrated to death with ActiveSync, and everyone who has held off on buying an iPhone because it doesn't have the "it just works" syncing capabilities of RIM's Blackberry. It's far too early to tell just how well Apple has implemented MobileMe, and it may very have its own frustrations and limitations. However, it has the potential to be a very appealing alternative to Microsoft's and RIM's offerings.

The one big frustration that I have with the announcements is that the iPhone 3G still doesn't have video camera capabilities. A 3G iPhone with the video capabilities of, say, a Nokia N95, would be a multimedia killer product, and I'm still not giving up hope that Apple with do something in this space in the future.

We're Not Related

I was asked the other day if I'm related to Loren Feldman of 1938 Media...you know, the sock puppet guy. "Feldman" is the "Smith" of Judaism--there's a lot of us out there, and with the exception of our immediate families, it's highly unlikely that we're related to each other. So, unless he can trace his family back to southeastern Ohio, we're not related.

The Game Changer?

Yesterday, Netflix and Roku announced the Netflix Player. This device, priced at $99.99 and about the size of a paperback novel, can stream the portion of the Netflix catalog that's available for immediate download (approximately 10,000 out of 100,000 movies and television shows) to any television. The player has composite, component, S-Video and HDMI connections. It supports both SD and HD, although Netflix only offers SD streams at this time. It has both wired and wireless (802.11g) Ethernet connections.

The least expensive Netflix plan that provides unlimited downloads is $8.99/month, going to $15.99/month (the only difference between the plans is the number of physical DVDs that can be out at any one time--one for the $8.99 plan, three for the $15.99 plan.)

The reviews of the Roku Netflix Player so far have been positive; the biggest drawback is the relatively limited selection of movies available for instant streaming. However, this is an issue that I think will be resolved over time, as more studios see Netflix's service as a variation of VOD, at least for catalog material.

In the past, I've believed that the chances for third-party set-top boxes have been slim, but this Netflix/Roku box could be a game-changer. The price is so low that the player is almost a throwaway item; as one reviewer pointed out, if you watch 25 movies, the incremental cost of the box is only $4 per movie. The box already supports HD, when Netflix makes it available.

The Netflix/Roku player is a test case for whether or not a managed network is really needed for IPTV. The "standard definition" of IPTV includes a managed network with controlled Quality of Service and Quality of Experience. If Netflix and Roku can deliver acceptable performance "over the top", on the public Internet, it makes it hard to justify huge capital equipment expenditures in order to deliver IPTV over a closed network.

For example, in the U.K., BT is using VOD as its primary "value-add" for subscribers to its IPTV service, since the company relies on the over-the-air Freeview service for broadcast channels. Freeview, however, is launching its own over-the-top VOD service, similar to the Netflix/Roku service. If it works, where does that leave BT?

Maker Faire: A Bagel of a Show

I was excited about attending last weekend's Maker Faire...frankly, more excited before I got there than after I left. One review of the event that I read likened it to a science fair, and I think that's a good comparison. To me, it was very much like a county fair, and I don't like county fairs very much. To be sure, there was something for everyone, whether you like greeting cards, woodworking, electronics, knitting, software, flamethrowers, home-built aircraft or even those EepyBird guys with their Diet Coke and Mentos, but that was the problem. There was no "center". The only organizing theme was that everything there was homebuilt, but then how did that explain Disney's display of robotic toys that will be built by the millions in factories in China?

Apparently, I'm not the only one who felt this way. According to John Markoff of The New York Times, Tim O'Reilly, the founder of O'Reilly Media, the company that put the Maker Faire together, was having his own concerns about "cognitive dissonance": "When I saw Mr. O’Reilly he seemed to be in the process of trying to figure out what he had created and how it had gotten so far out of hand. 'The vibe is definitely ’something is going on here, but you can’t figure out what it is,’ he said."

I think that Maker Faire needs more focus. It goes beyond organizing the exhibits better so that related projects and vendors are together. It really means better curating the show, and making necessary decisions about what to include and not include (just as the editors of Make Magazine, from which Maker Faire sprang, have to make editorial decisions every day about what gets into print.)

A few kudos...

I've been "off the air" for a while, while I was finishing work on MRG's biannual IPTV Forecast and client presentation. They're finally done, so I can catch up with a few topics that I've wanted to write about.

When I was in London not long ago for IPTV World Forum, I found out the hard way that the charger for my new Remington cordless shaver was 120 volts only. Two days before my trip was over, my shaver ran out of power, and I had no way to recharge it and no place to get a replacement charger. I ended up having to buy a replacement shaver (the cheapest decent one I could find was another Remington.) While I was in London, I emailed Spectrum Brands, the company that owns Remington, and complained about getting a 120 volt-only charger on a product that was clearly designed for travel use.

I expected them to, at best, send me a dual-voltage replacement charger, but instead, they asked me to return the entire shaver, replaced it at no charge with a new cordless shaver with a dual-voltage charger, and compensated me for shipping the old shaver back to them. I'm still stuck with the cost of the cord shaver that I purchased in London, but I'm very happy with their response. (By the way, I originally purchased the cordless Remington for travel, since I use a (very expensive) Braun Pulsonic at home, nearly lost it in travel once and didn't want to risk losing it again. The Remington, which costs less than 1/3rd the price of the Braun, gives me every bit as good a shave.)

Also, I want to give a shout out to Nespresso. If you're not familiar with the name, it's a line of capsule-based coffeemakers and coffee sold by Nestle. They're very popular in Europe, where I and my fiancee (Caylia) first came across them. Caylia teaches music in the public schools in Marin County, CA, and she has to get up very early to get to class. As you might expect, she needs a lot of coffee to get going. The Nespresso machines are great, in that it only takes a minute or so to make a cup of coffee, they can make both espresso and coffee, and they're very easy to clean and maintain. Also, the capsules aren't cheap ($0.50 or so), but they're a small fraction of the cost of a cup of coffee at Starbucks. So, I bought her a Nespresso machine for the holidays.

Now, I haven't been a coffee drinker. Typically, I'd have a cup every week or so. However, when I tasted the coffee from her Nespresso machine (one of the best cups I'd ever had,) she went out to Macy's and bought me a matching machine. I now have a cup of coffee every day, and I'm hooked. (Caylia typically has three cups a day, but she's not jumpy at all. Really. You can trust me on that.)

One final endorsement, if you want to call it that: I've started using the Zemanta plug-in for Firefox to help me create my blog entries. As I've been writing, Zemanta has been identifying links and tags for terms that I've been using, such as IPTV and Nespresso. With a couple of clicks, Zemanta inserts some or all of the links and labels for me, automatically. If you have your own blog, give it a try.

The Next Generation of Red

Red,NAB,Red One,Scarlet,Sony,Panasonic,Canon,Apple,Final Cut Studio

In some previous blog entries, I discussed the new products announced by Red at NAB. Scarlet, the "3K for under $3,000" camcorder announced for shipment next year, takes Red into an entirely new market segment, one in which the Japanese consumer electronic vendors (primarily Sony, Panasonic and Canon) have long played.

