Tag Archives: Netflix

Everything you know about media is changing dramatically

I mean it. Everything. The media and entertainment industry as we have come to know it is being disrupted, and so is this blog, more on that later. Where to start? Because I did say everything is changing.

Broadcast is dead

Until I spent time this week wandering the exhibit hall and attending talks at INTX 2016 this week, broadcast’s obituary was going to be buried a little deeper in the post. I frontload so heavily because I know how long the average reader spends here. Although I am tempted to name my posts something like “20 things are changing in the media and you won’t flippin’ believe number 19” and then present it as a slide show, I respect your time enough to make but the important stuff first.

We’ve been declaring broadcasting has been braindead for years, but now it’s time to start harvesting the organs. Sports and regional news won’t cover the bill to keep the ventilator pumping indefinitely.

The spectrum currently used by digital television would be put to better use quenching consumers’ insatiable thirst for wireless bandwidth. To that end, the FCC has allowed broadcasters to opt into the Broadcast Incentive Auction. The idea here is simple. Give up spectrum so it can be licensed to wireless providers for 5G service and make some money. As a disincentive to hoarding and holding for a higher price, the first part of the auction is a reverse auction, so it pays to get in early.

As infuriating as it might be for a taxpayer to watch broadcasters profitably sell back to the public airwaves they lobbied so hard for and swore they could not live out, you have to feel a little bit sorry for the dinosaurs now that the asteroid is in sight. I’m partial to the EU’s approach of reallocating the spectrum over 700 MHz for wireless and simply assigning new VHF channels to broadcasters, but here in the US corporations are people too, so we just can’t act in the public’s interest for the sake of the public interest. We have to think of the lobbyists.

Variety had a great explainer on the auction in March. My favorite numbers gleaned are below.

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The final act of this play will be streamed

Once the video over IP’s latency problem with live events is solved broadcast will have completely outlived its usefulness. We will have reached a point where even the Super Bowl can’t save it. Currently IP network latency delays live events up to thirty seconds. As an MLB.TV fanatic, I have to put the mobile down to enjoy a game otherwise I’ll witness the Twittersphere lighting up before I even see the batter step into the box to crush the game winning home run. For sports to remain a communal activity in the age of social media, latency has get down to about two seconds.

That date is very near. Using a combination 4G LTE bonding and some really nifty video file wrapping tricks, the Israeli startup Zixi has reached that bar with image quality that rivals today’s Xfinity and FiOS pictures. It’s just a matter of adoption. I put it at 24 months for Zixi or a rival technology to make broadcasting over the air obsolete.

The passing of traditional broadcast is interesting enough. In fact, I could stop here and call it a post except that I said everything was changing. And, dammit, everything really is.

Move over Viacom, Fox, and Disney

Amazon, Netflix, Google, Apple, Netflix, Facebook, and Microsoft all want to steal your lunch money. Wall Street believes they will, and these things become self-fulfilling prophecies in short order. They all already own or aspire to own a significant portions of the entertainment value chain. Microsoft and Facebook are longer shots but somewhat more interesting because they are not just looking at the traditional media value chain, but are approaching M&E through significant investment in gaming and VR. For them it comes down to whether VR technology will be ready for primetime soon enough. If one of them wins, just read Ready Player One to see how the story ends. Google’s gotten into VR as well, but it gets lumped it with the others due to its ownership of the world’s most successful online video platform. And how many OVPs does the world really need? Hint: The answer is not greater than two. One rare bit of investment advice from this publication… short OVPs and go long on CDNs.

It going to come down to who can afford to front the large sums of money to create tent pole content, who can store and protect it throughout its lifecycle without losing it to theft or in a theme park fire, who can monetize it effectively, and who can deliver it efficiently. That’s what will determine the winners. Amazon with Elemental and Apple with all its video expertise are positioned for an epic battle. Apple has the edge in video smarts while Amazon has the edge in distribution, pricing, and packaging smarts. How will Apple compete against free two-day shipping for underwear and great programming for $99 a year? Whatever the tech giants come up with will certainly beat a $300 a month cable bill.

Where’s Google in all this? I can’t help but feel that Google will mess it up. Media and entertainment is all about user experience. Google simply doesn’t value design and user experience enough. YouTube and Gmail are still ugly after all these years. While an email client can be ugly and a little clunky as long as it’s free and the user never loses anything, the presentation layer for the night’s entertainment should be inviting.

