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Monthly Archives: December 2011

Dear Jeremy (d/b/a HBO) [guest post]

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This is a guest post by Lee Milstein, you can find his bio below.

Thank you very much for taking the time to explain your stance on why I won’t soon be able to subscribe to HBO GO without first becoming a cable customer.  To paraphrase your argument, you indicate 3 primary motivations for keeping your service as an add-on and not making a direct consumer offering.  Those motivations are:

  1. You don’t have a direct customer business today and would have to staff up, primarily for billing and support to be able to make an offering;
  2. You don’t believe you’d be better off (financially) trying to go after individuals directly; and
  3. You make too much in guaranteed payments from your existing customer base  (the cable MSOs) to risk pissing them off.

You’re stance, while rational and understandable is also wrong. Taking each point in turn:

You do have a direct customer relationship today.

You already maintain an active user database on your website, complete with authenticated email registration, and you offer technical support to your users on the same site.  So, the issue is not that you LACK consumer touch points, it is that you believe them to be insufficient.  I think you’re better off than you realize.

Apple has proven that, with a good enough product, you don’t need free customer support.   AppleCare subscriptions or one-time incident fees are required for support for streaming services from Apple, and I’d be willing to bear the same lack of support for you.  In fact, NOT offering support may help your cause (more on that later).

Further, online payment is an opportunity to partner with players such as Google, Square, Amazon, PayPal and others in what is amounting to one of the most brutal fights in our digital world.  For the right deal, any one of them would likely be willing to help you get transactions working.  Plus, you have DRM covered as part of the streaming protocol and with very little effort, you can do what Spotify does, allowing only 1 stream to run at a time on the same authenticated account.  You already have most of what you need.

The Direct-to-Consumer Opportunity is Big, and not Mutually Exclusive with the MSO offering.

In your letter to MG and in other public statements/posts, you’ve pointed to the 100M cable subscribers (70% of which don’t subscribe to HBO today) compared to only 3M broadband customers as a reason to stick ONLY with your current model.  BUT, the broadband subscribers represent a mere fraction of the potential market for HBO GO, and it is a group of users that has been marketed to efficiently for decades.

The real potential customer base includes tablets and smart phones, not just broadband subscribers.  With over 25M tablet devices and roughly 400M iPhones/Android phones now on the market, after making some assumptions about geographies, the potential domestic user base is likely to be in the range of 200M subscribers, not 3!  That’s twice as large as the cable base, and they’re worth more money to you.

Assuming you get 50% of a subscriber’s monthly payment from cable; that means your 28M subs net you approximately $196M per month in the US (again, let’s leave out your international revenues, which are both substantial and need not be impacted at the outset).  If you need to make that whole number with digital subscribers (at the $20 monthly rate suggested in MG’s letter), you need only roughly 10M subscribers to make even money.  You can have 1/3 the number of subs for the same receipts!  Netflix, even after all of this summer’s hoopla is estimated to have around 20M subscribers and they don’t have the original programming that is the biggest draw for HBO.  You can’t do half as well as Netflix?   Plus, the cable MSOs have had decades to attract HBO subscribers for you and still haven’t surpassed the 30% mark.  What’s going to change?  Direct is a much bigger opportunity than you’re suggesting

The MSOs aren’t going anywhere.

But it would be fair to agree with the above and still not be willing to risk guaranteed revenue if indeed the MSO revenue would be put substantially at risk.  It wouldn’t be.

There are at least 3 arguments worth highlighting here:

  1. Making an offering won’t take your MSO revenue to zero.  The cable companies won’t drop you (you’re still worth too much money to them), so they’ll simply renegotiate, but again, not substantially.  It is fair to assume that not only will a material percentage of people continue to subscribe through their MSO, but a naked offering from HBO can help highlight a cable offering as premium.  The vast majority of Americans have access to local broadcast channels free over-the-air, yet choose to subscribe to cable.  Making a similar argument for the benefit of HBO isn’t much of a stretch.  Cable still offers the easiest, most reliable means of accessing ANY programming.  Any IP-delivered video service is likely to stop at least once during playback to buffer, and require you to switch inputs if you want to watch the game.  Cable doesn’t.  Plus, there are other conveniences including direct-billing, discounts on bundled services, DVR functionality, AND robust customer service that will bolster the MSO offering.  Cable shouldn’t be impacted materially.
  2. Broadband subscriptions benefit the cable operators.  More and better streaming video offerings help drive broadband subscription and that is a good thing for the cable companies.  Access, unlike cable is a high-margin business with little incremental cost for adding a new userPlus, any new broadband subscriber offers cable a chance to convince users to take or retain core bundled services.  Cable knows you aren’t killing their business by offering something of value that requires broadband.
  3. Consumer interest won’t last forever. Finally, you can’t expect consumers to wait for you to deliver what they want.  Cord-cutting isn’t the issue, but accessing programming via the device and at the time of a user’s choosing is.  Taking a quote from Steve Jobs out of the Walter Isaacson biography, “If you don’t cannibalize yourself, someone else will.” With Amazon, Apple, Google, Netflix, Disney and many others offering direct-to-consumer access to movies and programming, people have to make trade-offs. I’d sooner pay for the series you’re making, but if you won’t let me, I’ll eventually give up.  I’m not alone.

To Be Fair.

But, to be fair, I understand your unwillingness to do it TODAY. You’ve got enough money coming in and your building a large enough stockpile of great original programming to license out if you choose to do so.  There’s very little urgency.

