LIVEdigitally

Category Archives: Video/Music/Media

Curved TVs are the new 3DTVs

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20140108-162233.jpgApparently the hot, buzzy thing at CES this year is the curved OLED TVs. I saw one – it’s very very pretty. And much like the last 2 attempts by manufacturers to stir up interest in buying new sets, this just isn’t going to cut it.

Firstly, we all need to acknowledge the massive rush to buy new sets last decade occurred because of *multiple* factors that contributed to a zeitgeist-level shift in set ownership:

  • Thinness: sets went from being 2 feet deep to 6 inches or less deep
  • Size: sets went from 27 inches to 50 inches
  • Resolution: shift from below standard definition to high definition
  • Quality: not only the raw resolution, but every aspect of picture quality was obviously visually improved
  • Sex appeal: being early to having a plasma was sexy – then when it became mainstream enough, not having some kind of flatscreen was definitively unsexy
  • Format shifts: simultaneous to new sets, tons of new content was instantly available – and not just new content, but libraries of favorites were accessible
  • Set price: getting a flatscreen (at Costco!) was very very affordable
  • Content price: while VHS libraries were only for the few, building a collection of your favorite DVDs was relatively inexpensive (for younger readers: VHS tapes in the early 90s would sell for $80 or so)

All of the above occurred in an effective blink of an eye. There were so many reasons to to upgrade, it just had to happen.

But now that these beautiful, thin, huge displays got mounted on peoples’ walls, it’s become a lot harder to unmount them. I don’t even want to think about doing it – and I don’t think the manufacturers have yet presented us a reason to follow along.

Smart TV? OK, if I’m buying a new set. Or I just get an Apple TV, Roku, Xbox, Playstation, Chromecast, etc. I gain very little benefit from an actual set upgrade, compared with the cost of an add-on box that I can easily replace. It’s akin in my eyes to paying the extra $3+K for an in-dash GPS unit as opposed to buying a $100 Garmin, or just using my phone.

2nd try: 3dTV? Personally, I actually avoided one the last time I bought a set (63″ Samsung plasma – yes!). Turns out I wasn’t the only one, and 3d was (as I predicted it would be) quite a failure.

Batter up…. CURVED SETS! Huh? Don’t get me wrong – they are pretty in so many ways. Thinner than my iPad – love it, very slick. But would I even consider the hassle of the upgrade for it? Same deal for 4K – just not *enough* to cause another societal shift for “MORE”. Further, I think the curved nature of the device is an ill-fit for most living rooms, where the benefit of super-thin is eliminated by the odd shape in the room. Has anyone checked if these things are Feng Shui?

Sooner or later we’ll likely find the next big reason to upgrade displays, but it’ll have to rank in there in the leagues of when TV was first available to the masses, to when it first went color, to the current state, before it happens.

Why it’s (almost) 2014 and you still need a set top box

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I actually had one of these!

I stumbled onto a discussion on Quora entitled “Why do we still have television set top boxes?” and as I often see, it’s full of conjecture and suspicion about the evil empire that is the pay TV industry.  While I am not specifically trying to support or vilify anyone from that industry, I thought it worthy a response that has less conspiracy theory than others.  So let’s start with some important facts:

1) Set Top Boxes (STB’s) take, on average, from day of deployment 30+ months to “break even” for a cable company2) Any tech support, home maintenance (“truck roll”), etc is costly to a cable company
3) Software updates, QA, etc are slow and costly to a cable company
4) Most north american pay TV providers now enable some form of “TV everywhere” service available by App or Browser
5) Many pay TV providers now offer same apps on Roku, Apple TV, and several smart TVs
6) Smart TV software platform updates happen 1+/year – which could easily result in incompatibility with pay TV services.  Only very recently have any of the manufacturers begun to standardize their own platforms.
7) The technology in homes is moving at an *extreme* pace, so even if a pay TV operator is moving “fast” they will still appear, relatively speaking, to be moving slowly.
7a) thinking point – Until about 5 years ago, this just wasn’t the case at at all, the pay TV providers didn’t really even need to innovate whatsoever.  So here we are 5 years later and they have APIs, multiple apps, etc – not too many industries one could point to and make a similar statement about incumbents…

