It's Rishi

Hulu, the hit free online video service backed by News Corp and NBC, has been a shining example of how big traditional media companies are finally starting to “get it”. Hulu represents big media company’s recognition that fighting the illegal distribution of their video content by blackmailing ISP’s to curb bittorrent traffic and threatening YouTube (and others) with lawsuits is not a forward-thinking strategy. Via Hulu, big media companies embrace the opportunity to control the delivery of their content and (attempt to) effectively monetize it. The result is a win-win for big media companies and consumers. Not surprisingly, the site’s traffic growth has been staggering:

Enter Boxee. The first time I heard about Boxee, I was excited. Over the past five years or so, there has been an increasing demand by consumers to watch digital video content on their TV. A few years ago, Microsoft proclaimed the future to be a PC hooked up to your HDTV powered by Windows Media Center. I think it’s safe to say that vision didn’t quite pan out. However, we can thank Microsoft for creating the XBox because from that XBMC was born. XBMC was the first powerful glimpse of what a media center should be. It allowed streaming of video content over the network and, being open source, many interesting features, such as web browsing and music players, were integrated into it. The problem with XBMC was that you had to find and hack an XBox to get it. Not mainstream. Apple TV could have been a breakthrough product but, in true Apple fashion, the closed nature of the product and DRM restrictions limited its potential it. XBox360 and PS3 make major leaps by allowing users to stream unlicensed video content, but stop short of really embracing the media center concept. Finally in June of 2008, Boxee releases an Alpha of what eventually could be the first mainstream media center software product.

I’ll let you visit Boxee’s web site and discover all the useful features of the product and how you can obtain it. One of the killer features the Boxee team added was Hulu streaming.

Hulu on Boxee (courtesy of Fred Wilson)

Last week alone, Boxee claims to have streamed over 100k Hulu streams. That’s a huge number considering Boxee’s installed base is still pretty small. At a glance, this would all seem like a win-win-win. Big media companies control content delivery via Hulu and Boxee enables Hulu users to enjoy the flexibility of using the service on their TV. Unfortunately, good things don’t last forever. Somebody was going to get hurt. It turns out, it’s Boxee.

Apparently, the big media guys didn’t like that consumers could watch shows like Lost and 24 on their TV via Hulu. After all, big media makes its money by selling TV ads. If Boxee users could enjoy their favorite shows on their TV via Hulu, then big media sells less ads and earns less from cable providers for channels like FX and USA.

The problem in this logic is that it seems to me that Fox/NBC hasn’t really thought this through. What will these Boxee users do instead of watching on Hulu? My guesses are:

1) Tivo/DVR the shows. Result: Ads are skipped altogether. No cable viewing.
2) BitTorrent. Result: Ads are non-existant. No cable viewing.
3) Doesn’t watch the show. Result: This hurts the media companies in several ways. Ads are not seen and no cable love because the show is not seen. The show ultimately becomes less popular, ad space is less valuable, less DVD box sets are sold, less syndication monies, etc., etc.

See a pattern? =) By blocking Hulu on Boxee, Fox/NBC are simply creeping back into their old-school mentality that is slowly bleeding their ad money dry. My hunch, like many others who have blogged about this story, is that this decision will be overturned. Unfortunately, I wouldn’t be surprised though if there are some restrictions placed on Boxee to encourage Hulu users to watch on their PC. Such restrictions could be no HD content or more annoying ads. We’ll see…

One of the items I put on my to-do list is to do some research on what the ad rates are for Hulu (and others like MTV’s Overdrive) and how that compares to TV on a per impression basis. My hunch is Hulu is way higher…I’ve found myself actually intently watching the 30-second ad spots! That rarely happens on TV. Plus the other side benefits of delivering the ads online like opportunities to interact with the ad. I’ll report my findings in a later post!

Oh how mainstream media has changed over the past decades. Back in the 1960’s, during JFK’s presidency, news outlets wouldn’t publish any stories about the president’s infidelities. News editors had a sense of responsibility towards upholding the values and code of our society. There was no need to blemish the president’s name for little good would have come from it. Back then, news was controlled by a handful of agencies. Not only did these agencies have control over what news was received by citizens across the nation, but also when they received news. There were no 24-hour cable news channels and of course there was no Internet.

