WRFest (Telemediatainment): The Content Who Would Be King
With network convergence, the shift of consumer electronics from analog to digital technology and new tools for content generation and management we're seeing a major evolutionary event emerge in front of our eyes. And are participants willy-nilly. But are we knowledgeable ones ? Gaining ground on that is helped a bit by framing the changes. What we're seeing is the Telecom industry going thru network and service changes, and increased overlap with Media and Entertainment, shifts in Consumer Electronics and the growing force of things like games in the later. In my mind that leads to the re-labeling of the new industries as Telemedia and Entertronics. The individual components will remain by thes new hybrids are also forming. And at the end of the day it'll be all about the content - who creates it, how it's packaged, who distributes it, over what kind of networks and where/what/when it's delivered.
In case you haven't noticed in the last 18 months we've seen ginormous changes in the way
content is presented on the Web. People talked about Web 2.0 which was really just extensions and developments on the capabilities of the existing capabilities into social networking, collaboration, etc. IOHO what we're seeing now is something truly deep - a fundamental re-think of how content is presented. Which is accompanied by a change in who the players are. It started with Iger taking over Disney and striking up a deal with Apple for content distribution - thereby becoming the first major media player to seriously embrace the web and begin the landslide beyond small-scale participants. The other big change, which we first really noticed about two years ago, was that content generators were beginning to really re-think presentation instead of just adapting the formats and thought processes inherited from prior generations. Now things are much more inter-active, non-linear, multiply connected and wide open. And we're seeing it just in the last couple of months. The first example was Amazon's re-think, the WSJ has done some really good stuff over the last year or so but now it's spreading like wildfire. And a great example is Hulu.
All of a sudden a huge wealth of old and new content is readily available on-line in a decent
intercface with more coming.Now personally I think some of it needs to be worked on, more is needed and they've already exceeded the limits of managing the sortation and searching. In other words they need a much better content architecture and information management capability. But when you look at the quality of the material, as opposed to say one more YouTube amateur nightmare, content quality matters. And when you've said that you've said it's about the people, skills, money, networks, resources and management capacities to create, build and distribute content. This is the REVOLUTION folks. Just in the last month I've been able to re-discover Dougie Howser, Babylon 5 and Studio 60 (Fair Disclosure: my TV went away a couple of years ago and I've been online for things like Rose, etc. for that long). Here's one my favorite S60 episodes which proves the point. Sadly the show went into a nosedive after the creator moved away from exploring deep and great issues and started writing to his personal troubles. But while he was on a roll he was looking at US culture, what it takes to run a creative business, Corporate America, the wasteland of TV all inter-woven with personal stories. It could have done for culture and the corporate world. Sorry about the sidebar. Now wait - that is the point. It's all about the content !
Now it's going to be about the Value Chain the emerges and evolves for the Telemediatainment Sector(s). Consider the picture at right which shows the ecology of that value chain as it was. To get an idea of how it will be "simply" add more major "Distributors" to the framework. We'll take a deeper dive sometime in the future but the excerpts below should be looked at in this context. The Telecom industry faces huge demands for bandwidth and shifts in types of service, which'll impact the Equipment providers. Major Web 1.0 content providers (Google, Yahoo, Amazon, AOL) are showing widely varying ranges of adaptability and innovation to old challenges and new ones. Yahoo in particular is a sad....sad story because it had the world's largest portfolio of high-value content which it let go fallow thru neglect and an inability to sell and then monetize. Now it's looking for quick fixes but can't explain any of this (for the record I read the latest major investor presentation which hints at some interesting things but is so discomboobulated that, as a mirror on executive thinking, it's scary). You also find stories on new ways to manage content, alternate distribution experiments, e.g. Blockbuster's bid for CC (!! yikes) and the problems with providing economic access to bandwidth which could kill the whole thing.
