eBooks: After the transition

In my last post, I examined the impact that eBooks have had on the publishing industry, and I noted that things are just getting started. Most industry observers agree that eBooks now comprise around 20% of book sales by unit volume. The Forrester Research/Digital Book World survey of U.S. publishers I wrote about found that the single largest group of respondents believes that eBooks will comprise 50% or more of total book sales by sometime in 2014.

What will the book industry look like when today's ratio of eBook to print book sales is reversed--when 80% of book sales by unit volume comes from eBooks? I'm not willing to guess when the industry will get to that point, but I have no doubts that it will get to that point eventually. Here are some likely results of the transition:

• Print books will be much more expensive: As anyone who's purchased large print jobs, from business cards to books, will tell you, the unit cost for printing decreases dramatically as the size of a print job increases. It's sometimes no more expensive to purchase a larger print run than a small one, even if you end up recycling some of the printed materials rather than using them. The reason is that set-up costs are the same whether you're printing a small number of items or a large number, and that set-up cost is spread over the total number of items that you print. Books encounter additional set-up costs for binding, especially for hardcover books.
  
  Companies such as Kodak, HP and Xerox are major players in the print-on-demand market, using digital presses rather than offset or letterpress in order to make small runs economical. However, some of the costs, such as binding, remain, no matter what method is used to print. Even with digital presses, it's not going to be possible to make short-run books at the same unit cost as large-run books. We're already seeing this effect, as the "Big 6" publishers are using agency pricing to boost the prices of their eBooks in order to offset the lower profit margins they're getting on print titles. That's with 20% of sales going to eBooks. When eBooks comprise 80% of sales, publishers aren't going to be able to hide the true cost of printing and binding books.
• Nevertheless, print books will still be around: Even though print will be more expensive, I have no doubt that print books will survive, just as vinyl records have achieved a renaissance thanks to audiophiles and nostalgia buffs.
• Publishers will only commit to print runs for their "sure-fire hits": Just as the movie industry is fixated on producing sequels and movies based on existing successful books, television shows and comic book characters, major publishers will only print books that are from well-known, previously-successful authors, as well as new authors who are well-known from other arenas, such as television, movies, sports and politics. All of their other titles will be published as eBooks first, and will get print runs only if they're justified by customer demand.
• Bookstores will be very different: In the U.S., there will be far fewer Barnes & Noble bookstores, and the ones that remain will be much smaller. As I wrote some time ago, they're likely to be cafes with bookstores inside them, rather than bookstores with cafes inside them. They'll still carry some print books, albeit a much smaller selection. Big touchscreen displays will give customers a similar experience when shopping for eBooks that they have today when shopping for print books: They'll see bookshelves with book covers, and with a flick of a finger, they'll be able to see the back cover, inside covers, and leaf through the book, just as they can today with print books. With another few touches, they'll be able to buy the title as an eBook and download it instantly, or for some titles, purchase it in a print version that will be shipped directly to their home if it's not in stock at the store.
  
  As for independent bookstores, there will also be fewer of them, but the ones that focus on used books will do quite well. Used titles will be much less expensive than new ones, so for price-sensitive customers and those who have to have print books, used bookstores will be their best choices.
• Today's black & white eReaders will be a thing of the past: All eReaders and tablets will use color displays. In the case of eReaders, they'll use low-power displays such as Qualcomm's Mirasol and E Ink electrophoretic color displays; tablets will use LCD and OLED displays. The functionality of the devices will be more similar to each other than they are today; both eReaders and tablets will be able to handle audio, video and interactivity. The primary differences will be in battery life and cost.
• The "Big 6" will become the Big 3 or 4: Just as in the music industry, where financial problems have resulted in a wave of consolidation, we're almost certainly going to see consolidation among the "Big 6" publishers, as well as publishers in every market segment: Business and professional books, children's books, religious books, K-12 and college textbooks.

I would argue that most of these developments are already underway, and the ones that aren't will start once eBooks pass 50% market share. As I wrote in my last post, anyone who doesn't believe that eBooks will result in revolutionary changes in the book industry is fooling themselves.

eBooks: Reality sets in for publishers

Forrester Research and Digital Book World released some details yesterday of a survey of book publishers representing 74% of U.S. revenues. According to the survey conducted late last year, publishers are actually getting more pessimistic about the future as eBooks become more important. In a similar survey in 2010, 66% of respondents said that they expected that more people would read eBooks than before; in 2011, only 47% gave the same answer. When asked whether eBooks would cause people to read more books than before, 66% of respondents answered "yes" in 2010, while 60% answered "yes" in 2011.

29% of 2011's respondents believe that eBooks will comprise 50% of all book sales in 2014; 22% of the respondents believe that eBooks won't reach the 50% mark until 2015 or later. 82% of respondents are "optimistic" about the digital transition, but while 51% of respondents in 2010 believed that their companies would be stronger as a result of eBooks, only 28% believed so in 2011.

These are only a handful of responses from what is undoubtedly a much more detailed survey, but they suggest that publishers' mindsets are changing. In 2010, many publishers believed that eBooks were only another "binding"--another way to consume books--and that they didn't represent a fundamental change. Since then, however, you'd have to be living under a rock not to recognize that eBooks are changing just about everything about the book industry:

• eBooks are continuing to cannibalize print sales. Last year, eBook sales more than doubled over 2010, but sales in every category of print books tracked by Nielsen Bookscan were lower in 2011, from a drop of 3% for hardcover adult nonfiction to a 24% decline for mass market paperbacks.
• According to USA Today, for the week including Christmas 2011, 42 of the top 50 titles sold more eBook than print copies (this compares with 19 of the top 50 titles for the same week in 2010).
• When customers walk into the biggest bookstore chain in the U.S., Barnes & Noble, the first thing they see is no longer a table stacked with new print arrivals. Instead, it's a display of Nook eBook readers and tablets, staffed full-time by a salesperson.
• Self-publishing, which was once the domain of vanity presses and the last refuge for writers who couldn't get a contract with a publisher, is now a viable option for writers--even those who could get a conventional publishing deal. It's now possible for authors to sell a million copies of their self-published eBooks.
• The tasks performed by publishers, including acquisition editing, copy editing, book cover design, book layout, typography, format conversion, distribution of eBook masters to resellers and printing, are now being done by contractors, service suppliers or the authors themselves.
• Amazon, which represents both the biggest customer and the biggest frustration for many publishers, got into publishing in a big way in 2011 with five imprints. Amazon is willing to pay top dollar to sign authors such as Tim Ferriss and Penny Marshall, and to acquire backlist titles. 

Publishers are beginning to understand that things aren't going to go back to the way they were before the Great Recession, and that eBooks are much more than simply another way to consume books. They may not represent as shocking a transition as the effect of television on the movie industry during the 1950s and 60s, but eBooks' impact on the book industry will be dramatic, especially given that we're still early in the transition from print to digital. What will things look like on the other side of the transition? That's the subject of a future post.