The landscape of news exchange/delivery today could not be more different. Major news outlets source and publish news around the clock and around the world. Americans are able to receive news wherever and whenever. News is no longer thought of as a single collection of headlines that you consume at once. Instead, news is a continuous flow of stories and headlines that is streaming whether you’re there to catch it or not. The consumption of news went from being a 30-minute event each morning or evening to being a virtually constant activity. How did this happen? Where is all this news coming from?? From two places:

The world shrank – Digital information networks enables news to efficiently travel across the globe in an instant. Now only can data travel at the speed of light, but there is a connected path from the news source to the news consumer. Often, very little human intervention is involved.

Citizen journalism – Digital cameras/videocams, camera phones, laptops, and wireless connectivity allow every one of us to capture the events of the world. I would venture a guess that the majority of Americans under the age of 30 now have atleast one device capable of digital capture with them at all times. We then take this digital information and disseminate it to the world via social-networking sites, blogs, online photo albums/streams, YouTube, message boards, etc.. An average citizen doesn’t have the reach of NBC or CNN, but as is seen every day on the Web, viral citizen media can spread like wildfire and ultimately achieve the same or greater reach as a mainstream media broadcast.

With so much news being created and so many new ways by which news can be spread, there is tremendous competition for people’s attention. I’m not suggesting that the big media companies are going to be extinct any time soon, but I am suggesting that their role in society is. Let’s face it, NBC was thrilled when Cho’s package arrived in their mailroom. NBC said they spent hours deciding whether to air footage from Cho’s videos on the air. There’s little doubt in my mind that they were going to broadcast it. How could they not? The fact that Cho chose to send the package to NBC affirms NBC’s stature as a dominant media outlet. The only issue that they may have been wrestling with was whether to air it and get a backlash from the public, politicians, or special interest groups who might denounce NBC for sensationalizing the Va Tech shooter. However, if NBC didn’t air the footage, they would have no doubt posted it on their news website, MSNBC.com. I’m sure the NBC execs realized that if they didn’t release it, eventually the material would at some point get leaked and in this case, NBC wouldn’t get the limelight for having the scoop.

If Cho would have simply posted all his videos to a MySpace page or YouTube, he would have demonstrated that the big media companies are simply becoming irrelevant. But, whether he knew it or not, what he did was smart. He knew that NBC would whore out the video footage as much as it possibly could since they would have the exclusive and others would inevitably do the job for him of ensuring that the video got on MySpace, YouTube, etc… The reach of his videos was maximized as a result.

Unlike 40 years ago during JFK’s presidency, the media companies a) can’t afford to ignore stories which will garner them attention and b) simply have little to no control over what stories make it to the public. If they don’t cover a story, someone else will. AOL Time Warner realized this a couple years ago and launched TMZ.com. TMZ.com is a hollywood news/gossip site that basically runs stories that AOL Time Warner couldn’t on their mainstream sites. TMZ.com stories often lack the journalistic integrity that a mainstream news organization would want to uphold. AOL Time Warner knew that this segment of news was too much in demand and too lucrative to ignore. And they were right: TMZ.com has been enormously successful and one of the fastest growing blogs on the Web. Moreover, TMZ.com relies heavily on citizen- captured stories, photos and videos and not a dedicated news team. TMZ.com is an example of an old media giant embracing the fact they are losing control of the news rather than trying to combat this fact. There can be little doubt that other media giants will follow suit with sites of their own which embrace citizen media.

A big part of being a trusted news source is providing comprehensive information. Increasingly, this means relying on sources beyond a dedicated news team. Dedicated news teams simply will not be able to scale to meet the volume of news consumption in the future. News sites like TMZ.com, which rely on citizen journalism, can scale and will be a crucial strategy for the big media companies to maintain their significance.

Hmm I know I’ve got some more thoughts on this but enough for now… =)

It has been estimated that over 50% of the total Internet bandwidth (~2 terabit) in the world is consumed by BitTorrent traffic. It has also been estimated that about 50% of BitTorrent traffic is video. That’s a whole lot of video. In fact, that’s 2tb/sec / 8bits x.0.5 x 0.5 * 3600sec = 225 terabytes of video files downloaded every hour! From my experience, virtually all video files are DivX/Xvid avi files (I have yet to see a video torrent that isn’t) that seem to average about 7-10MB/minute. This means that every hour, about 20-30 million minutes of video are downloaded. Based on these numbers, it is very reasonable to conclude that tens and possibly into the hundreds of millions of people around the world are illegally downloading video via BitTorrent.