Telecom
AT&T braces for more hangups The pinch on consumer spending continues to cause big hangups at phone companies where their core businesses — landline telephone service — is eroding faster than ever. The latest round in the alarming decline in phone lines will come Tuesday morning, when AT&T (T) presents its first-quarter earnings. Analysts are expecting AT&T to report that the rate of line losses in Q1 exceeded the 8% hit it took last year. No. 2 telco Verizon (VZ) has an even higher cancellation rate, losing 8.1% of its lines last year compared with a 7.6% decline in 2006. The news signals an acceleration of a troubling trend for the sector as consumers, already hit by higher gas and grocery prices, look to their phone bills as a place to trim expenses. AT&T was the first telco to ring the warning bell when it said in January that there was “softness” in some regions of the consumer market.This sluggish economic backdrop has made a tough competitive market even tougher, as cable companies such as Comcast (CMCSA) and Time Warner Cable (TWC) grab market share with their triple play offerings — video, Net and phone services. If there’s one area that may help offset the landline defections, it’s wireless. But even AT&T’s high-revving mobile unit — the Apple (AAPL) iPhone’s only U.S. carrier – is feeling the slowdown as the market becomes saturated.
AT&T Profit Climbs 22% on IPhone Sales, Cost Cuts From BellSouth Purchase AT&T Inc., the biggest U.S. telephone company, said first-quarter profit rose 22 percent on sales of Apple Inc.'s iPhone and savings from a plan to cut 10,000 jobs after its 2006 purchase of BellSouth Corp. AT&T lost 1.6 million primary residential lines in 2007. To compete with cable rivals such as Comcast Corp., the company is spending $7 billion on network upgrades over five years to offer speedier Internet connections and television service. Subscribers to the company's U-verse service, which offers video over home-phone lines, rose by 148,000 to 379,000. AT&T reiterated its forecast for more than 1 million U-verse customers by the end of the year. The company also plans to boost download speeds on wireless phones beginning in 2011 or 2012, when it will introduce a new generation of mobile technology. AT&T paid $6.64 billion in a U.S. government auction this year to acquire airwaves for faster Web access.
Content
All eyes on Google as growth slows Google’s shares have lost a third of their value since the start of the year, and concern is growing whether the small text ads Google serves are partly to blame. That will be one of the top things Wall Street will pay attention to when Google (GOOG) reports earnings Thursday after the close of trading. “Revenue growth and paid clicks. That is what is on everyone’s minds,” says Imran Khan, an Internet analyst with J.P. Morgan.In late February, comScore released a controversial report that had many analysts convinced that Google was not immune to a recession. The comScore report suggested that Internet users in the United States were clicking on Google ads less frequently. Some analysts began slashing their price target on Google, which gets 97% of its revenues from online ads, after the report showed that Google’s ‘paid clicks’ were flat in both January and February from the same period a year ago. Tuesday evening comScore issued its latest report that showed Google’s paid clicks grew 3% in March year-over-year. But this time, analysts remain more cautious of the comScore’s numbers and warned investors against reading too much into the data.
Google regains its momentum With its strong first-quarter earnings report, Google on Thursday finally settled the score with comScore, which had sent Wall Street reaching for the antacid for the past two months. Google’s paid clicks, which measures how often Internet users click on its text ads, were up 20% from a year ago. That was a far cry from the 1.8% growth rate for the first quarter that research firm comScore had reported. Google CEO Eric Schmidt, wasted no time pointing out that fact at the beginning of the earnings conference call with analysts on Thursday. “It’s clear to us that we’re well-positioned in 2008 regardless of the business environment,” Schmidt said. “Paid click growth has been higher than speculated by third parties.” For the past two months, Wall Street has hung its fears that Google (GOOG) might get hit hard during a recession on the comScore metrics. Instead, the search giant said it would manage just fine. It explained that it was intentionally cutting back on some ads so it can improve the overall quality and ultimately charge higher rates. Not everyone was sold on the idea when Google discussed its quality control initiative in late January.
