For example, by unit volume June e-book sales at Amazon.com were eighty-percent greater than hard covers. Earlier this month notable authors such as Pat Conroy and Philip Roth contracted with powerful agents to publish their pre-Internet-era novels as e-books. The arrangement circumvents traditional publishers and increases author royalties. Simultaneously e-book reading devices are proliferating and prices are dropping. Visiting a typical Barnes & Noble store symbolically underscores the magnitude of change. As the leading terrestrial book chain few companies could be more dependent upon physical book sales. Nonetheless, each store now normally exhibits the Nook electronic reader prominently at the entrance. 

While paper books shall remain common for years, e-books will steadily increase market share. As they do, consumers will be increasingly discriminating about e-book reader features. Given comparable weight and price they’ll prefer units that (1) utilize touch screens and (2) are Web connected. However devices lacking such features may carve out a niche by being significantly less expensive, more rugged, lighter weight, and providing longer battery life.

The touch screen is preferable because it most closely approximates the conventional reading experience. For example, iPad users advance pages merely by flicking a finger along the bottom right corner of the right page. They turn backward by doing the same on the opposite corner of the left page. Additionally, iPad books are stored in a bookshelf icon. When enabled to arrange book spines within the icon in user-chosen order, the experience simulates a personal library. In contrast, pages in Amazon’s Kindle are turned by pressing dedicated “next” and “previous” buttons. Titles are retrieved by scrolling through text listings.

Internet connectivity is important because it enables the book reader to conveniently gather applicable context. For example, if the author notes that a character is sitting under a possumwood tree the reader is not limited to the embedded dictionary for a description. Instead he can highlight the term for a Google image search and learn that the tree looks like this.

Alternately a detective story writer might describe the recollections of a character who witnessed a murder to be as confusing as “the TV images of Neil Armstrong’s first steps on the moon.” Those of us who actually watched those steps in 1969 can relate to the simile, but younger readers may lack the context a YouTube video easily provides. Successful fiction writers know that they must avoid telling readers about a focal character’s conduct. Instead they must show it with dialog, mannerisms, expressions, and action. Internet hyperlinks can advance the principle to an even higher level.

In the future, consider how Internet connectivity combined with a touch screen may even simulate shopping in a terrestrial book store. For example, an evolved form of Apple’s iBook store may enable us to enter as avatars and search book shelves by subject, or author, or a variety of ways. Such a store could be an online multiuser domain much like an Internet connected video game. Thus, nearby avatars would represent real people with similar interests because they are searching neighboring shelves. Such a store enables us to make new acquaintances. If genuine friendship results, we can ad them to our online social networks or even meet personally.

Despite the preceding analysis, earlier this month I purchased a Kindle DX instead of an iPad. In short, Apple’s e-book experience presently falls short of the ideal paradigm and the Amazon unit was less expensive. If you would like a more complete explanation, email me.

If you want to learn how your company can profit from potentially explosive growth for commercial WiFi networks, this video is for you.

Our eight minute PowerPoint explains the triggering factors, sizeable potential, and enough concrete information to get your company started.

Download video for iPad, iPhone, and iPod here.

First, AT&T Wireless’ decision to impose usage-sensitive data pricing on the iPad and iPhone will cause subscribers to seek WiFi hotspots.

Second, you can profitably deploy mesh WiFi networks giving consumers’ free Internet access because merchants will pay you to build and operate the networks.

Third, there are two reasons merchants will pay. One is that your network will bring iPad and smartphone subscribers into their stores. A second is that your network will offer each merchant the ability to post location-specific ads whenever smartphone or iPad users log-on. For example, a restaurant could offer a 20% meal discount if the meal is purchased within one hour after log-on. Such time-sensitive ads could prompt sales that merchants might otherwise have lost.

Fourth, your network will have three revenue sources, (1) merchant subscriptions, (2) advertising, and (3) bounties from landline ISPs.

Fifth, compared to today’s typical retail WiFi, your mesh network will be superior in two ways. One is it will cover a bigger geographic area enabling merchants to attract more distant customers. Additionally, it will use “industrial-strength” access points that are much more reliable than most retailers now use.

To connect-the-dots and get enough information to begin your own WiFi operation watch the eight minute video because a picture is worth a thousand words.

Download audio narration for iPod, iPhone and iPad (four minutes)

Our July, 2010 Mobile Bandwidth Crisis research report identifies alternatives and explains implementation. For example, in an earlier post we discussed how ad-supported WiFi networks could successfully bypass cellular congestion. Furthermore, we noted that iPhone-4 features such as FaceTime video calling– prohibited on AT&T cellular — combined with the expected popularity of  media streaming on the iPad will lead owners of such units to seek out WiFi alternatives. Such networks could grow rapidly and earn exceptional profits.

While we could not address all the important management and implementation issues in a blog post, they are covered in our 18-page research report. Additionally, buyers of the report are also entitled to free telephone consultation to help answer questions about how to construct and operate such businesses. Examples of key questions to answer before attempting to build and operate such a network include:

1. How can the operator create ad revenue?

2. How does the operator earn subscription fees while providing free WiFi to consumers?

3. What other fees can the operator earn?

4. Why is a mesh network important?

5. What is the likely profitability?

6. Which access point vendors are best?

7. What are the construction costs?

8. Can merchants be persuaded to pay for construction?

9. How does a merchant target ads about her business to WiFi users when they log-on in her store?

10. When a WiFi user logs-on should the proximate merchant offer a shortly expiring discount coupon on the splash page?

11. How can merchants target ads to WiFi users in other parts of the mesh?

12. How big should a mesh be geographically?

13. How can ads be updated and customized?

14. How can administration costs be minimized?

15. What reporting statistics should be provided?

16. Are big industries going to enter the market? Which ones? Will they be aggressive?

17. How can small companies compete as network operators?

18. What types of localities should be first targeted?

19. Is an FCC license required?

20. Why should merchants strongly want to participate?

If you are serious about making money from the collateral effects of AT&T metered pricing in combination with the enthusiastic market receptions for the iPhone-4 and iPad, you can get answers to such questions in our July, 2010 Mobile Bandwidth Crisis research report. All buyers may phone us for free telephone consultation with questions specific to their needs. Visit Inside Digital Media for more information or to download a free synopsis.

Download audio of  narrative for iPod, iPad, and iPhone here.

For the uninitiated, “cord-cutting” refers to a consumer’s decision to discontinue a television subscription service and replace it with various Internet activities on the TV screen. Generally Cable operators, media companies, and conventional industry researchers dismiss the possibility. For example, earlier this year one prominent industry analyst labeled it an “urban myth” because TV subscriber numbers continued to climb.

But he misses the key point. Although the number of CATV and Satellite subscribers is indeed increasing, so also is the number of consumers getting Internet access on those TVs. Thus, undeniably the two media platforms are increasingly competing with one another on the same screen. The true myth — whether urban or otherwise — is that Internet video is limited to the small screens of computers, or the tiny ones of smartphones.

Unlike the Cable and Satellite industries there is no central association compiling statistics on Internet-to-TV connections. However, since there’s been a rapid proliferation of ways to do it, the growth rate is certainly far ahead of the single digit rates of conventional television subscriber growth. Examples of proliferating techniques include computers, video game consoles, Netflix, Amazon-Video-on-Demand, appliances such as TiVo, and new models of connected TVs. Even iPhones and iPods can be attached to TVs with $50 cables thereby enabling users to watch videos stored on those units via the television.

Admittedly, aside from a computer most such devices presently only provide a “Walled Garden” on Internet content. But after a time of experiencing only selective access, viewers will regard a “Walled Garden” as indistinguishable from a “Walled Prison”. Architects of such gardens will surprisingly discover they unintentionally motivated consumers to seek ways to explore beyond the boundaries.