Don’t get me wrong now, I’m not writing this to incriminate anyone. BitTorrent has been very good to me also. It has essentially saved me the cost of a Tivo every month. Any TV show I want, I have in a matter of minutes and with a little RSS magic, what I want is automatically fetched for me as it becomes available. Of course, a significant percentage of this video is movies, not TV. But let’s put that aside for now and focus on TV.

My roomate and I pay about $60 to Comcast every month just for cable television. I personally feel like that’s a good amount of coin and as such I don’t necessarily feel that horrible when I download torrents of shows that I miss. Without a doubt Comcast is getting hurt by BitTorrent. If the estimate is correct, half of their bandwidth is being used up by BitTorrent traffic so they have surely had to pay hefty amounts to accelerate the upgrading of their capacity. However, my guess is that very few consumers have cancelled their cable TV subscription due to the availability of TV content through BitTorrent. So, while the impact of BitTorrent on Comcast’s ISP business may be significant, I doubt their cable TV business has been affected much.

So who’s the big loser? The TV networks of course. Torrents of TV shows have all the commercials stripped from them to make the file smaller in size and for the downloader’s viewing pleasure. As of last fall, ABC’s Lost had an average 30-second spot rate of $328k (Ad Age chart). At that time, Lost had about 10m viewers. Back in October ‘06, it was measured that over a span of a week, torrents of the latest episode of Lost had been downloaded over 500k times and as much as 1m times. That represents 5-10% of Lost’s total viewership. A 1-hour show like Lost has about 30 30-second paid ads which at the rate of $328k per ad, ABC brings in almost $10m per episode in ad revenue. For the sake of simplicity, let’s say that the ad rate is directly proportional to the audience size. In the absence of BitTorrent, if half of those 5-10% of downloaders would have watched the regular broadcast of the show, that would haev added about $.25-.5m in ad revenue per episode. For a 20 episode season run that’s $5-10m per season in lost revenue for ABC from the show Lost alone.

It is important to point out that at the time of measurement, Lost was the most downloaded TV show on BitTorrent. Also, looking at the chart, Lost’s $328k 30-second ad rate is amongst the highest in primetime. With these two factors combined, the revenue impact of Lost is probably an order of magnitude higher than the typical show. Overall, though, I can definitely see a major network like ABC losing out on about $25m of ad revenue across all of its shows this year. And that is $25m of pure top line since the cost of that additional revenue is essentially zero.

So what can the networks do about this? Plenty. Moreover, just as p2p has sparked tremendous growth in the long-tail of the music industry and created new opportunities, the same is happening in TV and film. I’ll talk about what the networks and new industry players have been up to and sort out some of my thoughts in my next post.

Businessweek Interview

The truth is what Google is doing now is transferring the wealth out of the hands of rights holders into Google. So media companies around the world are all threatened by Google. Why? Because basically Google is telling you how much of your ad revenue you get to keep.They better get some competition. Us. Yahoo! (YHOO). Somebody better break through or you can short all media stocks right now. As long as there are two, you can hold onto media stocks.

Worth reading…

I’m not a big fantasy sports enthusiast but I usually participate in fantasy baseball and football every season. Anyone that plays, or has played, fantasy sports is that one thing you crave is real-time player news and stats. If your players are currently involved in a game you want to know exactly how they’re performing in that game, and if they’re not in a game, you want to know if there’s any injury updates or other news that might affect their future performance.

Most people use the Web to satisfy this hunger for player information. That often means watching the game on TV with a laptop in your hands or if your out at the mall shopping, it means running into the Apple store and checking the latest fantasy stats. Well, the good news is that technology is soon going to be making the life of a fantasy player easier.

Sprint NFL Mobile

A few weeks ago, Sprint launched a free application for their Vision and Power Vision (that’s what they call their data plan add-on for phones and it costs $15/mo for unlimited data) called NFL Mobile. Here are some screenshots of NFL Mobile running on a Samsung A900:

I tried it out yesterday and I can happily say it rocks. You fire up the application and you instantly get the latest NFL scores and news. The coolest feature is that you can personalize the application by adding any number of players to a “My Players” list. Whenever you view “My Players”, it shows you the latest fantasy stats for those players. Now, whenever I’m on the go, in just a few seconds, I can fire up NFL Mobile on my phone and see how my players are doing. This is an application that I honestly would have expected a mobile carrier to charge a couple dollars a month for. For Sprint to offer it free is very cool.