Yahoo Reports First Profit Increase in Two Years Amid Fight With Microsoft Yahoo! Inc., seeking to prove it's worth more than Microsoft Corp.'s takeover bid, reported its first profit increase in more than two years on a gain from an investment. The earnings didn't spur much enthusiasm from investors looking for Yahoo Chief Executive Officer Jerry Yang to put up numbers high enough to squeeze a better offer from Microsoft. Yahoo shares fell after the report. Microsoft has threatened a proxy fight and perhaps a lower price if Yahoo doesn't agree to a deal by this weekend. ``The board should take that money and run,'' Paul Meeks, an analyst at LR Burtschy & Co. in Charleston, South Carolina, said in a Bloomberg Radio interview. ``They needed to show fabulous results and these are good results. I don't know if they're what's necessary to prove to investors they can go it alone.'' Sales, excluding revenue passed on to partner sites, rose 14 percent to $1.35 billion, topping analysts' average estimate. Excluding the gain and the cost of stock options, profit of 11 cents a share beat projections. Net income a year earlier was $142.4 million, or 10 cents, Sunnyvale, California-based Yahoo said in a statement today.
Microsoft Rules Out Higher Yahoo Bid; Ballmer Says He Doesn't Need Company -- Microsoft Corp. Chief Executive Officer Steven Ballmer said the world's biggest software maker doesn't plan to raise its $44.6 billion offer for Yahoo! Inc. ``We are offering a lot of money,'' Ballmer said today at a Microsoft conference in Milan. ``If Yahoo's shareholders like it, that's great. We are prepared to go forward without a merger with Yahoo.'' Microsoft has offered $31 a share in cash and stock.
Has Yahoo already lost credibility battle? Yahoo Inc. was clearly gunning to win over investors and Wall Street with its first-quarter results on Tuesday, but the initial question on the post-earnings conference call instead invoked a sense of disbelief. Quizzing the company's management on an "investor presentation" the company filed last month with the Securities and Exchange Commission, Jeffries & Co. analyst Youssef Squali expressed a healthy set of doubts about the company's vision for its future. He noted that Yahoo was projecting growth for the next couple of years that "far outstrips" the projected growth of the online advertising market, where Yahoo has ceded its leadership position to Google Inc. The question points to a problem Yahoo may be facing as it continues to spurn Microsoft's $40 billion-plus takeover offer. Namely, Wall Street seems to doubt the Web giant's credibility as it tries to make its case for the health of its business and why Yahoo could remain independent.
The charmed life of Amazon's Jeff Bezos By virtually any measure-market share, revenue, profit, stock price, customer satisfaction, international reach - Amazon Inc. is thriving. With $14.8 billion in revenue, Amazon is ranked 171 on the Fortune 500 (up 66 places from the previous year). It was the fifth-ranked company as measured by its 134.8% return to shareholders during 2007, putting it, surprisingly, two ranks above Apple. So how did he avoid the fate that befell so many dotcoms and turn Amazon into a real business? It's easy to believe that Jeff Bezos is one of the great innovators. But that's not exactly the case. His rise into Fortune 500-dom actually has little to do with innovation and more to do with iteration. If anything, Amazon demonstrates how a cutting-edge Internet company - of all things - can succeed slowly. The trick is taking a million tiny steps - and quickly learning from your missteps. By doing just that, Bezos has created one of the all-time great retail operations. But he wants Amazon to be more than that. Now he's trying to build his company into the Web's biggest seller of digital media - downloadable copies of books, music and movies - and turn it into a provider of the fundamental services that power business itself. He doesn't just want to be the Wal-Mart of the Web; he wants to be its Con Edison, too. For all of Amazon's ups and downs over the past 13 years, Bezos's strategy is one thing that hasn't changed. Customers want three things, he says: the best selection, the lowest prices, and the cheapest and most-convenient delivery. At Amazon, he explains, all decisions flow from those fundamentals.
AOL's Web Sites Show Gains in Traffic A yearlong effort by AOL to transform its content Web sites into crowd-pleasers is beginning to pay off. Traffic to the sites -- including AOL Money & Finance, entertainment, and the male-oriented Asylum -- grew 15% to 56.5 million unique U.S. visitors in the first quarter from a year ago, according to comScore Media Metrix. Measured by traffic, some of the sites even top the charts for their categories.AOL still hasn't translated the surge in visits into higher ad revenue. But the news is positive for the Time Warner Inc. unit, which has struggled with another initiative -- building AOL into a major digital ad-sales firm. When Time Warner reports earnings next week, AOL is expected to post a weak first quarter, with ad revenue that is flat to slightly down. The content push is part of AOL's bid to reinvent itself as an ad-supported Web company following its August 2006 decision to make its Internet-access service free. Visits to AOL's Web sites slowed as a side-effect of that decision. Many of the visitors had been paying subscribers who logged on to check email and then looked at other AOL features. To draw visitors back, AOL redesigned sites in the news, sports and health categories. It also created a half-dozen new sites that don't use the AOL name, such as a technology-focused site called Switched, a hip-hop site called BlackVoices, and a Web trend tracker called Urlesque.com, as well as Asylum.