I think if you add the above together, the answer should be something like this:

The pay TV industry would be happy to rid itself of STBs, but only *very recently* have viable alternatives hit the market.  Pay TV companies are very rapidly adopting these platforms, but your definition of “rapid” is radically out of whack with how an established industry moves.  Over the next few years you should expect most North American Pay TV providers to give you as a consumer multiple options for using their services in the platform of your choosing.

As a bonus:
8) CableCards *could have been* a good solution, but were way too soon to market to make the industry comfortable with them.  Ask yourself this question: if you were the person in charge of P&L on the hardware deployment business, and you knew full well that consumers will call you with any problems whatsoever, would you support some “standard” by which *other company’s hardware* was causing YOU customer service issues?  Me neither.

What a Next-Gen Apple TV Could Bring

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While I’m not as bullish as others that the following tweet should be taken as gospel, I’ve been thinking a lot recently on what a new version of an Apple TV product could look like.

So, in no particular order… “why update the Apple TV?”

  • 4K video
    I wouldn’t bet on this, at all, since there’s virtually no content available today, and probably won’t be much in the next 24-36 months.  If 4K looks promising, they can rev again in the future.  Further, Apple has historically *not* led in this category, and I’d be surprised to see them do it this time.
  • Rich SDK
    Yes, there are plenty of apps available for Apple TV today, but access is limited and granted in an ad-hoc fashion to selected content providers.  Many folks assume one day they’ll open this up to a wider developer network -as in, all developers.  I know very little about the programmability/guts of the Apple TV, but I have to assume the current one simply wasn’t designed to be uber-expandable.  As a sub-point, I *could* see an argument for an extension of iOS here, but I’d hope it’d be a differentiated offering to relate to the different UI mechanisms.
  • HDMI Passthrough
    For the literal heaps of things Google TV has done wrong, HDMI passthrough was smart.  Enabling the Apple TV to sit on Input 1 at all times enables no-input switching for any connected experience.  But even better than that, it’s not a stretch to see a version of AirPlay with a, wait for it, transparent layer.  What does that mean?  Imagine every cool thing about Interactive TV you’ve ever heard or thought of, minus all the lame stuff, now have it actually work, powered by your iPhone/iPad.  Awesome.
  • Gaming
    Many of us already believe the next generation of consoles is doomed, but what if the Apple TV came with an optional joystick and as much gaming horsepower as an iPad or Xbox 360, and stayed at the $99 price point?  It’s the exact opposite strategy Microsoft is taking with their platform (gaming first, everything else second), but since about 1998 that’s pretty much a winning approach.

And that’s it – which is telling in its own way.  There’s no other “basic” TV/streaming need to upgrade the current hardware, and Apple certainly isn’t going to put out a new version without a very specific reason.  Perhaps I’m missing something (comment please!), but I am at a loss to come up with any other drivers for new hardware.   Oh, and yes, I’m ruling out Siri, physical motion gestures, cameras, etc – while any could certainly come at some point, they aren’t going to exist without one of the above as well.

Which leaves me with the following: if you do not think the above reasons are compelling, and you can’t come up with a better one, I think you can pretty much write off a new piece of hardware.  Further, I have strong convictions that the only truly viable option above is adding a Rich SDK/open developers kit, so if we don’t see that next week, I don’t think we see any new device show up either.

The only thing that could kill TV? TV itself.