The current Red One lists for $17,500, but by the time lenses and accessories have been added, the cost can easily double (or more). At that price, there's enough margin for video system integrators to make money, and the systems are expensive enough for rental houses to have a steady market.

However, at $3,000 plus accessories, the Scarlet will clearly be a prosumer product that should sell in quantities many times that of the Red One. From interviews with Red executives at NAB, it seems clear that they see a market much bigger than that served by the mail-order video resellers such as B&H.

At the show, Red executives talked about the company's close relationship with Apple. It seems to me entirely possible that Scarlet, in a package closely integrated with Final Cut Studio, could be sold in Apple's stores, possibly even exclusively. This would give Red street-level access to consumers and media creation professionals around the world, without having to vet a sales channel store by store.

There have been rumors about Apple purchasing Red, but as I've written about previously, I think that Apple's hardware-agnostic approach to professional audio and video (as opposed to its hardware-centric approach to everything else) has worked in its favor vs. Avid. By buying Red, it could alienate its largest hardware partners, but by simply reselling a Red-branded Scarlet in its stores, it would remain agnostic, yet share the spotlight with the company that is fast becoming the Apple of video cameras.

Please keep in mind that this is speculation on my part; I have no inside information. However, I've felt for a long time that the design of camcorders needs a major overhaul in order to make them more usable, and that Apple is ideally suited to design and build such a next-generation product. A reselling partnership with Red could be the first step to such a product.

Returning from NAB

I'm now back in Silicon Valley, organizing my thoughts about the NAB conference that ends today. Here are a few thoughts to get started:

First, the final attendance count was 105,259, of which 28,310 came from outside the U.S. Press attendance was 1,296.

This year, the organizers expanded the charter of NAB to make it cover everything about content, but I think that the result is that the show is getting too diffuse. What had originally been a show focused on broadcasting now also covers filmmaking (from tiny independent films and documentaries to studio tentpoles,) podcasts (both audio and video,) Internet radio and streaming media, IPTV and more. NAB is probably still the foremost broadcasting, audio/video production and post-production show in the world, but the spectrum of topics and range of products available is getting too broad. Want a bag of three USB cables? You can find them on the show floor, along with products ranging up into the millions of dollars.

In the past, NAB tried to segregate products into physical areas. They still tried to do that this year, but odd products kept cropping up everywhere. There's simply too much demand for exhibit space to maintain any meaningful separation by function or application.

The reality is that the same product can be used for lots of things: A camera light can be used for a TV news interview, a video podcast, a short film or an epic. Almost any production or post-production tool has multiple applications. When a prosumer camcorder can be used for B-roll on a production that uses cameras costing hundreds of thousands of dollars, the walls that previously clearly separated applications start tumbling down.

So, should NAB continue to pursue its "come one, come all" approach to content? Lots of people like it, but I suspect that some of NAB's core membership, broadcasters, are grumbling that it's simply too hard to see, or even find, the products that are relevant to their businesses. The tent, so to speak, is getting uncomfortably large.

Real vs. Vapor

I had a chance to spend time at Sony and Red on the NAB show floor today, along with a return visit to Panasonic. Here are a few thoughts on what I saw:

• Red: If the Red booth had been a conference room in a hotel, the Fire Marshall would have closed it down. Attendees were packed in like sardines. The Red One is definitely real; there were several being demonstrated, and many satisfied customers were in attendance. On the other hand, the Scarlet, Epic and Red Ray were vapor; each product was in a glass case, and none of them was functional in the least.
  
  
• Sony: Unlike previous NABs, Sony came with a full suite of real (or nearly real) cameras. In my opinion, the PMW-EX3, which will ship this summer, is the real deal. It adds several features to the EX1, the most important of which is interchangeable lenses (which perhaps means not as much as it might, since Sony is introducing its own proprietary lens mount, although an adapter will allow some 2/3" lenses to be used with the 1/2" EX3.) The other huge thing that Sony has addressed is ergonomics; the EX1 was widely reported to be highly uncomfortable to hold for any length of time. The EX3 is designed to be very easily shoulder-mounted. There were several operational EX3s in the booth, configured for handheld, studio and cinematography applications.
  
  
• Panasonic: The company's hot new announcement, the AVCHD HMC150, was a non-functioning mockup made to look like it was operating. (A product manager explained that "...it isn't shipping for six months," to explain why it looked like it was working when it wasn't.) I asked him about the relative performance problems to date with AVCHD vs. HDV--it's been widely reported that while under ideal conditions, the two formats look very similar, but when things get suboptimal, such as low lighting and motion, HDV still looks better. The product manager challenged my statement, and asked me to "find the artifacts" in a perfectly lit video with little motion. I told him that I couldn't find any, but I didn't expect to.
  

He then whipped out a chip with what he told me were many samples of AVCHD footage that would disprove my contention. The first (and only) clip that he showed me was of a backyard barbeque, again with lots of light and, for the most part, little motion. He told me how wonderful the footage looked, ignoring the motion artifacts visible when the camera moved. However, when I asked him if he had any low-light footage, he took his chip out and put it away, telling me that "low light is a problem with the camera, not the compression." I rest my case.

Now, I have no doubt that Panasonic will eventually deliver the camera (let's not forget that the first P2 prototypes shown at NAB were made of balsa wood, but they delivered cameras in time for the next year's show.) However, I'll still take a strong "show-me" position on AVCHD. I'd love it to be as good as (or preferably better than) HDV, but I'll believe it when I see it.

NAB: Fun With Audio

A few months ago, Avid made big news by pulling out of NAB. Well, apparently that decision didn't sit well with Digidesign, the pro audio division of Avid, which normally exhibits in the Avid booth. I discovered a Digidesign booth in the North Hall, much smaller than even Digidesign's normal display space within Avid's previous NAB booths, but a 20' x 20' booth nonetheless. There was a full-blown Icon console on one side, and a new C24 console and some other equipment on the other.

I also stopped by Euphonix's booth. The company, which specializes in very large, very expensive audio consoles, recently announced the MC Control and MC Mix, a pair of low-cost control surfaces for software such as Apple's Logic Studio and Final Cut Studio. There were two MC setups in the booth, and I had a number of questions and would have liked a demonstration. However, even though there were no other customers and a half-dozen Euphonix staffers in the booth, I was totally ignored.

Now, I'm not entirely chopped liver; I'm an Audio Engineering Society member, and I could have had an intelligent conversation, but I never got the chance. I suspect that Euphonix's salespeople were far more interested in selling their big, expensive "pro studios" products, but if that was the case, why did they even bother bringing the MC control surfaces to NAB? Note to exhibitors: Don't waste the space in your booths displaying products that you don't want to sell. And if you do want to sell them, don't ignore your customers. There are way too many competitors in the low-cost control surface market for Euphonix to take it for granted.