Vizio launches $99 Google TV set-top box

Dan Rayburn of StreamingMedia.com reports that Vizio's new Google TV-based Stream Player will ship in the first half of 2012, and will be priced at $99 (U.S.). According to Rayburn, the set-top box will only be sold directly by Vizio from its website, but I don't expect that to last--Vizio sells too much product through resellers such as Costco for the company to ignore that channel.

The VAP430 Stream Player uses the new ARM-based Google TV architecture, and Vizio has reskinned Google TV's user interface. It will have HDMI in and out (so it can be connected to a receiver or A/V amplifier in-line with another set-top box or other device without taking up an additional HDMI port), Ethernet and Wi-Fi interfaces, and a USB port that can be used to connect an external hard disk (only for playing, not recording, audio and video). It will also come with a universal remote control with both IR and Bluetooth outputs. The device will support 1080P video in and out, and Vizio claims that the device will have sufficient bandwidth to support 3D streaming.

Vizio has confirmed that the Stream Player will support Netflix, Amazon Instant Video, Hulu Plus, HBO Go (for existing HBO subscribers), YouTube, Pandora, Technicolor's new M-GO streaming video service, and others. Additional services will be announced by the time the device ships.

On paper, Vizio has hit all the right notes: The Stream Player will be priced competitively with Apple and Roku, it will run a more polished version of Google TV, and it can be connected in-line with the user's existing cable, satellite or IPTV set-top box, instead of requiring a separate HDMI connection. It remains to be seen how well the device works when it gets into the hands of consumers, and whether Google and Vizio have smoothed out the many rough spots in Google TV's user interface. If it works well, it'll help put Google TV back into the thick of the over-the-top set-top box competition.

JVC's 4K $5K Camcorder

After showing it at the 2010 NAB Conference as a non-working mock-up and at the 2011 NAB show as a working prototype, JVC has formally announced the first prosumer 4K camcorder, the GY-HMQ10, at CES 2012.  The GY-HMQ10 records at 3840 x 2160 resolution, or four times the resolution of a conventional 2K (1920 x 1080) camcorder, using a single 1/2" CMOS imager and a fixed 10X zoom lens. It supports frame rates of 24P, 50P and 60P. The camcorder can also record in 2K mode for compatibility with existing infrastructure at 50/60P and 50/60i.

The camcorder uses AVCHD compression...but the AVCHD standard doesn't support 4K. To do it, JVC splits the 4K image into four 2K images that it records and compresses simultaneously using the company's new Falconbrid processor. Each 2K image is compressed at 36Mbps, for a total bit rate of 144Mbps. Each 36Mbps stream is then recorded on its own dedicated SDHC card. So, yes, the HMQ10 has four memory card slots. For live broadcasts and external recorders, the HMQ10 has four (yes, four) HDMI outputs. The camcorder can also down-convert the 4K images to 2K on the fly, so if 2K is all you need, you can use a single SDHC card and HDMI interface. It's also got two XLR microphone inputs.

Does it work? I saw footage that was shot on JVC's prototype at NAB last year, using a true 4K monitor. The picture quality was stunning, but there was no way to test the camera under real-world operating conditions--panning, zooming, low light, etc. So, how much would you pay for all this? When the camcorder ships in March, JVC plans to charge $4,995 (US). That's right--$5K for a 4K camcorder. The 4K mode isn't terribly practical today, and with a 1/2" imager and without a removable lens, the HMQ10 isn't going to be as flexible as a camcorder like Sony's FS100 or Panasonic's AF100/101. Nevertheless, 4K for $5K? That's pretty amazing pricing.

Desperation time: Warner Bros. doubles the waiting time for DVDs

All Things Digital reports that Warner Brothers is set to double the delay between the time that DVDs and Blu-Ray discs go on sale and when they're available for rental through Netflix, Redbox and Blockbuster from 28 to 56 days--almost two full months. (In a separate decision, Warner Brothers' sister division HBO has decided to stop selling DVDs to Netflix altogether, requiring the company to purchase the movies at retail price.)

Warner Brothers' plan is very likely to anger consumers but have no substantial effect on DVD sales. The reason is that consumers who are already unwilling to pay for a DVD in order to see it a month sooner aren't likely to be willing to pay for it in order to avoid a two-month delay. Under Warner Brothers' new plan, movies will hit the rental and pay-TV/video-on-demand markets at about the same time. The plan could actually backfire and lead to lower wholesale sales of DVDs and Blu-Ray discs, since Netflix, Redbox and Blockbuster may purchase fewer copies due to the increased competition from video-on-demand and streaming services.

Warner Brothers and other studios can't turn back the clock and can't change the economy. They might be able to make their plan work, if they make UltraViolet versions of their movies available without having to first purchase the movies on DVDs or Blu-Ray, at a reasonable price and with a much simpler process than they have today. That would make services like Warner Brothers' Flixster a real alternative to Netflix, rather than an ill-conceived tool for decreasing piracy.

Reality bites: Google replaces Intel with Marvell for Google TV

Earlier today, The Wall Street Journal reported that Marvell has replaced Intel as the lead chipset supplier for Google TV. The deal is non-exclusive, but the bigger news is that Google has replaced Intel's X86 architecture with ARM, which is supported by Broadcom, nVidia, Samsung and Texas Instruments, along with Marvell and others. When the first Google TV devices were released by Logitech and Sony, it was clear that they were far too expensive for the market; for example, while Apple was selling Apple TV for $99 (U.S.) and Roku's set-top boxes were priced at $99 or less, the Logitech Revue was launched at $399. In order for Sony and Logitech to be competitive, they had to drastically cut prices and, in Logitech's case, take huge losses. (Logitech subsequently abandoned Google TV.)

By switching from the Intel architecture to ARM, Google TV's licensees will gain a less-expensive, lower-power platform that can compete with set-top boxes from Apple, Roku and others on both price and performance. They'll also get a choice of multiple processor vendors; for example, even though Marvell is the lead partner, there's nothing keeping Samsung from using its own ARM-based processors in its HDTVs, Blu-Ray players and set-top boxes.

In short, this is the move that Google should have made from the beginning. With lower-priced set-top boxes, the ability to run apps and an operating system based on a more modern version of Android, Google TV 2.0 should be significantly more successful than the original version. At the very least, it has a chance for survival, instead of being "dead on arrival".

Best Buy: Another example of the "self-inflicted wounds" rule

Forbes.com has an op-ed post about Best Buy. It centers around a case of horrible customer service that the writer and his friend experienced a few days ago at a store in the San Francisco Bay area. They wanted to buy a copy of the Blu-Ray version of "How to Train Your Dragon", which is a Best Buy exclusive (when will the movie studios stop giving exclusives on hot titles to retailers and consumer electronics companies?). Best Buy's website said that the movie was back-ordered online but was in stock at a local store. They went to the store, only to find that the movie was out-of-stock. They weren't offered a rain check or even an apology. When the men shopped for another Blu-Ray disc at the store, an unkempt salesperson came over and tried to sell them a television service (they never found out exactly what he was selling). They finally found a movie to buy, only to realize when they got home that, with all the irritation, they'd picked up the wrong one. When they came back to return the unopened disc, they were told that all software sales are final and were refused a refund.