I don’t blame you for waiting, but you don’t have to.  I’ll sign up today.  You’ll make more money and grow your audience.  I hope you’ll reconsider.

Thank you,

Lee

About Lee Milstein: Trained as a lawyer, but a tech guy at heart, Lee is on a quest to better media through the use of technology.  Currently doing business development deals for AOL, Lee previously ran Business and Corporate Development at DivX and once took a class called “Mobile Robotics” that he never heard the end of from his friends. Read more on Lee’s blog.

How to be a Great Mentor

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Let’s face it, running companies is tough.  Really tough.  We all need a little help from time to time, whether this is our first startup or our tenth.  Unlike when I started my first company back in the mid-90’s, there’s free flowing advice all over the Internet.  But not all advice is appropriate for all companies, and that’s where industry knowledge, experience, and expertise matter, and I’d make the claim that there’s not a business leader on the planet who couldn’t use some form of mentor from time to time.

Personally, in my roles at Stage Two, 500Startups, the C100, and Founder Fuel, I’ve acted as a mentor for literally dozens of companies, both big and small.  I really enjoy the process of getting to know the team behind a new venture, learn about their goals, their ambition, and their vision.  It’s the latter that makes up a key starting point in any mentoring session – understanding vision. I feel most startups are clear on their business, their tech, their product, their market, but can rarely clearly articulate vision.  My #1 tip to all entrepreneurs (first time or tenth time) is to watchthis TEDtalk by Simon Sinek.  To mentors – think about your role, your process, your learnings over the years and figure out your own “must-do” items for the companies and teams you meet.

Whether formal or informally structured, I think another key thing entrepreneurs and mentors need to figure out is what they want to get out of the relationship.  Oftentimes I get brought into some strategy or brainstorming session, but nobody in the room has any goal or desired outcome.  The best way to get the most out of these structures is to know in advance what the targets are.  Then you can get right to work, dive into the product, the pitch deck, the business model, the marketing strategy, etc, and also have some form of expectation management.  This burden falls equally on the mentor to help guide the entrepreneurs as to what they *could* get out of the relationship.

It’s important to know one’s strengths.  I’m known for creating great product experiences, marketing strategy, etc, but also more specifically in the consumer technology field.  Sure, my experience and knowledge can lend itself to helping an enterprise company navigate some issue, but I’m sure I’d be better off finding that company someone with more pertinent advice.  There’s tons of smart people out there, so try to find the ones who have directly tangible experience to what it is you are doing.  And to the mentors, ditto – yes, you can probably help lots of companies, but you as well should try to focus your energy on the companies you are best suited for.

It’s just as important to know one’s resources.  I’m a father of young children and work at a startup.  I don’t have much time on my hands.  So when a company asks for my help, I’m typically pretty clear about my availability with them.  Everyone has constraints, so both to entrepreneurs and potential mentors – make sure these are well communicated.

Lastly, and probably most importantly: expect brutal honesty.  I open every new relationship by saying “I trust you have friends and family to tell you how amazing you are and how this startup will change the world.  That’s not my job.”  There’s a great blog post on “stop being so nice” here, and I agree with it all the way.  I’m not mentoring when I’m ignoring flaws in the business model, or go-to-market strategy.  I’m not being helpful when I say the app “has potential.”  It’s when I help dive into these issues, and keep asking the “why is that true?” or “and how exactly will you do that?” questions that I’m being a good mentor.

Now, be careful not to berate.  Startups have their boards to be on their ass about whatever mistakes they are making.  The mentor’s the coach, the “go give em hell, tiger” person – once the path is clear, that is.  I make sure to toe the line well between finding (and attempting to fix) problems before they happen, then help right the course when the problems do happen.  You never want to feel bad leaving a mentoring session, but as I said earlier, you aren’t the cheerleader either.

Finding and/or being a great mentor is a challenge.  But it’s one well-worth taking.

note: originally posted on the c100 blog

My Top 8 iPad Apps of 2011

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On Friday I listed my top iPhone apps that I’m using frequently.  Here’s the list of what I love on my iPad:

Evernote

Evernote is one of my few mobile/iPad/Web/OS X utilities – I use it everywhere.  I have notes, future blog post ideas, libraries (I have virtually every quality “Future of TV” article written archives in a Evernote folder), lists, etc.  I keep copies of everything in my wallet, just in case.  I have an archive of every serial number of all white good appliances in my house (for when I call for service – especially the often-needed repairs – I’m looking at you, Miele and Whirlpool).  Everybody should use Evernote, all the time, for all purposes.  It might just save the world. Free (with paid upgrades for heavy users).

Note: saving the world not guaranteed by myself nor the makers of Evernote.

Jack and the Beanstalk

This “interactive storybook” has kept my 4 year old entranced for months.  It’s a simple retelling of the classic story, with some fun humor, and lots and lots of interactive elements.  There’s a little “golden egg” hidden somewhere on every page, plus tons of other clever little items.  One of my top 2 kids apps.  Paid app.

Doodle Buddy

This is a great sketching tool, useful for me and fun for my kids as well – a very rare combination.  The app has simple tools for drawing and doodling, can import your photos for fun, and has a great “stamp” tool.  Only downside is each new build seems to add some new popup that wants me to pay for something – which I “get” as it’s free, but I’d happily pay them something to get rid of the popups forever.