New Content Generation
Peter Gabriel's Web filter But now Gabriel has a new business that's potentially much bigger. On Tuesday, he and a new group of partners launch the private-beta version of a web-based service called The Filter that will sort through the vast inventory of content on the Internet and recommend songs, movies, television show and web videos to its users. In May, The Filter website will be open to the public. Ultimately, Gabriel and his partners in his Bath, England-based company have a grander vision for the Filter than telling you that if you like Sammy Hager, you might also like Van Halen's earlier stuff with David Lee Roth. They hope you'll one day be able to log in and find the perfect place to dine on your upcoming trip to, say, Barcelona -- and a suggestion for the right clothes to wear on your night out. Now that sounds like something an art rocker like Peter Gabriel would go for --- as opposed to a night of tequila swilling at Hagar's nightclub in Mexico.
I Waste People’s Time Online. How? Don’t Ask Me. Links to funny online videos, pictures and the like pepper our in-boxes like so many temptations of the devil: “Cat Plays Piano!” “If Celebrities Were Fat!” or “MySpace: The Movie!” Sometimes ignored but often indulged, such viral (person-to-person) content — “Check out this bear asleep on a hammock!” — offers a four-minute vacation from work spreadsheets or school term papers. But for me it’s serious work, all those videos of wedding bloopers, photos of innuendo-laden billboards and articles about Indiana Jones’s lesser villains. And all those users send us a lot — a lot — of content. Each day we wade through an ocean of submitted items, selecting only 30 or so to publish. In an age when Web sites increasingly rely on complicated algorithms to rank content, we pick our stuff by hand. This very newspaper said of us in 2007, “No one can accuse this site of not understanding Web video.” So we sure seem to know what we’re doing, huh? To be honest, though, we don’t. Nobody in the online content business truly does. The taste of the Internet user is as idiosyncratic as it is fickle. What is popular and funny one day could be clichéd and boring the next. (“Chuck Norris is so tough” jokes, anyone?) There are certain common traits of viral content that loosely guide our selections — it should be short, easily understood, universal, nostalgic — but for every hit sharing those qualities there are millions of similar failures, not to mention stuff that simply defies explanation.
Wired plots a new style for Web journalists For decades, journalists have relied on such time-honored books as the Associated Press Stylebook and the Chicago Manual of Style. But if these well-thumbed arbiters of language and grammar seem a tad too 20th century for your tastes, enter Wired.com. The technology-centric publication plans to unveil a stylebook that will not only modernize its popular decade-old version but also provide a fresh, sophisticated look at current issues facing online media. The updated stylebook will highlight such current Web-publishing issues as anti-spam techniques, online community standards and ways to increase rankings on Internet search engines like Google, Hansen said. Hansen is doing his best to bring together the often alien communities of journalists and techies. "With these two parallel worlds, if they touch, there will be complete annihilation," he joked. "There is often a separation between editorial and technology," he said. "We're trying to create a culture where there is a lot of parity. We want to give editorial people a primer on what do you need to know to work well with the tech people. And the tech people can learn about news people."