Just about everyone I know who shops at Best Buy has a customer service horror story. Last year, I went there to buy a point-and-shoot camera. They had the model I wanted on display, but when I told a salesperson that I wanted to buy one, he told me that it was out of stock. He said that another store had it, and that they would ship it to his store, and I could come back in a day or two and pick it up. I told him that if I had to drive back to his store in a day or two, I could just as easily drive to the store that had it and buy it that day, or go online and have Best Buy ship it directly to my home. The salesperson insisted that I have the camera shipped to his store for pickup, most likely so that he could get credit for the sale, and I left without buying anything.

Shortly before Christmas, Best Buy told an unknown number of customers that it couldn't fulfill their online orders for products, some of which had been placed as early as Thanksgiving. Best Buy refuses to reveal the number of customers affected, or which products were involved. After Christmas, the company sent an email to its regular customers with a video from company CEO Brian Dunn. In the video, he thanked customers for their business and said that things would be "even better" in 2012. He didn't apologize for the holiday order snafu. Just a single sentence, such as "We're committed to improving customer service online and in our stores" would have indicated that top management is willing to admit that the company has customer service problems. Instead, the impression left was that Dunn and his team are in denial.

Most businesses that fail do so because of self-inflicted wounds, rather than competitors or the economy. Circuit City brought on its own failure, through a combination of poor locations, confusing store layouts, skimpy product selection and lousy customer service. Best Buy has a perfect example of what not to do from Circuit City's example, but it's going down the same path.

The best thing that the company could do is to close the stores that it plans to close in 2012 quickly, and then focus 100% on improving customer service:

• Improve employee training.
• Encourage good employees to stay with pay and benefits; don't repeat the mistakes that the company made in 2007, when it fired 3,400 of its most experienced (and highest paid) salespeople, replacing them with cheaper new hires, and in 2009, when it demoted as many as 8,000 senior sales associates to regular sales positions, with 25% to 50% pay cuts.
• Get rid of the third-party salespeople, or at least force them to stay at their stations (I was shopping for a laptop at Best Buy a couple of months ago, and a third-party Comcast salesperson came over and tried to sell me a Comcast subscription. I suspect that the person who interrupted the writer of the Forbes.com article was a third-party salesperson.)
• Implement whatever systems are necessary to avoid a repetition of the pre-Christmas order cancellations.
• Improve the accuracy of inventory counts on the Best Buy website, so that customers aren't told that products are in stock in stores when they're actually sold out.

The good news is that Best Buy has time to turn itself around, but it first has to acknowledge that it has a real customer service problem.

Is there a market for "enhanced" eBooks?

Shortly before Christmas, The Huntington Post published an interview with David Prichard, the President and CEO of Ingram's Content Group. Ingram is the largest book distributor in the U.S. and operates Lightning Source, which is one of the largest publishing-on-demand services companies, and a major vendor to self-publishers. In the interview, Prichard talked about the future of publishing, and one of the things he talked about were "enhanced" eBooks:

"Enhanced e-books are only in their infancy, allowing authors to add alternative endings or interviews. Down the road, who knows what's possible? Maybe we will have biometric devices that can sense your pulse and body temperature and change the plot based on your feelings -- and you think Stephen King is scary now." 

"...for example, a biography can to come to life in many ways. Jacqueline Kennedy: Historic Conversations on Life with John F. Kennedy has all of the interview audios, videos, photographs, text, and transcripts available. Even classics -- Penguin has updated Pride & Prejudice with clips from the movie and even instructions on dancing. For the 75th anniversary of The Hobbit, HarperCollins released an e-version with exclusives including J.R.R Tolkien's book illustrations and recently discovered Tolkien recordings. Publishers are still learning what added value readers will or won't pay for. I expect we'll continue to see lots of experimentation in this arena." 

Seth Godin, well-known author and marketer, responded on paidContent.org to Prichard's remarks:

"It (the interview) is filled with breathtaking visions of the future, and they are economically ridiculous. The Long Tail creates acres of choice, so much as to make the number of options almost countless. But at the same time, it embraces (in every format) much lower production values. For what Michael Jackson and Sony (NYSE: SNE) paid to produce the Thriller album, today’s artists can make and market more than 5,000 songs. You just can’t justify spending millions of dollars to produce a record in the long tail world." 

"The same thing that happened to music is going to be true of books. The typical e-book costs about $10 in out of pocket expenses to write (more if you count coffee and not just pencils). But if we add in $50,000 for app coding, $10,000 for a director and another $500,000 for the sort of bespoke work that was featured in Al Gore’s recent “book”, you can see the problem. The publisher will never have a chance to make this money back." 

"Sure, there will be experiments at the cutting edge, but no, they’re not going to pay off regularly enough for it to become an industry. The quality is going to remain in the writing and in the bravery of ideas, not in teams of people making expensive digital books."

Others have picked up on the discussion; for example, the Teleread blog summarized Godin's post, and as of now, every comment on the Teleread post opposes Godin's position. I agree with what Godin wrote, with some reservations. First, let's leave the "long tail" arguments aside--the long tail theory has largely been debunked. The long tail only makes money for distributors, who can aggregate small numbers of sales from a large number of publishers/writers/producers. However, the market is being flooded by titles from self-publishers, and it's harder than ever for consumers to separate the wheat from the chaff. Price is no longer an indicator of quality. The most likely outcome is that there will be a small number of titles that do well (as usual), and an ever-larger collection of titles that barely, if ever, earn back their investment in time and money.

Many of the Teleread commenters objected to Godin's statement that it costs "$10 in out of pocket expenses to write" an eBook. He doesn't include editorial, design and eBook conversion services, which can cost hundreds to thousands of dollars if an author farms them out, but that's not what the commenters objected to. Their concern was that Godin made no accounting for the value of the time that authors spend writing. I understand their arguments, but I'm not sure that they're realistic, especially in today's climate. In the 1990s, I wrote two computer books, one for Prentice Hall and the second for Ventana. The first one earned back its advance and sold around 12,000 copies domestically, as well as local-language reprints in a variety of markets. The second one was never released in the U.S., but was released by Ventana's partner in Japan as a local-language title. It didn't earn back its advance. Considering the time I spent writing the two books and the amount I earned, I would have made about the same amount on an hourly basis if I'd worked at Burger King. That's why I stopped writing books.

Your market value is what your customers or clients will pay for your time. In the case of a self-publisher, it's the income that you get from your title divided by the number of hours you spent working on it. If that number doesn't satisfy your financial requirements, you have to increase the number of copies you sell, change your pricing, or do something else that pays more money.

Now, to Godin's central point: Most publishers and self-publishers are very unlikely to recoup the additional cost for adding rich media and interactivity to their eBooks. His cost estimates may be off, but his logic is correct. The fact is that most "enhanced" eBooks to date have sold poorly. If you're creating a native app for iOS or Android and you have to hire developers to do it, that costs money. Even if you're sticking with, say, Apple's EPUB extensions for rich media, Barnes & Noble's extensions for Nook Kids, Kindle Format 8 (when it becomes available to all publishers) or, in the not-too-distant future, EPUB3, there's a cost in time and money for adding interactivity and rich media. For now, at least, you're unlikely to earn back that cost. Thus, the most reasonable approach is to create conventional eBooks.