TowerMadness

This is the best Tower Defense game I’ve seen on the iPad (and I’ve tried most of them so far).  Easy levels are fun, hard levels are challenging, and the “madness” levels are so tough that beating them feels like a real accomplishment.  And unfortunately, I’m not Ender, so killing all these aliens is squarely a waste of time (except that I think everyone should play more video games.  possibly the real way to save the world, since I was definitely wrong about it being Evernote).  Awesome game, and one that the developers continue to improve, which is a major plus for me – one of the few games I’ve played on the iPad that keeps getting enhanced!  Paid app.

iMockups

I do a lot of wireframing work, most of which I do using Balsamiq, one of the few desktop apps I’ve purchased in the past few years (worth every penny).  iMockups is not quite as polished a tool, but gives me the ability to do the same via the iPad.  It could use a few enhancements (search!), and isn’t the most beautiful app I’ve seen, but it’s a solid performer.  Paid.

World of Goo

I’m rarely a big “immersive experience and storyline” gamer – I tend to care about the gameplay, balance, and flow more than anything else.  But World of Goo is the only game I play where I make sure the sound is on and I can get into it for a while.  The game itself is a fun puzzler, it’s perfectly suited for touch, and the storytelling and ambiance is perfect.  I’m hoping for a sequel, but in the mean time keep coming back to finish the OCD levels (don’t call it that!).  Paid.

Toontastic

Parents: go download Toontastic now.  No, seriously, get it.  It’s an animated storybook creator, and the user experience is so great my 4 year old can fully make the animations himself.  And that includes the narration, background effects, character and scene selection, and every other perfectly customizable detail.  It’s really great, and even has tons of online sharing features for those into that kind of stuff (I’m not, but I know everyone else is).  Oh, and not only is it that great, it’s free. Wowza.

Zite

Zite is the only app to make both my iPhone and iPad lists.  It’s my ultimate source of “being informed” on topics I care about.  Yes Flipboard is more popular, and Editions is beautiful (and built by friends of mine but I had already gotten so deep into using Zite that I just couldn’t switch – sorry guys), but Zite just does it for me (and personalized flow of info is a big deal when it comes to news reader type of apps, so I understand why people get so loyal to the ones they start with).  When Zite got acquired by CNN I was pretty happy for the guys behind it, and now, months later, I’m still happy that it hasn’t become the “CNN” of news reading apps.  Love. Free.

And, just like in iPhone, here are the runners up:

  • AppShopper – keep track of when the paid apps I’m interested in go on sale
  • #sworcery – it’s beautiful, I just don’t find myself with the time to play as much as I want
  • NHL Gamecenter – on the plus side, I can watch the Habs play, either in real-time or catch-up.  on the unbelievably pathetic down side, I can rarely watch catch-up without seeing the score in advance, because apparently the NHL doesn’t seem to care about those of us who cannot watch live hockey at 4pm multiple days per week.
  • Sundry Notes – this is an amazing note-taking / scrapbooking style tool.  super powerful, probably awesome for college students.
  • Tilt to Live HD – fun quick action game
  • iSpadez – great spades game, with live multiplayer!
  • Ticket to Ride – perfect adaptation of board game, just wish they’d let me speed up all the animations.
  • Majesty – another fun non-RTS RTS game
  • Dropbox – yup, it’s Dropbox – on the iPad. moving on.
  • Kayak – taking the depth of booking travel and making it work on an iPad is a challenge, and the Kayak app hits it out of the park
  • Waze – great on the iPhone, even greater on the iPad – free turn-by-turn nav!
  • Catan HD – would make my main list, but the app is just too unstable.
  • ColoramaMask – another fun drawing app for kids
  • Fingerzilla – crush, stomp, tap, destroy!!!
  • Pat The Bunny – good kids interactive experience
  • Talking Tom – silly fun
  • IMDB – if you are a movie nerd like me, you probably don’t need to be told about the app…

The most interesting revelation I had whilst writing these two lists is the breakdown of paid vs free apps.  On my iPhone only 2/10 “top” apps were ones I shelled out invisible coins for.  Whereas on the iPad, 5 out of 8 were paid (though if memory serves at least one was a free weekend download, but I could be wrong).  If I was a real reporter I’d go through my transactions to figure out how much money I’ve spent on each platform.  But I’m not, so instead, thus endeth the blog post.

My Top 10 iPhone Apps in 2011

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Sharing your favorites seems to be the hip thing to do, so I thought I’d share my absolute favorite apps on both my iPhone and iPad (not including any default iOS apps).  These are basically the apps I use all the time, and really enjoy using. There’s also quite a few apps I use daily, but might not like as much, as well as apps I think are amazing, but only use on a very infrequent basis.  And there are also apps I don’t much like and rarely use, but I didn’t really see the point in including those…

One other note – I picked apps from all categories, including games, social, etc. Also, I didn’t deliberately pick 10, it just worked out that way.  First up – iPhone fave’s (in no particular order, btw).

Chef’s Feed

Chef’s Feed is a fun app for foodies (wannabe foodies as well).  The app has a list of the “top” chefs of a city, and said chefs have picked their favorite dishes (not restaurants) to eat.  The app lets you make a bucket list of dishes that appeal to you, and also is a handy way to find a good bite when you aren’t sure what to eat. Free app.

Words With Friends

It’s like Scrabble, only more “balanced” so players at many levels can really enjoy the game.  Vocabulary and knowledge of “Scrabble words” is very helpful, and tile placement strategy is essential to win, but regardless, it’s possibly the best non real-time game time waster app out there. Free and paid versions.