Live from NAB (Part 1)

I'm blogging from the show floor at NAB (the North Hall, to be precise.) It's too early for me to make any generalizations about announcements at the show, but the sound and fury is coming thick and fast in the camcorder world:

• Panasonic announced five new camcorders: Two top-end Varicam models (including one that uses P2 flash storage exclusively), an update of the prosumer HVX200, a higher-end HPX170 model and the HMC150, a prosumer AVCHD camcorder that should (at least in theory, based on its compression bitrate) match or exceed HDV quality.
  
• Sony announced US availability of the PDW-700, a XDCAM HD (optical disc) model, along with a preanouncement of the PMW-EX3, the next model in the highly-regarded XDCAM EX (flash-based, using the SxS format) family. The EX3 will feature interchangeable lenses, addressing perhaps the biggest drawback of the EX1. (The EX3 also looks as though it will be better balanced in the hand than the EX1, addressing the other major complaint.)
  
• Red fired off a couple of preannouncements: Scarlet, a 3K handheld camcorder expected to be priced under $3K, and Epic, a next-generation 5K camcorder expected to be priced in the $40K range. At this point, both products are scheduled for release in "early 2009," with features, specifications and prices highly likely to change.
  

Leaving MRG

MRG,Multimedia Research Group,NAB

Late last week, I gave notice to my employer, Multimedia Research Group (MRG), that I'll be leaving as soon as the Spring five-year Forecast is done, which will probably be before the end of April. It's never easy to leave a job, especially one that enabled me to return to Silicon Valley, and one in which the company's owner is a good friend with whom I've worked off and on for almost 20 years, but it's time to make a move.

There are three key reasons for me to move on. The first, and most important, is that MRG is a small company, and I need to increase my income. I recently got engaged, and the money that was sufficient for myself and two cats won't cut it for a family. The second reason is that the travelling that I've been doing has been exhausting. In the last fifteen months, I've visited London twice, Shanghai and Shenzhen, China on two separate trips, Singapore, Chicago, Boston, Amsterdam, Paris, Rio de Janeiro, and undoubtedly places that I've forgotten. It's harder for me to rebound than it was when I was travelling back and forth between California and Tokyo when I worked for Toshiba in the late 1980s.

My final reason is that I'd really like to get my hands dirty again with products or services, rather than just write and speak about what other people are doing. Analysts are observers--we sometimes consult one-on-one with clients, but we rarely have an integral role in defining or launching products.

I'll be representing MRG on a panel at the National Association of Broadcasters' convention in Las Vegas later this month, and I'll be continuing this blog. I'm "pursuing other opportunities," as the saying goes, so if you know of an opening, please let me know at lfeldman(at)feldmanfile.com.

On ZTE

ZTE,UTStarcom,Huawei,Ericsson,Nokia Siemens Networks,Cisco,IPTV

As I mentioned in some previous posts, I spent most of last week at an analysts' conference in Shenzhen, China, sponsored by ZTE Corporation. To folks like myself in the U.S., ZTE has been a fairly "invisible" company; this conference was an attempt to make the company, and its products, more visible.

ZTE is one of the largest telecommunications equipment manufacturers in China. Its largest local competitors are Huawei and UTStarcom. The Western companies that I'd compare ZTE to most closely are Ericsson, Alcatel-Lucent, Nokia Siemens Networks, and to a lesser extent, Cisco. ZTE is a wireless powerhouse; it has product lines covering GSM, CDMA, WiMAX, and the Chinese standard TD-SCDMA (where it's the market leader). It's also a large supplier of wireline access equipment (IP DSLAMs and xPONs) and routers.

In IPTV, ZTE supplies all the key system components except live encoders. Everything else--Video-on-Demand systems, Set-Top Boxes, Middleware and Content Protection--ZTE can provide itself, or integrate other companies' products into a turnkey system. ZTE's approach is closest to that of UTStarcom, a U.S.-based company with a huge presence in China, but the companies have two different strategies: UTStarcom prefers to sell complete, turnkey systems using its components, while ZTE will sell complete systems or individual components. This enables ZTE to sell to service providers that want "best-of-breed" products, as well as those who want everything from one company.

What both ZTE and UTStarcom have in common is that they're both focusing on China, India, and developing markets. In my opinion, this is a very smart approach for ZTE. While the company has some advanced technology, such as software-defined base station radios for mobile applications, it can best be thought of as a "fast follower." ZTE is unlikely to be the company to bring technology to market first, but when its products do come to market, they tend to be less expensive than their Western counterparts. This is very important for service providers in developing countries with very low ARPUs (Average Monthly Revenues Per User).

Even though ZTE isn't much of a market factor in Western Europe or North America, it doesn't mean that the Western equipment vendors can breath easy. I see ZTE, Huawei and UTStarcom much as Toyota, Honda and Nissan were when they entered the U.S. automobile market in the early 1960s. The first Japanese cars to reach U.S. shores were tiny, underpowered and not terribly reliable, which made it easy for both American and European manufacturers to ignore them. However, the Japanese manufacturers learned what American consumers wanted, and gave it to them with high quality and low prices, eventually driving American manufacturers out of the small car market. Even after Japanese manufacturers went upmarket and raised their prices, U.S. consumers still preferred their products.

I think that ZTE is going to be one of the world leaders in mobile, and possibly wireline, communications by the middle of the next decade. In fact, it may not take that long.

Confronting the Great Firewall of China

I returned yesterday from China, where I was in Shenzhen, attending ZTE's Global Analyst Conference. (More on ZTE in a future post.) Using the Internet there was an adventure in finding out what I could, and more usually couldn't, get to. Many of the sites that I regularly visit (most of which could hardly be called political or provocative) were blocked.

Pretty much any blog, no matter its contents, was out of reach. I tried accessing blogs through both a feed reader and Firefox to see if the problem was that RSS feeds were blocked, but I got the same result. Even blogs that are completely politically innocuous, such as Engadget and Gizmodo, were unavailable.

Interestingly, I could post to my own blog, but I couldn't read it. Similarly, my mail client could send mail, but not receive it; the only way that I could receive mail was through a web client. I was in Shanghai and Hangzhou last year, and I didn't notice the same level of interference.

On my way back to the States, I had a wait for my return flight at Hong Kong International Airport. Using PCCW's free WiFi service, I fired up my browser, feed reader and mail client, and everything worked just fine. I could access all of the sites that were blocked just a half-hour away on the Chinese mainland, as well as get my mail.

It may have been the combination of the Great Firewall with the fact that my hotel was right next to the local police station, but I felt more than a little paranoid and uncomfortable while I was in Shenzhen. The city is very modern (it's the place where China's experiment with Capitalism inside of Communism began,) and the people were very friendly, but I frankly don't look forward to going back.

Comcast and BitTorrent: Best Buddies?

Comcast,BitTorrrent,CDN,P2P,FCC

Yesterday, Comcast and BitTorrent announced that they're working together to help Comcast address network congestion problems in a "protocol-agnostic" way. This is perhaps the ultimate marriage of convenience for both companies. Comcast's unannounced throttling and blocking of BitTorrent traffic, identified first by TorrentFreak and verified by the Associated Press, made Comcast into the poster boy for net neutrality. By the same token, had Comcast continued its traffic interference unimpeded, other service providers would have undoubtedly adopted the same techniques, and BitTorrent's attempt to turn itself into a legitimate competitor of Akamai, Limelight Networks and other Content Distribution Networks would have failed.