As the percentage of Internet connected TVs inexorably grows, the amount of time consumers spend on the Internet through television screens also increases. Initially, they may spend only 5% (or less) of their TV-screen time on the Net and won’t “cut the cord”. But if the Internet share should rise to around 80% with signs of continued growth, many will discontinue TV service. A number of factors suggest that it will indeed rise to such a level.

First, once television and the Internet compete for attention on the same screen, the Internet’s versatility and interactivity become decisive advantages. For example, consumer Internet-on-TV activities will extend well beyond merely watching TV shows and movies. They’ll include multi-player video games, online social networking, online shopping, and general Web surfing.

Second, advertisers will prefer that the shows they sponsor be on the Internet instead of conventional television for three reasons. One is that consumers will be able to click-through on ads to purchase merchandise or otherwise complete a call to action. A second reason is the superior addressability of behaviorally-targeted ads enabled by the Net. Finally, advertising can be held accountable so that sponsors need only pay for ads that get clicked-on. Balkanization of CATV and Satellite technical standards implies that only the Internet is likely to satisfactorily provide all such features.

Third, consumers will also prefer that video programming migrate to the Net. One reason is that recorded programs can be viewed at anytime without having to remember to “TiVo” them. (Ultimately even live programming may be better on the Net since viewers could be empowered to choose from one of many cameras.) A second factor is that content is searchable with battle-tested engines such as Google. Yet another factor is that consumers can find Long-Tail content on the Net that is unavailable on TV. Already YouTube’s cultural programming is superior to TV while educational programming is also often better on the Net.  Finally, when ads successfully address a genuine interest consumers can spontaneously purchase the associated merchandise online.

Fourth, once advertising agencies learn how to create and target ads that get watched, they too will prefer the Internet. One reason is that they will be able to command premium rates for ads that get clicked-on much like popular Google AdWords cost more than less popular ones. A second benefit is that they will be able to collect a bounty when consumers who click-through such ads also purchase the merchandise online or complete a call to action.

Finally, consider by analogy the experience of the landline telephone industry. When we first started using cell phones, most of us over age forty gave no thought to discontinuing landline service. But as cell phones became more convenient and reliable, many of us dropped the landlines. The key point is that for a time subscriber numbers for both types continued to grow. But ultimately the older technology was eclipsed because of the superior versatility of the newer one.

Download to iPod, iPhone, and iPad here.

The decision to adopt usage-sensitive data pricing by AT&T Wireless is significant. It is likely to cause a chain reaction fundamentally transforming the Wireless Internet. The changes will create important new business opportunities in both regulated and non-regulated sectors. The reaction sequence will proceed through three steps.

First, most major cellular carriers will follow AT&T’s lead. For example, Bloomberg reports that Verizon will be Apple’s second cellular operator when it launches its 4G network in January. Importantly, the carrier has separately commented that it will abandon unlimited pricing on that network. Although network congestion resulting from past explosive traffic growth accompanying smartphone and iPad popularity is the official explanation, it is also an opportunistic way for the industry to increase average subscriber revenue and thereby profits.

Second, as a consequence of metering charges there will be a dramatic slowdown in the growth of Internet activity on cellular networks. Ten years ago an AT&T Labs researcher investigated pricing trends in the history of communications technologies over two hundred years.  He investigated postal, telegraphic, telephonic, and Internet communications. His most significant conclusion is that network usage is markedly sensitive to fixed rates.

Part of his analysis examined how Internet usage changed for three major wired Internet Service Providers (ISPs) over five years from 1996 to 2001. One provider, AOL, switched from metered rates to a flat rate at the beginning of the study period. A second, Telecom New Zealand, shifted from metered to fixed pricing mid-way through the period.  Lastly, the French ISPs maintained usage-sensitive pricing throughout. The chart below demonstrates the comparative usage impact in each of the three markets.

Flat Rate Usage Impact

At the end of the period AOL subscribers used the Net nearly three times as much daily as the metered-rate French subscriber. In New Zealand the average subscriber was on the Net more than twice as much as those in France.

Third, users of smartphones and iPad-like devices will anxiously search for ways to bypass cellular systems in order to more actively use the Internet features of their units. For example, AT&T Wireless forbids iPhone-4 owners to use the FaceTime video phone calling feature on its cellular network. Instead users must find WiFi networks. Consequently, we anticipate that merchants will form ad hoc WiFi mesh networks to serve the need.

There are two reasons that merchants will want to participate in such networks. One is that it will draw visitors into their store. Second, when visitors log-on the merchant can present a time-sensitive and location-specific ad. For example, if the merchant is a restaurant, it could offer a meal discount coupon expiring one-hour after the user logs-on.

If you would like learn more about how the mobile bandwidth shortage will impact your business and create lucrative new opportunities our Mobile Bandwidth Crisis research report may be of interest. The July, 2010 report is 18 pages and priced at $395. You can download a free synopsis here.

Download audio narration to iPad, iPhone, or iPod.

Typically consumers buy a new TV every ten years. Presently a typical 52-inch model costs about $1,200. Presumably an Apple version would add Internet access, memory, and electronic intelligence thereby lifting the price even higher. If it adds as much memory and intelligence as contained in the MacMini, a hypothetical 52-inch Apple television would almost certainly be tagged over $2,000. (The MacMini is an Apple computer typically sold without a monitor.) Given such a price consumers would probably replace old sets at about the same once-per-decade rate.

In contrast, computers are replaced about once every three years for two reasons. First, they normally cost much less than an HDTV. Second, owing to technological progress a new computer is significantly more useful than a three-year-old one. Yet computerization is the primary value Apple could add to a TV set. Consequently a hypothetical Apple television would be vulnerable to technological obsolescence before the owner is ready to replace it. Thus competitors merely offering intelligent appliances for conventional HDTVs could quickly surpass the heart of Apple’s value-added features.

Such a scenario presents Apple with the formidable challenge of holding customers loyal for up to seven years after competitors can offer superior hardware. While Apple may partially succeed by providing an advantageous user interface and be aided by an Apps ecosystem, such factors will not be enough. Much like a seven year old Mac cannot compete with a modern PC, a hypothetical Apple television with seven year old electronic intelligence will be hopelessly outclassed.

Instead Apple could offer a new appliance priced between the $1,000 of a top MacMini and the $230 of an AppleTV. (The AppleTV is a current appliance that most owners use to watch shows downloaded from iTunes. It provides very limited Internet access with a rare example being YouTube.) The new appliance would attach to an HDTV as conveniently as does a DVD-player or video game console.

Crucially, it would offer abundant Internet access in one or two ways. First, could be via numerous Apps much like those for the iPad and iPhone. A second way could simply be via a browser. Like the iPad both ways could be made available, although users would gravitate towards one method or the other depending upon the chosen applications.

The appliance would be controlled remotely from viewing distances customary in the living room. While it would have its own control unit, we suspect the unit will look much like an iPad or iPod Touch. There will likely be a new user interface based upon the touch screens used by those devices. Furthermore, Apple would presumably enable existing iPad, iPhone, and iPod Touch units to also function as remote controllers via downloadable software upgrades.

Confessedly, we have no secret knowledge of Apple’s plans, or absence of them, in the Digital Living Room. The company has proven to be highly innovative in the past. Thus we admit that that it may discover an innovative way to prevent an Apple-branded television from becoming technologically obsolete within the normal ten year replacement cycle, but we cannot predict how.

Download audio to iPod, iPad, or iPhone.