At some point, enhanced eBooks will "crack the code" and become widely popular, and the additional front-end expense to produce them will be justified. Today, however, that's not the case.

Curation: Publishers' most important role

Book publishers perform many functions (some better than others, but that's a topic for another post). Some people believe that the most important thing that publishers do is edit manuscripts--both giving direction to the author and copyediting once the manuscript is complete. Others focus on sales and distribution--getting bookstores to carry their titles, and making co-op payments to bookstores in order to get display space at the front of their stores, along with better facings on the shelves. However, my opinion is that the single most important thing that publishers do is curation--selection of which titles to publish.

Yes, publishers often select and underwrite titles for a variety of reasons that have little to do with quality. They buy up the rights to titles (that are usually ghostwritten by professional writers) from celebrities and jump into hot markets with "copycat" titles, such as the endless stream of vampire-related books that followed the success of the "Twilight" series. However, they also impose basic quality standards on their writers, and they (usually) have standards about what they will and will not publish. To a knowledgeable consumer, seeing the Random House or Farrar, Straus and Giroux name on the spine (to take two examples) says that they're likely to get a well-written, well-edited book that's not going to be a waste of their time or money.

In the new era of self-published books and eBooks, most of the functions of publishers can either be farmed out or are irrelevant. Editing, copyediting and cover/book design can be contracted out or done by an experienced writer. eBook conversion can also be done by the writer or by a contractor. Printing can be done by any of a variety of companies. Distribution can be done by the author for eBooks; distributing print titles is more difficult, but can still be done through companies such as Ingram's Lightning Source, which deals with most of the world's major booksellers.

However, the one thing that neither a self-publisher nor companies that assist self-publishers does is curation. The writer of a book is the last person who can make an objective judgement about its quality--for better or worse, most authors are either far too hard on themselves or are deeply emotionally invested in their work. Self-publishing services companies are concerned with generating as much revenue as possible from self-publishers. That means not turning away any manuscript, no matter how poorly written, so long as the author can pay for their services. About the only thing that will keep a title out of Amazon's and Barnes & Noble's self-published eBook collections is if it's proved to be largely or wholly plagiarized, and even that doesn't happen very often.

Amazon and Barnes & Noble (and other booksellers) claim that their customer reviews provide a curation service for customers, but the reviews can be gamed:

• Authors can encourage their friends and acquaintances to post positive reviews, or they can pay people to do so.
• Consumers sometimes give extremely low ratings to books because they believe that they're priced too high (often, the consumers giving the ratings have neither purchased nor read the books).

There are also book curation websites, but none of them are widely popular, and they can be gamed the same way as the eBook retailers' sites. That leaves the tasks of curation and quality control to the publishers. To the extent that publishers abandon those roles, or de-emphasize them in favor of chasing celebrity and copycat titles, they'll give away their biggest advantage over self-publishers.

DRM: The product that (almost) nobody wants

A few years ago, I was an industry analyst covering the IPTV (Internet Protocol Television) industry--the video delivery technology used by Verizon (FiOS) and AT&T (U-Verse) in the U.S., and many other companies worldwide. One of the hardware segments of IPTV that I tracked was Digital Rights Management (DRM). When I came on-board, the retiring analyst whom I replaced warned me that the DRM vendors would probably cause me ten times as much grief as those in any other segment. He was right.

DRM is an unusual business: The companies that demand that DRM be used aren't the ones that pay for it. You can't distribute television shows or movies from any of the major television networks or studios unless you have an acceptable DRM system in place. The same is true if you want to distribute eBooks from most of the major publishers (O'Reilly is the biggest exception...in fact, O'Reilly demands that its eBooks be distributed without DRM.)

The movie studios, television networks and publishers often specify which DRM systems are acceptable, but they don't pay for them. That cost is borne by cable and IPTV operators, over-the-top video distributors (such as Netflix and Amazon) and eBook distributors. For their part, cable and IPTV operators have their own conditional access systems, and a nearly foolproof way of keeping unauthorized users from getting their content--in the worst case, they can send out a truck and disconnect the pirates from their network. However, that's not good enough for the movie studios and television networks, who want to make sure that their content can not only not be viewed by the wrong people, but that it also can't be copied.

Over-the-top video and eBook distributors are less concerned about piracy than they are about making their services extremely easy to use, in order to stimulate sales. They already require usernames and passwords in order to download content, which helps to insure that only those customers who are authorized to access their content can get it. They want DRM, but they don't want it to make their services hard for average consumers to use. The more hoops that consumers have to jump through in order to purchase, download and use content, the less likely it is that consumers will continue purchasing from those vendors.

Apple and Amazon developed their own DRM systems, which were designed to protect content while making access as easy as possible for consumers. Most other companies don't have the ability to develop their own DRM systems, and that's where third-party vendors come in. Content distributors want the cheapest DRM systems they can get that are acceptable to their content suppliers, because DRM adds no value for the consumer (it actually subtracts value), and it adds cost for distributors while offering little or no value. The only parties that it serves are the content providers, who don't pay for the DRM systems, implement them or deal with customer complaints.

This has created a field of third-party DRM vendors who are fairly paranoid. DRM vendors regularly compete on price, but some companies have chosen other approaches. Widevine, which was acquired in 2010 by Google, had several patents on its DRM technology and would threaten (and sometimes file) patent infringement lawsuits against competitors who were undercutting it on price. Widevine used the same tactics against market research and industry analyst companies that didn't report on the company the way that it wanted, or that put its competitors in a positive light. In the case of the company I worked for, Widevine demanded that we lower the installation counts that we had compiled for some of its competitors. When we refused to do so, it threatened to file suit against us. We easily could have prevailed in any litigation (simply going public with their threat would have been sufficient to destroy their credibility), but the owner of my company caved in and removed Widevine's name from our report, replacing it with "Anonymous". Shortly after, Widevine signed a consulting contract with us, hoping to have more influence over our reporting. When a subsequent report had installation counts for competitors that Widevine disagreed with, they again threatened to file suit, and my company's owner again caved into their demands. I demanded that the company take my name off the report and resigned shortly after, because I didn't want my reputation to be sullied. 

Another company, NDS (owned by News Corporation) refused to give us any numbers for its installed base, but after each report we issued, they would complain loudly that our numbers were inaccurate. When we said that we would be glad to adjust the numbers if they gave us installed base numbers that we could confirm, they said that they were under no obligation to give us any information. Given that they were unwilling to provide any evidence to support their complaints, we stuck with our numbers.

In short, DRM is a product that (almost) nobody wants, where the companies that want it don't pay for it, and most of the companies that are forced to pay for it don't really want it. That would be enough to make just about anyone a little paranoid.