Yahoo! Sports for TV

Now for a real glimpse into the future. As I said earlier, a common sight for the typical fantasy player is to be on the sofa, laptop in hand, watching the game. What’s the natural evolution of this? Fantasy stats on your TV screen while you’re watching the game. How badass is that?! Well check out this screenshot of Yahoo! Sports for TV that Yahoo’s Digital Home team is launching this morning:

The features of this are the ones you would expect and is very similar to the Sprint app: league scores, fantasy stats of your own personalized list of players, and a live gametracker. Now that I have you all excited, here’s the cooler: you need a new “entertainment PC” that is Intel Viiv enabled. From this Wikipedia article

Viiv is a particular combination of CPU, mainboard chipset, software, Digital Rights Management and network card. It is intended for primary use as an in-home media and desktop platform with the ability to operate as a normal PC or as a hardware media player/centre – running applications, playing DVDs, CDs, MP3, photographs and games as well as subscription based (partially DRM protected) content such as ILoveFilm, Napster and SKY

. I didn’t spend a lot of time figuring out exactly what’s up with Viiv, but because of some DRM issues, it seems like you probably won’t be able to take any Windows MCE system and make it work. An example of a Viiv-based PC is the new Dell XPS 410.

Since the marriage of TV and Web content is inevitable, I’m going to bet that many more solutions like the new Yahoo! Sports for TV are on their way. Kudos to Yahoo! for making the first leap even if most people, including me, won’t be able to enjoy it just yet.

“The era of the blockbuster is so over. The niche is now king, and the entertainment industry – from music to movies to TV – will never be the same.” says Chris Anderson of Wired Magazine.

Mr. Anderson has written an article that clearly articulates a trend in media that you and I have observed over the past few years but since it has been gradual, it may not have struck you as being as dramatic as it truly is.

Let’s look at some facts:

• Twenty-one of the all-time top 100 albums were released in the five-year period between 1996 and 2000. The next five years produced only two
• Time spent listening to the radio is now at a 12-year low, and rock music is among the formats suffering the most.
• The average top 25 blockbusters in any given year so far this decade have accounted for 5 percent less of the total box office gross than in the 1990s, even as they’ve cost 57 percent more to make.
• Today’s top-rated show, American Idol, is watched by just 18 percent of households. During the ’70s, American Idol wouldn’t even have made it to the top 10 with that kind of market share.
• the number of weeks the average best-selling novel remains at the top of the list has fallen by half over the past decade.

OK, enough with the facts. Read the article

It sure didn’t take long for Yahoo! to rebrand the media center and DVR software they recently purchased from Meedio. The result is Yahoo! Go Beta. It pretty much has the standard features you expect: photo managing/viewing (via Flickr and Y! Photos…kinda cool), watch video content from Y! video search and also some Hollywood teasers, and stream music from their Launchcast radio service. All of this, of course, is designed for users who have their PC’s hooked up to a TV. This immediately makes Go a niche, albeit growing in appeal, market product. However, what is important to point out is that Go does bring media center functionality to the vast majority of Windows users who are running XP Pro or Home, not the special MCE. That is huge. There has been some media center software packages in the open source community, such as MythTV, but for reasons such as lack of awareness and setup difficulties, they have generally gotten interest only from the geek community.

Initial comments of Go have generally been satisfactory at best with most people indicating that MCE is without a doubt the superior product. That isn’t a huge surprise since MCE has been around for a while now. Clearly, Go is unlikely to be successful if it’s simply a cheaper, but-not-as-good alternative to MCE. You can expect that much of this functionality will be in all versions of Vista and will server as a death sentence to Go if Y! can’t innovate to justify the product’s existence. So how can they innovate?

1) Add wireless streaming functionality – Streaming multimedia content to cellular phones and other wireless handheld devices is gaining traction fast as devices are getting more powerful and broadband cellular networks are becoming ubiquitous and cheap to access. Orb has been offering a free download which enables exactly this functionality from any Windows PC. You can stream your music and video (including recorded DVD content) to wireless devices. The best part is that it’s free and relatively easy to setup. Y! should license this technology and bring it to Go ASAP. The reports are that Vista will have this functionality as well, but Y! can beat them to the punch. Also, you can bet that Microsoft’s implementation will be anal about DRM issues as well as being incompatible with DivX/Xvid out-of-the-box.