A MacMini is a computer typically sold without a monitor. Increasingly it is often mated to an HDTV, just like a DVD player or video game console.  As a result, the television becomes a gigantic computer monitor. Users often buy a wireless mouse and keyboard in order to control the MacMini from a convenient viewing distance such as the living room sofa.

The unit includes lightning fast dot-11n WiFi enabling it to connect over a home network to the Internet. Consequently, broadband ISP subscribers get high speed Internet right on their televisions. They can choose to watch conventional TV with a one-button click on their TV remote by selecting, for example, the CATV input. Alternately, they can chose Internet access on the TV with a one-button click on the same remote by selecting the socket where the MacMini is connected.

The following new features improve the MacMini as an Internet gateway.

First, unlike earlier versions the new one includes an HDMI socket. That means it can deliver to the TV high quality video and sound over a single cable. Earlier versions required adapter cables, complex harnesses, or separate wires for sound and video. HDMI is an industry standard used by many electronics appliances, such as DVD players, designed to be connected to HDTV’s.

Second, presumably with Internet video in mind, Apple provides a handy control permitting users to easily adjust the MacMini output to fill even the biggest HDTV screen. By comparison, it is often complicated to configure a Windows laptop to fill-up the entire screen when a TV is used as an external display.

Third, the new MacMini uses a cord similar to an ordinary-looking household electrical cable since the power supply is built-in. There is no external transformer, sometimes derisively labeled a “brick”.

Fourth, the graphics card is about twice as fast making it suitable for more advanced video games.

Although not a new feature many users appreciate that MacMinis are compatible with Adobe Flash. Like all conventional Macs the Minis use Apple’s Snow Leopard operating system instead of the iOS of the iPhone, iPad, and iPod Touch. Some buyers may consider such compatibility an important feature since Flash remains the leading video platform on the Net, although its days appear to be numbered as iOS-based devices gain popularity.

MacMini comes in two models. One is priced at $700 and the second at $1,000, which are higher than the previous tags at $600 and $800 respectively. The lower model has a slower processor, DVD Player/Burner, half the RAM, and 65% of the Disk memory of the top model. The top model eliminates the DVD slot, relying instead on a 500 Gigabyte hard drive. Presumably, Apple wants users to download or rent videos from its iTunes store instead of using DVDs. It seems a natural evolution given the vanishing pre-recorded music CD.

The most important inference of the upgrade is that Apple is likely much more serious about the Digital Living Room than implied by management’s public comments suggesting that AppleTV – a more limited but perhaps better known product — is merely a hobby. In our analysis, most anyone using a computer as a TV Internet gateway for more than six months cannot fail to conclude that consumers will ultimately demand unlimited Web access on their televisions.

This video demonstrates just how powerfully a computer can transform a TV into a media center, even though the MacMini used in the example is about two years old.

Download Audio Narrative Here (5 Minutes)

According to Metcalfe’s Law the value of a network is proportional to the square of the number of connected members. With apologies that WordPress does not permit superscripts, the concept is expressed algebraically as:

Metcalfe’s Network Value = n<2>

where n is the number of network users and <2> is a symbol for squared.

The Law is more of a metaphor than an ironclad rule. But it accurately describes the importance of adding participants. For example, the infant telephone industry of the late 19th century provided little value when there were few subscribers to call. But as numbers grew the network’s utility for each subscriber increased exponentially. In principle the law applies to all multilateral networks such as fax machine users and social websites like FaceBook and FourSquare.

Apple’s Impact

Eventually the most significant effect of Apple’s mobile devices, such as the iPhone and the iPad, will be a coming-of-age for The Wireless Internet. They are harbingers of a day when consumers can choose to be routinely and nearly continuously connected to the infinite mind of the World Wide Web. Although Apple mobile units can reach any website via a browser, the company also successfully pioneered a new paradigm of connectivity in the form of Applications from the App Store.

Updating Metcalfe’s Law

Similar to the way Apple invented new product categories with the iPhone and iPad, the App Store success means that the company also launched a new type of network, to wit an App-Centric Network. Upon analysis, Metcalfe’s Law requires modification when applied to such a network. The value of an App-Centric network is the product of the number of members times the number of applications. It may be expressed algebraically as follows:

App-Centric Network Value = ( subscribers num.) x ( Apps num.)

Like Metcalfe’s Law, the modified equation is more a heuristic expression than empirical rule. But the significant difference is that the value of the network is the product of two variables instead of just one. Moreover, the effect of changes in one variable are either amplified, or diminished, by changes in the other. If both are trending upward the network value increases exponentially. Thus, anything that Apple, its ecosystem, or AT&T do to enhance, or reduce, the value of either component on the right side of the equation impacts the overall value of the network to the user on the left side. For example, by adding phone features Apple favorably impacts the first variable. Similarly, adding mobile advertising within Apps benefits the second.

The equation leads to a number of other important implications. All are discussed in our $395 research report to be released next month, but we’ll share one now.

Some applications are themselves basically multilateral networks. As such their value is governed by the conventional version of Metcalfe’s Law. Consider FourSquare. As an application its value rises with the square of the number of users. Substitution into the second variable yields:

Network Value = (device sub. num.) x (FourSquare Friends)<2>

Note that the second variable is squared. Thus, the value of the network to the user expands even more rapidly as the number of his FourSquare Friends grows. By implication, one of the most powerful techniques for Apple and its ecosystem to increase the value of the customer’s network is to develop successful multilateral apps.

As noted, next month we’ll release a research report focused on the AT&T Wireless metered pricing plan and it affect on Apple and the Apple ecosystem. Included will be an analysis of how the potential negative impact on Network value can be mitigated. Those subscribing by June 25th get a 25% discount from the $395 price. Should you wish earn the discount please email me with your advance order by June 25th.

Phil Leigh

Download Audio Narration Here.

Extensive research into usage-based pricing of communications services conclusively demonstrates two points. First, consumers hate it. Even when metered-pricing would consistently result in a lower bill, they prefer a flat-rate. Second, flat-rates markedly stimulate network usage.

Consider how Rochester, New York telephone subscribers reacted to the following message from the Bell System 124 years ago in 1886.

Unlimited telephone use leads to unnecessary occupation of our wires and to much borrowing of telephones by parties who are not subscribers. This encumbers the system with unnecessary and illegitimate calls resulting in greatly impaired service.

When Bell switched Rochester to metered rates, nearly everybody in the city quit subscribing.

It is also interesting to note Bell’s outrage when one neighbor let another use his telephone, which was apparently against the rules. The point reminds me of the RIAA’s indignation toward file-sharers who are often characterized as youthful offenders in need of moral education. Apparently Rochester adults over a century ago also needed edification. But that’s another story, and presumably a good one.

A more recent example of consumer preference for flat-rate pricing dates to 1996 when AOL abandoned metered rates. Prior to the change AOL subscribers’ number one gripe was the ticking clock. They did not want to pay by the hour. It was far more of an annoyance than unsolicited email, dropped connections, or anything else.

A research paper from AT&T Labs about 10 years ago surprisingly concluded that consumers favor flat-rate pricing even when metered rates are cheaper. There are apparently two reasons. One is to avoid the “mental transaction costs” required to constantly monitor usage. A second is termed the “insurance effect”. Basically, consumers are willing to pay a flat-rate premium in order to eliminate the normally remote risk that they will run-up a large bill.

Since AT&T Wireless reports that about two-thirds of iPhone subscribers used less than 0.2 Gigabytes monthly and 98% used less than 2.0 Gigabytes the unlimited data rate at $30 apparently included a sizeable “insurance” premium. That’s because the new usage-based rates are $15 monthly for the first threshold and $25 for the second higher one.