It remains to be seen how "agnostic" the resulting techniques will be. Will they favor BitTorrent's content provider-oriented DNA protocols over those of competitors, or will it be some kind of agreement by Comcast not to block P2P seeding completely, but rather, to limit the available bandwidth for P2P by some other methods? So far, the statements from Comcast and BitTorrent are fairly content-free as to what's actually going to be done.

In any event, Comcast may succeed in getting the FCC to back off on its investigation of the company's traffic throttling practices, while BitTorrent may remove an enormous impediment to sales of its services.

Breaking Up is Hard To Do?

Well, THAT was fast! No sooner did I finish my blog entry on Motorola's mobile handset business than the company announced that it will split into two parts, with the mobile business in one company and everything else in the other. Details about the breakup are still very sketchy, and the distribution of stock in the two companies to Motorola subscribers isn't planned until some time next year.

The breakup might placate Carl Icahn, but it does nothing to solve the fundamental problem at the mobile division, which is that the company is an "also-ran" in every product segment. That would probably be fine if the company was at least a strong number two in most segments, but it's not. If the recent Mobile World Congress is any indication, Moto's product development process seems to have stalled, and the pipeline of compelling future products is in doubt.

CTIA starts next week, so we'll have another view into Motorola's future product pipeline. However, if the rumors that have surfaced so far are true, Motorola's introductions will focus more on WIMAX and picocell base stations than on new handsets.

It's difficult to believe that Motorola can fix its product development problems while its mobile business is in the limbo of a spinoff that's as much as a year away. Whatever Motorola does, either to sell or spin off the business, has to happen quickly, not next year. Otherwise, the company's market share, and the resulting value of its mobile business, will continue to deteriorate.

Cisco: Hello, Moto?

I'm at the ZTE Global Analyst Conference in Shenzhen, China, but I'm following Carl Icahn's latest moves on/against Motorola. In the past, there were many rumors that Motorola would spin or sell off its sputtering mobile phone business in order to raise cash. Those rumors were incorrect (at least at the time,) but Icahn's renewed activity has led me to speculate (and that's all I'm doing) about who would be a good buyer for Moto's handset business, if the company decided (or was forced) to sell.

Most of Motorola's competitors either ruled themselves out the last time or, like Nokia, would likely be ruled out due to antitrust considerations. But there's one company that I think should be ruled in: Cisco. Yes, Cisco and Motorola are fierce competitors in many aspects of the cable and IPTV businesses, but Cisco only has an IP phone business right now.

Adding Motorola's mobile handset business would dramatically increase Cisco's telco business, but it would accomplish two more important things:

1. It would make Cisco one of the largest players in a business that's far more important than PCs and set-top boxes combined to getting IP-based content and services into the hands of consumers. Last year, according to Strategy Analytics, 1.12 billion mobile handsets were sold, vs. 267.7 million PCs shipped worldwide, according to IDC.
   
   
2. It would turn Cisco into a consumer brand, an objective long cherished by Cisco management. Last year, Motorola shipped 159 million mobile handsets. Imagine the consumer impact if those handsets carried the Cisco logo instead of Motorola's.

Yes, Motorola has slipped to Number 3 worldwide in the mobile handset business behind Samsung, but by a tiny amount. Strong product management and creative recruitment of development teams from competitors could turn the situation around for Cisco, not to mention the fact that team morale at Motorola would most likely improve immediately.

"Hello, Cisco" has a nice sound to it. Let's see if it sounds good to Motorola as well.

VOD Gets Traction

Comcast,VOD,Apple TV,Vudu,Amazon,Unbox,TiVo,DirecTV

According to this article in CED Magazine, Comcast's VOD service has had more than seven billion views totalling more than one billion hours since the service was launched in 2003. Monthly, there are more than 275 million views totalling more than 130 million hours, and approximately 40 million movies are being watched on-demand.

Comcast's VOD library consists of more than 10,000 titles available each month, approximately 90 percent of which are free to view. By the end of the year, the company expects to have 6,000 movies in its VOD library, half of which will be in HD. (Given the statistics, they most likely have less than 1,000 movies available today, of which only a relative handful are in VOD.)

It's easy to forget, but cable VOD is most certainly a direct competitor for Apple TV, Vudu, Amazon Unbox on TiVo, and similar services. (DirecTV is readying its own Internet-based VOD service for later this year.) I think that it's far more likely that consumers will use the VOD service that comes from their incumbent video service providers than buy and install a separate set-top box that offers much the same content.

Travel Tip: Saving Money on Mobile Calls

mobile,roaming,SIM,Skype

Over the past year, I've traveled more than I ever have before, to London, Shanghai, Amsterdam, Paris, Singapore and Rio de Janeiro, not to mention points all across the US. (I've started the loop again--London last week, and Shenzhen next week.) Shortly before I signed up for this job, I switched my mobile phone service to Verizon, which probably has the best service in the US. However, Verizon uses the CDMA transmission standard, not the GSM standard that's used in most places around the world.

Even if CDMA worked around the world, however, I'd still be stuck with high roaming charges. To get around those costs, I buy a prepaid SIM card in each market, and use it in an inexpensive tri-band GSM phone that I purchased from T-Mobile and had unlocked. I don't need a SIM for every country; for example, my Orange UK SIM works across Western Europe, and roaming charges there are reasonable.

For other countries, I did some research on the Internet to find the local operator with the best prices and coverage. For Singapore, I went with M2, and in Rio, I used TIM. The biggest problem with this approach is that I have a phone number for each SIM card, but I know some people who use Skype to forward calls from one central number to their SIMs as needed. You'll have to pay Skype's per-minute rates for the incoming calls plus the mobile phone operator's charges for local calls, but the combination is still much less expensive than international roaming with a US carrier. In my case, I simply distribute my SIM number as needed. Either way, you'll save a lot of money for a little inconvenience (purchasing a SIM.)

IPTV: The View From London

I just returned from IPTV World Forum in London. This is the world's largest trade show dedicated to IPTV, which doesn't necessarily make it very big (attendance was esitmated at 7,000 early in the show,) but does make it quite influential. Senior executives from many if not most of the world's largest telecommunication companies attended, although the focus was clearly on Western Europe (there are separate versions of the show covering Asia, Latin America, Eastern Europe, and for the first time this summer, North America.)

I wish that I could tell you that I saw something earthshaking, but I didn't. That's one of the problems of being an industry analyst; we see almost everything well before it's revealed publicly, so there are rarely big surprises. However, at a show summary session on the last day, one of the analysts had an interesting insight: There were no content companies exhibiting at the show. Compare that to The Cable Show, the National Cable & Telecommunications Association's conference, which will be held this May in New Orleans. Virtually every cable network that operates in North America will either be exhibiting or operating a suite at the show. These are the same companies that sell programming to IPTV operators, so why aren't they at IPTV World Forum?