Camera+

It’s a good photo taker, but more importantly it’s a fun photo editor/filter.  Simple effects, easy cropping, and simple sharing (though I wish they’d just let me send images instead of creating a whole new link/web system). Paid app.

Test Flight

Simply put: Test Flight lets app developers send you their apps prior to putting them in the iTunes App store. It’s great for previewing or testing out apps in development. If you are an app developer and are not using Test Flight, you should start now.  Free to consumers, paid by developers.

GrubHub

GrubHub is an app that replaces all the crappy little delivery menus restaurants leave on your door (though hey, free rubber band).  They have tons of local restaurants, plus in-app ordering, and, as pictured above, an order history which makes it super convenient to remember where you liked (or hated) to eat.  Free app.

Starbucks

Yeah, I know, cliche, whatever. You prefer Blue Bottle, great, so do I, but $12 for a latte that takes 45 minutes to make doesn’t always work out for me. The Starbucks app does one main thing: let me not have to carry my Starbucks card around.  Nice.  Free app.

Flashlight

Guess what this app does?  Free.

Temple Run

After Words, Temple Run is the next best time-killer game I know.  Basically, you run, and run, and run, and then run a bit more.  You jump, duck, pivot, and you turn yourself around, and that’s what it’s all about.  Free.

Pandora

Free personalized radio on your iPhone.  Any questions?  Nah, I didn’t think so. Great for road trips.  Free.

Zite

Gosh I love Zite.  Zite brings me articles I want, on topics I like, and does so with sickeningly good accuracy.  While Twitter (and vis-a-vis Flipboard, Pulse, etc) are great for bringing me feeds on a variety of topics, the one thing these apps fail to deliver for me is topical content based on my interests, not my followers or those I am following. I open Zite, I find content I like.  Life is good. Oh, and – free.

That’s my list of favorite iPhone apps, hope you enjoy.  Here’s the quick list of “runners up”:

  • Plants vs Zombies – it’s fairly new to me, I’m having fun playing but I’m not sure how long it’ll hold my interest.  Could be a winner, not sure yet.  Paid.
  • WhiteNoise – self explanatory. Free and paid versions.
  • Flixter – movie lookups (solid app, just don’t get to see many movies).  Free.
  • IMDB – satisfies inner movie nerd needs. Free.
  • Path – just started experimenting.  Beautiful app design. Does all that Facebook stuff, only without the massive invasion of privacy.  Also, just for your real-world friends (you remember those, right?). Free.
  • Twitter – read description of Path above.  Now think the opposite of it.  Free.
  • Yelp – great to look up restaurants I already am thinking of going to. Not useful as a restaurant recommendation/finder app.  Free.
  • CardMunch – take picture of business card, scans it, sends to the Internet, comes back as LinkedIn contact.  Previous version of app was notably better than current, but still works great. Free.
  • Expensify – if you do a lot of business expensing, you must have this app.  Free.
  • Sonos – controls my Sonos.  Would be on the must-have list, but I know not everyone has a Sonos.  Free.
  • AppShopper – great app, lets you create a “wishlist” of apps you want, then notifies you when they go on sale.  Free.
  • iHandy Level – it’s a level.  comes in handy.  Free.

Anything you think I should check out – leave a comment!  iPad version of this list coming soon!

ps – I’d include Dijit, but that’s cheating. 🙂

Dear MG (a note from HBO)

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We saw your letter yesterday, and wanted to take the time to write you back.

First and foremost we love your content too!  Seriously, you write great stuff, and we generally love all of our fans.  This is why we’re writing to you.  See, the thing you love us for is the great shows we make like Game of Thrones, Entourage, The Sopranos, etc.  And we love making them.  Some might say our brand is at its strongest in recent memory, as we put out some of the best shows on television (though we’ll give a little head nod to our friends at AMC for their impressive content selections in recent years – we wish we had grabbed Mad Men, but… oops!).

See the thing is, the way we get to make these shows is, candidly, by spending a lot of money on trying to be the best (btw – can you believe it’s been 20 years since “Simply the Best” was our theme?  flashbacks!).  Our mutually agreed upon favorite Game of Thrones?  North of $5 million – just to make the pilot!  And the dude writing it hasn’t even finished the whole series yet!  This stuff costs a fortune, and, as you’ve probably seen, they can’t all be winners.

We love that you’d spend $19.99 (or more) to pay for our service, and we wish we could have you as a customer.  But let’s talk about that for a second.  First of all, we don’t have any direct relationship with our fans right now, so when you need customer service, you call Comcast or DirecTV or Cox, etc.  So we’d need to get customer service up and running, and that’s pricey, since, as you know, we’d want our service to be top notch.

Next, we have no method of billing you.  And sure, we can just do some PayPal or an easy Website transaction, but then we’d also need a full authentication framework (we trust you, MG, but let’s face it – not everyone on the Internet is quite so honest).  Today, we just get paid by the cable/satellite companies, and it’s up to them to deal with everything else.

But let’s get to the crux of the issue.  There are about 30-40 million Americans who watch HBO shows legally, and we agree, a lot of them would be happy to pay us directly. If we went, as you put it, “cable-optional,” we’d be breaking our existing, mega-million-dollar contracts with our current partners, and from what we’ve seen, they wouldn’t be too happy about that.  Second, we don’t really know how they’d change their billing relationship with you or other consumers.  Which is going to put a lot of people into a precarious position of having to decide if they really do want to sign up with us and keep paying their cable bill.