My year-end waste of time: Predictions for 2012

I've decided to participate in one of the most potentially embarrassing annual blogging rituals: Predictions for the coming year. So, for what it's worth, here are my predictions for 2012, in no particular order:

eBooks and Publishing

• Both the European Commission's Directorate for Competition Law and the U.S. Justice Department will file suit against Apple and five of the "Big 6" trade publishers (Lagadere's Hachette publishing group, News Corporation's Harper Collins, Holtzbrinck's Macmillan, Pearson's Penguin Group and CBS' Simon & Schuster) for eBook price-fixing under the agency pricing model. Bertelsmann's Random House most likely won't be charged, because it joined in agency pricing long after the other five publishers. All the companies charged will strongly deny any conspiracy to fix prices, but they'll all eventually agree to a consent decree (and the European equivalent) before the cases go to court. The settlement will require Apple and the publishers to make cash payments for consumer damages, and the agency model will be discarded. eBook distribution will go back to the wholesale model.
• There's also a possibility that the U.S. government and European Union will use the antitrust litigation as a lever to force the Big 6 to make their eBooks available to libraries on commercially reasonable terms. Currently, only Harper Collins and Penguin make their titles available for library lending, and both companies impose significant restrictions.
• eBook sales in early 2012 will follow the same pattern as the last few years--there will be a huge burst of sales in January and February as millions of consumers who received eReaders and tablets as holiday gifts stock up on titles. However, the year-to-year growth rate in eBook sales will drop, due both to the increased share of eBooks as a percentage of all book sales and higher prices from the Big 6 publishers.
• Even though the growth of eBook sales will slow, print sales will continue to decline. Independent booksellers in the U.S. won't pick up the slack from the closure of Borders, nor will they make big strides in increasing their overall share of U.S. book sales.
• The Big 6 publishers' pricing policies will continue to encourage sales growth for smaller publishers and self-publishing authors, as consumers experiment with less-expensive titles and find that many of them are just as good as titles from the top publishers.
• While the number of titles from medium, small and self-publishers continues to grow, the Big 6 will continue to cut back on the number of titles that they release, focusing even more on pre-sold authors and titles, series and backlist titles that are reissued with a variety of value-adds.
• The "eSingle revolution" (short eBooks, no more than 50,000 words and typically 30,000 words or less) will grow, with more conventional book publishers offering titles. In addition, more media companies from other fields (magazines, broadcasting, cable and the web) will enter the eBook market with eSingles, either by themselves or in partnership with established book publishers.
• $99 will become the top-end price for dedicated eReaders sold in the U.S.; someone (probably Amazon) will go to $49-$59 for an entry-level model. The ad-supported/no-ads issue will become moot, as consumers show that they're perfectly happy with a cheaper, ad-supported eReader.
• The tablet market in 2012 will look very much the same as the market at the end of 2011: Apple will continue to dominate the high end of the market, with two lines of tablets: A new "iPad 3" (although I'm not sure that'll be its name) at the current iPad 2 prices, and the existing iPad 2, possibly with fewer storage and broadband options, at $100 or so below its current prices (for example, $399 for a 16GB model). At the low-end, a variety of tablets will compete in the $149 to $249 range, led (at least for the first few months) by Amazon. I wouldn't at all be surprised to see Barnes & Noble drop prices of both the Nook Color and Tablet by $50, to $149 and $199 respectively.

Cameras & Camcorders

• We're almost certain to see new cinema camera models from Canon in 2012. The prototype cinema camera based on the EOS body will be launched, as well as at least one new model in the C3XX range, with improved electronics including auto-focus, auto-aperture and auto white balance and 10-bit log output. The new EOS model could be announced as early as NAB in April, and the new C3XX model is likely to be shown at IBC in September.
• Panasonic's AG-AF100/101 is getting a little "long in the tooth", so I expect a refresh of the model in time for NAB in April. I also expect the GH3 to be announced in the first half of the year.
• Given all of Sony's 2011 EVIL, DSLR and camcorder announcements, I don't expect any big announcements from Sony in 2012.
• AVCHD 2.0 (also called AVC Progressive) will become ubiquitous on all new cameras and camcorders supporting AVCHD.

Motion Pictures

• We'll see major consolidation at the U.S. movie studios, like what we've already seen at Paramount, with even deeper cuts. Studios will become even more conservative about which titles they greenlight for production, continuing to focus on remakes, series and pre-sold titles (very much like the big publishers). This risk minimization strategy will lead to even more boxoffice and home video revenue declines.
• Online movie rental services such as Netflix and Amazon will continue to increase their share of home video revenues, but what could have been a huge win for Netflix will be a much more competitive market, due to Netflix's self-inflicted wounds from 2011.
• Studios will rethink the value of 3D given audiences' rejection of the format, and will put more effort into using 3D well on a smaller number of "event" titles. That means that 2D-to-3D conversion, which has never worked well, will go away. Studios will have to come to grips with the fact that 3D, like Blu-Ray before it, will not be their financial savior. Even well-done 3D won't save movies that audiences don't want to see.
• UltraViolet, the "online digital locker" system supported by most of the major studios, will fail to get significant market share, although the studios won't give up on it in 2012. Consumers will find it too hard to use, not worth the effort and not a compelling reason to go back to buying DVDs and Blu-Ray discs.
• With an handful of exceptions, independent films will reach audiences through VOD and online streaming services, not through theatrical exhibition or sales of physical media.

Rifles vs. shotguns: The GoPro advantage

The rule over the years for camera and camcorder manufacturers has been to make a model for every need and every price point. Canon, Nikon, Sony and Panasonic sell everything from inexpensive point & shoots to DSLRs. All but Nikon do the same with camcorders--prices run from around $100 for YouTube-focused models to upwards of $100,000 for digital cinema cameras.

The "model for every purpose and every pocket" approach means that, as a manufacturer, you won't miss a sale because you don't have a model that a customer can afford or can use, but it has some significant downsides. One is that it's expensive to develop new camera designs, both in terms of money and time. Canon's new C300 digital cinema camera took two years to develop, and that was considered a "fast track" project that required adapting the electronics from an older camcorder design in order to meet its deadline. In addition, as development budgets get strained, it's necessary to "milk" designs by releasing cameras that are minor variations on each other. Not to pick on Canon again, but the T2i, 60D and T3i DSLRs are very similar to each other, with minor differences in areas such as LCD mountings and video settings.

There's another side-effect of having so many models--features are deliberately left out of some lower-priced models in order to avoid cannibalizing sales of more-expensive ones. Sony is famous for this; for example, a big reason that the FS100 only has a HDMI output instead of HD-SDI is to avoid cannibalizing sales of the F3 camcorder. There's no technical reason why the FS100 can't have HD-SDI--the less-expensive Panasonic AF-100 has it, and it was introduced a year before the FS100.

Some companies practice another approach--build a limited number of models (or even a single model) of camera or camcorder, with a very specific target market or application. That brings us to GoPro, a camcorder company based in Half Moon Bay, California. GoPro only sells two models: The HD Hero and the new HD Hero2. Physically, the two cameras are almost identical to each other, but the Hero2 has improved electronics and optics. There's about $60-$70 difference between the two models, and none of them sell for more than $300. According to company founder Nick Woodman, GoPro initially built ruggedized cameras for use by surfers and skiers, but they were designed to be used by two people--one to surf or ski, and the other to shoot the action. Woodman's revelation, and the core principle behind everything that GoPro sells, is that athletes want to take video or still pictures of themselves in the act, or from their point of view. That meant that GoPro's cameras needed to not only be ruggedized--they had to be tiny, operate automatically, and be mountable just about anywhere.