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It’s fun to write about the “death of TV” (or flip flop on it, whatever).  Why it’s so fun, I’m not sure, but I have a hunch it’s because…

  1. It’s a HUGE industry ($500+B/year if not more)
  2. It’s been utterly untouched by the Internet (so far – a thing that really rankles a lot of people, mostly tech bloggers)
  3. The newspaper and music industries both got trashed, so why not TV too?
  4. It’s controlled by a very small number of extremely powerful and wealthy companies
  5. The aforementioned companies have a perception of (a) greedy profiteering, (b) being dinosaurs, and (c) restricting people from doing whatever they want with content, which also tends to rankle said tech bloggers

Arguments for the death of TV are equally fun to read and fantasize about.  They tend to fall into these categories:

  • “Those Kids Today”:
    Theory – Kids today like to watch the YouTubes and the Torrents!  Kids today don’t like to pay for content. Therefore when kids get older, they will continue to watch YouTube and not pay for content.
    Reality – To debunk comically: kids today like Play-Doh, Lego’s, Justin Bieber, and eating Mac & Cheese at every meal – none of which hold true when kids become grownups (well, maybe the mac & cheese bit).  To debunk more seriously: kids have loads and loads of time on their hands and very little money, so they can spend the time and energy hunting and pecking for free content – something most adults (30+, with kids) just don’t have.  Or, it’d be like assuming that because kids like Justin Bieber when they are teenagers they will like equally crappy music in their fifties.  Well, that might just happen I guess.
  • “Cord-Cutting/Shaving/Trimming/Slicing/Thinning/Balding/Receding”:
    Theory – everybody’s quitting cable! EVERYBODY!
    Reality – I’m not even going to bother finding the links, but bottom line is this – for every article that shows XX thousand customers quit Cable, if they don’t ALSO INCLUDE the part where XX thousand customers signed up for IPTV, FIOS, Telco’s, or Satellite, you need to utterly ignore the article.  After that, there’s not much evidence left.  This may change, but that’s just a theory, and one that’s yet to be really substantiated.
  • “The Great Unbundling/A La Carte/Go Direct to Consumers”:
    Theory – In the not-too-distant future, you’ll be able to set exactly the lineup you want, and not pay for channels you don’t watch.  Or you’ll watch *everything* a la carte, paying as you go.  Or channels like HBO will start selling direct to consumers.
    Reality - This is in utter conflict with how the TV industry actually works and makes money. And since they, you know, like making money, and since shows are, you know, expensive to make, they need to keep making the money.  So if channels were to unbundle, they’d instantly get so expensive people wouldn’t be paying for them.  Here’s some of my previous thoughts on this same topic.
  • “Newspapers/Music died!”:
    Theory – Because of the deaths of other industries, TV will die too, as it’s antiquated, etc.
    Reality – This is like arguing that because the coal and steel industries in the US shrank, so will the TV industry. Other than being ad-supported, TV and Newspapers are utterly dissimilar (and BTW, the way the ads work for both are exceptionally different).  Other than being, well, media, TV and Music are utterly dissimilar.  We might as well say the Internet will die soon because it’s just like newspapers.
  • “Startups! Technology!”:
    Theory – Some startup will come along and just utterly kill TV in every way.
    Reality – Yeah, no.

OK, Jeremy, Mr Big Talk Guy, so what could actually happen?  Here’s my theory on what could “kill” the TV industry as we know it – it’s “catch up TV”. For those unfamiliar with the term, “catch up TV” (also called “binge viewing” sometimes) is when you watch a show long after it aired, by days/weeks/months/even years.  Whether it’s via Hulu, Netflix, Amazon, iTunes, Video On Demand, or any other service, it’s the rapidly increasing trend on TV consumption.  And it’s the one thing the TV industry is massively enabling, and could massively come back to haunt them.