This too wouldn’t be a problem if we had a really strong feeling about our ability to recoup the investment. See, we make about $4 billion a year right now.  Yes, that’s right, four, zero, zero, zero, zero, zero, zero, zero, zero, zero dollars.  Oh my is that a lot of zeros.

We’d basically be building a product, from scratch, with no distribution whatsoever (remember we’d have to break all our contracts to be able to run a standalone business, which would put a major crimp in our style of marketing and promotions). And even if our current brands were strong enough to build on, do you think our entire customer base would make the shift?  We don’t, even the ones who love our shows.  We also don’t think this standalone business would actually get us a larger audience than we have today, which means even less people would get to watch our stuff.

So MG, we’d love to have you as our direct customer, but honestly, we can’t afford you.  Can we send you a real crown from the set of the show instead?

-your pals at HBO

ps – just in case its not clear, I don’t really work for HBO, nor would I presume they’d write a letter like this one, nor can I be 100% certain of some data points including subscriber base or ARPU. in other words #satire.

The Dirty Little Secret of The Future of TV: Data [Guest Post]

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This is a guest post by Anil Podduturi, you can find his bio below.

Gary Myer, who helped found DirectTV, recently penned a guest post for Wired on the future of TV. It comes with a provocative headline: Why Nobody is Challenging the Pay‐TV Providers.

Myer covers a lot of ground in the post, but it’s mostly familiar territory for readers of this blog: Unbundling, linear vs. VOD, social, device ecosystems. After setting the scene with the 40k-foot industry landscape, Myer makes some bold claims about what’s gating television innovation that dramatically oversimplify industry dynamics.

The biggest problem with Myer’s argument is that it ignores the major impediments to progress for both newcomers and incumbents – these include product design in all of its various incarnations, but let’s not forget content rights, content cost structures, and the economic realities of unbundling. It’s not as simple as cracking a new navigational paradigm for on-demand video or acquiring more content.

(For more on the nuances of this industry quagmire, see my Storify from last week capturing a Twitter conversation between Dennis Crowley, Dan Frommer, Hunter Walk, and others, that all started when Dennis’s grandmother couldn’t watch the Pats game in Florida without a $350 DirectTV Sunday Ticket subscription.)

At the end of the day, video services of the future must increase the value of the monthly subscription through a mixture of distribution, content, and user experience, but getting there will require a data-driven approach to the business that embraces platform dynamics and wedges the economics of content in favor of consumers.

This approach should extend to every dimension of the business, including content acquisition. Myer acknowledges that content acquisition is one of the biggest challenges for would-be disruptors. In fact, it’s his hypothesis for why nobody is challenging the pay-TV incumbency:

What’s the Problem

To seriously compete with existing pay‐TV providers, new providers need to offer at least what the existing providers offer, plus added benefits (more content, lower price, superior user experience, etc).

Successful internet‐video providers will offer a comprehensive catalog of à la carte/on‐demand content –- with an intuitive user experience. Existing internet video players are offering only a fraction of the programming of pay‐TV providers and they are securing new content rights haphazardly. If you’re going to compete with the incumbents, why guess what programming is important to your customer by only acquiring rights to selected programs?

That’s the old Microsoft embrace-and-extend ploy. I’ll save you my personal thoughts on embrace-and-extend as it relates to product development, but assuming some newcomer could actually afford a content acquisition strategy that successfully equalized the traditional channel lineup, what would be the return on such an astronomical investment, and would it even add value for consumers?

Myer says that newcomers shouldn’t guess what programming is important to the customer, and he’s right. But that doesn’t mean the video service of the future should strive for parity in programming. We now live in a world where the best consumer web products have iterated in part because of data – usage data if your product has traction, but how about general industry research like this Nielsen study that tells us the average US home with a cable package receives about 118 channels, but only watches 17 of them.

The way to increase subscription value isn’t by embracing the same content library, but rather by extending the value of the ~14% of content that consumers do access regularly and augmenting that offering with other relevant content and services. To do that, newcomers should leverage actual consumer data signals if they’re fortunate enough to have built a product that can capture them.

"Let me just write em an email, I can explain it all in a simple email!"

Netflix has built a data-driven product, and this is why Reed Hastings got on stage earlier this month at the UBS Media conference to proclaim that he’s the Billy Beane of digital media.  “We’re very much the ‘moneyball’ content buyers. We’ll look at, OK, we paid X for something, so how many people watched it?” Netflix is collecting and analyzing viewing data that then informs their content acquisition strategy.

Netflix, like the Oakland A’s, must apply a data-driven approach because they simply can’t afford to acquire everything they think consumers might want. It’s been reported that Netflix’s streaming content licensing costs will rise from $180 million in 2010 to $2 billion in 2012. Netflix can’t afford to spend another dime or another million on content that doesn’t directly add measurable value to the service.

But at least Netflix is in position to measure value and apply data-driven learning to its product strategy. This brings us to the supply chain of internet-age content distribution, an ecosystem within which Myer says, “companies need to control at least the device and the service.”

It remains to be scene whether this level of control will prove to be a categorical business imperative. Apple and Amazon seem to think so, and have demonstrated success owning their respective hardware and software stacks.

Netflix, on the other hand, is a service provider that understands platform dynamics and how to extract value and meaningful consumption data at the service layer. Netflix not only operates its service across PCs, tablets, gaming consoles, connected TVs, and phones, but has also developed the technical proficiency to optimize that cross-platform device distribution. This allows Netflix to maintain a direct relationship with the consumer and refine its user experience across platforms.