My suspicion is that they see the Forum as a technical and engineering show, in much the same way that the Western Cable show eventually turned into a technical show before it was discontinued. The problem is that the primary thing that IPTV operators have to sell is programming. If the programming vendors don't see the industry's premier trade show as a viable venue, perhaps they don't take IPTV all that seriously.

What's the subscriber count at which programmers will see IPTV as a serious business? 25 million? 50 Million? My argument is that they need to take IPTV seriously now, even if it won't be a "real business" by their measures for a few more years. In particular, they need to start thinking about how the markets for their programming will change when the telcos are "busting silos" between the Internet, set-top boxes, mobile phones and landlines. In the long run, this is how IPTV will compete against cable and satellite.

Mea Culpa

David Pogue,NYT,New York Times,Blu-Ray,DVD,apology

Yesterday, David Pogue commented on my previous post ("Sorry, David",) and said that I had misunderstood his point when he was on CNBC last week: He was explaining why DVDs wouldn't be overtaken by online movies, NOT why Blu-Ray wouldn't be overtaken. Although I continue to disagree with his arguments against online video (at least in the 2-3 year timeframe,) he's right about my misunderstanding his position on Blu-Ray.

I didn't see his entire segment on CNBC. In the part that I saw, he was holding Blu-Ray boxes in his hand, so I assumed that he was comparing Blu-Ray against online. I wasn't able to watch the segment again, either on the CNBC or New York Times websites, to factcheck. I should have at least reread his article on the Times website, but I didn't do that. I made assumptions based on incomplete information, and I'm sorry about that. This is a case in which I should have waited until I could rewatch his video before posting.

I can't say that I'll never do something like this again (incomplete information is how the world works,) but in the future, I'll certainly make sure that I read the whole article (or watch the entire segment) before I comment.

Sorry, David

David Pogue,Blu-Ray,DVD,online movies,downloads,streaming,CNBC,The New York Times,HD,1080P

I turned on CNBC this morning, and what did I see but a rant (and rant is the only word I can use to describe it) by David Pogue assailing online movies and defending Blu-Ray. (I can't find it on the New York Times site, and Windows Media Player is crashing both IE7 and Firefox before I can get the URL for the video from the CNBC website, so click here to read his article.) (UPDATE: The video is now availabe on the New York Times website; click here to view it.) I've already dealt with most of his arguments in previous posts, but there was one that I missed: Since only 50% of the U.S. population has high-speed Internet connections, the other 50% can't get access to online movies.

That's entirely true, but think for a minute: If you can't afford or live in some place too rural to get a high-speed connection, how likely is it that you'll have a big-screen HD display? Not very. It's even less likely when you consider that a 1080P display is needed to get the full value from Blu-Ray. As I wrote in an earlier post, less than 30% of all households now have HD monitors or receivers of any resolution, let alone 1080P. An upscaling DVD player will work fine for most people, at a cost of 50% less than a Blu-Ray player.

In fact, Pogue inadvertently made my argument for me. By the time there are enough HD monitors and receivers in households to make Blu-Ray a viable business for either consumer electronics manufacturers or movie studios, the problems of online movies will largely be resolved. For the vast majority of people in North America, there's no reason for them to buy a Blu-Ray player, unless they're already buying a Playstation 3 or PC with a Blu-Ray drive.

Thus, I believe the transition will go from DVDs to downloads and streaming. Just as DVD-Audio and SACD were touted as the next generation of CD but were bypassed by downloads, DVD will live on, and Blu-Ray will be bypassed by downloads and streaming.

Does VOD Suck? I Think Not

Blu-Ray,DVD,VOD

A number of writers have suggested that Blu-Ray won't be made obsolete by VOD and downloads, for several reasons:

• Only a few thousand movies are available electronically, while Netflix is said to have some 90,000 titles on DVD
• It's too hard for most consumers to view VOD movies or downloads
• Consumers want the commentaries and special features found on discs

While all of these arguments are true today, none of them will stand up for very long. Let's take them in order:

• It's true that there are only a few thousand titles available on VOD today, but almost all of the major studios' releases are made available electronically. In addidion, only a small fraction of the total output of DVD titles will ever be released in Blu-Ray. The post-production, mastering and manufacturing costs are simply too high when compared with the available audience.
• The user interfaces for some VOD and download systems are awful, but user interfaces can be fixed.
• How many viewers really want commentaries and special features? Yesterday, I was at Target, looking at the DVD of "Michael Clayton." It had a commentary by the director/writer and two documentaries. Price: $16.99. I ended up watching "Michael Clayton" on Comcast VOD, in HD, for $5.99. It simply wasn't worth $11 more for special features that I most likely would never watch.

I have shelves full of DVDs that I've watched once, and will likely never watch again. Rather than make the same mistake with Blu-Ray, I'm perfectly happy to watch on VOD, and to perhaps buy the few films that I know that I'll want to watch over and over. Parents will undoubtedly want to buy movies for their kids to watch again and again, but why buy them in Blu-Ray when the kids will be perfectly happy with DVD?

In short. Blu-Ray is simply too late for the marketplace, and in my opinion, it will never be more than a niche product for the top end of the audience.

HD DVD is Dead...Now What?

Two days ago, Toshiba announced that it has abandoned HD DVD, with player production and all marketing activities to end in March. Yesterday, Universal Home Video announced that it would discontinue HD DVD production and shift to Blu-Ray. Paramount and DreamWorks, the remaining HD DVD-only studios, haven't yet made an announcement, but one is expected soon. (UPDATE 02/21/08: Paramount and DreamWorks have officially announced that they've dropped HD DVD in favor of Blu-Ray.) Thus, we finally have a single high-definition blue laser optical disc standard. The question is, does it really matter?

Video Business and Adams Media Research recently reported that the adoption curve for the first two years of HD disc sales ran significantly below that of DVD sales; 8.3 million HD discs vs. 16.3 milion DVDs. Now, there are a number of reasons why the growth of DVD sales was much faster than that of HD discs:

• DVDs were clearly superior to VHS cassettes, while HD discs are far less of an improvement over DVDs.
• HD discs are of value only to those consumers who already have a HD television set, of which only 26.5 million households in the US (out of 111 million total, according to Nielsen) have at least one.
• Many consumers can't tell the difference between movies on HD discs and DVDs.
• The format wars caused many consumers to delay purchasing either format until a winner arose.

Now that Blu-Ray is the winner, consumers don't have to choose between formats, but there's still the issue of the evolving Blu-Ray standard. In order to get the interactive features of BD Live (Internet connectivity, games, forums, etc.), Blu-Ray players have to conform to Profile 2.0 or greater. Unfortunately, the only player on the market right now that can meet Profile 2.0 is the Playstation 3, and even it will require a firmware update later this year in order to get BD Live functionality. So, smart consumers won't rush right out and buy a Blu-Ray player, unless they're already buying a Playstation 3.