In a nutshell, the TV ecosystem is like a big food chain, with advertising dollars acting at the bottom of it all (yes, TV ads are the kelp of the TV world).  Should advertising falter in a notable way (which, by the way, it isn’t at present), it could bring down the whole system.  There are several exceptions to the system, such as HBO, but the numbers there ($1.2B) are literally paltry when compared to TV ads ($90B).  And catch-up TV represents a problem, as it’s not monetized the same way as live TV.  See the Live TV part is where almost all of the $90B of TV ad revenue comes from – hence why ratings declines cause shows to get cancelled, as they don’t generate the cash flow to sustain themselves.

So as we all get further and further accustomed to being able to watch shows whenever we want, we (collectively) are reinforcing the habit of “why bother watch live?”  For example, my friends all tell me to watch Homeland, but I don’t really have the time for a new show right now, so I’ve bookmarked it for later (ahem, NextGuide), and will just start watching it on Netflix.  Along with Breaking Bad, Mad Men, and lots of other shows I know are great, but just haven’t watched – yet.

What, then, happens to highly anticipated shows that launch, combined with audiences who increasingly choose to wait to view them?  They get cancelled (great thoughts on this by Andrew Wallenstein here).   Sure a startup like mine can benefit from this, and even become a fabled Billion Dollar Company (FTW!), but success beyond our wildest dreams will, in no way, replace the lost revenue the entire ecosystem would suffer.  And just as environmentalists are concerned about loss at the bottom of our food chain, if the TV ad system begins to crumble, then so do budgets for new shows, etc.  It ain’t pretty.

Now I’m not predicting the above will all happen – but at the current pace of things, it wouldn’t shock me to see much of it play out.  The TV industry is giving its content away way too cheaply to all the providers to sustain itself without the advertising, and they are effectively disincenting viewers from the live experience (not that it’s not cool to get a sticker or a badge or something, but let’s face it, people are smarter than that – hence the general “meh” of most of the social TV offerings – sorry guys, but #come #on), other than for appointment TV programming.  Further, it has a certain prisoner’s dilemma aspect to it all, as no single network can make the bold move to pull recent content from the variety of catch-up/streaming services – oftentimes their own apps! From the discussions I’ve had with TV execs, there’s a lot of awareness and a growing concern, but no solutions in sight yet.   But, at least it’s the enemy we know…

NextGuide, now with Amazon and more awesomeness

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NextGuide, my personal favorite TV Guide app (that I built at the company I run), is now updated to include Amazon Prime and Amazon Instant Video alongside live TV, Hulu Plus, iTunes, and Netflix.  It’s really a great experience to browse all providers simultaneously and to search for shows and actually know where they are watchable. You can get the update here on the App Store.

That’s the “big” news (yes, adding a streaming provider with tens of thousands of hours of streamable shows and movies is a big deal IMHO), but we also took the time for a lot of across the board improvements to the app.  Here are some of the highlights:

>> New Gestures – two-finger swipe within showcards, pinch to hide, fullscreen media gallery, and more!

One of my favorite things about a great iPad experience is gestures. One of my favorite favorite things about any app is hidden features. While it’d be fun to document them everywhere, we’ve loaded up the NextGuide experience with many new gestures.  Explore around, let us know what you find and think of them!

>> Enhanced Cast & Crew with 1-click saved searches and Wikipedia biography lookups.

File this under “finally!”  When we shipped the 1.0 version, the cast and crew view just wasn’t that useful.  Now, go to the cast and crew tab for any movie or show, and tap on a person you are interested in.  Want to find more stuff from them?  Tap “add to interests.”

>> New Category Editor with easy drag & drop category setup

While we made removing/hiding categories really easy in the app, it’s always been a pain to add them. Now, push and hold on anywhere in the “Category Bar” to get a slick interface to add genres, custom genres, and trending topics.

>> Channel Setup now part of Initial Setup Wizard

The customer is always right, and lots of ours told us they didn’t like the fact they couldn’t customize their channel lineups until after launching the app.  Now you can.

>> Improved “Your Picks” algorithms

Let’s face it, recommending content is a very hard thing to get right. Our focus is to get beyond the baseline concept of “if you like this then you’ll like that.”  We’re constantly working to improve it, and I think our users will see a lot of progress in this department.

