The Feldman File

Thoughts on Microsoft's new Xbox One

noreply@blogger.com (Len Feldman) — Wed, 22 May 2013 22:13:37 PDT

Yesterday, Microsoft unveiled its new Xbox One game console to an assembly of press, analysts and Microsoft employees on its Redmond, WA campus. The Xbox One has faster processors and more memory than the Xbox 360. A new version of its Kinect 3D digitizer with a 1080p camera is included as standard equipment. The Xbox Controller has also been redesigned, although the changes are mainly cosmetic. In addition, the Xbox One has an HDMI input, so that selected cable, satellite and IPTV set-top boxes can be connected to and controlled by the Xbox One.

Microsoft spent the first half of the presentation focusing on the Xbox One's TV-related features. For example, the Xbox One will have a built-in Electronic Program Guide (EPG) that supports many video operators. Users will be able to change channels and look for shows to watch by voice. In addition, the Xbox One will enable navigation via Kinect gestures.

The second half of the presentation was devoted to games. Only a handful of game publishers were represented on stage, and none of them showed actual game play; instead, they showed trailers. To my eyes, the most impressive trailer was for Forza Motorsport 5, which is the only game title that's been confirmed to be released day-and-date with the Xbox One. It looked great, with visual elements such as metallic paint and realistic depth-of-field rendering that would have been possible only in pre-rendered cutscenes not long ago. Unfortunately, that wasn't the case with the demos from the other game publishers. Electronic Arts, for example, appears to be using the Xbox One's additional horsepower to add more intelligence to the game play in its sports titles rather than for improving how its games look.

Microsoft is apparently concerned about the future of the Xbox given the falloff in sales of console games and the rise of casual games on smartphones and tablets. As a result, it's trying to position the Xbox One as both a set-top box (one that can both connect directly to content over the Internet and indirectly through cable, satellite and IPTV set-top boxes) and a high-performance game console. The problem is that those are two very different markets, with different use cases and consumer expectations. For example, Google TV provides most of the same non-game functionality as the Xbox One, albeit without voice recognition or gesture control. On the other hand, you can buy a Google TV-based set-top box from Vizio for $99, while I expect the Xbox One to be priced around $399. You can also buy an Apple TV or Roku set-top box for $99 or less. I simply don't see very many people buying the Xbox One for its set-top box features, since they can get most of its functionality from less expensive competitors. That means that most of the Xbox One's buyers will be hard-core or moderate gamers, which won't expand the potential market for the device at all.

I suspect that Microsoft's corporate leadership has fallen victim to Shimmer Syndrome (named after the combination floor wax and dessert topping in the famous Saturday Night Live commercial parody.) As with Windows 8, which works both on tablets and on conventional PCs but is compromised on both platforms, it's trying to make the Xbox One work both as a set-top box and game console. The compromise on the set-top box side is clearly price; we don't yet know what the compromise is on the game side, but it may be lack of attention that opens the door for Sony to offer a superior developer and gaming experience.

Does a Microsoft purchase of Nook Media make sense, and to whom?

noreply@blogger.com (Len Feldman) — Sun, 12 May 2013 10:57:55 PDT

Earlier this week, TechCrunch reported that it received private documents describing a $1 billion offer made by Microsoft to acquire Barnes & Noble's digital businesses from its Nook Media business unit, in which Microsoft invested $300 million last year. Nook Media also includes Barnes & Noble's college bookstore unit, which Microsoft doesn't want and would most likely be reintegrated with B&N's retail business.

Here's what Microsoft would be acquiring:

Barnes & Noble's eBook business, including its publisher contracts, self-publishing business, eCommerce websites, online order fulfillment infrastructure and customer lists.
The Nook hardware line (both eReaders and tablets,) and Barnes & Noble's hardware design operation in Silicon Valley.
B&N's other digital product lines (apps, magazines, newspapers, audiobooks and video.)

The deal, if it goes through, would make Microsoft the second largest reseller of eBooks in the U.S., ahead of everyone other than Amazon. It would save Microsoft the time needed to build its own relationships with publishers and eBook distribution infrastructure. However, the other things it would buy might not be all that valuable:

Barnes & Noble's tablet business, which was once a viable competitor for Apple and Amazon, has been declining since last year's Holiday sales season. B&N has been running a series of promotions to try to sell off its inventory of Nook HD and HD+ tablets.
The document received by TechCrunch states that Barnes & Noble intends to shut down its tablet business by the end of its 2014 fiscal year. That's a huge "red flag" to B&N's Silicon Valley-based hardware and software engineers, who'll have no trouble finding jobs with other companies. By the time a Microsoft acquisition closes, most of Barnes & Noble's top engineers are likely to be gone.
The existing Nook tablet line is of no interest to Microsoft, and in fact will represent a customer support liability.
Microsoft already has its own app stores for Windows 8 and Windows Phone 8. It has no interest in maintaining the Nook's Android-based app store.
Microsoft already sells videos and music through its Xbox Marketplace; it doesn't need Barnes & Noble's content.

That's what Microsoft gets for its one billion dollars, but what does the deal mean for Barnes & Noble? A billion dollars could fund a more serious reorganization of Barnes & Noble's retail business. The company is planning to reduce its store count largely by allowing leases for less-profitable locations to expire. Microsoft's money could enable Barnes & Noble's management to buy out leases and reduce its total number of stores much more quickly. It could also be used to redesign the stores in order to make them more profitable--but there's no evidence to date that Barnes & Noble knows how to turn its stores around.

Selling its eBook business to Microsoft also leaves Barnes & Noble with a big problem. eBooks represent as much as 30% of the sales of the Big 6 publishers; for some genres, such as romance, eBooks comprise 50% of sales. B&N's eBook sales are profitable and growing. So, Barnes & Noble needs to continue to offer eBooks to its customers. It could do so by referring its customers to Microsoft's eBookstore and getting a commission. However, Barnes & Noble would no longer be able to use its eBook sales to negotiate steeper discounts from publishers, since Microsoft would actually be the reseller for those publishers.

So, is Barnes & Noble's eBook business really worth a billion dollars (71% of the company's market capitalization as of this writing) to Microsoft? Is that billion dollars worth it to B&N if it means getting out of the only segment of the book business that's continuing to grow in both revenue dollars and units? In the long run, will selling its eBook business save Barnes & Noble's retail bookstores, or will it only buy the company a little more time?

Adobe drops software sales in favor of subscriptions

noreply@blogger.com (Len Feldman) — Mon, 06 May 2013 17:00:02 PDT

Earlier today, Adobe announced a major change in strategic direction. Its Creative Suites, which bundle software such as Photoshop, Dreamweaver, Illustrator, Premiere Pro and After Effects into multiple packages for applications such as video post-production and web design, will be discontinued as of June, when the company introduces the next version of its Creative Cloud service. CS6, the current version of Adobe's Creative Suite, will remain on the market in both physical and downloadable versions, but will not be updated. In addition, individual applications will only be available in physical and downloadable versions in their CS6 form. As of June, the only way to get the latest version of Adobe's software will be to subscribe to either the complete Creative Cloud or to individual applications.

As with the current version of Creative Cloud, the new version will be priced at $49.99/month, and individual applications will be priced at $19.99/month. Existing Adobe customers who own either a complete copy of Creative Suite 3 or greater, or one of the applications in Creative Suite 3 or greater, can take advantage of three different pricing models:

They can license individual applications for $9.99/month.
If they own CS6, they can license the complete Creative Cloud collection for $19.99/month.
If they own CS3, CS4, CS5 or CS5.5, they can license the complete Creative Cloud collection for $29.99/month.

After the first year, the price of individual applications will increase to $19.99/month, and the price of Creative Cloud will increase to $49.99/month.

Customers who use most of Adobe's applications, such as those in the former Production and Master Creative Suite collections, will end up saving money with Creative Cloud versus buying annual updates. On the other hand, customers who use fewer applications, such as those in the Design and Web Creative Suite collections, and customers who've typically skipped versions of Creative Suite in the past, will end up paying more on an annual basis for Creative Cloud subscriptions.

As it stands today, Creative Cloud is a good deal for many Adobe customers, but what we don't know are Adobe's future pricing plans. What's $49.99/month this year could be considerably more in a few years. My sense is that there's going to be a lot of resistance to the end of Adobe's Creative Suites and individual purchase options, and a fair number of creative professionals will begin evaluating open source and lower-cost replacements for Adobe's software.

A new approach to ENG field transmission

noreply@blogger.com (Len Feldman) — Mon, 29 Apr 2013 05:26:54 PDT

There are two approaches that most local television stations use to get audio and video from their news gathering trucks to their studios:

For decades, ENG trucks have been equipped with microwave transmitters and antennas mounted on masts that range from 14 to 42 feet high when fully extended. These systems provide very reliable transmission, but they require that the ENG truck be parked, the mast be extended and the antenna be aimed at one of the station's receivers. Extension and retraction of the mast takes time.
In the last few years, companies such as LiveU, Dejero, TVU, Streambox and Teradek have offered Wi-Fi- and 3G/4G/LTE-based broadband transmitters, all of which are small enough to be carried in a backpack, and some of which are small enough to be mounted on top of or behind a camcorder. These systems are light, portable and can go live very quickly. They also operate from moving vehicles. On the other hand, these broadband transmitters are at the mercy of available mobile phone bandwidth. In a situation such as the recent bombing in Boston, mobile phone networks may become gridlocked, resulting in blocky video as the system is forced to use less bandwidth, or the connection may be completely dropped.