The biggest issue, however, is whether electronic distribution will make Blu-Ray obsolete before it has a chance to take hold. As a Comcast subscriber, I can already see some VOD movies in HD; I can also rent HD movies on my Apple TV. As I write this, a partnership between Microsoft and Netflix is being rumored; this will get Netflix's streaming catalog, including some HD titles, onto Xbox 360s. If I can rent a movie electronically for a few dollars (and even see it at the same time that it's in theaters, as I did with "4 Months, 3 Weeks and 2 Days" last weekend on Comcast,) why do I need to buy or rent it on physical media?

If the Blu-Ray and HD DVD contingents had settled their quarrel two years ago, before either of them came out, the unified standard would have had two years to establish itself in the market. Today, I honestly can't recommend that anyone buy a Blu-Ray player unless they're buying it for some other reason (such as playing games on the PS3,) and thus will get the Blu-Ray capability "for free."

The New Medium: One Perspective

Michael Wolff,Vanity Fair,user-generated contemt,UGC,reality television

In the March, 2008 edition of Vanity Fair magazine, Michael Wolff addresses the decline of the film and television industries as a result of the wholesale shift away from plot-driven narratives. I'll pull one quote from the article that summarizes his point:

"...nobody, writers or executives, remotely has an idea about how to do what they do, how to apply their trade—creating these elaborate, hoary, three-act or four-act divided-at-the-midpoint stories—in a new form with a new means of distribution for an audience that seems more and more to want some radically different thing."

Wolff isn't quite sure what that "radically different thing" is, and neither am I. He lumps together reality television, user-generated content and videogames, when those are different forms (although one can argue that that reality TV and UGC are often more alike than different.) Writers aren't going away, but what they write is changing dramatically. Will the three-act form finally go the way of the dodo?

Add One: Samsung's Soul

Samsung,Soul

In my previous entry, I missed one new 5 Megapixel phone, the Samsung Soul. The Soul was apparently the hit of the show; in addition to its 3G chipset and 5 MP camera, it has a touch-sensitive display with haptic feedback and navigational/function icons that change in context with what you're trying to do (it's easier to see than to describe, so you'll find more details here.)

I'm now following cameraphones...

Mobile World Congress,GSM,Nokia,Samsung,Sony Ericsson,Microsoft,Danger,Android,Google,T-Mobile,Sharp,Motorola,Apple,iPhone

Given the content of my previous post, I've decided to start following developments in camera phones. (Yes, I know, it's about time.) This is a good time to start, as the Mobile World Congress, covering everything to do with GSM, started today in Barcelona. So far, the state-of-the-art seems to be 5 Megapixel phones, new versions of which were announced by Nokia (the N96 and 6220 Classic), Samsung (the G810) and Sony Ericsson (the G900 and C902.) (Note that I'm not including launches of phones with 3MP cameras; if I did, the list would include three new models from LG.)

You may have also heard that Microsoft purchased Danger, the company that created the Sidekick phone for T-Mobile and other operators. (Danger's co-founder now works for Google and manages the Android mobile phone operating system project.) Danger farms out manufacturing to companies such as Sharp and Motorola, but this acquisition firmly puts Microsoft in the handset, not just the operating system, business. However, Danger has a miniscule share of the overall smartphone market, so it remains to be seen if Microsoft will actually market its own phones (and go head-to-head with Apple's iPhone) or use Danger to create reference designs that it will then license to other companies.

Short-Form Video via Phone

jeff jarvis,beet.tv,nokia,n82,qik.com

I've been catching up with Jeff Jarvis's dispatches from Davos, along with an interview that he did with Beet.TV concerning his new video dispatches.

Click To Play

Jarvis has been doing video interviews with the Nokia N82, which has been customized by Reuters and Nokia to accept an external microphone; the interviews are streamed live to the Internet via qik.com. With the exception of the microphone adapter, everything is standard and is available today.

I've been unimpressed with the quality of pictures taken by camera phones, as well as the user interfaces used to control the cameras. I haven't been able to play with the N82, so I can't comment on either the camera phone's quality or ease-of-use, but Jarvis is quite enthusiastic. In any event, the N82 gave him an almost transcendent ability to get interviews with the likes of Sergey Brin, Bono and Hamid Karzai. The camera phone has become such an integral part of day-to-day life that it almost disappears from the conversation, in a way that even small camcorders can't. It reminds me of when I took one of JVC's first DV camcorders to Canada in 1996; it was so small and light that most people didn't even think that it was a camera, let alone a camcorder.

The output of these camera phones won't look like something that's been shot by a conventional three-person crew (camera/sound/reporter,) but it doesn't have to. Short-form video is developing into its own medium, one that has very different quality expectations than either film or broadcast television. Are these camera phones the "Brownie" cameras of this new medium?

Avid & Apple Withdraw From NAB--What Does it Mean?

apple,avid,yamaha,roland,creative,sony,thomson,harris,m-audio,digidesign

Earlier this week, Apple confirmed the rumors that it’s not going to exhibit at NAB this year. This comes on the heels of Avid’s announcement that it would pull out of this year’s show. Both announcements spawned a variety of speculations about the reasons behind their departures; said speculations will now be added to by myself.

To me, Avid’s announcement that it’s withdrawing from NAB is far less important than the announcement of the company’s new Chairman and CEO, Gary Greenfield. Here’s Mr. Greenfield’s bio, from the press release announcing his appointment:

“Greenfield has been CEO of GXS since 2003, a leading worldwide provider of business-to-business integration, synchronization and collaboration solutions. Since December 2003, he has also been an operating partner with Francisco Partners, a leading technology-focused private equity firm.

Previously, he served as CEO of Peregrine Systems where he managed the restructuring of their business; president and CEO of MERANT; and while CEO of INTERSOLV, they merged with Micro Focus to form MERANT. He has experience growing businesses both organically and through acquisition, managing development, marketing and operations, and serving diverse customers from small businesses to the Fortune 500.”

I don’t see any experience with audio or video production or post-production in his background; in other words, he doesn’t know the company’s business. He does, however, know how to restructure businesses. My bet is that he’s going to split up the company and sell pieces to the highest bidders. Yamaha or Roland would be potential bidders for Digidesign and M-Audio, Creative Technologies might snap up M-Audio and/or Pinnacle, and Sony might take all three. As for Avid, I think that Sony, Thomson or Harris are the most likely bidders.

The speculation that Avid might buy Apple’s media products, or anything else, is silly under the circumstances. They’re trying to clean up the company as a result of previous acquisitions that made little sense (Pinnacle being the best example), as well as failures to deliver promised products; acquiring yet more products would be counterproductive.

Apple’s move to exit NAB is more interesting. A company spokesperson stated that the company’s decision was made, in part, because it has a very effective way of reaching users through its Apple stores. I think that’s one reason, but I also think that exiting NAB allows Apple to change its development schedule to better fit reality. There doesn’t necessarily need to be a major new version of Final Cut Studio every year; features can be added and bugs fixed incrementally. I believe that Apple is fully committed to being in the media creation tools business; the company’s success, especially in the video field, has been at the expense of both Avid and Adobe.