GoPro sells a suite of mounting kits that allow its cameras to be mounted anywhere from the exterior of a race car to a surfboard. The company has a library of incredible footage shot underwater, on skydivers, mountain bikes, snow skis, skateboards, even as the payload for a weather balloon at the edge of space. It also has accessories to make the cameras easier to aim, extend their battery lives, transmit their video via Wi-Fi and gang two cameras together for 3D video. Yet all of it is based on the same camera design, for the same fundamental application.



I was amazed by how crowded the GoPro booth was at the NAB conference last April. This is a under-$300 camera, yet broadcast professionals were packed into the booth. GoPro's cameras are used for shooting the contestants' points of view on reality game shows, for recording experiments on Discovery's "Mythbusters", and for use almost anywhere danger is involved. Two thoughts went through my mind:

• Someone is going to buy Woodman Labs, the parent of GoPro, and
• Surely one of the big Japanese camera or camcorder makers will jump into the market.

I certainly hope that Woodman Labs isn't sold--the scariest example of what could happen is what happened when Cisco acquired Flip Digital. Before the acquisition, Flip was the leader in the market for inexpensive, simple-to-use camcorders. Earlier this year, due both to competition from smartphones and mismanagement, Cisco shut down Flip completely. Whenever a big company buys a small, focused company, it's usually the small company that suffers. As for the second possibility, a Japanese competitor could try to copy GoPro's ideas, but they'll stumble on their need to be all things to all people. To build a viable competitor, you need to understand GoPro's markets and applications as well as GoPro does, and that's hard when you're also trying to build cameras for every possible market and application.

Had GoPro tried to enter the general-purpose camera or camcorder markets, it would have had its head handed to it. Instead, it dominates the point-of-view market, which it can effectively defend. There's a lesson there, not just for other small companies but for the big camera makers as well. It may be time to focus on a few markets instead of trying to compete in all of them.

Blackmagic Design acquires Teranex, slashes prices

Earlier today, TV Technology reported that Blackmagic Design has acquired Teranex, a digital image processing company, from Jupiter Systems for an unreported price. Teranex has had some excellent technology for years, especially for standards conversion, video denoising and upscaling/downscaling, but it's never been part of a company that was focused on broadcast technology. Teranex started in 1998 as a spin-off of Lockheed Martin, which invested more than $100 million in real-time video processing. Lockheed Martin, of course, was primarily focused on defense-related business, not broadcasting. In 2004, Teranex was acquired by Silicon Optix, which focused primarily on semiconductors and consumer-grade video scalers. Silicon Optix sold Teranex and most of its other products to Integrated Device Technology in October 2008, and IDT sold Teranex to Jupiter Systems, a video wall manufacturer, in June 2009. And now, 2 1/2 years later, Jupiter Systems has sold it to Blackmagic Design.

When a company has been bought and sold as many times as Teranex, it's very difficult to retain employees or to focus on long-term product plans. As a result, it's hard to know exactly what Blackmagic Design is getting. Teranex has some very interesting 3D software that enables two of its video processors to convert 2D to 3D and output 3D in a variety of formats. Combined with Blackmagic Design's ATEM production switchers, the Teranex products give the company much more extensive real-time image processing capabilities. However, many of Teranex's hardware designs are several years old, and could probably benefit from Blackmagic's abilities to redesign the products using current LSIs for lower cost and higher performance.

Update, December 14, 2011: StudioDaily reports that Blackmagic Design has slashed the price of Teranex's top-of-the-line VC100 universal frame synchronizer and format converter from $90,000 to $19,995. In addition, Blackmagic added additional features including dual-channel 3D support, so that it no longer requires two converters to handle 3D. Existing owners of VC100s can get the new features with a $3,000 upgrade. Even without redesigned hardware, Blackmagic has managed to reduce the price by almost 80%,

In short, the acquisition is certainly a good move for Teranex, which is finally partnered with a parent company that knows what to do with its technology. Depending on how much it cost Blackmagic Design and how old Teranex's technology is, the acquisition might or might not be such a great idea for it. We'll know more at NAB 2012, when we see the first displays of Teranex products in the Blackmagic Design booth.

PressBooks eBook publishing service opens its doors to the public

PressBooks, a Montreal-based startup, took its eponymous online eBook production service public today. There are lots of services and software for creating eBooks, but PressBooks has some interesting features for self-publishing authors (and even for established publishers--more on that in a minute.) PressBooks is an online service built on top of WordPress. If you're familiar with the WordPress dashboard, you can jump into PressBooks right away. The service creates fully-formatted EPUBs and PDF files, as well as HTML online eBooks and XML documents. It's primarily designed for text-intensive trade-style eBooks; if you're planning to create picture books or heavily-formatted multi-column text titles, there are better tools than PressBooks. However, you can import book covers and images into a built-in media library.

PressBooks uses a simple WYSIWYG editor for creating and editing text; text can also be edited offline and then uploaded. A small variety of templates are available for automatically formatting eBooks; PressBooks is working on more designs. Multiple authors and users can be defined, and the site can be public (anyone can read the eBook) or private (only specified users can access the site). Users can enter metadata in the Book Information section, including title and subtitle, descriptions, names of editors and translators, print and eBook ISBNs, and prices.

PressBooks has already been used for creating two commercially-published eBooks: "Book: A Futurist's Manifesto", which was edited and published by the PressBooks team for O'Reilly Media while the software was under development, and "Nine Things Successful People Do Differently" by Heidi Grant Halvorson, published by the Harvard Business Review Press.

At the present time, PressBooks is a free service, but that's likely to change once it exits beta. Here's a presentation that demonstrates most of the service's features:

Pressbooks Demo Deck

A few quick presenting tips

I spent a couple of hours at an event last night where the main presenter spent about 40 minutes talking about himself and 15 minutes about the topic we were there to hear about. The information that he presented in those 15 minutes could have been reduced down to a two-paragraph blog post.

Most people who are asked to make presentations don't have a clue what they're doing. I used to believe that it was rude for audience members to check their email or browse the web during a presentation, but after sitting through years of crappy presentations, I now think that it's rude for poor, unprepared presenters to waste their audiences' time. So, in the spirit of making everyone's life easier, here are a few presenting tips from someone who's made every mistake in the book:

• If you only had five minutes to speak, what are the points you'd want to make? Those points should become the core of your presentation.
• It's better to focus on a few key points than it is to try to pack everything but the kitchen sink into the presentation.
• Use PowerPoint sparingly, and put one item on each slide. Keep them simple.
• If your presentation isn't well-organized, your audience won't understand it.
• Keep the presentation focused on the audience, not on you.
• Unless you're specifically doing a sales presentation, use your presentation to inform.
• Rehearse. The first time you give the presentation should never be in front of the intended audience.
• Arrive at the venue early enough to check out everything--make sure your laptop works with the venue's projector, your microphone works and, if you need it, you've got a network connection. Assume that nothing will work, and prepare backups.