TVNewsCheck reports that Gray Television has developed its own approach to ENG transmission that combines many of the benefits of the microwave and broadband approaches. Its new system, called GrayMax, uses a single steerable antenna in a dome on top of a SUV, which connects to base stations with 18-inch antennas located around the city. Gray says that four base stations should be sufficient to cover a medium-sized city. The operator in the truck can use GPS to steer the antenna to align with one of the base stations with a single button push, but the antenna can also be manually steered. Gray will use the 2 GHz Broadcast Auxiliary Service (BAS) to send audio and video to the studio, and to receive audio instructions from the studio. The antenna can dynamically track the base stations while the vehicle is moving, so it can continue to feed content back to the studio.

A fully-equipped system, including the transmitter, base stations and vehicle, could cost as little as $80,000. Gray believes that it can eventually reduce the size of GrayMax so that it will fit into a backpack. In short, the system should offer the reliability of microwave systems with broadband's much faster set-up and ability to operate while in motion. In addition, by using the BAS band, it's not impacted by mobile phone congestion.

GrayMax won't replace broadband systems, because they're much less expensive and more flexible, albeit at the cost of lower reliability. However, for stations that want to replace existing microwave systems, GrayMax is likely to be less expensive to acquire, easier to use and more flexible than simply upgrading what they already have.

Post-NAB business idea, 2013 edition

noreply@blogger.com (Len Feldman) — Fri, 26 Apr 2013 19:49:37 PDT

Every year, I return from NAB with a buzz from seeing new products and meeting new people. I get energized with lots of ideas--and then start penciling them out, which usually results in a bad case of reality setting in. Here's my 2013 idea:

A lot of people are repelled by the atrocious state of television news in many markets: A focus on crime and accidents, along with shoving cameras and microphones in the faces of victims' family members. My premise is borne out by the ever-older audiences for broadcast news: People who grew up watching it keep watching, but younger viewers get their news from the Internet. There has to be a market (albeit a small one) for people who want more serious local news, and they're likely to be both better educated and higher income than the population in general--prime targets for upscale advertisers.

The costs of building out a streaming-based (not over-the-air) news-focused television station are a fraction of what it would have cost to build a broadcast station just a few years ago. In fact, you can build eight or ten streaming stations for the cost of a single broadcast station. You don't need transmitters, antennas, studio-to-transmitter links, or any of the overhead required to fulfill FCC requirements. LED lighting and low-powered equipment make it feasible to use former retail space for production and post-production, and there's plenty of retail space available for lease in most major markets.

Start with a streaming station in a single major market to test the concept and identify what works and what doesn't. Then, over time, build out additional stations in other large markets, and create a network the way it was done in the early radio days--one station at a time. At a minimum, each station would produce two daily newscasts; as the network grows, those newscasts and additional stories would be fed to the network to create two national newscasts. In addition, some of the local stations would produce their own programming, such as talk and children's shows. The best of that programming would also run on the network. All programming, both local and network, would be available both live and on demand.

That covers equipment and real estate, but one area where you can't save much money is labor. A streaming station doesn't require as many people as a comparable broadcast station, but if the goal is to provide a superior news alternative to existing stations, you've got to hire experienced journalists. Yes, lots of stations and networks are laying off personnel, as are newspapers, but good people need to be paid appropriately. I'm a strong believer that if you're running a for-profit business, you should pay a living wage to the people who work for you, even if there's some way to get around it with interns and freelancers. People can't eat "exposure."

To staff a seven-day-a-week news operation producing two daily newscasts, by my count it would require 42 people at various salary levels. That's more than $2 million per year in salaries and benefits, even in a fairly small market. Advertising revenues aren't assured until the station can demonstrate that it has a loyal and worthwhile audience.

I believe that this idea has tremendous promise for someone who's willing to invest with the expectation that 1) Break-even may be five years out, and 2) To fully capitalize on the opportunity, the network will have to be built out. I can't fund it, and it's unlikely that I can find someone who will, so it goes into the drawer, likely to be pulled out again after NAB 2014.

Update, 4/26/2012: Google would be the perfect company to launch streaming stations, for several reasons:

It fits very well with YouTube, and adds a live, local news component that YouTube doesn't have.
The local stations can double as production and post-production space for YouTube's "creators," expanding beyond their existing facilities in Los Angeles, New York and London.
Google TV would get the streaming stations onto big-screen TVs.
Other than Netflix, Google is probably the biggest buyer of Internet bandwidth in the world, and it operates its own international fiber network that rivals the major telcos. Its bandwidth costs, a big part of any streaming network, would be the lowest in the industry.
As Google expands Google Fiber, locating streaming stations in Fiber cities would allow Google to compete with cable operators that have their own local channels.
Google already has 12,000 advertising salespeople worldwide, so it's well-equipped to sell advertising for a network of streaming stations.

Amazon's "Pilot Season," and the limits of reviews

noreply@blogger.com (Len Feldman) — Wed, 24 Apr 2013 15:11:16 PDT

Last week, Amazon released a group of television show pilots for audience viewing and feedback. Eight of the pilots are comedies that would (more or less) fit into a 30-minute sitcom slot, while the remaining six are children's shows between 10 and 20 minutes long. Most of the comedy pilots feature involvement by a few well-known entertainment names, including John Goodman, Bill Murray, Bebe Neuwirth, Jeffrey Tambor and Garry Trudeau. However, most of the roles, both in front of and behind the camera, are performed by a mix of experienced but lesser-known talents and complete newcomers.

Amazon's goal is to get "real viewers" to rate the pilots, with the highest-rated pilots getting "greenlighted" for production of an unspecified number of episodes. It's a great idea--instead of a handful of programming executives at a network making the decisions, Amazon has potentially tens of thousands of customers deciding what goes into production. At least, that's the theory.

The reality is that as of this writing, each of the pilots has from a few hundred to a few thousand reviews. In every case, the reviews are skewed heavily toward five stars--which makes it look suspiciously like friends and fans of the creators of the pilots are trying to skew the ratings. With so few reviews, it's difficult to separate the bogus reviews from the real ones, so the decision about which pilots to put into production will ultimately be made by the Amazon Studios programming team--the same people who would make the decisions at a network.

We know how many people have reviewed the pilots and how many ratings they've given them, but only Amazon knows how many people have viewed each pilot. The actual viewer count is by far the most important measurement, because that can't be gamed--Amazon knows how much of each pilot is viewed each time, so it can subtract out views of, say, less than five minutes (or even use them as a negative indicator--if someone drops out after watching just a few minutes of a video, that's a fairly clear sign that they don't like it.)

My sense is that it may take several "pilot seasons" before Amazon gets enough viewers to be able to make well-informed programming decisions. It'll be interesting to see how Amazon's decisions on this first batch of shows match up with the reviews--if there's any correlation at all.

Teradek goes upmarket

noreply@blogger.com (Len Feldman) — Sun, 21 Apr 2013 18:57:57 PDT

I've been waiting for a little free time to write about the new Teradek video encoders and decoders that I saw at NAB. Teradek has been known for very cost-effective camera-top video encoders and wireless broadband transmitters. They've scooped up a fair share of the field video acquisition market that was pioneered by companies like LiveU, TVU and Streambox--and those companies have responded with their own lower-priced encoder/decoder systems. Just before NAB, Teradek started shipping its $699 VidiU live streaming encoder to reviewers; the company may have already begun customer shipments as I write this post. The VidiU brings much of the functionality of Teradek's Cube and Bond to a "prosumer" encoder priced less than $1,000.

When I visited Teradek's booth, I expected that the VidiU would be the company's primary new product, but I was wrong. The VidiU was on display, of course, but Teradek announced several new products, all of which are aimed at broadcasters and cable networks. Note: Teradek hasn't announced pricing or availability dates for any of these products. Here's a brief summary:

The Bond Pro is an integrated encoder/cellular bonding system that's designed to attach to the Gold Mount and V-Mount battery plates used by professional ENG camcorders. It also includes an SD card proxy recorder, and has redesigned mounts for up to six 3G/4G/LTE wireless broadband modems that provide better protection from rough handling.
The Bond II is a Bond Pro that's designed for camera-top mounting. Unlike the Bond Pro, it has its own internal rechargeable battery.
The Edge is a Bond II in a 1U rackmount chassis, designed for permanent mounting in ENG trucks and mobile studios. Unlike the Bond Pro and Bond II, which use customer-supplied broadband modems, the Edge has six built-in 3G/4G/LTE modems as well as a WiFi hotspot. Up to 14 external antennas can be connected to the Edge for better cellular connectivity and WiFi range.
The Slice is a pair of 1U rackmounted H.264 encoders and decoders. The encoder has one HD-SDI input and two outputs, as well as a WiFi hotspot in the encoder and a USB connection, while the decoder has a HD-SDI output and both Ethernet and USB connections.

Teradek also announced three new and updated software products:

Sputnik 2.0 is the updated version of Teradek's Linux-based software for taking bitstreams from the multiple wireless broadband connections from the Bond, Bond II, Bond Pro and Edge, and bonding them back into a single H.264 video stream. It also enables tunneling of non-bonded point-to-point video streams from one network to another, supposedly eliminating the need to open firewall ports. Sputnik 2.0 has improved adaptive bit rate management that responds faster to changes in available bandwidth and bit rates from the encoder, as well as a new feature that reduces audio and video loss when a broadband modem drops its connection or is physically removed.
Core is a new application that enables control of all of a organization's Teradek encoders, cellular bonding systems and decoders from a single location. One encoder's output can be routed to multiple decoders, and all settings of all of the devices can be managed from the Core console, allowing teams in the field to focus on getting stories instead of configuring encoders.
Lokr is a new digital media and metadata management program that stores and logs all digital audio/visual media and metadata generated locally or remotely. It works directly with file-based cameras and existing VTR systems, and can mirror recorded files to a local RAID array or to a cloud-based storage system like Dropbox.