The AT&T Labs paper also documents a marked sensitivity to network usage from fixed-rates. From 1996 until at least 2000 ISP rates in France were metered whereas AOL adopted a flat-rate in 1996 and New Zealand’s major provider adopted fixed rates in 1999. As the chart below demonstrates, per-subscriber Internet use in France remained relatively constant whereas it sharply increased for both AOL and the New Zealand provider.

Flat-Rate Use Sensitivity

At the end of the period AOL subscribers used the Net nearly three times as much daily as the metered-rate French subscriber. In New Zealand the average subscriber was on the Net more than twice as much as the French one.

In conclusion, there’s little doubt that AT&T Wireless’ new usage-sensitive data pricing will adversely impact the utilization of iPhones and iPads on The Wireless Internet. As a byproduct subscribers will be less likely to try new Applications and less prone to use ones currently loaded. Unless alternate usage-insensitive ways of accessing The Wireless Internet materialize, demand for Apple mobile devices, advertising Apps, and Third Party Apps will be lower than otherwise.

Importantly, we do not necessarily conclude that such alternatives shall fail to come-of-age. In point of fact, next month we shall release a research report about the new pricing and how its adverse effects may be offset. Those subscribing by June 25th get a 25% discount from the $395 price. Should you wish earn the discount please email me with a confirming note now.

Download audio to iPhone, iPad, and iPod here. (six minutes)

Essentially, Apple minimizes the Digital Living Room because there can be no “go-to-market” strategy. Jobs reasons that modernizing television requires replacing conventional set-top boxes with better designs. While readily conceding that Apple could develop such designs, he assumes they could not profitably sell them because the cable and satellite industries rent current set-tops for artificially low fees cross-subsidized by programming charges. By way of example he notes that TiVo, ReplayTV, Roku, Vudu, and similar products failed to tap into the mass market.  Apple’s analysis is faulty for two reasons. First, it is unnecessary to replace the set-top box, although it would be preferable.  Second, consumers will pay for TV enhancements when the improvements are sufficiently valuable.

Most with a computer already connected to their TV cannot doubt that consumers will eventually demand abundant Internet access on televisions. The experience is simply that transformative. If cable and satellite set-top boxes fail to offer it, consumers will buy separate appliances in order to get it. The main reason TiVo, Roku, Vudu, and Replay failed to become mainstream is their Internet access is sharply limited. Their failure echoes the experience of early record-label-backed online music services PressPlay and MusicNet which were similarly restrictive. Only when iTunes convinced the labels to drop overly confining rules did legitimate online music become a mass market.

Significantly, Jobs didn’t mention Mac’s and PCs among the products failing to be commonly mated with TVs. But domestically alone we estimate  about 12 million computers are attached to televisions to provide unlimited Internet access on the big screens. They are navigated with familiar browsers and can be controlled remotely with a wireless mouse & keyboard. While not yet a mass market phenomenon, the trend is likely to be a forcing-factor leading to the advent of consumer-friendly appliances for the same purpose. Such units will provide either (1) a browser-centric experience at the TV or (2) an abundance of Apps capable of delivering Internet video and popular websites to TV screens. An evolved form of AppleTV could be just such an appliance.

Confessedly, Jobs correctly notes that adding such an appliance without replacing the set-top box increases cost and clutter. But prior experience demonstrates that consumers will do so when the added value is sufficient. For example, thirty years ago broadcast television reception was generally good in urban markets. Nonetheless, city residents eagerly subscribed to CATV despite the incremental cost and added set-top box clutter because they wanted the additional programming. More recently they connected video game consoles and DVD players to TVs so they could play games and watch movies that were unavailable on television.

Similarly, Internet age consumers will increasingly value Web access at their TVs. The trend is particularly evident among young adults. For example, a survey commissioned by RealNetworks revealed that nearly half of 18 – 25 year-olds split their video time equally between the Internet and conventional television.

Finally, the market is simply too large for Apple to ignore. We estimate the Digital Living Room market potential in the United States alone at over $225 billion as outlined in the table below.  It is almost four times the size of Apple’s estimated worldwide revenues this year.

Apple’s go-to-market analysis is valid when applied to devices intended to simultaneously accommodate conventional television and Internet access. It’s a fool’s errand for two reasons. First, when sold in competition to the CATV and satellite industries, such units cannot approach the subsidized price for existing set-top boxes as Jobs argues. Second, if designed to be marketed and thereby subsidized by the CATV and satellite industries themselves, the contraptions will likely be saddled with too many restrictions. Basically, the conventional television industry does not want consumers to have abundant Internet video on their TVs any more than the record labels wanted music distributed over the Web.

In sum, abundant Internet access at the TV is as certain as fleas on a yard dog. If cable set-top boxes don’t provide it, consumers will buy computers and future appliances that do – just like they bought video game consoles and VHS & DVD players to enjoy entertainment of the screen that television did not offer.

To download, instead of stream, this video click here.

AT&T Wireless’ decision to replace iPhone and iPad $30 monthly unlimited Internet access with metered pricing is significant for two reasons. First, consumers will learn that it is much more restrictive, or costly, than they want. Second, it will stimulate the development of competitive lower cost municipal-mesh-WiFi-networks or alternate technologies which consumers will eventually prefer. Consequently, AT&T has planted the seeds of self-destruction.

AT&T claims that most subscribers will save money under the new plan. While presumably valid when based upon historical usage, there’s not a shadow of doubt that the projected future usage patterns for all-you-can-eat pricing were going to be much more data intensive for two reasons. One is that iPhone patterns were already trending that way. For example, it was recently reported that iPhone data traffic was bigger than voice traffic. A second reason is that iPad Internet usage is expected to be even more intensive than that of the iPhone particularly considering the new product’s enthusiastic market reception.

For new subscribers, AT&T will replace the $30 monthly unlimited tariff with two monthly options. One is a $15 fee for 0.2 Gigabytes while the second is $25 for 2.0 Gigabytes. Each partial Gigabyte above the 2.0 threshold costs users an additional $10. AT&T notes that 98% of us so far use less than 2.0 Gigabytes a month.

Even a well know early adopter and power-using geek like David Pogue of The New York Times discovered he almost never uses more than the 0.2 Gigabytes a month of the lower option. But he also knows that AT&T is not altruistic. So he contacted the company for an explanation. He was told that AT&T wants to encourage subscribers who do not yet have a smartphone to upgrade and get one.

Perhaps Pogue is correct. But in my experience regulated businesses with strong lobbying organizations are about as trustworthy, and dangerous, as a teased Mexican scorpion. The advent of the iPad will radically change mobile Digital Media consumption. Already one popular example is an application permitting users to watch ABC television shows on the unit. Furthermore, given an adapter cable, the iPad could be connected to a TV screen thereby enabling Internet videos to be watched on television. For example, users could download iTunes movie rentals for $2 - $3 each and get any number of free video podcasts including network broadcast news – and Inside Digital Media.

Significantly, on average iTunes rented movie files are about one Gigabyte. Thus users downloading one per week over AT&T’s network will get a $45 monthly bill, for data alone. And that does not include any other Web activity such as YouTube or other video streams, or even email. Presumably, the data charges can be reduced by using WiFi networks whenever possible. This could become AT&T’s Achilles Heel.

In short, metered data pricing could resurrect a concept that was ahead-of-its time about five years ago. Back then there was much discussion about the promise of free municipal WiFi networks. But operators discovered that they could not generate enough advertising to pay for the costs. Furthermore, mobility was hampered by poor hand-off performance as users migrated from one wireless LAN to another.

There are three changes since then. First, costs are lower. Second, mesh networks greatly improved hand-off performance. Third, location awareness for hardware and applications such as FourSquare enhance the economic feasibility of the advertising model.