The publisher bypass operation

I just read an article in the latest issue of Wired about the new breed of subscription music services--companies like Spotify, MOG and turntable.fm. The problem with these services (and for that matter, conventional purchase services like iTunes) is that artists get a very small share of the revenue. Most artists are now getting the majority of their income from live performances, not music sales. Where concerts once served to promote album sales, now digital music promotes live performances.

Online video distribution has had a similar impact on movies, television and original video. Most of the revenues from movies and television shows sold or rented by Netflix, iTunes, Amazon, etc., goes to the studios and distributors, not to the original producers. Original video produced for YouTube and other services is incredibly hard to monetize; only a few series, like "The Guild" and "Easy to Assemble", have sponsorship or distribution deals that directly compensate the producers. Most original video has to make do with a trickle of advertising revenue, modest sales from iTunes, or nothing at all.

That brings us to books, where the situation for independent authors is very different. Amazon will pay as much as 70% of the revenue from sales of eBooks to self-publishing authors, and other resellers will typically pay 35%. Compare that with the typical 10% to 12% royalty on wholesale price paid by publishers, and self-publishing starts to look very appealing. Yes, the self-publisher has to pay upfront for editing and design, but many publishers recoup those costs before they start paying royalties. In addition, unless you're a top author, publishers will do little or nothing to promote your title, so you'll have to hire a publicist or do the work yourself.

It's true that print still represents the majority of book sales, but the market is quickly shifting to eBooks. Some of the most popular titles are already selling almost as many copies of eBooks as print, and heavy book readers are adopting eBooks faster than any other group. The majority of book sales are likely to come from eBooks by the middle of this decade.

So, where does that leave publishers? Penguin, for one, is getting into the self-publishing business through its Book Country online service. In addition to charging upfront fees for formatting and designing eBooks, Book Country demands a hefty fee for distributing self-published eBooks to online bookstores--which self-publishers can do themselves. Other publishers are experimenting with "augmented" eBooks--containing audio, video and animations--which they believe are beyond the ability of self-publishers to create. There are two problems with that approach:

1. Companies such as Vook are launching eBook creation tools that will allow self-publishers to make augmented eBooks, and
2. Sales figures to date suggest that there's not a big market for augmented eBooks. For example, Vook's original strategy was to publish augmented eBooks itself, but the company couldn't sell enough to sustain its business, so it's now focusing on licensing its platform to others.

To be sure, publishers still provide valuable services, especially for top-tier authors--but book publishing is the first industry where creators (writers) can compete effectively with distributors (publishers). In the near future, the big publishers will likely find themselves focusing on two categories:

1. New releases from "A-list" authors that can command high prices and sell tens of thousands of copies in print, and
2. Milking their existing backlist for eBook reissues, bundles, and other ways of delivering "old wine in new bottles".

Some mid-tier authors may find a home with smaller specialty publishers, but almost everyone below the "A-list" will have to self-publish. We're likely to see some self-publishing authors join together in "United Artists"-like organizations to create "quasi-publishers" that perform some of the functions of existing publishers, such as design, publicity and promotion. The participating authors could serve as editors for each other.

By mid-decade, we're going to have far fewer and smaller "old-style" publishers. On the other hand, we'll have far more self-publishers and quasi-publishers that are performing most of the tasks previously done by publishers themselves. The industry power will reside with resellers such as Amazon and Barnes & Noble in the U.S., and their equivalents in other countries around the world.

Be careful when you partner with startups

There are so many startups launching new products and services every day that it's incredibly tempting to work with them. In many cases, they offer their services for free or at a very low cost in order to get customer feedback and build a user base. In the past, the big problem with startups has been the risk of their going out of business, but that was usually visible long before the companies actually failed--for example, they couldn't find financing, their reference accounts were weak, or they were asking for investments at the same time they were trying to make the sale. Today, however, there's a new trend that magnifies the risk that successful startups will go under, and if you're not careful, they could take your business with them.

In the last two days, "talent acquisitions" have resulted in the closure of two well-regarded web startups. Talent acquisitions happen when startups are acquired, not for their products but for their people. The acquirers tend to be industry giants, such as Google, Facebook, Microsoft or Apple. On Tuesday, Facebook acquired the talent running Strobe, a startup that had built a cross-platform app development system based on HTML5. Facebook didn't acquire the Strobe platform itself, and Strobe (or what was left of it) said that its service would remain available indefinitely in beta. However, with no one working on it, bugs aren't going to be fixed and new features won't be added. In other words, that parrot is definitely dead. There's still a possibility that the Strobe team may sell the software to someone else, but it's very unlikely given that the entire development team is gone. If you were developing your apps using Strobe, you're now faced with finding another development platform, and likely, rewriting your apps to work with that platform.

Today, Google acquired Apture, which offered a plug-in for browsers that enabled pop-up searches for almost every word on webpages, and a JavaScript add-on that allowed multimedia content from many sites, including Wikipedia, Google and YouTube, to be integrated into pop-up windows on blogs. Apture had customers using its service including The Economist, the Financial Times, Reuters, Scientific American and Scribd. Unlike the Facebook-Strobe deal, Google acquired all of Apture, but Google has decided to discontinue the Apture services within the next month, according to TechCrunch. The Apture development team with join the Chrome browser project.

The lesson is that you can no longer use the funding or success of a startup as an indicator that the startup will remain in business. A "successful" startup can be acquired and its services can be shut down or left in limbo by the acquirer. So, what can you do to protect yourself?

• Be very cautious about building your product or service on top of an API offered by a startup. If anything happens to the startup or API, you may have to go into crisis mode to replace it.
• Make sure that you have a way to export any data that you don't already have copies of, and keep a local backup.
• Closely review the terms of service for any startup that you work with. If necessary, you should propose a revision or addendum that gives your company non-exclusive rights to continue using the service or software if the startup, or its acquirer or investors, decide to discontinue it. That may require you to host the service yourself or take possession of the software and source code from an escrow account.
• If the startup is providing hardware that's essential for your business, you should buy sufficient additional units and/or replacement parts to meet your needs long enough to transition to other hardware.

I'm not suggesting that you shouldn't do business with startups, but you should exercise caution. A good "Plan B" is an essential insurance policy.

"My name is Bond...Teradek Bond."

Video "uplink in a backpack" systems, pioneered by LiveU, have become very popular for use at major-market television stations for live remotes. These systems use multiple 3G/4G broadband wireless connections, as well as Wi-Fi, to send HD-quality broadcast video live from the field for streaming to the Internet, or for live broadcast. LiveU typically rents its systems for $2,500/month or leases them on an annual basis for $1,500/month; comparable systems from TVU and Streambox sell for $25,000 to $40,000 (U.S.).

Teradek, whose Cube was the first device that made live broadcast-quality Wi-Fi streaming from camcorders feasible and inexpensive, has launched a new device called Bond that shrinks the "uplink in a backpack" down to a size that fits on top of a camcorder, and a price that almost any producer can afford. The Bond is designed to be connected to a Cube, and accepts up to five 3G or 4G USB cellular modems. The Cube provides the HD/SD-SDI or HDMI video input for the Bond; some models also provide Wi-Fi output. At the station or streaming end, Sputnik, a Linux-based application reconstructs the bonded video into a single MPEG-TS stream that can be processed with most H.264 decoders.