Incumbents like HBO and Showtime have begun to recognize the value of the direct-to-consumer model with their HBO Go and Showtime Anytime streaming services. Competitors like Hulu and YouTube keep investing in direct-to-consumer efforts to drive greater engagement (Hulu Latino, YouTube Channels). Microsoft redesigned the XBox Live Dashboard as a platform for content providers to go direct-to-consumer. Just this past week, we saw the comedian Louis CK pull off an experiment in content distribution, going direct-to-consumer to the tune of $200k and counting in profit.

These direct relationships, and how service providers leverage them to extract data that in turn informs product development, content distribution, and content acquisition will help shape the real future of television at the service layer. No single service will be able to provide a comprehensive offering so long as there is still exclusive, marquee programming and healthy competition in the device ecosystem. However the dust settles, content must stay accessible and affordable for the consumer.

—
About Anil: Anil Podduturi was most recently VP of Product Strategy at NBCUniversal. Prior to NBC, he led product management at Daylife, MTV Networks, and Microsoft. On Twitter: @anilpod

Talking Future of TV & CES 2012 With Robert Scoble

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I first met Robert back in my Slingbox days, and now we get together a few times a year to chat tech in general, kid stuff, but especially gadgetry. He sat down with myself and Maksim (the CEO of Dijit) this past summer, and a couple of weeks ago I went to see him and his new digs at Rackspace HQ. Here’s the video:

A quick summary of what we discussed:

  • CES 2012
  • Gadgets
  • Future of TV
  • Social TV
  • CES 2011
  • Kids
  • Tech
  • Facebook
  • CES 2010
  • Gadgets
  • TV
  • Dijit’s iPad app
  • CES (all others)

And for a fun flashback, here’s the video from our chat right before CES 2009:

good times, Robert, thanks!

Decoding "I Cracked It"

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As Nick Bilton wrote:

“I’ve finally cracked it!” Steven P. Jobs, co-founder of Apple, told his biographer, Walter Isaacson.

This topic seems to come up time and time again in the “future of TV” discussions, and was revived today over at AllThingsD: “Though it’s currently only embedded in the new iPhone 4S, Siri could eventually change the face of the TV industry.”  I’ve seen a few other stabs at what “cracking it” could possibly refer to, but none seem quite right.

First, regarding voice-controlled TVs.  Is this part of the future?  Absolutely, unquestionably, undeniably.  Siri hacking is already a hobby, and the idea of “TV, channel 702 please” or “TV, Watch The Office” or “TV, Record New Episodes of Arrested Development” all sound great.  But how much of an improvement is this really?

I’d call it a minor enhancement – specifically in context to all the action happening in the second screen. If you can pick up your smart phone or iPad and perform roughly the same query in one of dozens of apps, then “talking” this command doesn’t really sound like a HUGELY big deal.  It sounds incremental.  And “cracking it” doesn’t seem like it’s about incremental.  As I’ve written about previously, I don’t think it’s about physical gestures either, and as I’ll write about more in the future, it’s unlikely “apps” nor about some “new” 10-foot user interface (those are terrible, and are dead, thankfully).

What if the interview wasn’t about some futurey thing we’ll see one day?  What if it’s not some mystical innovation that we can’t possibly fathom?  See, I talk to virtually everybody in the future of TV industry, and not a single person seems to be able to imagine what this could be.  That’s a whole lot of smart, industry-relevant, savvy people to be so in the dark.

So I’m going to take a giant leap backwards on the statement “I cracked it” and instead of looking at what might come, I’m looking at what’s already there.  See, from my eyes, the single biggest improvement to the TV experience I’ve ever seen happened last year.  I think “I Cracked It”exists, and it’s called AirPlay.

AirPlay takes a fundamental mindshift from thinking about whats happening ON the screen, where you have to use a remote (or gesture or voice or whatever) to control some awkward, ill-performing, frustrating, fundamentally LOUSY user interface.  AirPlay shifts the interface to your favorite location, the device you hold, and carry with you all the time.  AirPlay enables you to have the most organic, natural, helpful user experience you can, then just shift that experience to the device you want, easily and flawlessly.  It’s an awesome experience.

For the record, I don’t mean this to be a gush about Apple TV / AirPlay – merely the experience the two together provide, one I anticipate will be replicated by others, and soon. The future of TV interfaces will be controlled by your second screen, and you’ll have one simple way to get it to the screen of your choosing.  Today that’s done by AirPlay, but by the end of 2012 you’ll see this type of offering from a variety of manufacturers and app providers.

The first “moment of change” for TV user interfaces happened in the late 1990s by TiVo.  The next one happened in 2010, by Steve Jobs & Apple.  And yes, he cracked it.

Why Apple Won't Buy Netflix (or Sony or RIM or …)

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We're like Media. Squared.

I enjoy pondering the question of “who should Apple buy next?”  I think it’s probably best answered in this Quora post, which conveniently includes a history of most of their recent acquisitions, then followed by all sorts of fun guesses.  Some of the companies mentioned include: Square, Pandora, Sony, Amazon, RIM, and many more.  PaidContent lists Apple as a good future home for Netflix.

I’m sure on paper many of these are sound acquisitions.  Some bring good IP. Others good cash flow.  Others good branding and distribution vehicles.  I’d surmise that many a financial analyst could put together very solid plans, and would even wager the discussions happen within Apple from time to time on the topic.  But I don’t think Apple’s buying any of them, and for a vastly different reason, one that won’t make any spreadsheet or pro forma statement anywhere.  It’s about the DNA transfusion.