Presumably, AT&T expects other wireless carriers to follow their lead. If so, metered pricing provides a fourth major change that could lead to widespread mesh municipal WiFi network adoption. Specifically, it gives users a powerful economic incentive to avoid cellular networks.

An efficient municipal WiFi system would permit users to move about freely within urban areas while constantly retaining a faster-than-cellular wireless Internet connection. A combination of location awareness and behavioral targeting of ads and promotions, such as rapidly-expiring discount coupons, could be sufficiently effective to financially support the entire network.  Store owners would pay for the Access Points in order to attract customers by presenting targeted ads and coupons to iPhone users when they are in the neighborhood and ready to buy.

Phil Leigh

Last year Michael Kaiser of the J.F.K. Performing Arts Center lamented that Arts Programming was vanishing from TV. Since most PBS stations lack the money for quality recording of local performances, he concludes that PBS should reorganize. Instead of relying upon local affiliate productions, he prefers that the parent organization “determine the best in American arts and fund its broadcast across the nation”. Presumably that means PBS must reduce its financial contributions to affiliates, or get Congress give more than the $400 million it presently donates annually – 90% of which passes thorough to local stations.

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Like many leaders of slowly changing businesses, Kaiser fails to recognize how fast the Internet already shifted the ground under his feet. While focusing on PBS and taxpayer subsidies, he neglects to notice that a critical mass of top-quality cultural programming already populates the Net. One example is YouTube which provides three advantages over conventional television. First, it’s free. Second, viewers may watch at anytime instead of designated broadcast times. Third, it’s searchable.

Once consumers get TVs connected to the Internet, those with a taste for cultural programs may be among the first to habitually replace regular television with Internet-videos-on-TV. Furthermore, the ever-quickening growth in methods for connecting TVs to the Internet is obvious to anyone not living in a cave for the last year. It’s as certain as summer follows spring that the trend shall accelerate.

Those questioning whether the Net truly offers considerable high-quality cultural programming might view the following examples:

First is an excerpt from Scheherazade by a Venezuelan youth orchestra. The teenagers play simultaneously with an eagerness characteristic of their first time on stage, but with a determination for perfection as if it was their last opportunity. It’s obvious within the first two minutes that something remarkable happened. The excellence of this multiracial orchestra is a hopeful symbol for the 21st Century. They merit a date at the JFK Center or Avery Fisher Hall.

A second example is the mystical Wolf’s Glen scene from rarely performed Der Freischutz. Most experts have only academic interest in the opera as a precursor to Wagner. Fortunately they are not the Internet’s gate keepers. Consequently Web viewers can judge for themselves the value of Weber’s signature work. Which maybe illustrates the tragedy of having to live on what musical talent alone can earn, because established cultural leaders often fail to recognize and pay a living wage for originality. As a business principle they gravitate toward the well-connected — meaning people like themselves. But as Wilson Mizner put it, “Most live wires would be dead ones without their connections”.

Third, as for ballet, YouTube provides a magically inspiring version of Stravinsky’s Firebird. The “russianballetvideo” channel at the website offers 22 hours of ballet.

Fourth, for those interested in the classic plays of literature YouTube channel “shakespearandmore” provides over 650 videos. More modern plays such as Eugene O’Neill’s Desire Under the Elms can also be found on the website. Performances of varying quality for dramatists such as Wilder, Beckett, Miller, Ibsen, Wilde, and Shaw are numerous. Many are staged by regional production companies like the ones Kaiser wants PBS to fund and broadcast.

Initially it seems ironic that the cultural audience may well be the first to benefit significantly from Internet-Video-on-the-TV. After all, it is a small group. For example, classical music represents less than 5% of CD sales. But, upon reflection the ability of the Net to better address arts programming underscores the validity of Chris Anderson’s Long Tail Theory. The category is largely ignored by conventional media because the audience is small. The Internet already meets audience needs without the government subsidies and centralized control that Kaiser advocates.

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Public Broadcasting offers high quality programming. Presently most of us watch it via one of about 400 local PBS affiliates. However, the most popular shows like Charlie Rose, Masterpiece Theater, Antiques Roadshow, and Nova are produced by only a few originators. Increasingly the creators are also putting many of those shows on the Internet where they can be watched at the viewer’s convenience without needing the local affiliate.

Last year Congress gave the Corporation for Public Broadcasting $400 million. About $360 million passed through to local affiliates. They generally used the money to purchase programs such as those noted above. However, the grants only represent about 20% of the typical affiliates’ overall budget. The other 80% was mostly used to fund affiliate operating overhead. Most of that 80% came from (1) prominent corporate underwriters, (2) grants from the individual states, and (3) “viewers like you”.

As methods of connecting TV sets to the Internet gain traction, Public Television will face two significant challenges.

One will be the relevance of local affiliates. Except for news broadcasts, most popular PBS shows are pre-recorded. Internet distribution is ideal for pre-recorded shows because it permits viewers to watch anytime, as opposed to a scheduled broadcast time. It also permits consumers to browse and search the entire inventory of available shows before selecting one. Finally, when fans of each particular show are looking for an episode to watch they are more likely to visit the website of the program originator instead of the local PBS affiliate.

For example, viewers who like Charlie Rose are more likely to visit the eponymous charlierose.com than WXYZ.com. Additionally, at the Rose website they can browse, search, and select any interview spanning an approximate twenty year period.

A second challenge is that the Internet can provide even higher quality programming than PBS.  For example, although Nova science programs have some great episodes on Physics, viewers desiring an even more thorough understanding may prefer MIT’s free OpenCourseware that includes video demonstrations of instructional experiments. Similarly, episodes of PBS’ American Experience might find they are competing with free videos from Yale University Department of History. Finally, YouTube offers competitive cultural programming like top quality symphonic performances. For example, consider this brilliant excerpt from Scheherazade by a Venezuelan youth orchestra; or the sinister and mystical Wolf’s Glen scene from rarely produced Der Freischutz.  In short, the Internet is gradually appropriating Public Television’s original educational mission

To remain relevant local PBS affiliates must take two actions.

First, is to create valuable programming germane to their communities. Although this is a traditional objective the effort must now be raised to the Nth degree.

One way is to invite local citizens to create documentaries and shows for submission. After evaluation the bad ones can be declined, the better ones  posted to the affiliate’s website, and the best put on the broadcast channel as well. Additionally, interviewing selected local new media businesses would help station personnel and local citizens understand how media is likely to change. Since the best way to predict the future is to invent it, such knowledge can help the affiliates fashion a better future. Finally, station personnel can learn how to create more of their own shows with lower production cost equipment and smaller crews.

Second, a local affiliate’s website must be central to its survival strategy. Should broadcasting ultimately become largely redundant, the website will likely become the affiliate’s most valuable media property. Therefore, it’s crucial that citizens find value and feel engaged at the website. This could be accomplished by encouraging visitor commentary much like is popular now at The New York Times and Wall Street Journal websites, both of which also offer abundant video. Another way is to encourage local residents to create video content as noted earlier. A picturesque website incapable of engaging visitors is like a ghost town. It will ultimately be abandoned, even by those who built it.

As Robert Gallagher put it, “Change is inevitable – except from a vending machine.”

However, regular Inside Digital Media subscribers recognize that we’ve been chanting this mantra since last July’s Future Developments in Video Advertising research report. Another example is our Thinking the Unthinkable about Video Ads last September.

Ever since the 1930s when John Wanamaker commented, “Half of my advertising is wasted, I just don’t know which half”, sponsors have longed for better ad accountability. There are three reasons why that wait is now ending for video advertising.