2) Create special versions of Y!’s other properties to Go. I want to see Y! Games, Fantasy Sports, News, Mail, and Finance. Sure, since you’ve got your PC hooked up to the TV, you could just fire up your web browser, but because the TV environment is so different from the PC (in terms of screen resolution, viewing distance, input devices), it’d be a lot better to create new UI’s designed specifically for access via a TV. Imagine having customized Financial news broadcasted to you on your TV. Forget the Bloomberg channel, let’s focus on my portfolio and the markets that I’m interested in. Why not overlay my league’s realtime fantasy sports stats on top of the game that I’m watching right now. If you’re like me, when you’re watching TV, you probably have your laptop in front of you. If done right, a marriage of interactive content with broadcast content would shock and awe the TV viewing masses.

3) Integrate simple BitTorrent search and client software. Okay, Okay, this one is pretty controversial since that may suggest Y! endorsing piracy. For me though, BitTorrent is the only DVR I need. I’ve talked about it before but with the combination of BitTorrent and RSS, I have access to all the shows I want, when i want them regardless of whether I get the channel or remembered to record it. Again, I could just use the software I have on my PC already but a simplified, TV-based interface (integrated with TV Guide listings!!! *gasp*) would make it a lot more accessible to mainstream folks.

4) Add video phone functionality. I’d much rather use my TV to engage in video telephony instead of my PC. Y! could do a promotion on webcams. To begin with, they could just support between two Go users. Down the road, maybe somehow tie this in with Y!’s VOIP service and maybe there’s some interesting interopability that may be possible.

I think it’s exciting that another big player is stepping up to this space. Competition should spur some much-needed innovation. All the necesary pieces (broadband in the home, broadband on our phones, HDTV, digital video content everywhere) that we’ve been dreaming about for a decade now is here and it’s about time we try to bring convergence to the masses.

UPDATE: For some screenshots of the user experience with Go, click here and here

In response to supporting Slingbox, Verizon says “What runs on our network are our services.”

OK, fine then I’ll just stream my own media with Orb. Oh wait, I can’t do that either with Verizon. According to Verizon’s Acceptable Use Policy (scroll to bottom) their service “cannot be used (1) for uploading, downloading or streaming of movies, music or games, (2) with server devices or with host computer applications, including, but not limited to, Web camera posts or broadcasts, automatic data feeds, Voice over IP (VoIP), automated machine-to-machine connections, or peer-to-peer (P2P) file sharing”

Uh, so what can I do? Oh, that’s right, what I can do is pay big bucks for Verizon’s mediocre, expensive vCAST premium services.

When will Verizon (and other carriers) realize that while they do own their respective networks, they cannot force their customers to use only their own content services. Sure they can try. Verizon has crippled it’s phone’s browsers by limiting 3GPP support, blocking ports, and even crippling the phones itself e.g. crippling Bluetooth so as to further limit customers to their own services.

Carriers spend gobs of money building and operating their cellular infrastructure and I have no problem paying them handsomely every month for the privilege of using it. However, force me to be limited to that carrier’s content and services? Hell no. Verizon, and other carriers with similar strategies, will realize the same fate as access-providers throughout history that had the same isolationist approach, e.g. Compuserve, Prodigy, AOL, etc.

Before the widespread availability of the Internet, you were stuck with whatever your access-provider offered. This is essentially the state that we’re in right now with mobile. We’re really just at that tipping point. As mobile phones are just now really becoming true multimedia devices and with the recent arrival of real cellular broadband in all the major metropolitan areas, the mobile web is ready to explode. And you can bet that the breadth and depth of both free and paid services from third-party providers will blow away anything that any carrier will be able to offer.

Note: I would like to say that from the research that I’ve done on this subject over the past several weeks, Sprint is MUCH more liberal than Verizon. They only officially disallow illegal uses of their network (basically like all ISP’s do) and they don’t block ports or cripple devices in any significant way. They still do not allow (unlimited) laptop tethering however. Needless to say, I can’t wait to switch from Verizon to Sprint.