At one time, I thought that Apple might purchase a video or audio hardware company to better compete with Avid; both AJA and MOTU were potential candidates. However, I think that Avid’s failure indicates that Apple has the correct strategy right now: Stay out of the hardware business, and support the most popular products out there.

I’d bet that twelve months from now, Avid will either be a much smaller company or only a brand name within another company’s product portfolio, and Apple will still be in the media creation and post-production business with its suites of video and audio software.

The Writers' Strike: Inertial Guidance in Action?

writers strike,producers

As I write this, the Writers Guild of America strike against the Association of Motion Picture and Television Producers has been going on for more than five weeks. Production on most scripted television shows has stopped; all but a few of the late night talk shows have been in reruns since the strike began. Motion picture production is still continuing, although a number of films have been postponed.

I've read the WGA's proposals and the producers' counterproposals, and frankly, I don't see anything in what the WGA is asking for that will dramatically impact either the producers' profitability or their ability to do business, on the Internet or anyplace else. Of course, with negotiations coming up with both the Directors Guild and the Screen Actors Guild, the producers don't want to set precedents that will cost them far more money if they make similar concessions to those unions.

Even if the producers manage to beat back the WGA, there's no guarantee that SAG, which has far more power, won't ask for the same things, and put the producers right back to where they are today. Iin fact, the situation will be even worse, with all production suspended. So, why aren't the producers trying to get a compromise with the writers now?

In my opinion, the reason is that this is the way that the producers have always dealt with the writers, and they're not going to change, even though it's clearly in their best interest to do so. This is inertia. We've seen the effects of inertia on American business many times before:

• The consumer electronics business was once dominated by U.S. companies. After World War II, Japan had a reputation for making shoddy products, and U.S. manufacturers discounted their ability to ever compete effectively. Of course, we know what happened--the Japanese flooded the world market with superior products at low prices. Rather than aggressively lower their own cost structures and improve quality to compete with the Japanese, U.S. manufacturers sued, charging that the Japanese were dumping color televisions in the U.S. at below their cost. Some Japanese manufacturers were penalized, but ultimately, all the U.S. consumer electronics companies were either acquired (for example, RCA by Thomson of France, Motorola Quasar by Matsushita of Japan and Zenith by LG Electronics of South Korea) or went out of business.
  
  
• The U.S. was also once the world leader in steel production, but by the mid-1970s, management had completely lost control of costs. In some cases, steel was being manufactured in plants with furnaces that were over 100 years old. The Japanese entered the U.S. market with better products at a lower cost, and as with consumer electronics, rather than build new plants and renegotiate labor contracts to get costs down, U.S. steelmakers sued to keep the Japanese out. That strategy worked for only a short time, and in the early 1980s, the U.S. steel industry collapsed. A handful of companies survived and built plants that could compete, but the Rust Belt was decimated. Whole towns looked like a neutron bomb had exploded--the buildings were still there, but the people were gone.
  
  
• The recording industry is "circling the drain." Rather than respond positively to the advent of MP3s and file sharing, they chose to sue their own customers, charging them with piracy. They're still making only half-hearted attempts to come to terms with this new environment.

The motion picture and television companies have generally done a much better job than the recording industry in adapting to the Internet, but their arguments about not yet understanding the value of Internet content are just silly. Viacom is suing Google for one billion dollars for unauthorized use of their content, and NBC Universal removed its content from iTunes because it wasn't making as much money as it thought it should, but both companies are pleading ignorance about the value of Internet content.

Marc Andreessen thinks that a long writers strike could result in a Silicon Valley-style economy in the entertainment industry. I don't think that the strike by itself will precipitate that outcome, and the film industry is incredibly resilient--the major studios "melted down" in the 1950s with the one-two punch of the advent of television and the loss of their theater chains, but they still survived. Nevertheless, the major media companies are going down the same path as consumer electronics, steel and music. By the time they stop suing people and "taking their ball away," and start making the radical changes to their businesses that will be needed for survival in the 21st Century, it will probably be too late. We're nearing the point at which the "wire" used to get content, whether it happens to be cable, twisted pair, fiber or wireless, will be completely unimportant. Physical media (CDs, DVDs and the blue laser bombs,) for all intents and purposes, will go away. Content will be consumed any time, anywhere. User-generated content will become a permanent, and major (if not dominant) part of the media landscape. Self-distribution will be the norm rather than the exception.

The major media companies are at a crossroads, one that will be exacerbated by probable back-to-back strikes by writers and actors. I honestly think that there are some senior managers in these companies who don't have their heads in the sand, and who, if given the chance, could help their employers make the next evolutionary step. Whether they're given that opportunity is an open question.

Opportunity 3: Video Editing

video,editing,Avid,Adobe,Apple,Pinnacle

Lord knows there are many, many choices for video editing software. Most of them follow the "timeline and bins" model popularized by Avid almost 20 years ago. Avid and similar platforms from Apple (Final Cut Pro) and Adobe (Premiere Pro) now dominate professional video and film editing. And, up to the YouTube era, even consumer editing software looked like Avid (Pinnacle Systems, one of the leaders in the consumer business, is actually owned by Avid.) However, there's a dawning recognition that most video editing programs are simply overkill for consumers.

Apple's iMovie 8 and Adobe's Premiere Elements 4, the most recent versions of each company's consumer editing software, have adopted a much simpler user interface. They're both a lot easier to use than previous versions, but they're also much less flexible.

On the other hand, Pinnacle's latest package, Pinnacle 11, has gotten even more sophisticated; the Ultimate version comes with hundreds of special effects, noise reduction, music composition software and even Chroma Key capabilities with an included green screen.

The job of a video editing package, or any tool, is to make it as easy as possible to get the results that you want. Any director or editor will tell you that they actually use a very small number of video transition--fades and cuts--when they're editing. Yet, the sophisticated consumer editing packages have hundreds of transitions (wipes, 2D and 3D effects,) the vast majority of which never get used. They add to the complexity without adding any real value, but they look great on the box.

Pick up a copy of any consumer-oriented video magazine, and you'll see dozens of articles and ads that assume that readers want to be the next Spielberg. but I really don't think that's the goal of most videomakers in the YouTube era. If the continuum runs from Daddy and Mommy wanting to show how cute their new baby is on one end, to the next Steven Soderbergh on the other, most people are somewhere in the middle. They want to entertain and communicate, and they want their videos to look and sound good. For them, the "easy" software (including online services such as Adobe Premiere Express, Eyespot, Flektor, Jumpcut, Kaltura, Motionbox and One True Media) isn't enough and the "complex" software is too much.

Thus, the opportunity that I see is for editing packages that work the way real editors do, with enough functionality to produce good-looking results in a minimum of time, but without all the unnecessary "gingerbread" of the high-end consumer packages. Could someone "de-feature" an editor such as Pinnacle 11, write it in Flash or Java, and make it an online service? At IBC, Forbidden Technologies launched a service called FORscene, which is a step in the right direction, but there's lots of room for innovation.