First, Google has conditioned AdWords sponsors to an expectation that they should only pay for ads that actually get used. Nearly all of the company’s $23 billion annual revenues come from AdWords. They are search terms selected by advertisers to be associated with targeted banner ads. However, advertisers only pay for the banners when viewers click on them.

For example, a Louisville State Farm agent might sponsor the phrase “auto insurance, Louisville” as a Google search term. Thus, when a local resident searches Google for “auto insurance, Louisville” that agent’s banner will appear on the screen, so long as the agent out-bid his competitors for the phrase. Should the viewer click on the ad, the agent is required to pay Google. Conversely, if the viewer ignores the ad, or merely looks at it, the agent owes Google nothing. It is a powerful method for the State Farm agent to catch a Louisville car owner who appears to be shopping for auto insurance.

Second, as Internet Video gains momentum there’s no reason for sponsors to conclude that video ads should be treated any differently than banners from pay-only-if-used viewpoint. It will be an epiphany to advertisers and viewers alike. Furthermore, when a Google-like experience gets on the TV screen the revelation will hit us with all the force of Paul’s vision on the road to Damascus.

Third, once ad agencies discover that sponsors will resist paying for ads that don’t get watched, the agencies will have to change in two ways.

One is they will adopt behavioral targeting as a means of putting ads in front of the viewers with the most interest. Much like Amazon.com and iTunes display ads consistent with our prior purchases, cookie-enabled browsers on our televisions will permit video ads to be similarly targeted.  A second change will be a quid pro quo requiring sponsors to pay bounties whenever viewers click-through video ads to buy merchandise or complete a similar call-to-action.

Importantly, the changes noted above are most effectively accomplished by shifting all video to the Internet. Attempting to replicate the Net’s proven technical capabilities on the disparate standards of existing CATV and Satellite Networks — as attempted by Project Canoe — are a Fool’s Errand.

For those who would like to learn more about how our research can keep you ahead of industry developments consider our free Webinar on at 2:00pm Eastern Daylight Time on June 10th to discuss our Future of Apple research report. Please e-mail phil@insidedigitalmedia.com if you would like to participate.

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Today’s video podcast narrates a PowerPoint presentation summarizing our recent Future of Apple market research report.

Although the report is 68-pages, it is also a multimedia document that includes links to videos and animations to demonstrate key innovations instead of merely describing them with text. Included is a five year revenue forecast by business sector as well profitability analysis by product line. We identify four growth engines; two already existing and two yet to be announced. Apple’s ecosystem strategy is forecast including an analysis of whether the company should license its operating system in response to Android’s open platform.

There will be three wellsprings of growth: (1) Present Products, (2) New Markets and (3) Retail Stores. Present expanding businesses include iPhone, iPad, Macs, and iTunes. Two future opportunities will be The Digital Living Room and Transactional Services.

Significantly, AT&T recently announced that over half of iPhone traffic is data as opposed to voice conversations. Not only does the statistic underscore that the iPhone defined a new product category for itself, but also implies that the iPad will do the same on the way to major success. The triumph of both products will be amplified by the touch-screen interface which shall become a new computing metaphor as significant as the mouse & icon replacement of the command line about 20 years ago.

Despite their 100%-plus price premium over Windows computers, Mac’s will gain market share for years to come. First, during the past decade many Windows users acquired a favorable impression of Apple after buying non-computer products such as the iPod and iPhone. The constructive experience leaves them increasingly interested in trying Mac computers, especially given the malware common in Windows. Second, Digital Media is becoming steadily more important and Mac’s have a tradition of superiority in such applications.

Despite comments by Apple management that AppleTV is merely a “hobby”, the market potential of the Digital Living Room of the Future is far too big for Apple to ignore. We calculate the opportunity at over $220 billion in the USA alone which is about four times Apple’s estimated Worldwide revenues this year.

Partly owing to the potential of the Digital Living Room, Apple will evolve iTunes and the App Store so that Transactional Services become an increasingly important revenue source. Two examples are advertising and a Web 2.0 version of iTunes.

Apple’s ecosystem strategy will bifurcate. Mac’s will continue to be largely self-reliant in terms of applications software. One notable exception is the Microsoft Office suite. Other products, such as the iPod, iPad, and iPhone, will principally rely upon third party developers to submit applications for the App Store. Apps are preferable to open-source licensing of the Apple OS because they avoid malware.

It’s unnecessary to license the OS as a competitive response to Android. Prior to Microsoft’s dominance, vertically integrated IBM was the computer industry’s most successful participant. When the PC was introduced with commercially available components, MS-DOS became the common denominator. This enabled clones to suck the value out of IBM hardware. During the industry’s ensuing rotation to a horizontal structure the opportunities for innovation were abundant. However, after Internet usage become common the rotation also gave miscreants plentiful incentives to create malware.

Recent experience increasingly suggests that the successful computer industry model is rotating back to the vertical. No company is better suited to benefit than Apple.

In short, Apple will be one of the most potent forces shaping the future of media. You can learn more by downloading a free three-page prospectus to our Future of Apple research report here.

Jim Burger

Today’s audio podcast is an interview with Jim Burger who is an intellectual property attorney with Dow, Lohnes. As such, he is as vigorously opposed to copyright infringement as anyone. Nonetheless, Jim questions the validity of claims by music executives that Peer-to-Peer file sharing has been a major cause the industry’s revenue decline.

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He readily admits a correlation between P2P activity and declining CD sales, but emphasizes that mere correlation does not constitute causation. For example, CD sales topped-out during the 1999-2000 period, but those were the same years when Napster was most active. Not only was Napster the first popular P2P network, it was also probably the most widely used. Album sales did not decline until 2001 which was the same year that Napster was shut-down by a judge’s order. 

From 2000 to 2008 album sales dropped by almost 50%. Aside from the P2P file-sharing on post-Napster renegade networks, Jim notes there were two other rising trends that correlate with the decline in album sales. More importantly, each of the additional factors might also have displaced album sales via substitution.

First, between 2001 and 2004 album sales dropped about 5% per year. During those same years DVD sales grew 65% annually. Given that DVDs and CDs are priced about the same, a fraction of the DVD sales might have been directly competing with CDs for the consumer’s discretionary funds. Put another way, at times the typical consumer might have reasoned that a DVD movie was a better value than a CD and consequently elected to buy a DVD instead of a CD. If only one-out-of-eight DVD purchases was influence by such reasoning, the entire decline in CD sales from 2001 to 2004 could be explained by the rise of DVD sales.

Second, although DVD sales flattened from 2004 to 2008, a second factor gained momentum that may also have displaced album sales. Specifically, digital singles became available through online stores such as Apple’s iTunes. As album sales declined 13% annually from 2004 to 2008 digital singles grew at an annual rate of over 70%.

Prior to the advent of digital singles, record labels did not commonly promote physical singles. Instead they preferred that customers buy entire albums, even if the customers were primarily interested in only a few tracks. Suddenly the widespread availability of digital singles enabled consumers to “cherry pick” their favorites. For example, they could buy their three favorite tracks of a newly released album for only $3 as opposed to the $15 or so typically required to buy the entire album.

Jim laments the economic decline of the music business because like nearly everyone he loves music. As with most of us, his musical tastes are an integral part of his personality. Our favorite tracks provide experiences we want to share with intimate family and friends. For many of us music motivates us while we exercise and for some it inspires us when we think. Our interest in music is not going to vanish.

As noted in earlier posts, when music is easily shared in cyberspace more of us can more easily become acquainted with new compositions. Some of them will become fresh motivating and inspiring experiences as well. They can brighten our days, lift our attitudes, and underscore our moods. Given a choice of a “free” P2P download that could well be infected with pernicious software, most of us would likely tolerate commercials or pay a fee for a dose of rhythmic Prozac.