Even though these products are likely to be significantly more expensive than Teradek's previous products, it doesn't appear that Teradek is going after the high-end encoder market that companies such as Ateme, Elemental, Ericsson, Harmonic and many others compete in. Instead, Teradek continues to focus on mobile encoding products. Its Slice is a "toe in the water" for fixed-location encoding, but it rounds out Teradek's product line rather than strikes major new ground for the company.

In fact, all of the new products are aimed at offering a much more comprehensive product line: More professional encoders, rack-mounted devices, and software that enables centralized management of an entire network of Teradek devices, all make the product line much more appealing to major market broadcasters. Everyone from individuals streaming live webcasts from their living rooms to big-market broadcasters are now covered by Teradek products.

NAB 2013: The Wrap-up

noreply@blogger.com (Len Feldman) — Wed, 17 Apr 2013 08:37:54 PDT

I only had a day to spend at NAB last week, so I couldn't get to every booth, and undoubtedly missed some "gems" hidden around the show floor. However, I did get to see much of the South and Central Halls. Here's a summary of the products that impressed me (I've already written about Blackmagic Design's two new Cinema Cameras,) along with what wasn't there, and some thoughts about the future of the business:

The New

Canon's XA20 and XA25: Canon's new small, light and low-cost ENG camcorders are the company's first models with 1080/60p capability. Both models have 20x zoom lenses, dual-band WiFi and dual SDHC/SDXC-compatible memory card slots. The XA25 adds dual XLR audio inputs and an HD-SDI output. The list price of the XA20 is $2,499 (US,) while the XA25 is priced at $2,999; street prices are $2,199 for the XA20 and $2,699 for the XA25. Both camcorders are expected to ship in late June.
JVC's GY-HM650U ENG camcorder (street price $5,695) was launched at last year's NAB, and it's recently scored a number of high-profile, big-quantity sales to customers including the BBC. The 2.0 model introduced at this year's NAB (a firmware upgrade for camcorders already in use) adds a number of new features. The HM650U has three 1/3-inch CMOS sensors and a 23x zoom lens. It can simultaneously record to dual SDHC/SDXC-compatible memory cards, output video through its HD-SDI or HDMI connectors, and stream a webcast-appropriate version of the video over its built-in WiFi interface or a 4G LTE adapter.

Perhaps the biggest hit of the show was Freefly System's Movi M10 camera stabilizer. Unlike stabilizers built around the Steadicam model, which uses a system of springs and joints (and requires a vest on larger models to handle the combined weight of the stabilizer and camera,) the Movi is an active hand-held design using direct-drive motors and accelerometers to keep the camera stable. The Movi weighs 3.5 pounds and is built using carbon fiber in order to keep its weight down. It can be operated in two modes: In "Monarch" mode, the cinematographer uses his or her movements to control the Movi, while in dual operator mode, one person holds and moves the Movi while another person wirelessly controls the camera's position using a tablet and RC control.

Before NAB, a number of observers said that the Movi would be too heavy for long use. The maximum weight of camera, lens and accessories that the Movi can handle is 10 pounds, making the total maximum system weight 13.5 pounds or less. I saw men and women of various sizes handling the rig without problems. The Movi M10 model is priced at $15,000 and is expected to ship in Q3; the company plans to add a M5 model priced at $7,500 that can handle a maximum camera weight of 5 pounds. $15,000 is out of the range of most independent filmmakers, but the Movi will undoubtedly be available for rent.
The low-cost UAV business got a big boost from the DJI Phantom, a fully-assembled quadricopter that includes a RC control, GPS navigation and camera mount for a GoPro camera, for under $700. The Phantom's maximum flight time is 10 to 15 minutes, and it has a maximum flight control range of 300 meters. DJI showed a prototype of a new Phantom model with a built-in video camera that can be remotely tilted. Neither the price nor the availability of the new model were announced at the show.

The Phantom is about as foolproof as a radio-controlled quadricopter can get:

It has a built-in autopilot that enables navigation to a specific latitude and longitude.
The manual controls can be set to allow steering to be correct relative to the operator's position, no matter what position the Phantom is in.
It can return to the operator automatically.
If it flies beyond the range of the RC controller, the Phantom goes into hover mode, and if a good GPS signal is available, it will automatically return home.

Matrox's new $995 Monarch HD live video encoder accepts video input from HDMI and outputs H.264 video at up to 20 Mbps in both RTMP and RTSP protocols, which means that it supports virtually any streaming server or service. It can simultaneously save the video in MP4 format at up to 30 Mbps on a removable SD card, USB hard disk or flash memory, or on network-attached storage. It has a simple web-based user interface, and can control up to three additional slave encoders for feeding to multiple streaming servers, services or CDNs.

The Missing

One thing that surprised me was the lack of new products from some of the leading broadcast equipment companies, especially Panasonic. For many years, Panasonic could be counted on to introduce new and exciting cameras, but this year, there was nothing really new. For example:

The AG-AF100A, which pioneered the big-sensor low-cost cinema camera market, has only been lightly upgraded since it was announced in December 2010. Panasonic hasn't introduced any new cameras into this market (excluding the GH3, the follow-on to the company's "accidentally successful" GH2 digital camera that's gotten a wide following from budget-sensitive cinematographers.)
Last year's "camera under glass," a professional 4K camcorder with an Android interface, disappeared this year and was replaced with a generic, consumer-looking 4K camcorder mockup that was first shown at CES in January.

Sony, JVC and Canon didn't announce many new products. JVC's biggest news was a firmware upgrade, and Canon didn't announce anything new on the Cinema Camera front. It's possible that the companies are "catching their breath" after the last 18 months' explosion of new product introductions, but it's still disappointing to come to NAB and not see much new from the market leaders.

The Trends

Video hardware and software pricing is looking more and more like computer pricing, where prices go down and capabilities go up each year. Here's a few examples:

Adobe's Creative Cloud offers users everything in Creative Suite 6 for about $50 per month per user, and they can use the software on two PCs. That, combined with improvements in Adobe's software, is enabling Adobe to pick up lots of market share in video editing and post-production. In response, Avid has priced its new Media Composer 7 at $999, with the additional Symphony features priced at $1,499. $999 used to be the price of a competitive upgrade from Final Cut Pro or Premiere Pro to Media Composer, and only for limited periods; now, it's the list price of the software.
Blackmagic Design has driven down prices in every market that it's entered, and competitors have had no choice but to respond. Prices for professional color correction systems have tumbled since Blackmagic acquired Da Vinci Systems, as have prices for video production switchers (except the very top-of-the-line models) since it acquired Echolab. The market for high-end video processing systems has always been small because of their high cost, but Blackmagic's acquisition of Teranex and subsequent rock-bottom pricing will dramatically increase the size of the market. The cinema camera market is already highly competitive, but Blackmagic is increasing options and decreasing prices for buyers.
Canon, JVC, Panasonic and Sony are using their top-of-the-line consumer camcorders as the basis of their entry-level prosumer/professional camcorder lines, which increases production volumes, decreases costs and allows manufacturers to lower prices. In most cases, if you don't need XLR inputs or HD-SDI outputs, you can save a fair amount of money by buying the consumer models. However, even the prosumer/professional models are less expensive and more capable than comparable models from even a couple of years ago.
DSLRs have dramatically decreased the cost of cinema cameras, and an entire ecosystem of lenses, rigs and accessories that are fairly priced in relation to DSLRs has emerged.

4K for video production and post-production: Buy or wait?

noreply@blogger.com (Len Feldman) — Wed, 10 Apr 2013 08:50:16 PDT

You can summarize this year's theme at NAB very easily: 4K. There are vendors selling 4K cameras, monitors, storage devices, production switchers, routers, video capture cards, video editors and post-production software all over the show floor. Salespeople will tell you that 4K is "the next big thing," and you'd better start buying equipment and software to support it. The problem is that the last "next big thing," 3D, wasn't, so does it really make sense for television stations, video production companies and post-production houses to buy 4K equipment?

There are clearly applications for which 4K makes sense, of which motion picture production and post production are the most obvious. In movies, more resolution is almost always better, especially where special effects are used--you can lose resolution in the process and still have enough for for acceptable quality when projected onto a big screen. However, when it comes to television, 4K may be too much of a good thing. 4K video requires four times as much storage and much faster connections than 2K, both of which increase costs. 4K monitors are still scarce and are much more expensive than 2K monitors.

The question for video producers is, will 4K television sets and media players take off with consumers, and if so, when? Based on 3D's track record, producers may want to wait a while to spend their money. 3D was originally launched by motion picture distributors and adopted by consumer electronics companies in order to increase their revenues. However, they didn't consider whether consumers were really interested in 3D, how much they were willing to pay for it or how much grief they were willing to go through in order to get it.

Like Blu-Ray before it, there was no single standard for 3D, which led to consumer confusion and frustration. Some 3DTVs required heavy, expensive, battery-powered "active" 3D glasses, while others required lighter, less-expensive "passive" glasses that many users felt didn't deliver good enough picture quality. Glasses for one manufacturer's 3DTVs usually didn't work with other manufacturer's sets, and most 3DTVs only came with one or two pairs of glasses, so families with children had to shell out more money to buy additional pairs. Movie distributors struck exclusive deals with consumer electronics companies for some of their films; for example, 20th Century Fox gave Panasonic an exclusive for "Avatar." Consumers who purchased Panasonic 3DTVs a free copy of the movie, but buyers of other brands couldn't get it at all.