If there’s one thing Steve Jobs created over the past decade-plus it’s a certain DNA.  It’s a company-wide culture that transcends from product to marketing to customer service to building design.  And inserting hundreds of product managers, engineers, QA staff, designers, etc who come from radically different types of DNA will result in exactly one thing: Brundlefly.

How about an iMinidisc player? Or adding UMD to next-gen Macbook Airs?

My money is on Apple continuing their pattern of only absorbing companies who are either:

  • Small – smaller teams who are tightly focused can have their developing culture be absolutely subsumed by Apple’s
  • Non-consumer facing – ingredient technologies (chips, algorithms, infrastructure) tend to need less of the consumer product dogma that guides the “Apple way” and have less impact on culture

The exciting thing about an Apple acquisition, in my opinion, is watching them take little pockets of technology and turn them into big consumer products far down the road.  Although I would say, of all the companies named above, it certainly does seem like Square could be a good fit from a product, market, *and* DNA perspective, but that’s just from outside appearances.

If AppleTV is 1/3 of the market, who's selling the other 2/3?

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A few blogs are reporting about Strategy Analytics’ recent claim:

Strategy Analytics projects that the market will reach almost 12 million units globally this year, with Apple alone predicted to sell nearly four million devices.

Wow. Pretty bold claim.  Let’s deconstruct it.  Let’s assume it’s a correct prediction:

AppleTV will sell 4 million units, leaving ~8 million for “the rest”.

what do you mean "and the rest"?

Here are “the rest”: Roku, Western Digital, D-Link (Boxee), and… er… I don’t know, how about Logitech? Maybe a few other smaller players, but nothing you and I are buying in a Best Buy, Target, Walmart or Amazon – the only places that matter at all for moving these kinds of numbers.  Yes, there are some other odds and ends in the bizarre category known as Internet Set Top Boxes, but they aren’t mustering up sufficient sales to count here.

Roku: I’ve heard all sorts of things, but lets use publicly available information: as of last January, Roku hit 1 million devices sold.  I’ll assume they’ve at least doubled that in 2011, possibly as much as tripled, due to new products, more viability, and lower prices.  That said, they are now up against an ever-improving AppleTV product.  Even so, let’s assume they can hold pace against the world’s largest marketing machine for digital lifestyle products, and sell another 3 million units in 2012.

Western Digital: You probably haven’t heard of it, but that little gadget your buddy has for watching photos on his TV is called the WDTV Live, and they’ve sold somewhere in the 1-3 million unit range (I know that’s a big range, but it seems pretty fair based on some poking around).  Not a bad showing for a company known for making hard drives.  But in the presence of both Apple and Roku, it’s a pretty fair bet that they aren’t edging out of third place for future market share.  I’ll again be kind with 1.5 million units sold in 2012.

From these guys, only for your TV. Perfect.

D-Link (Boxee Box): Disclosure: I was a core part of the launch teams for both Boxee and the Boxee Box by D-Link, and wish to see them extremely successful, though I am no longer professionally engaged with either company in any way.  And that said, I don’t think they’re anywhere close in numbers yet, and don’t see them hitting the million unit mark any time soon (specifically in regards to unit sales, this has nothing to do with downloads, active community, or positive thoughts). Optimistic high end prediction in 2012: 750K units.

Logitech: $100 million loss.  Let’s move along shall we?

Have the factory spin up about a bajillion of them, nothing will go wrong.

Everyone else: I’ll generously band them all together, and predict they maybe move 500K units.

Unknown entry by traditional consumer electronics brand: Look, anyone can make a media streamer, in fact you can make an adequate one by buying off the shelf parts and licensing open software platforms.  But even the formerly mighty Sony and the young stalwart Vizio is going to have a tricky road in getting a product out in this category that doesn’t include a full end-to-end solution.  And there just aren’t enough to go around.  Maybe Amazon could have some kind of Kindle Fire: Home Media Edition or something, but something tells me they are still getting their feet wet in hardware and aren’t going to jump too rashly into the space (though I’ve been known to be wrong about Amazon and hardware in the past).  Top guess: 250K units.

Grand Total Units Sold, Highly Optimistic Prediction Mode: 6 million units.  Giving Apple TV, with 4 million sales, a 40% market share.  And that’s me being *quite* optimistic, and I’d wager it’s more like a grand total of 4 for the rest.  Or less.  Giving Apple TV a significantly larger potential – and by the way, it’s not exactly Apple’s strongest product.

But their math was so good!

This whole story just reminds me of the time when I was reviewing an analyst report for the *exact same space* back in 2003 when we had just shipped the HP Digital Media Receiver (the first mainstream Internet Set Top Box, by the way).  This was, by the way, before consumers had Flips or other simple video recording devices, digital cameras were mostly a novelty, and there was no YouTube, Netflix streaming, or pretty much anything else to watch on the darned thing.  But still, the potential!

The analyst predicted hundreds of thousands of “streaming video boxes” sold in 2003.  The only snag was, we were literally the only game in town, and we had predicted tens of thousands at best.  When I spoke with the analysts, they said they predicted several years forward, based on consumer interest, to arrive at several million units a year.  Then, they backtracked it into 2003 and, boom, hundreds of thousands.  What could possibly go wrong with this kind of logic?