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As software GoogleTV may be incorporated into hardware products from most any reputable manufacturer. Yesterday’s participants are only the early examples. Logitech will make an appliance that will transform any modern TV into GoogleTV. Sony will include it in new models of TVs and Blu-ray players. DISH, a satellite TV service, will install it on subscriber DVRs.

Regular subscribers know for over a year Inside Digital Media has repeatedly emphasized that the natural evolution of television is toward just such a concept. One example is this post about our February ’09 Third Generation Television market research report – 15 months ago.

GoogleTV is significant for two reasons.

First, it implies that major industry factors with enough power to invent the future at last see the true vision of television evolution. GoogleTV includes a browser and therefore does not restrict access to only selected components of the Web. I’d wager $100 against a good Cuban cigar that most anyone with a computer already connected to their TV screen is convinced that unlimited Internet access at TVs is inevitable. No matter how beautiful the Internet walled gardens attempted earlier by other TV and CE makers, consumers will eventually regard them as a walled prison, just as did Napoleon III at the castle of Ham.

Once Internet access is commonly available on TVs new transformative business models will begin to emerge. For example, ultimately sponsors will no longer pay for ads that don’t get watched. However, they will pay a bounty for ads that successfully motivate consumers to click-through and buy merchandise, or complete some other call to action.

Second, whether GoogleTV per se is successful is immaterial.  Others will be motivated to respond. For example, despite repeated comments that AppleTV is merely a “hobby”, Google’s announcement will almost certainly motivate Apple to get much more serious about the Digital Living Room of the Future. We have emphasized this point in our Future of Apple research report as well as in this two-month-old post. At over $220 billion annually, the market opportunity in the United States alone exceeds four-times the size of Apple’s anticipated worldwide revenues this year. The chances of Apple forfeiting such a market to Google are as slim as an Apache Indian getting elected Pope.

For those who would like to learn more about how our research can keep you ahead of industry developments consider our free Webinar on at 2:00pm Eastern Daylight Time on June 10th to discuss our Future of Apple research report. Please e-mail phil(at)insidedigitalmedia.com if you would like to participate.

David Pakman

Today’s audio podcast is an interview with David Pakman who has been a venture capital Partner with Venrock since 2008. Earlier he was the CEO of eMusic where he led the online retailer to sell more music download tracks than any competitor except Apple’s iTunes. Before joining eMusic he Co-Founded MyPlay which pioneered online music lockers. MyPlay was sold to Bertelsmann shortly after the turn-of-the-century. Earlier David was a digital music innovator with N2K and Apple.

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David believes that the recorded music business has reached yet another mutation point. Over the past decade worldwide revenues dropped from $40 billion to about $17 billion.  Furthermore, unless the industry begins to proceed along a new evolutionary path he predicts the declines will continue for another five years before bottoming-out at perhaps $7 billion.

In order prosper henceforth, David believes the industry must permit recorded music to become “part of the very fabric of the web, not merely an overlay on top of it”.  That’s because users increasingly visualize the entire Internet as a readily available computing resource. While the concept is described with new terms such as “Cloud Computing”, in reality it is an amplified echo of a slogan popularized by Sun Microsystems 20 years ago when LANs first came into use, to wit, “The Network is the Computer.” The only difference is today’s network encompasses the entire Internet.

As a consequence we are beginning to live in our computers as much as we live in a physical world. That’s why online social networks such as Facebook and FourSquare are becoming popular. When something is important to us we seek to share it with friends and family in both the terrestrial and cyber worlds. David contends that music is typically one such part of our lives that we are often anxious to share.

When music is within the fabric of the Web, users might embed it like a Twitter Feed, or share tracks at Facebook with a single mouse-click as lala.com once permitted. Developers could create “more engaging and relevant online music experiences” that might become the foundations for new businesses and consequent incremental revenues for the music industry.

As noted in earlier posts, broadcast radio is losing influence. Domestic radio’s advertising revenues dropped from $21.7 billion in 2006 to $16.0 billion last year. To a large extent, broadcast radio depends upon record labels for content. If music listening migrates to the Internet, then there should be a good opportunity for advertising to follow it and for labels to pick-up a major share.

Precisely how this will happen is unclear, but as always the ones best able to predict the future are those who invent it. In this context, there has been much speculation that Apple’s decision to close lala.com is a precursor to the introduction of a Cloud-based music service by iTunes.  Apple acquired lala.com only about six months ago. It seems unlikely that they would shut it down without resurrecting it in related form more integral to the Apple business model. Apple’s developer conference scheduled for early next month might be an opportune time for the company to reveal its plans.

I have – a number of times. Even though I was in a dark theater surrounded by many people, it became a reflex.

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There have been similar experiences while listening to my car radio. I get sporadic impulses to advance the playlist to the next song. It happens when I don’t like the DJ’s current selection.

About a year ago I started using Pandora’s iPhone application. Pandora calls itself an Internet “radio station”. In reality, at a basic level it is a free Internet service that streams a playlist of recorded tracks. Most importantly, within technical and legal limits it permits me to choose the type of tracks in the list. For example, I specified one station as Richard Wagner thereby getting selections by Wagner and comparable composers. But, as Woody Allen put it, “too much Wagner could leave me with an uncontrollable urge to invade Poland”. Thus, I designated a second station as Bruce Springsteen resulting in song streams by Springsteen and related artists. And so on.

An adapter cable connects the iPhone to the car stereo which I can also use with a discrete iPod. Increasingly my car stereo is either playing iPod selections or Pandora streams, both of which enable me to skip songs failing to suit my ephemeral tastes. As a result, when listening to conventional radio, I instinctively feel entitled to skip songs I don’t want to hear. Sometimes my right hand automatically reaches for the advance button. After the reflex has already started, I consciously remind myself that traditional radio has no such button.

Although habits are hard to break, reflexes are uncontrollable. This is bad news for traditional media, especially radio. As the wireless Internet steadily enables other forms of interactivity the gap between my reflexive expectations and the capabilities of broadcast radio will grow. Consequently, I’ll listen to radio less often as will the public at large.

Even 5 – 10 years ago radio had too many commercials. But today my favorite station seems to be scrapping the bottom-of-the-barrel to find sponsors. While the loudly obnoxious auto dealers remain typical, I’ve noticed a significant allocation of ad time to businesses that seem misleading, if not fraudulent.

One example is a company offering a “free” $130 device to help smokers quit. Another uses an announcer imitating Paul Harvey’s monologue style to promote an accounting service for taxpayers with money-owed notices from the IRS. The ad mentions settlements for pennies on the dollar and a never-before-available opportunity to reduce IRS debts by up to 85%. Last, is one recruiting “girls in your area” to be models. While it sounds like it’s seeking people for a glamorous paid assignment that is only temporarily available, most likely it is instead of a solicitation for a fee-based service of dubious value.

Despite other commercials aired for trustworthy companies, the ads noted above are as conspicuous as cow patties on a snow bank. They lower the station’s audience trustworthiness. Reputable sponsors are increasingly likely to seek better opportunities. As a viable business the station may already be circling the drain.

Aside from the Clintons, who are either famous or notorious depending upon political polarity, few public figures are from Arkansas. Admittedly, every now-and-then there’s a Huckabee whose very name implies Arkansas, if not Mayberry.

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Along the state’s eastern border, the Mississippi River Delta is little changed in the past half-century. Although four-lane roads replaced two-lane blacktops, visiting there is a form of backward time travel. It’s still not rare to encounter vehicles looking like mutant forms of 1940s pick-ups trucks crossed with 1980s vintage rice harvesting equipment hauling overfilled loads of used tires or similar junk while crawling in the left lane at 25 miles per hour. It’s tempting to pass them on the right, except that half the time their uneven cargo tips the contraption that way too, threatening to topple everything on any driver with courage enough to try it.