A few television producers jumped into 3D early; for example, Discovery, Sony and IMAX launched a 3D cable channel called 3net, and ESPN launched a 3D channel. While ESPN got fairly wide carriage, 3net has spotty availability. That's about it when it comes to regular 3D service, and even for that limited selection, consumers are usually required to pay extra for 3D by their video service providers.

So, is 4K likely to be different? It won't cause the headaches and nausea that some viewers get with 3D, so in that sense, there's likely to be less resistance to 4K. On the other hand, consumers will need new 4K televisions. They'll have to buy a new video player, because Blu-Ray is limited to 2K. They'll have to replace their home theater systems and A/V receivers, because a single HDMI connection can only handle one-fourth of the bandwidth required for 4K. Cable, satellite and IPTV video providers will have to provide new set-top boxes and dedicate multiple channels for a single 4K signal, as well as upgrade their signal distribution systems, potentially at an enormous capital cost. Finally, ATSC 2.0, the upcoming new standard for digital television broadcasting in the U.S., won't support 4K. For 4K to be supported by broadcasters, it will have to wait for ATSC 3.0, which is still in an early state of development and won't be implemented for over-the-air use for years.

There will eventually be a big consumer market for 4K; it's the obvious next step in resolution. However, it may be five to ten years before we get there. If you can get the 4K-capable equipment you need at the same price as 2K, you should buy it, but unless you're working on movies, it's better to let consumer adoption tell you when it's right to buy into 4K, rather than vendors.

If Fox and Univision go to cable, what happens to their stations?

noreply@blogger.com (Len Feldman) — Tue, 09 Apr 2013 11:49:40 PDT

Yesterday, both Fox's Chase Carey and Univision's Haim Saban said that they would move their networks from over-the-air broadcast to subscription cable distribution if Aereo is allowed to use their content without paying for retransmission rights. Both of these statements are empty threats, because the economic damage from going cable-only would be much greater than the loss of retransmission fees. Here's why:

Fox owns 27 television stations, 17 of which are Fox affiliates. The 10 non-Fox stations are MyNetworkTV affiliates. If Fox goes cable-only, what happens to the 17 stations? Will Fox make them MyNetworkTV affiliates? Not likely, since it already owns MyNetworkTV affiliates in a number of the same markets. Will it sell them off? Perhaps, but not at the price it would like, since they'd be independents. (See Young Broadcasting's fiasco with San Francisco's KRON.)
Univision owns 23 television stations, all of which carry the Univision network. They've got the same problems and issues as Fox--what will it program the stations with if they don't carry Univision, and who will it sell them to?
In both cases, can the networks afford to lose viewers who can't afford or don't want to pay for a cable, satellite or IPTV video subscription?
Finally, if either Fox or Univision goes cable-only, their affiliates will immediately go to the FCC and Congress to block the move. Just as with the networks themselves, the economic value of their stations would be dramatically reduced by losing their network affiliations.

There are several other reasons why a shift to cable is unlikely, especially for Fox. In any event, Carey's and Saban's threats are nothing more than that. If they can't stop Aereo in the courts, broadcasters will use their enormous clout to get legislation from Congress banning or greatly limiting Aereo. Lobbying, campaign contributions and Fox News' bully pulpit, not taking the broadcast networks to cable, will be the tools used to minimize or eliminate the threat from Aereo.

Blackmagic Design rocks the cinema camera world--again

noreply@blogger.com (Len Feldman) — Tue, 09 Apr 2013 22:40:56 PDT

I just returned from the 2013 NAB Show in Las Vegas. My first stop (as it apparently was for a lot of other attendees) was the Blackmagic Design booth. NAB attendees have gotten used to playing the game "What the heck is Blackmagic announcing this year?". Two years ago, they announced radically lower prices for the ATEM production switchers that the company acquired from Echolab and a $995 model for schools, churches and even individuals. Last year, they announced the Blackmagic Cinema Camera. This year, while there were several new and updated products, two new cameras drove crowds to the Blackmagic booth. Let's take the somewhat less-radical model first:

Blackmagic Production Camera 4K

The Blackmagic Production Camera is a 4K camera with a Super 35mm sensor, 12 stops of dynamic range and active EF mount for $3,995. It's in the same physical package as last year's Cinema Camera, except that it has a bigger sensor that's a much better fit for EF mount and cinema lenses, and a global shutter to deal with rolling shutter issues. It's also got exactly the same combination of connections as the Cinema Camera, except that the SDI connections are 6G-SDI to support 4K output. The Production Camera stores and outputs video in Apple ProRes 422 (HQ) and CinemaDNG RAW. The company claims that CinemaDNG RAW gives an output comparable to RAW while producing much smaller files.

Blackmagic claims that the Production Camera is the smallest 4K camera on the market. However, it's got many of the downsides of the original Cinema Camera: An internal battery that can barely run the camera for an hour, RCA-style audio inputs instead of XLRs, a reflective viewfinder/touchscreen that's almost impossible to use in sunlight and pretty much requires the use of an external monitor, and a trapezoidal body that looks like it can be handled like a DSLR but really can't.

However, just as with the original Cinema Camera, plenty of buyers will accept the tradeoffs. For $1,000 more, you get a Super 35mm sensor with 4K resolution that can take full advantage of EF and cinema-style lenses. The Production Camera doesn't feel like quite as much of a bargain as the Cinema Camera did last year, but it's still a very good deal. However, the second new camera is what really drew attention:

Blackmagic Pocket Cinema Camera

If you did a double-take when you read the word "pocket," so did I when I saw it on the sign in Blackmagic's booth. But this really is a cinema camera, with a Super 16mm-sized sensor with 13 stops of dynamic range, exactly the same user interface as the larger Cinema Camera, and an active Micro Four-Thirds lens mount, all in a body that's the size of a typical digital mirrorless still camera. Yes, it can fit into a shirt pocket (although not once most lenses are attached.) Like the other models, it outputs in both Apple ProRes 422 (HQ) and Adobe CinemaDNG RAW. And did I mention the price? $995 (U.S.).

A $995 pocket-sized cinema camera suggests that there had to be some compromises--and there are. The Pocket Cinema Camera has 2K resolution vs. the 2.5K resolution of the bigger Cinema Camera. It's missing the 3G SDI and Thunderbolt connections of the bigger Cinema Camera; the only video output is HDMI. Instead of a touchscreen, the menus are navigated with directional buttons, and the display's usefulness as a viewfinder remains to be seen (although its matte display is much less reflective than that of the original Cinema Camera.) The microphone and headphone jacks are both stereo mini-jacks.

On the other hand, it has several features that the Cinema Camera doesn't have:

* The Pocket Cinema Camera has an active Micro Four-Thirds lens mount, which means that it can use all of Panasonic's and Olympus's lenses, third-party lenses and adapters that require power from the camera. By comparison, the bigger Cinema Camera's MFT lens mount is passive, which means that it only works with manual lenses.

* Unlike the built-in rechargeable battery in the Cinema Camera that's really only usable as an emergency backup, the Pocket Cinema Camera's battery is both rechargeable and removable, and Blackmagic says that it uses a standard, widely-available digital camera battery.

* The Pocket Cinema Camera comes with a wired remote control.

As with the Production Camera, the Pocket Cinema Camera's functional tradeoffs are going to be offset by the value of its incredibly small price and size, plus the flexibility of its active MFT mount. Blackmagic suggests that the Pocket Cinema Camera will be the perfect "sacrificial" camera for use in war zones, riots, or countries where the camera might be confiscated by officials. If it's lost or destroyed, it can be inexpensively replaced. The small size also has another big benefit: No one who sees it will believe that it's a professional camera, so it should be easier to get wild footage in situations where permits are ordinarily required.

Which brings us to the original Cinema Camera. It's identical to the models that Blackmagic introduced at NAB and IBC last year. The Micro Four-Thirds mount is still passive, and the EF mount version still has the problems inherent with using a big lens with a small sensor. With these new cameras, I'm not sure that there's much of a market for the Cinema Camera: For $1,000 more, you can get the much-more-capable Production Camera; for $2,000 less, you can get the slightly-less-capable Pocket Cinema Camera. I suspect that Blackmagic is keeping the Cinema Camera in the line in order to fulfill its order backlog, but I expect a lot of customers will cancel their orders and replace them with either the Pocket Cinema Camera or Production Camera.

So, when do these new cameras ship? Blackmagic says that both the Production and Pocket model will ship in July. Blackmagic CEO Grant Perry says that his company has resolved the problems that led to the long delays in shipping the original Cinema Camera, but I'd take those dates with a grain of salt--and even if they start shipping on time, the order backlog is likely to be enormous.

Turn any Thunderbolt-equipped Mac into a Mac Pro

noreply@blogger.com (Len Feldman) — Thu, 04 Apr 2013 09:05:18 PDT

High-end media producers have become concerned about the future of Apple's Mac Pro, for two reasons:

The Mac Pro hasn't received a major update in years, and
Apple withdrew the Mac Pro from Europe on March 1st because it doesn't meet European safety regulations.

It's entirely possible that Apple plans to update or replace the Mac Pro later this year--but it's also possible that this is it for the Mac Pro. That makes ways to expand Apple's other models even more important. For the past couple of years, Apple has touted its 10Gbps Thunderbolt interface as the expansion interface for media producers, but Thunderbolt docks have been very slow in coming to the market.