>> Lots of other little new features for you to explore throughout the app

Thanks again to every one of our users, even the 1-star reviews in the App Store – its the best way to learn, and learning is what we’re doing!

ps – sorry about not blogging much, just been working on, you know, everything you just read about.

Redefining TV in a Mobile World

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I had the honor to present on a “disruptive” topic at the Grow2012 conference last month in Vancouver, and, big surprise, I opted to talk about TV.  I decided to take a bit of a departure from many of my typical presentations and focus on the myths and truths (or at least truthiness) about disruption in the TV industry, with a focus on how our mobile lifestyles are changing the way we think about television.  Here’s the video (and slides):

Slides:

Is there a market for Ultra High Definition TV?

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Quick history lesson. From the birth of TV through the invention of cable TV and the VCR, picture quality was effectively the same. Along came DVD, which doubled the screen resolution to 480p, ooh ahh. Then along came HDTV with 720p. Then 1080i, and now we’ve “settled” on 1080p. Only we haven’t – the next two resolutions are already picked, they’ve been called 4K and 8K by the industry for a while, and just got fancy labels with “Ultra High Definition Television.” And much as I’ve always considered Blu-Ray a loser format, I believe the same fate is in store for UHDTV.

First, the picture quality is virtually imperceptible. I’m pausing for a second as rabid video engineers attempt to tar and feather me, but on a 50″ screen from about 10′ away, 4K looks roughly the same as 1080p – which, while I’m at it, looks roughly the same as 720p.  Unless you really really really know what you are doing, and really set up your room properly, and really have the right size TV for the distance from your couch, and really watch the right source material, and really really really – you get it.  But for most regular humans watching most regular TV (which, I might add, isn’t even being broadcast in 1080p – what? yes, it’s true – if you are watching TV, you are not watching 1080p. deal with it), your existing HDTV setup probably looks beautiful enough as it is.

Second, even if you can tell the difference, it’s not impressive enough. I distinctly recall watching my first DVD, and I distinctly recall my upgrade to HDTV.  Each were monumental shifts in resolution and display quality. It’s reminiscent of upgrading to a retina display iPhone/iPad. But then what? If the next shift upwards doesn’t bring the same “ooh, ahh” moment, it’s a resounding “meh” – and “meh” doesn’t sell new TVs.

Third, it’ll be perfectly timed for “higher quality format fatigue” to set in.  As I’ve described above, consumers already finished going to stores to upgrade to get to the promise of “FullHD” – which, again, generally isn’t even being broadcast in FullHD. Going from FullHD to UltraHD is just going to make folks wary, if not pissed.  Nobody likes to think their recent investment as worthless, regardless of the plummeting prices of flatscreens.  It’s too little, too soon.

Fourth, there won’t be enough content. Whenever 4K sets are available, and I predict it’s coming within 18 months, odds are really low that a corresponding broadcast source or streaming medium will offer 4K videos. Unless a huge back catalog of content is released at the same time, most of which doesn’t even exist at 4K resolution I might add, consumers won’t see a compelling reason to upgrade.

Fifth, streaming won’t support 4K into homes anytime soon, and physical media is dead, which means there’s not going to be 4K content anytime soon. Per above, no content equals dead format, and since we don’t really have the infrastructure in North America to support a wealth of content…

Sixth, and it’s a minor point, but how can you have two different standards with the same name?!?!? Consumers hate that stuff. Quit it!

Much as the MP3 killed high definition audio long before its time, I believe streaming video and a lack of perceptible difference will kill ultra high definition video long before its time.  My advice to the industry: slow down, you move too fast. I know you are losing money on just about every TV you sell, and I know that’s not changing anytime soon, but 4K in 2012/2013 is not your answer.