Mark Twain’s 19th century characterization of a carnival-show promotional sign would likely still work in the region.

LADIES AND CHILDREN NOT ADMITTED

“There,” says he, “if that line don’t fetch them, I don’t know Arkansaw!”

But other parts of the state have grown – centrally located Little Rock, for example, where I recently ran my first marathon in over 30 years. Similarly, Wal-Mart and its ecosystem transformed the northwestern area. As most any Wal-Mart supplier might infer, it is a land where both the virtues and vices are simple. For example, suppliers are not permitted to entertain Wal-Mart executives. But those guys satisfy an endemic appetite for bar-b-cue and other fattening foods from their own wallet anyway, with predictable consequences at the waistline.

Interestingly, it’s also a state of good storytelling. Although few authors are nationally recognized the historical novels of Douglas C. Jones are vastly under rated. Since they’re geographically set west of the Mississippi River, publishers insist on labeling them Westerns. For example, the cover art for In Search of Temperance Moon suggests Jackson Hole instead of Fort Smith. Texas author Larry McMurtry got it right in parts of Lonesome Dove with characters like July Johnson wonderfully played by Chris Cooper in the TV mini-series where his sidekick was even better portrayed by Barry Corbin.

If I had the energy Donald Harrington’s esoteric stories would force me to open a dictionary at least once before turning nearly every page. His fans insist it’s worth the effort. I can at least agree that The Cherry Pit portrays Little Rock in the 1960s, with the authenticity to be iconoclastic to the uninitiated.

Finally, Donald Hay’s The Dixie Association is the finest baseball novel I’ve read, having bested Shoeless Joe which is the other one. Yet, if done right, it would make a better movie than either Field of Dreams (based on Shoeless Joe) or Bull Durham.  Billy Bob Thornton could probably do it right. He’s an Arkansan. I learned this by searching the Internet for movies with stories set in the state. I discovered that he became a popular actor after winning success as screen writer, much like Matt Damon and Ben Affleck.

Thornton first won critical attention with One False Move 18 years ago. He wrote the screenplay with his childhood friend Tom Epperson. Years earlier the two boys left to seek their fortunes in New York City. Shortly after arriving a sidewalk prostitute asked Tom if he would like to “go on a date”. With the characteristic naïveté of boys just off the farm he answered, “Why, no thank you Ma’am, but thanks for asking.”

Having never attended Mount Holyoke or Smith College and not being regular readers of The New York Times, the nearly penniless boys did not realize they were chauvinistic and privileged white males. Boys from Arkansas assumed that all women were vessels of purity forever to be treated respectfully.  It was one of the simple values learned at their mother’s knee.

Curiosity led me to search the Internet to learn if One False Move might be available online. As luck had it, Sony’s Crackle website offered it as an ad-supported stream. Since I have a laptop PC connected to my TV, I watched the entire movie on the television screen that very night. There was no need to drive to Blockbuster, or even wait for a download from Amazon-Video-on-Demand or iTunes. The experience led to the discovery of other enjoyable ad-supported movies at Crackle.

It also led me back to Google, this time to search the back-story of a familiar novel set in the Ozarks.

Wilson Rawls spent his boyhood as a member of a poor family in eastern Oklahoma during the 1920s. He never graduated from high school. Forced to leave the state in search of a job he wandered the Western Hemisphere as a construction worker for decades. But he also took time to write stories about his childhood. Mostly he used a pencil to more easily revise the manuscripts.

Rawls didn’t marry until his mid-forties. Shortly before the wedding day he set fire to all his manuscripts. He concluded that a married man must take family responsibilities more seriously. Setting aside spare time for story-writing would be frivolous. He was also embarrassed by the numerous spelling and grammatical errors resulting from his limited education.

Fortunately his bride convinced him to choose at least one story and re-write it. She would help with grammar, spelling, and promotion. A fresh draft was completed in three weeks.

In the early 1960s it was serialized in the Saturday Evening Post to an unremarkable reception as The Hounds of Youth. Gradually, however, the coming-of-age story about the maturity a boy achieves in taking responsibility for his own pets gained popularity. For years momentum was at the pace of continental drift, but after Rawls began lecturing at schools and the title was changed to Where the Red Fern Grows recognition spread like dogwood blooms in springtime.

Cynics might characterize the story as overly sentimental. Yet it seems authentic to the morals of the time and place. Surely during his wanderings in construction work Rawls had seen enough of the dark side of life to abandon any false conviction in the simple virtues portrayed in the novel. The beliefs must have been genuine if he remained faithful to them by middle age. Somehow poor families in the Ozarks of his youth stayed together. Divorce was as rare and disastrous as flooding by the Illinois River that could swamp the bottom lands of the former Indian Nations leaving behind the occasional red fern as a poignant symbol of what once was.

Having read the novel years ago, I searched the Internet hoping to find a movie version. Fortunately, a (predictably) Disney production was posted on YouTube. I don’t know by what authority it was uploaded, but it was available in a series of ten minute segments. Like the Thornton movie I saw earlier, I watched it that same night on my TV screen.

The Wikipedia entry for Rawls led me to discover he authored a second coming-of-age novel entitled A Summer of Monkeys, set in the same era and geographic region. I also found a film version on YouTube and watched it on my TV screen the next night. This time Disney filmed it in Alberta, presumably because of government subsidies. Consequently, to the knowledgeable eye it failed to match the authenticity of the first movie which was shot near Tahlequah, the former capitol of Cherokee Nation.

Readers who stayed with me so far my wonder how the preceding memoir is germane to Digital Media or Internet Video.

First, it describes how Internet Media has displaced time that I would likely otherwise have spent watching conventional television. But far too many TV shows fail to address my most cherished interests. Fortunately, Internet Media enables me to explore the topics. Perhaps most significantly, it permits me to discover conventional movies relevant to those interests and to watch them “right now”.

As I spend more time on the Net, eventually conventional TV will become unimportant. I’d wager $100 against a good Cuban cigar that the same point becomes self-evident to others with computer-to-TV connections who also explore the Web for videos targeting their interests. In time we’ll “cut the cord” to CATV. Instead, we’ll (almost) gladly pay for faster ISP service.

Second, as noted frequently in earlier posts, the PC-to-TV connection is not too geeky to prevent consumers from developing a taste for Internet Video on TV screens. Confessedly, I’d like a browser-centric appliance that makes it even easier, but the public spread of the PC-to-TV configuration will be a forcing factor leading to just such an industry-wide evolution. It appears that a consortium of Google, Intel, Sony, and Logitech, may announce one before year-end.

Third, the process of researching my interests to discover relevant videos underscores a conviction that the public will never be satisfied with limited Internet access at the TV. Maybe Apple can provide an acceptable substitute if they introduce an appliance with a vast number of applications, but nearly everyone will want to be able to search all corners of the Internet in pursuit of their passions.

Fourth, since Internet Media is interactive consumers will expect the same functionality on their TVs as more Internet Video arrives there. The CATV industry is an amalgamation of a variety of proprietary networks that can best provide such interaction by settling on a single standard. Unfortunately, they’re trying to invent a new one, whereas a fully acceptable bullet-proof protocol has already been massively deployed, to wit Internet Protocol.

Widespread Internet access at the TV obviates a need for new CATV interactive standards. Anyway, the disparity of MSO networks would likely result in an awkward standard like the overloaded mutant contraption noted earlier resembling a cross between a 1940s pick-up truck and 1980s vintage rice harvesting equipment crawling along the left lane of an east Arkansaw highway.