They sold literally dozens of them

Why Your Gadgets Don't Play Nice With Each Other

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I’m in the business of helping make your devices and gadgets work better and more seamlessly in your home.  But the truth is, if the industry made just a few simple decisions differently along the way, I wouldn’t have a business to be in.  The “remote control overload” problem we all have comes primarily as a result of your devices being digitally ignorant of each other.  Which, from the consumers’ perspective, sucks (industry term).  But the reason this sucks more than it seems is that your devices could be talking already, they just… don’t.  And they don’t in two different ways!

Connection-based compatibility – HDMI
Pretty much every HD product shipped in the past ~5 years has an HDMI connection. And HDMI has this protocol cleverly called Consumer Electronics Control – you can guess what it’s for.  It’s been part of the HDMI specification since the very beginning. And in general, virtually no manufacturers use it to control other brands’ products, though even more egregiously they even use this protocol to control their own products.  So your Samsung TV knows when a Samsung Blu-Ray player starts a movie playback, but ignores a Denon receiver’s request to change inputs. Fail.

"standards".

Network-based compatibility – DLNA

Back in the early aughts, there was this thing called the Digital Home Working Group, formed by several consumer electronics companies with the specific goal of – wait for it – making sure that consumers’ electronics products would work together harmoniously.  The DHWG was renamed into the friendlier Digital Living Network Alliance, and then launched in 2004. I was personally on the original working groups for the (both?) organization(s?).  Even at the time, it was beyond obvious that this open standard by committee approach wasn’t going to give consumers the solutions they were looking for.  7 years later, and I’d assert that consumer awareness of DLNA is negligible, and the standard has yet to provide the industry a reliable solution.  

So there we are, oodles of technology, tens of thousands (if not more) of man-hours developing standards and platforms, and still, consumers have to deal with the “input one” problem (in a nutshell: devices connected to anything but the first/primary input of a TV tend not to get used, with the lone standout exception being video game consoles, which is likely due to a) more explosions and b) children operating the equipment).  Why is this the case? My friend Julie Jacobson ponders a little conspiracy theory over at CEPro.

My sinister plot scenario is actually much simpler.  I think there are specifically two reasons why consumer electronics products don’t do anything “advanced connectivity”-wise together:

  1. It’s hard to make it a priority.
    Testing technology, in general, is challenging.  QA can take as long as actual development time, often more.  Many products get rushed to market even before the testing is complete.  So imagine, if you are the person in charge of shipping the product, and your marketing team probably (a) announced prematurely and (b) likely set expectations too high.  You are likely underresourced, understaffed, and concerned about just shipping at all (or maybe a few weeks too soon?).  How much energy do you think you’d spend on testing other companies’ products?  Right, me too.

    I'm not in charge of line-straightening, that's a different department.

  2. It’s not financially rewarding to make it a priority.
    As illustrated above, just getting the darn product to market is a major chore.  Further, you know that much of your sales and success in the marketplace have to do with product reviews, as well as customer ratings (and worth of mouth and social media, etc – but these all come from the quality of the product itself).  Lastly, you know that virtually no reviewer, either “expert” or “typical consumer” is going to take the time to really do a lot of testing of compatibility, unless of course you claim compatibility.  So if you don’t, and just sit back on the sidelines and phone it in when it comes to cross-brand compatibility, it isn’t going to hurt your product sales or market perception in any meaningful way.

The only meaningful standards to expect in living room are (1) most content should be able to play on most devices, and (b) most devices should use the same cables as most other devices, and (c) most devices will come with arbitrarily confusing directions as to how to connect said cables.  Oh, and don’t forget (d) most devices will not come with the cable you really need at 11:30pm when you finally get to setting it up.

Maybe they'd do better if they stopped asking for my phone number just so I can buy some more AA's?

Why iMacs will get Apple TV, not Apple Television

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Ah, Apple punditry, rumors, and speculation.  And back into TV land we go.  Today from Forbes:

Wedge Partners analyst Brian Blair this morning asserted in a research note that that the next version of the iMac, likely in the 2012 first half, will include some new TV functionality – basically, turning the desktop Mac into a bridge to a full-fledged television business.

This, plus another analyst who seems to know the exact sizes of the new long-awaited Apple Televisions is certainly fun reading.  But what parts make sense?

iMac + Apple TV?
Yep, makes sense.  After all, we’ve had Front Row in Macs for a long time now, it’s way overdue for an update, and having it function identically to Apple TV is a nice fit.  I’m buying this one.

iMac + Apple Television (aka iTelevision)?
To be a “television” a product, for the most part, includes a buit-in TV tuner.  It also has multiple inputs, and has all sorts of requirements/parameters for video display.  These components are effectively inconsequential to add, cost-wise to an iMac, so from a pure “could they build it feasibly” perspective, this actually passes a sniff test.

However,  what is this new product?  Is it a big computer “Now, from Apple, a 46″ iMac that you put in your living room”?  Is it a small TV “Now, from Apple, a 27″ iTelevision that fits nicely on your desk”?  Is it all of the above “Now, from Apple, in 7 different sizes, with 11 configurable options, the iMacTV.  We cook it your way”?

You know what it is?  Frankenstein.  Confusing.  To throw in some industry jargon – it’s what we’d call a “hodge-podge”.  Hard to explain.   How many other products that Apple ships are described like this?  None.  It’s the antithesis of an Apple product.  It’s something a PC company might do, certainly, but not Apple.

I still believe that iTelevision is coming.  I think we’ll, at the very least, learn a lot about it in 2012.  But there’s no weird “mashup” device coming.

They don’t ship iHodgePodge, not at 27″, 32″, or 55″.