My advice to the industry at large:

  • Don’t launch without a huge content library.
  • Don’t launch without multi-brand support.
  • Don’t launch without an all-streaming solution.
  • Don’t launch too expensively.
  • Don’t launch with a negative campaign against existing HDTV installations.
  • Don’t launch til you have it all perfect.  You aren’t there yet.  Stay quiet until you do.

ps – sorry for the gross picture.  :)

pps – to videophiles who want to nitpick with some detail I’m sure I got wrong – please do so constructively!

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.

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

They Pulled Me Back In! I’m Joining Dijit Media as Chief Product Officer

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A week ago I announced that Jim Schaff would be taking over active duties at Stage Two, and that I’d be focusing on “other stuff.”  Today I’m excited to share the stuff:  I am joining the management team of Dijit Media as Chief Product Officer, where I’m responsible for product and marketing (here’s the official update).  Not only that, my virtually common law married colleague (business partners for much of the past 14 years) and very close friend Adam Burg is the company’s VP of Business Development.

What???

Last Fall, I gave a presentation at the Set-Top Box Conference in San Jose, and the entire drive back I had a feeling of near elation.  Not that I had said anything extremely profound, but it was wrapped up in the feeling of doing something I had a lot of passion for – in this case, discussing the future of television.  Over the next few months, I spent a lot of time doing research in the Smart TV (also called Connected TV or Internet TV) space, and started seeing some trends emerge, and realized there were some very interesting business opportunities on the horizon.

Adam and I spent months developing a prototype concept of the vision we had, and went to meet with some of the brightest folks we know in the convergence field.  One such bright folk was well-known VC Stewart Alsop, who I’ve known since the late 1990s, who introduced us to Maksim Ioffe, CEO of Dijit.  In our very first meeting with Maksim it was clear he shared much of the same industry and product vision and philosophy with Adam and me. I’ll keep this part of the story short, as we’ve all seen this movie before – we ended up agreeing to join the company. And there was much rejoicing (yay).

Why Dijit?

The grand vision of Dijit is to create the ultimate “four screen” (phone, tablet, computer, TV) social entertainment experience, one which seamlessly merges disparate products and platforms and content into one single, easy to use, consumer offering.  The company is well on its way, and its first product is an iPhone app that enables a really sophisticated, yet elegantly simple control experience for home media centers.   As Maksim put it, “Consumers have 21st-century home entertainment experiences but are stuck with remote controls that haven’t been updated since the 1980s.”  The company partnered with Griffin to produce the Beacon, a clever take on the “IR blaster” product, and one that’s already receiving solid reviews (and I haven’t even done anything yet!).  This is going to be a very exciting company to be a part of, and I’m thrilled to have such an opportunity.

Reminiscing.

I still recall the early days at Mediabolic, where we enabled networked home entertainment solutions that interfaced with legacy, analog consumer electronics devices (yes, we were networking the living room in an era where there were virtually no HDTVs, no YouTube, no Pandora, and no… iPod!).  At Mediabolic I learned what it takes to design and build embedded entertainment devices, to work with consumer electronics manufacturers, and the deep set of challenges surrounding the connected home industry (fun trivia: I heard the phrase “this is THE year of the digital home” every single year starting in 2001 – possibly earlier).  It was a great experience, and key people from that team now work at amazing companies like Netflix, Rovi Corp (Rovi acquired Mediabolic in 2007), etc.

At Sling Media I had the unique opportunity to work for and with some outstanding individuals, not to mention the position of being tasked with figuring out how to deliver the perfect “living room experience” – only over the Internet.  The company’s CEO, Blake Krikorian, taught me the meaning of focusing on every detail and nuance, remaining truly innovative, and keeping the consumer’s wants and needs in the forefront of every product decision.  I also had to learn the ins and outs of social media, back in the era before it was called “social media,” where “the bloggers” were a special, hard to understand subset of humanity (or, as I rapidly learned, just cool people).  We accomplished a great success building the Slingbox, and I’m proud of the product, the team, and the experience.