Engadget reports that Sonnet, which already offers a line of Thunderbolt expansion chassis, adapters and disk arrays, has introduced the Echo 15 dock, with the widest array of interfaces I've seen. It includes:

Four USB 3.0 ports
Two eSATA ports
One Thunderbolt port (in addition to the Thunderbolt connection to the host computer)
One Gigabit Ethernet port
One FireWire 800 port
A DVD or Blu-Ray drive
Room to mount a 2.5" or 3.5" SATA drive internally

The Echo 15's prices will range $399.95 for the DVD-equipped model with no hard drive to $549.95 for the model with a Blu-Ray drive and 2TB hard drive. Sonnet is taking pre-orders at its website and expects to begin shipments this summer. The Echo 15 is priced very competitively compared to docks from Belkin and Matrox that have fewer ports and no optical or hard drives.

A psychic predicts the future of The Tonight Show

noreply@blogger.com (Len Feldman) — Wed, 03 Apr 2013 17:51:17 PDT

Earlier today, NBC announced that Jimmy Fallon will officially take over The Tonight Show from Jay Leno next April. Shortly after the announcement, I received an email from Ms. Rosa Conjunctivitis, who claims to be a psychic. She sent me a timeline for the future of NBC's late night schedule, and gave me permission to share it with you.

April 2014:

Jimmy Fallon takes over The Tonight Show.
Seth Meyers takes over Late Night.
Jay Leno goes back to doing stand-up full-time.

October 2014:

In an emergency move to shore up poor ratings before the November sweeps, NBC brings back Jay Leno to replace Jimmy Fallon.
Jimmy Fallon gets a $20 million bonus to leave the show. His bonus is paid for by a $1 charge added to the bill of every Comcast subscriber.

January 2015:

Jimmy Fallon begins hosting a new six-hour-long late night show for Fox titled "Jimmy FallON All Night."

January 2019:

Although Jay Leno's Tonight Show remains the #1 late night talk show, the average age of its viewers has increased to 69, so NBC replaces Jay Leno with Seth Meyers. Comcast adds another $2 to all of its subscribers' bills to pay for NBC's settlement with Jay Leno.
NBC names Funnybot 3000, an android, to be the new host of Late Night.
Jay Leno goes back to doing stand-up full-time.

August 2019:

Faced with a mass revolt by its remaining 46 affiliates, all of which are owned by one 69-year-old man, Jay Leno returns to host The Tonight Show. Comcast adds another $4 to the bills of all of its subscribers in order to pay Meyers and Leno.
Leno purchases the former Mall of America and turns it into a garage for his car collection.

January 2020:

Seth Meyers becomes the host of a nightly combination talk show and clearance sale on QVC titled Wholesale After Dark with Seth Meyers.

June 2024:

NBC announces plans to replace Jay Leno on The Tonight Show with Funnybot 3000. However, NBC's four remaining affiliates threaten to switch to QVC, so NBC keeps Leno as the host.

March 2046:

Jay Leno passes away at age 95 while doing weekend stand-up at the "Komedy Kabana" in Elkhart, Indiana.

April 2046:

The Tonight Show's new format consists of an hour-long broadcast of Jay Leno's embalmed body from a glass-walled sarcophagus built where the ice skating rink used to stand in Rockefeller Center. A drummer plays a rimshot every three minutes.

It looks like Teradek's VidiU live video encoder is a winner

noreply@blogger.com (Len Feldman) — Mon, 01 Apr 2013 14:23:19 PDT

In January, I wrote about Teradek's new $699 (U.S.) VidiU, a palm-sized portable video encoder that supports 1080P or 720P video at 5 Mbps maximum, and has built-in WiFi connectivity and a USB port for plugging in a 3G/4G broadband modem. The VidiU connects "out-of-the-box" with Ustream and Livestream, and can also connect to any streaming service that supports RTSP. Although Teradek and Ustream announced the VidiU in early January, the device is just now shipping to reviewers, and the company will start fulfilling customer orders later this month.

Streaming Media Magazine's Jan Ozer has posted a "first look" review of the VidiU. I strongly suggest that you read his review for all the details, but here are some of the highlights:

The VidiU has a free iOS controller app that makes configuring the encoder and monitoring its output very simple. (Presumably, an Android app is in the works.)
The VidiU can test the broadband connection and propose an optimal encoding rate to support the available bandwidth, and it also provides adaptive bandwidth management to optimize the encoding rate as available bandwidth changes.
Two simultaneous streams are outputted by the VidiU: One goes to the streaming services provider, and the other goes over WiFi to an iOS device for monitoring.
At the top quality rate for 720p video (2.2 Mbps,) Ozer reports that the video looked very good. You can see all of the videos that he recorded on Livestream by clicking here. Even at 446 Kbps, the video quality is impressive.
Ozer reported some faint audio distortion on all of his recordings, which he described as making them sound as though they had been recorded underwater. He used two different camcorders to try to isolate the problem, and determined that the distortion was in the audio from both camcorders--meaning that the VidiU was the most likely source. Ozer wrote that the distortion could only be heard with headphones, but it was sufficient to prevent him from rating the VidiU a "must-buy." It's likely that whatever is causing the problem can be fixed with a firmware upgrade, but so far, Teradek hasn't confirmed that the problem exists.

Assuming that the sound problem gets fixed soon, the VidiU will become the low-cost live video encoder to beat. I'll look at the VidiU myself next week at NAB.

Aereo scores big court win and looks for distribution partners

noreply@blogger.com (Len Feldman) — Tue, 16 Apr 2013 23:23:20 PDT

Earlier today, the New York Times reported that Aereo, the Internet TV service that uses banks of tiny micro-antennas to give subscribers access to broadcast TV stations over the Internet, has scored an important Federal court victory. Shortly after the Aereo service launched in New York City, a group of broadcast stations and networks filed suit against the company, charging that it was retransmitting their content without permission. Aereo defended itself by referring to a U.S. Supreme Court decision that said that a similar system implemented by cable service Cablevision for providing DVR service to its customers didn't require permission from broadcasters, broadcast networks or cable networks.

U.S. District Court Judge Alison Nathan denied a request for an emergency injunction made by broadcasters to stop Aereo's service, saying that it was unlikely that they would prevail when the full case is heard by the court. The broadcasters then appealed to the Court of Appeals for the Second Circuit, which ruled 2-to-1 today that Aereo's video streams don't constitute a "public performance," because for the duration of a usage session, one antenna is dedicated to a single subscriber, and therefore, the broadcasters are unlikely to win their case.

The broadcasters are likely to request an "en banc" hearing from the Court of Appeals, where the entire Court of Appeals would hear the case. (Update, April 17, 2013: The broadcasters filed an appeal with Court of Appeals for an en banc review on April 15th.) No matter which side prevails, however, the case is likely to be appealed to the U.S. Supreme Court. At this point, the Court of Appeals' decision is only binding in the states that comprise the Second Circuit (Connecticut, New York and Vermont.) Judges in the Ninth Circuit have heard similar cases and have been considerably more sympathetic to the broadcasters' arguments; conflicting rulings in two districts would be another reason for the Supreme Court to take the case.

In other Aereo news, the Wall Street Journal reports that the company is in talks with several pay-TV companies and Internet service providers; the article names Dish Network and AT&T as two companies that Aereo has had discussions with. The discussions center on Aereo providing a low-cost, Internet-based video service that its partners would offer to customers who don't want or can't afford hundreds of channels. Most "basic cable" bundles include many cable networks; the Aereo package would presumably offer broadcast channels only, with a smattering of cable channels that are more interested in distribution than in carriage fees.

In addition, the Wall Street Journal writes that pay-TV companies could offload all of their broadcast channels to Aereo and supply subscribers with set-top boxes that get those channels from Aereo. That would eliminate the need for Aereo's partners to pay for retransmission rights from broadcasters. If the courts ultimately rule that Aereo also doesn't have to pay for them, that could cut off a great deal of income for broadcasters and broadcast networks.

The stakes are so high that if broadcasters lose in court, they're certain to lobby the U.S. Congress to change the law so that the same rules that cover cable, satellite and IPTV video services also cover Aereo and similar services. However, such a change would most likely also require the broadcasters (and possibly cable networks as well) to deal with Aereo and others on the same basis as cable, satellite and IPTV companies. Right now, content providers are free to ignore requests by Aereo and others to distribute their content, or they can set prices that would make services like Aereo uneconomical. Whether content suppliers are willing to pay that price in order to rein in Aereo remains to be seen.

Livestream announces new family of production switchers and a new trend: The DIY switcher

noreply@blogger.com (Len Feldman) — Thu, 28 Mar 2013 10:50:40 PDT

Two years ago, Blackmagic Design threw a grenade into the broadcast production switcher market with its repackaging and aggressive repricing of Echolab's Atem switchers, along with its introduction of the $995 Atem Television Studio. Since then, other switcher vendors have been trying to figure out how to respond; some have lowered prices or introduced new products, while others have ignored the competition, in the hope that it'll go away.

Now, there's a new trend that promises to drop prices even lower while increasing flexibility. For lack of a better term, I call it the "Do-It-Yourself," or DIY, switcher trend. You may recall that last year, Livestream announced a switcher, portable computer and display integrated into a single box, called the HD500, priced at $8,500. The HD500 combines custom-designed switching software written by Livestream with off-the-shelf audio/video I/O cards from Blackmagic Design. Then, earlier this year, Livestream unbundled its switcher software into a $1,999 package that requires a fairly powerful Windows PC but can work with any Blackmagic Design video capture cards and devices--it can even drive the company's Atem switchers.