Alternate Distribution
Blockbuster Makes Unsolicited Bid for Circuit City of Up to $1.35 Billion Blockbuster Inc., the biggest movie-rental chain, made an unsolicited offer to buy Circuit City Stores Inc., for as much as $1.35 billion as the second- largest U.S. electronics retailer struggles with falling sales. The offer comes six weeks after Circuit City investor Mark Wattles said he wanted Schoonover ousted and a buyer found. The company posted five quarterly losses before returning to profit in the fourth quarter by firing higher-paid workers. Blockbuster CEO Jim Keyes said today that a merger would save money and combine expertise in media content and electronic devices. Circuit City has 693 stores in the U.S. and 779 shops and dealer outlets in Canada. Schoonover has opened smaller stores and reduced staff as same-store sales decline and it loses clients to Best Buy Co., the biggest electronics chain. Revenue and earnings are suffering because new employees are struggling to sell service packages and warranties, among the most profitable items electronics retailers offer. Before 2007, Blockbuster lost money in nine of the past 10 years as people switched from renting videos at stores. Blockbuster is cutting marketing costs and shedding unprofitable customers to return to profit. It's also sold more DVDs and raised prices on its Total Access online plan, designed to compete with Netflix Inc. in Internet rentals. ``At Blockbuster, we have successfully deployed a series of strategic initiatives designed to provide our customers with convenient access to media content,'' Keyes said in the statement. ``These strategic initiatives have already improved our financial results.''
- Look Before You Leap on Circuit City Investors should wait and see what happens with Blockbuster's takeover offer for Circuit City. That said, Wall Street is missing part of the rationale for this deal.
Blockbuster deal doesn't make sense Blockbuster Inc.'s unsolicited offer to buy struggling Circuit City Stores Inc. was panned from Wall Street to Hollywood as financially risky and poorly timed, but the proposed deal also makes no sense from a technological perspective. One of the apparent motivating factors behind the deal is the idea of "convergence" - a popular buzzword in high-tech and media circles that is often trotted out by cable companies getting into the telephone business and visa-versa. It was also some of the main "thinking" behind some of the most sketchy business schemes in recent history [hint: think AOL buying Time-Warner.This deal looks to be no less of a disaster - perhaps in part because Blockbuster's goals seem a bit unrealistic for a company that was just a year ago was plagued with management turmoil and a questionable outlook.
Why Netflix isn't obsolete Netflix announces its first-quarter earnings after the bell Monday, April, 21. With a spate of upgrades by analysts during Q1, Netflix is expected to demonstrate that its momentum isn't slowing, especially since its rival in the DVD-by-mail business, Blockbuster, looks to be more and more occupied with its bricks and mortar stores and a takeover bid for Circuit City. But as is always the case with Netflix, there are a lot of folks expecting the online video service to falter somehow - almost 40% of the public float is short-action. Still, those folks have been wrong in the past.A Silicon Valley venture capitalist, proud of a recent Web 2.0 investment that offered digital downloads of video, once described Netflix (NFLX) as an "ice cube in the sun." That was almost three years ago, and Netflix, No. 46 on Fortune's list of fastest-growing companies for 2007, shows no signs of melting. All indications are quite the opposite. Last year was tremendous for the online movie-rental company based in Los Gatos, Calif., with net income up 36% to $67 million on $1.2 billion in sales. Analysts estimate overall sales will increase 13% in 2008 and 14% in 2009. What that VC got wrong, and Netflix CEO Reed Hastings has right, is that digital downloads are not going to do away with the DVD anytime soon, no matter what Steve Jobs and his iTunes team would have you believe. With Blu-ray recently winning the format war for high-definition DVDs, you can expect a long life ahead for the business that Netflix pioneered. Hastings will tell you it will be at least five to seven years before digital technology improves enough to ensure the demise of physical discs. Whatever that window is, Netflix is pulling ahead of its chief competitor, Blockbuster (BBI, Fortune 500), in the DVD mail rental business; Netflix's subscriber base has grown, and Blockbuster's has flattened.
Viacom teams up for new premium channel Viacom Inc. and five Hollywood studios are joining forces to create a television channel and video-on-demand service, the companies announced Sunday. The venture, starting in fall 2009, will show movies and television series from Paramount, Paramount Vantage, MGM, United Artists and Lionsgate.It could provide competition in both programming and viewers to Time Warner's HBO and CBS Corp.'s Showtime. Viewers will have pay-per-view access to big-budget releases from the studios, such as "Cloverfield," "Iron Man" and "Star Trek." Movies from the companies' archive libraries and new TV series created by the studios also will be featured.The combined companies have a collection of thousands of films and hundreds of TV shows. MGM owns the world's largest modern film library, comprising titles from United Artists, Orion Pictures and other studios. Paramount has 3,500 motion pictures in its library, including recent blockbusters such as "Transformers" and "Beowulf" and Oscar winners "There Will Be Blood" and "No Country for Old Men." Viacom (VIAB, Fortune 500) owns the content of more than 100 television channels, including MTV, VH1, CMT, Nickelodeon and Comedy Central. Viacom will provide marketing and other operational support through its MTV Networks division.