Opportunity 2: Video Search and Discovery

video,search,discovery,metadata,tags

Video Search and Discovery are two very important, and closely related, functions: Discovery is when you want to find something to watch, and search is when you want to find something specific to watch. When I was writing the report on Internet Video for MRG, I wanted to illustrate the problems with video search, and I decided to do a very simple search, on the word "Panama." There are lots of things containing the word Panama: Panama the country, the Panama Canal, Panama hats, etc., but I was interested in the country and things related to the country.

I started with a text search using the Google engine, and sure enough, the first page of the search was exclusively related to the country and things in the country (including the Canal.) I then did the same search with a variety of video search engines: YouTube, Dabble, Truveo and EveryZing. (After the report went to press, I did the same test with blinkx, and got similar results.)

YouTube and Dabble gave the best results--everything was either related to the country Panama or had been produced in the country. Blinkx returned videos about Panama, the Canal, Panama City, Florida, and three versions of the Van Halen song "Panama." Truveo came up with a seemingly random list of videos with the word "Panama" somewhere in the title, description or tags. And EveryZing was the worst--it relies on speech to text recognition, and it completely misrecognized the speech in the videos it returned. Not one of the videos had anything to do with Panama.

Good video search relies on two components:

1. The metadata (title, description and tags) associated with each video, and
2. What the search engine does with that metadata.

Search engines like Google and Yahoo! have it relatively easy--they can use all the text in a page in order to index the page's content. The more text they've got, the more accurately they can index the page. However, to automatically index videos, you have to rely on the amount and accuracy of the metadata, not the content of the videos themselves. In my experience, search engines like EveryZing that reply primarily or exclusively on speech-to-text recognition simply aren't "ready for prime time."

YouTube gives good (not great) results, because it processes whatever metadata is available with Google's search engine. Dabble gets equally good (some would say better) results because individuals review and tag all the videos, and better metadata means better results.

In my opinion, however, no one has "cracked the code" for video search. This remains an area of tremendous opportunity for at least three companies (the companies that will eventually be bought by Google, Yahoo and Microsoft.)

Discovery is the other side of the coin. It's what you do when you're "channel surfing," or when you're scanning through an Electronic Program Guide (EPG) to find something to watch. EPGs have been around for many years, and they've worked very well. However, as the number of channels increases and Video-on-Demand (VOD) services become more popular, it gets harder and harder to find something to watch with an EPG. Including HD and music channels, many cable, satellite and IPTV systems now have channels into the 900's. How is a viewer going to browse through so many choices?

Companies are working on solutions to make video discovery easier and more intuitive. Hillcrest Labs in the U.S. and Ruwido in Austria have developed custom remote controls and software designed to make it simpler to navigate large libraries of broadcast and VOD content.

At the recent IBC conference in Amsterdam, Orca Interactive of Israel was claiming that "the EPG is dead." They and other companies have licensed collaborative filtering software called ContentWise from Neptuny of Italy. ContentWise both enables viewers to specify the categories and keywords that they're interested in and monitors actual behavior to determine viewers' interests. Then, programming that meets the viewer's interests as determined by ContentWise is offered on-screen, using a "cross-hair" display instead of the typical EPG table of channels and programs.

At IBC, we were assured that ContentWise won't be susceptible to "Amazon disease". If you're an Amazon customer, you know what I'm talking about--you purchased a book for a friend as a gift years ago, but Amazon keep trying to sell you similar books, and there's no way to stop it. The analogue in this case would be if your grandmother came to visit, and watched "Lawrence Welk" reruns on Public Television. Then, ContentWise kept recommending shows with accordion players. Both Neptuny and Orca assured us that viewers can go in and delete shows from their watching history. Nevertheless, I'll believe it when I see it.

As with search, no one has found the "holy grail" of 21st century video discovery yet, and the company (or companies) that do will have a tremendous opportunity to license their technology.

Opportunity 1: Monetization

If there's anything that Internet video sites need to figure out, it's how to make money. Today, it's clear that the way to make money is through advertising, rather than trying to sell access to your content to viewers. You can either persuade viewers to come to your site, or place your content on popular sites where lots of viewers already go.

There are two reasons to distribute video content hither and yon:

1. Drive viewers back to television screens, where they'll watch shows live or on a DVR, or
2. Sell advertising on the video content.

If you're pursuing Scenario #1, all you really need are some bumpers at the beginning and end of the video to let viewers know the name of the show that they're watching, and when they can see it on television. If you're pursuing Scenario #2, however, you've got to accomplish several things:

1. The advertising has to go with the video wherever it goes, and it should be very difficult to separate the two.
2. The advertising should be updatable, so that if the video gets played six months from now, it plays an ad for a campaign that's running then, not a campaign running now.
3. The video should be able to "call home," to provide at least basic information about when and where the ads were seen.

YouTube, VideoEgg and blip.tv have all deployed video advertising systems that can perform these three functions, but all three systems are "closed": Both the videos and the ads have to be served by the same company. VideoEgg and blip.tv are far more hospitable to independent video producers and sites than is YouTube, which really can't be bothered to negotiate with anyone much smaller than, say, Viacom. But, wouldn't it be nice to have a third-party solution that would perform all the needed functions without tying you to a specific video host or advertising network?

At IBC, I ran across a company called Adjustables (www.adjustables.com), with offices in The Netherlands and Sunnyvale, CA. They've come up with a third-party video overlay design tool and ad server that works with both Windows Media and Flash Video files. (A plug-in has to be installed into the Windows Media Player in order to support the Adjustables content.) Their product helps content providers to monetize their video content without locking them into one hosting vendor or ad network.

In short, the monetization opportunity is to provide a platform for producing and distributing in-video advertising that meets the three criteria described above, and that gives the content producer or Internet video site operator the flexibility to choose their own hosting services and ad networks.

The Three Opportunities in Internet Video

I'm taking a few days' break after months of 1) Finishing my report on Internet Video for MRG, 2) Inteviewing dozens of industry executives at IBC, 3) Meeting with IPTV service providers in France, and 4) Completing the fall Market Leaders Report for MRG. During my break, I want to catch you up on some of the industry trends that I've seen.

While I was writing "Internet Video for IPTV Service Providers," I came across three opportunities that are being addressed, but could be addressed far better. Whoever succeeds in solving these problems will be in a position to make a lot of money, through revenues and/or an acquisition. So, here are my "Big Three":

1. Monetization (a big word for advertising)
2. Video Search & Discovery
3. Editing

I'll use the next three entries to discuss each of these opportunities in detail.

Hello, Hulu!

News Corp and NBC Universal just announced the name of their Internet Video joint venture: Hulu. Not Hello or Hula, but Hulu. Apparently, this will be big in Malaysia; according to Wikipedia, Hulu Terengganu is a place in Malaysia. Everywhere else, it will cause people to scratch their heads.

The good news is that there's synergy with Vudu, the VOD set-top box company in Silicon Valley that's coming out of stealth mode. If the companies merge, you could get HuluVudu, maybe with a pupu platter on the side.