Today, Livestream dramatically expanded its product line, starting with the $6,999 HD50--a switcher in a mini-PC chassis that uses Blackmagic Design Decklink Quad and Decklink Studio video cards to provide essentially the same functionality as the HD500 in a smaller package, without the built-in display. The HD50 competes directly with Newtek's $4,995 Tricaster 40, but the HD50 has a big advantage--all of its inputs can be HDMI or HD-SDI, while the Tricaster 40 is limited to component and composite inputs. In addition, Livestream launched two new rack-mounted switchers, the HD900, priced at $14,999 with 9 inputs, and the HD1700, priced at $24,999 with 17 inputs. The HD900 and HD1700 are based on rack-mounted PCs with off-the-shelf Blackmagic Design video cards and Livestream's proprietary software.

Livestream isn't the only company that's playing the DIY game: Telestream, whose Wirecast software has been used for several years for low-end, inexpensive switching solutions, has partnered much more closely with Matrox, and supports the Matrox family of video cards and devices in much the same way as Telestream does with Blackmagic. Finally, Blackmagic recently released an API that allows anyone to write software that drives its Atem switchers.

We're on our way to switchers that start as nothing more than tower PCs. They'll make it simple for groups of inputs to be added by inserting video capture cards. Need five more inputs? Drop in another video capture card. Need more functionality? There's an app store where you can buy add-ons from the switcher vendor or third-parties. What we don't have yet is a good selection of third-party switcher control surfaces, but they're likely to start showing up soon, possibly as early as next month's NAB conference.

There will always be a market for integrated switchers, especially in smaller sizes that are easy to connect to a notebook computer via Ethernet. However, for the middle ground between the huge switchers used in the largest studios and production centers, and the small, portable, integrated switchers, there's a lot of room for PC-based, easily expandable switchers.

Hulu: Here we go again

noreply@blogger.com (Len Feldman) — Tue, 26 Mar 2013 19:05:51 PDT

You may recall that in June of last year, Hulu put itself up for sale, in part because of strategic disagreements between joint venture partners Disney and News Corp. (NBCUniversal, the third partner in Hulu, is prevented from taking an active management role as part of the terms of Comcast's deal to acquire NBCUniversal.) In October, Hulu's owners cancelled the sale because of "disappointingly low offers." That didn't solve the strategic differences between the partners, however. Today, All Things Digital reported that Guggenheim Partners, Yahoo and Amazon, possibly among others, are considering making offers to acquire Hulu--even though the partners haven't announced that it's for sale. The smell of blood in the water is just too strong.

I'll keep this brief: The reason that the offers for Hulu were disappointingly low last year was that the partners were unwilling to offer Hulu's buyers long-term access to their content. Exactly the same issue will arise if Hulu is put up for sale again. Hulu is effectively worthless without its content. With the exception of Guggenheim Partners, all of the potential bidders already have their own video infrastructure, players and apps. There was a time when Hulu's player was head and shoulders above anyone else's, but that's simply not the case anymore.

The purchase price of Hulu will have to include three to five years' of the partners' content, along with assurances that their content will continue to be available after that time at a price that Hulu's buyer can afford. If the content isn't there, any potential deal will fall apart.

This could turn into the Mergers & Acquisitions equivalent of Lucy pulling the football away from Charlie Brown at the last minute every year. Fox Sports could broadcast "Who Wants To Buy Hulu?"--just put Cleatus the robot into an Armani pinstripe suit, give the play-by-play to Fox Business, and you're all set. For now, all we can do is sit back and watch the action.

When companies get into trouble, CEOs do what they know best

noreply@blogger.com (Len Feldman) — Sun, 24 Mar 2013 14:57:31 PDT

Bryan Goldberg, the founder of the Bleacher Report, wrote a post for PandoDaily last week titled "You don't want experts. You want jacks-of-all-trades." His argument is that expertise in a single area is insufficient when companies increasingly depend on a confluence of skills for success. Further, expertise is much less transferable than it first appears. He points to AOL, JCPenney and Oracle as examples of companies that hired CEOs specifically for their expertise--with the results being far less than what each company's investors expected.

I'd like to propose a corollary to Goldberg's argument, which is that when a company gets into trouble, its CEO almost always falls back on their primary area of expertise. Outside of technology companies, CEOs tend to come disproportionately from two departments: Legal and Finance. (Why anyone thinks that being a lawyer is great preparation for running a company is beyond me--no insult intended to lawyers.) When a company gets into trouble, the CEO falls back on his or her experience. CEOs who started as lawyers look to litigation as their primary strategy for dealing with problems. That explains why so many record and movie companies turned to suing accused pirates as their primary strategy for dealing with digitization.

CEOs who have a financial background tend to turn to cost controls first as their way of dealing with problems. Every dollar that a company saves goes directly to its bottom line, while each dollar of increased sales may only add a few cents to the bottom line. Unfortunately, cost controls often have long-term negative impacts on companies. Layoffs, hiring freezes, capital investment freezes and divestment of underperforming businesses are all typical cost-cutting tactics that work well in the short run, but may leave the company unprepared to take advantage of future growth opportunities.

So, how do CEOs who come from other specialties respond to problems? CEOs with sales backgrounds generally pressure their organizations to sell more. Those with marketing backgrounds will focus on advertising campaigns, promotions, new product introductions and line extensions (for example, new flavors of corn chips) in order to generate revenues. CEOs with engineering backgrounds try to innovate their companies out of trouble with new technologies and products.

CEOs will, of course, use tactics that are the purview of other specialties if they have to. Cost controls are everyone's favorite (unless you're one of the people laid off,) because they get big results quickly. Steve Jobs wasn't a lawyer, nor is Tim Cook, but litigation was, and is, a key part of both men's attempts to slow down competitors. CEOs who've rotated through a variety of functions have a bigger quiver of arrows to choose from, but few companies give much more than lip service to developing their managers by rotation. So long as schools keep turning out specialists, and companies keep hiring them while giving short shrift to real management development, we'll continue to have companies led by people who see the world through the filter of their specialty.

How to podcast like the best

noreply@blogger.com (Len Feldman) — Fri, 22 Mar 2013 17:55:00 PDT

Over the last month, I've been dealing with either a herniated disc or arthritis (I haven't yet spent an hour in a tube getting an MRI to find out which one.) Laying down with a capsaicin patch on my back, there's not much to do but listen to something, and the something I listen to most often is podcasts. The ones I find myself enjoying the most are Jeff Garlin's "By The Way," and Alec Baldwin's "Here's The Thing." There are other podcasts that I listen to, but Garlin's and Baldwin's are consistently the best. Here are a few suggestions for how to produce great podcasts, based on their shows:

It's quality, not quantity: Some hosts seem to be in a race to produce as many podcasts as they can before they die, but as of this writing, Garlin has produced only six shows, and Baldwin has done only 38 since October 2011--about one every two weeks. It's much better to do fewer but better shows, than to stay on an aggressive schedule and produce a bunch of mediocre shows with a gem here and there.
It's the guests, stupid: No matter how good an interviewer is, what matters are the guests. You can only talk to yourself for so long before the audience gets bored. For their part, Garlin and Baldwin get great guests.
Book guests that you like: If you're interviewing someone that you don't like, respect or care about, your audience can hear it in the interview. Some hosts go after big-name guests, under the assumption that famous guests will draw an audience, but then the interviews turn out poorly. The chemistry between the host and guest is far more important than the guest's fame or status.
Leave the audience wanting more, not wanting to change the channel: Podcasts seem to have gotten longer and longer over time--80 minutes isn't unusual, and some can run for two hours. It's impossible for most hosts to maintain an interesting conversation for that long, so some introduce games, contests, etc., which for most listeners is the signal to turn off the podcast. In my opinion, 45 minutes to an hour is a good length for a podcast; no show should be longer than 80 minutes. If you really, truly have enough material to go longer, make the remainder of the podcast into a bonus episode.
Consider building a "company" of recurring guests: In the early days of U.S. late-night television talk shows, before most guests came on to promote their latest movie or television show, Steve Allen, Jack Paar, Johnny Carson and Dick Cavett had recurring guests, such as Norman Mailer, Truman Capote and Groucho Marx. These guests were such great conversationalists and had so many stories that they entertained audiences for years, even without new books or movies.
Don't supplicate yourself to guests: It's easy to turn into a "fanboy" when you interview a guest who you admire, but sometimes, it's uncomfortable for both the guest and the audience. It's fine to tell the guest that you're a fan of their work before you start recording, but once the interview begins, you and your guest are equals. That's what your audience, and most guests, expect. (On the other hand, if a guest expects you to "kiss up" to them during the interview, that's likely to turn into compelling audio when you confound their expectations. An interview that goes badly can sometimes be exciting and edgy for your audience--remember David Letterman's classic interview with Joaquin Phoenix.)
Don't be afraid to dump an interview: Even the best interviews have to dump an interview from time to time. Perhaps you or your guest is having a bad day, or you get into an interview and realize that there's absolutely no chemistry between you and the guest. If you record an interview and after listening to it find that there's no way to cut it into a usable form, it's no sin to say "Sorry, I was having a bad day, and we can't send the interview out." It's better to kill a bad interview than to air it and disappoint your listeners (unless its very badness makes it funny or compelling, as in the previous bullet point.)