Bandwidth
The Bandwidth Conundrum In today's world, bandwidth demand is similar to what processing demand was 20 years ago. You just can't get enough speed, no matter how hard you try. Even when you have enough speed on your own end, some other bottleneck is killing you. All too often, it's not the speed of my connection that's at issue--it's the speed of the connection at the other end. It may not even be the connection speed itself; it may simply be the site's ability to deliver content at full speed under heavy demand. This concerns me, since I'm an advocate of IPTV and other technologies that need lots of speed to work. We seldom consider the fact that if something becomes hyper-popular (like YouTube), user demand on the system is enormous and can easily break the system from the demand side. Understanding this phenomenon, by the way, is the reason BitTorrent was invented and has become one of the few useful download methodologies in an environment where a large demand for a targeted file exists. In a perfect world, a lash-up like BitTorrent should not be needed. And thus we have the lopsided nature of the Internet in general. While the public seems to think that higher and higher speeds will solve the bottleneck problem, it won't. If you could get a consistent 1-megabit-per-second stream from any site other than one dedicated to you, it would be a miracle.
ISPs Meddled With Their Customers' Web Traffic, Study Finds About one percent of the Web pages being delivered on the Internet are being changed in transit, sometimes in a harmful way, according to researchers at the University of Washington. In a paper, set to be delivered Wednesday, the researchers document some troubling practices. In July and August they tested data sent to about 50,000 computers and discovered that a small number of Internet service providers (ISPs) were injecting ads into Web pages on their networks. They also found that some Web browsing and ad-blocking software was actually making Web surfing more dangerous by introducing security vulnerabilities into pages. The data also shows that pages were sometimes changed by popup blockers within products such as CheckPoint's ZoneAlarm or CA's Personal Firewall, but also that some products actually inserted security vulnerabilities into the pages they processed. Even Microsoft's Internet Explorer browser is part of the problem, the researchers claim. IE injects HTML into pages that it saves to the computer's hard drive, making those pages vulnerable to attacks when the page is then reloaded from the local disk.
Get Ready for a Crackdown on Broadband Use Consumers using an expanding array of broadband services, including movie downloads, video games, online backup, and streaming audio and video, are flooding the nation's broadband pipes with data--and it could cost them. Consumer advocates say that it's only a matter of time before average high-speed Internet users get slapped with the label "hog." Craig Aaron, spokesperson for SavetheInternet.com, worries that Internet users may soon be charged extra for using "too much" bandwidth or cut off from using some bandwidth-hungry software applications. Bandwidth demands in the United States have been doubling each year for some time, according to Tom Donnelly, cofounder of Sandvine, a network management firm. As this trend continues, Donnelly says, it puts pressure on ISPs and on applications such as file-sharing software and streaming multimedia content, giving ISPs an incentive to clamp down on heavy bandwidth users. Major broadband ISPs shrug off criticism that their networks can't handle the increased demand for bandwidth. Despite the rosy picture painted by ISPs, some service providers are already clamping down on bandwidth hogs. Others are experimenting with payment plans (such as tiered pricing) that raise the cost to consumers of excessive bandwidth use. Analysts say that these moves indicate increasing pressure on broadband systems due to the volume of demand, and note that leading ISPs are moving quickly to avert bandwidth bottlenecks, as well as to forgo spending billions to upgrade aging networks. What would ISPs do if legally downloading high-definition movies, streaming TV shows from sites such as Hulu.com, and backing up PCs online became as commonplace for consumers as Silicon Valley companies hope they will? In big trouble, responds ABI's Schatt, vice president at ABI Research. Schatt says that ISPs need to spend a lot more money now to beef up their networks' bandwidth capacity for the future. ISPs are reluctant to admit that there's a problem, he adds, because "no investor likes to hear the phrase 'upcoming capital expenditures.'"