Over the past four years at Stage Two, I’ve had tremendous exposure to startups, big companies, CEOs, visionaries, the media, and managing a great team.  We literally put companies like Boxee, Bug Labs, and Pogoplug on the map, and have also had the chance to work for well-established firms like Electronic Arts, Best Buy, and VUDU (now Wal-Mart).  I’ve learned from entrepreneurs like Jim Lanzone (now president of CBS Interactive), Peter Semmelhack (Bug Labs), David McIntosh (Redux), Rahim Fazal (Involver) and so many others (I’ll write another post in the next little while chock full of shout-outs).  I’ve redesigned product experiences for dozens of products, and created marketing/PR/social media campaigns for dozens more, and had the pleasure to work with great teams along the way.

The Future.

And now I’m taking all of the above, and putting it to work at one place.  Welcome to Dijit.

Roku vs AppleTV smackdown

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I don’t have cable. But I watch a lot of TV.

For my birthday I got a Roku and after tooling around with it for a couple of weeks, I cut the cable cord, much to the wife’s chagrin. Then, last Christmas, I found under the tree an AppleTV (although it is small enough it could have gone in the stocking.)

AppleTV and Roku essentially inhabit the same space. Both are around (or under) $100, both are solely media streaming devices and, unlike the mythical GoogleTV or the enigmatic Boxee, neither offer web access.

So with no methodology and no experience in product reviews, here is my official, unauthorized, David-vs-Goliath head-to-head streaming media device smackdown. In one corner, Apple, the single greatest human accomplishment in the history of the universe; the company that proves Intelligent Design is real. And in the other corner, Roku, which means “six” in Japanese.

Design

OK, this isn’t really fair because this is where Apple has always excelled. When I first got my Roku, I thought it was a pretty slick device. Black plastic, pleasing angles and the size of a turkey club sandwich (hold the mayo). Then I unwrapped the AppleTV and…. My God you’re beautiful! So small, so sleek…

I looked at my Roku, what is that hideous oversized slab of a streaming device currently attached to my TV?

Point: Apple

UX

I won’t even go there. Apple’s is amazing… Roku’s has always sucked.

Point: Apple

Content

So this is where it gets interesting. The gateway drug for both of these is Netflix and Pandora, which are both awesome services and the reasons why the sun still shines in my world. But what’s there beyond that?

With Roku, yes there is MLB if you like baseball (I don’t) and HuluPlus if you’re able to figure out why you would want it (I can’t). Where Roku really shines is access to all the weirdo webTV shows on Koldcast, Blip.TV, Revision3 and so on. You have to really like web-only TV and fortunately, I do. The wife doesn’t so I end up watching a lot of it by myself. You can also watch Al Jazeera streaming live on Roku in the event you need more proof as to how f-ed up the world is.

With Apple TV, your channel flipping will lead you to YouTube or to all the various audio and video podcasts on iTunes. That may sound lame, but it really isn’t. There is a ton of great stuff there and most of it is pretty bite-sized. So in 3-5 minute increments you can flip from news to comedy to movie trailers… unless you land on the “This American Life” podcast, in which case you’re stuck on the couch listening to your TV for an hour.

Winner of this round? I’m going to give it to Roku. I love all the cheese that webTV has to offer. My big complaint is again the UX… it is hard to find content and then to remember which channel it is on if you want to go back to it.

Reliability
So here’s the knock-out blow… this goes to Roku. Yes, it is close, but Roku wins it. I found a better picture and fewer artifacts when streaming from Roku. Also, surprisingly, AppleTV hung up and crashed more than the Roku did. Not by a long shot, mind you, but enough to notice.

Final Verdict

If you like design, UX and more mainstream content, you’ll love AppleTV.

But this is my smackdown and I’m giving the prize to Roku. They’ve got the edge in reliability and I love the goofy webTV access… but that is just me.