If you follow these rules (and are a good interviewer to begin with,) your podcasts have a much greater chance for success.

ROI: The Innovation Killer

noreply@blogger.com (Len Feldman) — Tue, 19 Mar 2013 17:45:46 PDT

Why is it that established companies seem to have so much trouble with responding to (or developing their own) innovative products and services? Why have so many companies, both big and small, seemingly given up on solving big problems, and are instead happy to make incremental improvements to existing products? One big reason, in my opinion, is the focus in American business on Return on Investment, or ROI. Return on Investment is a measure of how much money, measured as a percentage, a given investment will return over time. The money comes from cost savings, increased sales, or both. Companies evaluate investments against a target Rate of Return that they set. If a proposed investment is expected to meet or exceed the company's Rate of Return, the company makes the investment; otherwise, it doesn't.

It's fairly straightforward to calculate the expected ROI for a new product or capital investment that's very similar to products that you (or others) already sell, or capital investments that you (or others) have already made. If you're Proctor & Gamble and you're considering introducing a new flavor of Crest toothpaste, you have a huge database of historical information about how much it cost to develop new toothpaste flavors, put them into production and market them, and how well they sold over time. If you're Amazon and you're considering building three new warehouses, you know with great accuracy how much it cost to build similar warehouses in the past and how long it took to break even on those investments.

On the other hand, consider what IBM had to deal with when it decided to launch its own personal computer in 1981. Its experience with building mainframe computers was useless in projecting the costs of developing, manufacturing and marketing a personal computer. The personal computers that had sold to date were intended for hobbyists, which was a very small market. IBM had very little information with which to calculate the ROI for its personal computer.

The more innovative a product is, the more it represents a discontinuity (a break from previous technologies, goods and services,) the less reliable are its Return on Investment calculations. To reduce risk, most companies will assign such investments a relatively low ROI. Then, when they compare the ROI with the company's target Rate of Return, they'll kill the project if the ROI is below the Rate of Return. Company managers can guarantee that the project will be killed by deliberately putting conditions on the ROI calculation that will force it to be below the Rate of Return.

Big companies innovate by accepting projects that have risky ROI calculations, or by ignoring the ROI analysis altogether. Bell Labs was able to invent the transistor because there was no requirement that John Bardeen, Walter Brattain and William Shockley work on projects that would generate a predictable amount of revenue in a predictable time. Texas Instruments and Fairchild Semiconductor invented the integrated circuit in parallel, not because they knew what the ROI would be, but because they believed that the opportunity would be tremendous. IBM's decision to move ahead with its PC despite the company's ROI requirements led to market leadership for nearly two decades. On the other hand, Xerox's Palo Alto Research Center invented laser printers, Ethernet and graphical user interfaces but ended up seeing its inventions commercialized by others.

Companies that hold every project to a strict Return on Investment calculation are likely to create only incremental improvements to existing products and processes--lots of "singles and doubles." Companies that are willing to ignore ROI in search of a greater goal are the ones that at least have a chance for true innovation--the "home runs" that can define, or redefine, an industry.

Why the status quo in the U.S. cable business can't hold

noreply@blogger.com (Len Feldman) — Tue, 26 Feb 2013 16:02:42 PST

The more that I look at the U.S. cable, satellite and IPTV business, the more I realize that "business as usual" is eventually doomed. Cable companies' core business for more than 50 years has been to sell access to bundles of broadcast and cable-only channels, which are accessed through the use of proprietary set-top boxes, to consumers. Starting in the late 1990s, cable operators started adding access to high-speed Internet services, which ride in and out of consumers' homes on available bandwidth not used for video. A few years later, cable operators added Voice over IP telephony services, which use the same bandwidth as high-speed Internet. IPTV companies offer the same service, but in the reverse order: First came analog voice telephony, more than 100 years ago. Then, DSL came in the 1990s for high-speed Internet service, and finally, AT&T, Verizon and others added broadcast and cable-only television channels, accessible through proprietary set-top boxes.

Today's cable and IPTV operators look very similar so far as consumers are concerned, and they both face the same business challenges: Retransmission and carriage fees. Retransmission fees are intended to compensate broadcasters for the use of their programming by video operators. Carriage fees provide compensation to cable network operators. It used to be that some cable networks would pay video operators to carry their programming, in order to sell advertising that would reach the widest possible audiences. Today, however, almost all cable networks charge video operators to supply their programming to consumers.

Until 2008's Great Recession, broadcasters and cable networks got most of their revenues from advertising. Broadcasters kept their retransmission fees low, or waived them altogether if video operators agreed to carry cable channels provided by the broadcasters' parent companies. Cable networks generally also kept their carriage fees relatively low, in order to get into the widest possible number of households. After 2008, however, all that changed. Broadcasters' advertising revenues dropped (in some cases, dramatically,) so they needed to make up for lost income. In addition, broadcast networks, which had been paying television stations to carry their programming, began charging stations for programming or demanded a portion of the stations' retransmission fees. Similarly, cable networks started increasing their carriage fees to replace lost advertising revenues.

Early on, video operators absorbed the price increases from content providers as best they could, knowing that they couldn't pass the increases on to customers in the form of higher rates during a recession. Now, however, not a week goes by where a video operator isn't threatening to drop a broadcast station or cable network because it's too expensive, or a broadcaster or cable network isn't threatening to cut off a video operator. Video operators are trying to disguise consumer rate increases as things like "concierge" services, where they charge for services that consumers used to get for free. And today, Cablevision filed an antitrust lawsuit against Viacom, charging the company with forcing cable operators to license a bundle of 14 unpopular cable networks in order to get access to popular ones such as Comedy Central and Nickelodeon.

This situation can't persist for much longer. In many markets, subscription prices have reached the maximum that consumers are willing to pay, and consumers have gotten wise to video operators' pricing tactics: Offer low "teaser" rates to get consumers to switch, and then start raising rates frequently, and often silently, once their introductory deals expire. Consumers respond by cancelling services, switching video operators, and in the worst case, dropping video services altogether and switching to over-the-air broadcasts and over-the-top Internet video.

Within a decade, I believe that most cable and IPTV companies will be well on the way to dropping their video services. Consumers will purchase their own set-top boxes, and similar functionality will be built directly into new televisions. Some set-top box vendors will also aggregate content. Rather than the plethora of formats for publishing video that work on set-top boxes from Apple, Google, Intel, Roku, etc., a single standard protocol will enable content providers to publish channels and on-demand video that will work with most set-top boxes, and will show up in the devices' program guides. Cable and IPTV companies are likely to partner with set-top box vendors and receive a portion of their revenue from consumer subscriptions.

Consumers would get the "a la carte" cable channel choices that they've been asking for--but at a price. For example, Disney's ESPN might make its primary ESPN channel available by itself to subscribers for $6.95/month--but price the entire ESPN channel lineup at $12.95/month, thus making it more attractive to pay more but get everything. This strategy would work for the rest of Disney, as well as Viacom, CBS, Discovery, Fox, NBC Universal and others.

The cable and IPTV operators would compete on other services and benefits--who offers the fastest and most reliable high-speed Internet service, the simplest and most useful home networking, the best home automation and security packages, etc. All of these would be services that the cable and IPTV operators would provide themselves--thus, they wouldn't be subject to ever-increasing financial demands from cable networks and broadcasters. By literally wiring their services deep into households, it would be much harder for consumers to switch from one service provider to another, which should decrease churn levels.

The war among video operators, broadcasters and cable networks, with consumers in the middle and paying the bills, can't go on for much longer. At some point, a critical mass of consumers will stop paying the bills, and video operators will have no choice but to spin off their video services.

Is "proved true" or "can't be proved false" the right standard for journalism?

noreply@blogger.com (Len Feldman) — Sun, 24 Feb 2013 09:39:42 PST

Unless you've been living under a rock for the last couple of weeks, you've probably heard about the battle between Elon Musk of Tesla and The New York Times. Here's a summary:

New York Times reporter John Broder took an electric-powered Tesla S sedan on a test drive for the purpose of seeing whether he could drive it from New York to Boston without running out of power. Broder claimed that his Model S ran out of power on the last leg of the trip and had to be towed.
Several days later, Tesla CEO Elon Musk tweeted that detailed logs of Broder's test from the Model S showed significant inconsistencies between what Broder wrote and what actually happened.
The New York Times replied in part by saying "We, of course, stand by our story."
A couple of days later, Elon Musk published the results of the logs on Tesla's blog, pointing out that in two of the three cases where Broder recharged the car, he only did so to a portion of the battery's capacity, and on the leg of the trip where Broder wrote that the battery died and the car had to be towed, Broder had charged the battery to less than 30% of capacity. He also pointed out discrepancies between how Broder set the heat in the car and what the car reported, and also, that Broder drove significantly faster than he reported. Musk wrote that he believed that Broder had deliberately botched the test.
On the Times' car blog, Broder gave point-by-point rebuttals for most of Musk's arguments, but couldn't explain why Tesla's logs showed the Model S going much faster than Broder claimed he ever drove. (Tesla's logs showed the Model S getting up to 80 miles per hour at one point, while Broder claimed that he never exceeded the speed limit.)
CNN and a group of Tesla owners (among others) reproduced Broder's test (albeit in slightly warmer weather) and said that they comfortably made it from New York to Boston without running out of power and without problems in finding charging stations.
New York Times Public Editor Margaret Sullivan interviewed Broder, reviewed his written logs, reviewed Tesla's logs from the car, and talked to owners. She concluded that there was no evidence that Broder or the Times had deliberately botched the test. However, she also found that Broder had done a sloppy job of documenting what he did in the test and couldn't substantiate a number of things that he wrote in his article, that Broder should have fully charged the car when he had an opportunity to do so, and that both Broder and Musk had made misstatements.
Elon Musk responded to Sullivan's article with a blog post that thanked the Times for reviewing Broder's article and reporting Sullivan's conclusions. In his post, Musk emphasized Broder's mistakes but didn't mention that Sullivan found that he had made misstatements as well.
New York Times Cars Editor James Cobb (Broder's boss) then took to Twitter to attack Musk for "smearing" Broder, who he (Cobb) called a "consummate pro."