That's interesting, but not revolutionary: The LiveU, TVU and Streambox systems do essentially the same thing. What makes Teradek's system revolutionary is the price: The Bond's list price is $2,490 (U.S.). A Cube 250 with a HDMI interface and USB output (needed for the Bond) lists for $1,590. Sputnik is free. If you want to use an end-to-end Teradek solution, a Cube 400 decoder outputs to a HDMI interface as well as wired Ethernet, for $1,190. That's a complete, broadcast-quality broadband ENG uplink/downlnk system for $5,270. Depending on whether you rent monthly or annually, that's about two or four month's rental of a LiveU system, and about 20% of the purchase price of a TVU system. You're going to see a lot more live webcasts and broadcasts, thanks to Teradek and its Bond.

More thoughts on the new Canon and Red cameras

Now that the dust has cleared a bit from Thursday's announcements by Canon and Red, I've had some time to consider the new cameras, and the compromises that both companies made when developing them.

First, the Canon C300. Physically, it's a gorgeous camera--it reminds me of classic 16mm film camera designs. What I'm less impressed with are some of the compromises in the Canon design. For example, the C300 has automatic nothing--no autofocus, auto-aperture, or white balance. The lack of automatic controls may be good for teaching cinematography, just as when learning how to drive, it's better to start by learning how to use a manual transmission. However, in the real world, cinematographers often use autofocus, especially for documentaries and sports. And why no auto white balance, when just about every other digital cinema camera has it? Another big "miss" is the lack of a dual-link HD-SDI output and no 4:4:4 mode. Yet another questionable decision is support for 60 fps only at 720p resolution, together with a sensor that, while it's technically 4K, only outputs 1920 x 1080. The result is a weird mix: Many features of the C300 are oriented toward movie use, while the output of the camera screams "broadcast" and the C300 is missing some key broadcast features.

The reason why the C300 turned out this way can be found in an interview that Larry Thorpe, Canon U.S.A.'s Senior Director, Professional Engineering and Solutions, Imaging Technologies and Communications Group, gave to Digital Photography Review. According to the interview, the C300 was a "fast-track" project inside Canon--two years from inception to product release. In order to meet the tight schedule, Canon couldn't develop new electronics for the C300, so it adapted the processor and electronics from the XF 305 camcorder for the C300. The XF 305 is a very nice camcorder, but it's not a digital cinema camera, and it's most certainly not a $20,000 camera. Most of the missing features in the C300 are due to using the XF 305's electronics.

From what Thorpe said in the interview, it's clear that the C300 is a placeholder for a broader, more functional line of digital cinema cameras coming from Canon. A few years from now, we'll probably look back at the C300 and wonder why anyone bought it, given how powerful the Canon models will be by then. For now, however, the C300 is a strange bundle--a great design, undermined by inadequate electronics.

The new Red Scarlet-X is different--it's plenty powerful enough, but it's not a Scarlet. It uses the same imager as the EPIC, except it uses it at a lower resolution and can thus utilize imagers that failed quality testing for the EPIC. It uses all the same accessories and software as the EPIC. It's the same form-factor as the EPIC. As Philip Bloom points out, it's not the Scarlet that Red's been talking about for three years, the one that was supposed to be light and cheap but still high-resolution. Perhaps the Scarlet-X should have been called the EPIC Light, and Red should have scrapped the Scarlet name. It's a niggling point--Red is going to sell lots of Scarlet-Xs--but the Scarlet-X doesn't fit into the niche that Red created for the Scarlet. Instead, it's an entry-level EPIC--perfect as a B camera to the EPIC, but not competitive in any way with the Panasonic AF101 or the Sony FS100. Speaking of which, the Canon and Red announcements have made the FS100 and AF101 look even more appealing.

Canon, Red and Sony: It's War, I tell you! War!

First, Sony released the F3, a Super 35mm digital cinema camera for about $17,000 U.S. list price--$14,000 street price. The F3 has a 2K sensor, uses Sony's 35Mbps XDCAM EX codec, and comes with a dual-link HD-SDI interface. For an additional $4,000, it can be upgraded to 4:4:4 output and 3G-SDI.

Next, in a theater on the Paramount Pictures lot this afternoon, Canon announced its new EOS C300 digital cinema camera, based on the EOS DSLR platform, but with a new form factor and sensor. The sensor has 4K resolution, but it uses all the pixels in the sensor instead of line-skipping, and outputs a native 1920 x 1080 image. It uses Canon's 50Mbps XF codec at 4:2:2 and delivers 12 stops of dynamic range. Unlike the F3, it doesn't have options for dual-link HD-SDI, 3G-SDI or 4:4:4, but it does have Canon's Log format built-in. Two lens mounts are available: Canon's EF and Arri's industry-standard PL mount.

Unlike the Sony and most other cinema cameras and camcorders, the C300 doesn't have any automatic settings at all: No autofocus, automatic aperture, or automatic white balance. Everything is manual. That works for digital cinematography, but it's useless for "run & gun" situations, such as sports and documentaries, where the shot changes faster than most cinematographers can keep up.

The Canon, like the F3, comes with most of the essential accessories bundled, including the viewfinder, XLR audio interface, side grip, top handle, battery and charger. The list price of the C300 will be $20,000 (U.S.), and will ship in January 2012.

No sooner would the ink about the C300 have dried on the page if we were still printing ink on pages, than Jim Jannard of Red was standing in front of another group in another theater in Los Angeles, introducing the Scarlet. Yep, THAT Scarlet, the one that's been announced more times than Harold Camping has predicted the Rapture. However, it's not really THAT Scarlet, the model that was supposed to cost $3,000 with a 3K 2/3" sensor and a fixed lens. The Scarlet-X that Jannard introduced has the same Mysterium-X imager as the Red EPIC, uses all the same accessories at the EPIC, and can be purchased with either a EF or PL mount.

The Scarlet-X's sensor has 5K resolution for still images, 4K at 1-25 fps, 2K at 60 fps, and 1K at 120 fps. The sensor's dynamic range is 13.5 stops, and up to 18 stops with HDRx enabled. It records REDCODE RAW at 440Mbps--almost nine times more data per second than Canon's C300. The basic Scarlet-X sells for $9,750, including the imager, an EF mount, Brain (central processor) and side mount for a Solid State Drive. Add $1,500 for a Titanium PL mount; a full configuration with viewfinder and HD-SDI output is $14,000. The Scarlet-X with the PL mount will start shipping this month, and with the EF mount will begin shipping on December 1st. Red estimates that it will take until February to fill all the existing back orders.

The Canon C300 has been seeded to a handful of cinematographers; it's not clear if anyone outside Red has used the Scarlet-X. In any case, reviews of both cameras should start showing up in a few weeks. There are now three digital cinema cameras in the $14,000 to $20,000 range, all of which can do things that required cameras of two or three times their price a year ago.