When I read Cobb's tweets, it was apparent to me that the John Broder he was lauding wasn't the John Broder that Margaret Sullivan interviewed and wrote about. I responded to Cobb's tweet with my own:

.@NYTjamescobb @elonmusk As your own public editor pointed out, @jbrodernyt was far from a "consummate pro," and you failed to fact-check.

Cobb responded back to me a bit later:

@lenfeldman Unaware of a single error of provable fact.

Cobb's response shocked me--there were many discrepancies between Broder's article and blog post and Tesla's logs. I didn't respond back, but many others did. My biggest shock, however, was how Cobb defined his standard for reporting: "Unaware of a single error of provable fact."

Since the end of the "yellow journalism" days, the standard for whether or not to go to press with a story has been "proved true." That means that the reporter has corroborated his or her story with interviews from multiple parties, has gathered facts from third parties that also corroborate the story, and has fully documented his or her own efforts to find the truth. However, Mr. Cobb is applying a much different standard: "Can't be proved false." Leaving the entire "you can't prove a negative" argument aside, what "can't be proved false" means is that there's some possibility, no matter how slight, that the reporter's account might be true.

Under Mr. Cobb's standard, Mr. Broder's practice of keeping sloppy notes and writing things that he couldn't verify is perfectly acceptable: If Mr. Broder says that what he wrote actually happened, and there's no one else in the car and no other means to provide independent verification, that meets the "can't be proved false" standard. The problem, of course, is that unbeknownst to Mr. Broder, everything that he did with the car was recorded, in minute detail, by Tesla.

Let me be clear--there are times when the "can't be proved false" standard is perfectly acceptable. Reviews of movies, plays, concerts, etc. fall into that category, because they're records of the personal opinions of the reviewers. A reviewer may write "This was so-and-so's worst film to date." Even though it's written as a statement of fact, it's clear that it's the reviewer's opinion. Car reviews can also fall under that standard, since so much of what's written in a car review is the reviewer's subjective opinion. However, what Broder did with the Tesla S wasn't a car review--it was a news story, to determine if it was possible (and practical) to drive an all-electric-car 300 miles from New York to Boston. The appropriate standard was "proved true," and Mr. Broder didn't do that.

I hope that the "can't be proved false" standard is unique to Mr. Cobb, not a reflection of general editorial standards at the New York Times. However, I'm going to be reading everything in the Times with a much more jaundiced eye from now on...at least until the newspaper officially repudiates Mr. Cobb's position.

Barnes & Noble: Controlled landing or slow-motion liquidation?

noreply@blogger.com (Len Feldman) — Sat, 02 Feb 2013 09:34:21 PST

Barnes & Noble just ended a bad week: First, It announced that it plans to close as many as 200 of its superstores over the next ten years. Then, a few days later, IDC released its global tablet shipments report for Q4 2012, which found that while the worldwide tablet market increased 75% in Q4 2012 year-over-year, shipments of Barnes & Noble's Nook tablets actually fell 27.7%, from 1.4 million units in Q4 2011 to one million in Q4 2012. Those numbers added to the gloom from the company's quarterly financial report issued in early January, which stated that B&N's sales from bookstores and its eCommerce site in the holiday quarter fell 10.9% year-over-year, while its same-store sales for stores open at least 15 months fell 3.1%. Revenue at Barnes & Noble's Nook Media unit, which includes Nook devices, eBooks and college bookstores, fell 12.6% year-over-year.

The question to some observers isn't what the company will look like once it closes a third of its stores over ten years--it's whether B&N will even be in business ten years from now. The signs aren't good. As an example, take same-store sales, one of the most important financial indicators for retailers, because it only looks at sales growth in stores open a year or more, not new stores. In Barnes & Noble's case, the same-store number for the holiday quarter was -3.1%. However, that -3.1% is an average. Some stores probably had year-over-year increases, but no one outside Barnes & Noble really knows for sure, and that's a critical factor in whether or not the company's plan to close a third of its stores will work. If B&N has a relatively small number of poor-performing stores, the company can close them as quickly as possible and concentrate on the successful stores. However, if sales are falling across most of B&N's locations, a 33% reduction plan won't be nearly enough to stop the bleeding.

Another example is B&N's failed merchandising strategy. Nothing that the company has tried has done anything to improve its stores' performance. It cut back on its music and video departments and used that space to create dedicated display space for its Nook tablets and eReaders, which are usually prominently featured at the front of its stores. However, its Nook business is actually falling faster than its retail business in general, and it's adding to same-store sales declines. It replaced some of its book display space with an increasingly large assortment of toys and games, but that isn't improving same-store sales, either.

Barnes & Noble's situation is looking uncomfortably like that of Borders and Circuit City, both big-box retailers that closed stores and experimented with a variety of merchandising changes, only to find themselves bankrupt and in liquidation. That's where the "controlled landing" vs. "slow-motion liquidation" question comes in. If B&N starts closing stores, and that results in sustainable year-over-year same-store sales gains, the company's plan to slowly weed out poorly performing locations is likely to work. However, if the same-store declines continue, even with fewer stores, B&N will have to dramatically increase its pace of store closings or come up with even more radical merchandising changes that actually work. As much as I want to see Barnes & Noble's retail stores survive, especially now that Borders is gone, my gut tells me that the company is going down the slow-motion liquidation path.

Apple-plexy, or the irrational fear of reality

noreply@blogger.com (Len Feldman) — Sun, 27 Jan 2013 10:19:46 PST

You probably know that Apple released its Q1 FY 2013 financial results last week, and even though the company had its best sales quarter ever, including the highest number of iPhones sold in a quarter by a fairly wide margin, Apple's stock price lost more than 10% immediately and, as of this writing, is priced around $440 per share. Some analysts were expecting Apple to sell 50 million or more iPhones in the quarter, but the company actually sold 47.8 million. In the real world, that's not all that big of a difference, but in the world of financial analysts and institutional shareholders, a less than 5% miss on optimistic forecasts is a big deal indeed. Analysts and investors also took note of a significant year-over-year decline in Apple's profit margins, from 45% in Q1 2012 to 38.6% in Q1 2013.

Apple's iPhone sales miss and profit margin declines are causes for concern, but in my opinion, they're totally expected. There are several reasons why:

Apple's competitors for both the iPhone and iPad are a lot better than they've ever been. If you haven't already bought into Apple's iOS infrastructure and have a big investment in apps and content, there are many more devices to choose from, including some with bigger displays and faster processors. Apple's competitors aren't locked into a once-a-year update model, so it's increasingly common for competitors to have newer, better devices available when mobile customers come off their contracts.
More competition ends up driving everyone's gross margins down. It's going to be increasingly hard for Apple to maintain its margins as both the functional and perceptual differences between Apple's devices and those of its competitors decline.
The U.S. smartphone market is reaching saturation, and the best growth opportunities are now in developing countries, where customers simply can't afford to pay as much for smartphones--and carriers can't subsidize as much of the cost of devices.
Apple's cannibalizing its own products--the iPad mini is taking away sales from the full-sized iPad, and both iPads are cutting into Mac sales, which missed estimates for the quarter by almost 20%. Tim Cook says that's he's happy to cannibalize sales from his own product line instead of losing those sales to competitors, but the cannibalization will inevitably result in lower revenues per sale and lower profit margins.

Yes, there are reasons for concern in Apple's financial results, but most of them are them are the result of a healthy, evolving market and improving competition--overall positive signs, not negative ones.

Movies to look forward to

noreply@blogger.com (Len Feldman) — Mon, 21 Jan 2013 17:23:01 PST

It's January, which in the U.S. means that it's time for all the movies that are too lame to get much of an audience, but too expensive to put on the shelf, to be released. Here are some of the movies that you can expect to see between now and Spring:

Brokeback City: The heartbreaking story of the mayor of New York and the gay police detective who secretly loves him. Starring George Clooney as Mike Bloomberg and Jake Gyllenhaal.
Zero Dallas Forty: The true story of George W. Bush's plan to send the Dallas Cowboys to Tora Bora to capture Osama bin Laden. Starring Tony Romo and Nick Nolte as President Bush.
The Master-Bator: That scene in "The Master" where Amy Adams "assists" Philip Seymour Hoffman, played over and over again for two hours.
One Flew Over the Shall We Dance?: Two disturbed people in a Philadelphia mental hospital learn to dance in order to be released. Starring Jack Nicholson and Robert De Niro, with a cameo from Zachary Quinto as Dr. Thredson. Dubbed from the original Japanese.
The Lincoln Motor Company: The untold story of Abraham Lincoln's attempt to build luxury buggies in Springfield, IL. Starring Daniel Day-Lewis as Lincoln and Jerry Lewis as his mechanic, Irving.
The Miserables: The entire score of "Les Miserables", as performed by the cast of "Glee" on stage in front of a live audience in Paramus, NJ. Musical arrangements by Jonathan Coulton (uncredited.)