IaaS the big play

The real money in media then is infrastructure as a service. What Avid, Grass Valley, and the like have done in the past must now become exponentially bigger, more robust, and more open. Avid is right. The industry is crying for a platform. Unfortunately for Avid, it’s crying for a platform a mid-sized tech company doesn’t have the resources to provide. Amazon with Elemental is already closer to realizing Avid’s dream than Avid is. A lot of small players have the necessary pieces built to connect to a network, a larger company, not viewed as  a direct competitor by potential partners is better positioned to roll them up into a unified platform offering.

Simplifying it a bit, whoever can provide the storage, rights management, and monetization tools will win. Dell-EMC is extremely well positioned to contend in that space with its hardware, virtualization expertise, and storage smarts. It makes the servers and intelligent storage. It owns VMware and Virtustream, so it will be able to provision data centers like no one else. Dell-EMC should be able to take a commanding early lead repurposing hardware in real time as audience usage patterns change. Add an acquisition like Telestream or Harmonic, and we have a new media and entertainment powerhouse.

IBM is the cicada in all this. Once every few years IBM shows interest in M&E only to shift focus shortly thereafter. With the right timing, IBM could get lucky.

Over the next few years, the remaining media-specific tech companies will have to become more focused on their core competencies. Their customer bases are buying less, forcing them to compete in a race to the bottom in a shrinking pool. While all are moving as nimbly as they can to make the transition from signal-based to IP video, they are faced with R&D resource limits and the drag of legacy customers such as large state broadcasters moving more slowly to the future.  These legacy customers account for significant portions of media tech’s revenue stream and cannot be ignored until the business transformation is complete.

Acquisition and Post are about to be disrupted too

Camera evolution is the total wildcard that can change the whole production and post process dramatically. When light field cameras get high enough resolution and come down in cost, the cost of shooting will drop dramatically due to shorter set up time and the need for fewer cameras. Composition, focus, lighting, tracking and green screen will all be handled in post, much of it algorithmically. Editing becomes a smaller part of the post process with DPs, directors, and VFX taking on larger roles once shooting stops. As post production for the 2D display requires more 3D capabilities, look for the post solutions market to bifurcate with Adobe taking the lion’s share with a combination of Avid and Autodesk tools owning the extreme high end. Don’t be surprised to see Media Composer land at Autodesk, or Autodesk’s media and entertainment business go to Avid. A number of former (and extremely talented) Avid engineers are now in Autodesk’s media and entertainment development organization.

Adobe has a leg up in the light field world. These cameras have been in development for some time. Light field still image capture is already available to the market, and Adobe has tools under development to enable Photoshop, Lightroom, Premiere, and After Effects to thrive in this new world.

How media is created, distributed, and consumed is all changing. No career in media will be untouched. No company will be sheltered from the disruption. Be agile. Embrace the disruption.

Everything includes this little nook in the internet

I will follow my own advice by embracing disruption and becoming more agile. It will no longer be focused exclusively on media and entertainment technology. Instead I will draw upon my experience of the past fifteen years in technology design, development, and product management. I will adjust my gaze away from LA and put more focus closer to home in the technology hotbed of Boston.

Some Oscar Night Reading

This week’s Economist features a brief article on the state of Hollywood. Though not a lot will be revelatory to those of us in the space, it does remind us of some interesting trends that many of could hardly imagine just a few years ago.

One example, rumors of television’s demise were premature.

TV is relatively stable and currently lucrative. TV networks earn money from advertising and from the fees that cable and satellite operators pay to carry their programmes. These fees amount to some $32 billion a year in America, and are growing by about 7% annually. People love watching TV, and, per hour, it is one of the cheapest forms of entertainment.

In contrast, film revenues are volatile. Attendance swings like the moods of Claire Danes’s bipolar character, Carrie Mathison, in the TV show “Homeland”. In 2011 American cinemas sold 1.28 billion tickets, the smallest number since 1995.

As studios continue to experiment with new distribution models, and companies like Netflix are getting into the content creation business, both the motion picture and television industries might be in for a period of growth.

 

Not much there in Netflix deal

So Netflix is paying $1 billion to Epix for the rights to stream titles from Paramount Pictures, Lions Gate and MGM. This could have been a big deal, but it preserves the cable networks’ 18 month exclusivity window. At the end of the day the Roku box remains a gateway to sometimes good, but somewhat stale Hollywood fare.

HBO and friends live on for a few more years as they evolve their businesses. Cable companies can continue to force customers into bundles that lump four or five “movie” channels showing pretty much the same stuff. Do cable companies see their reign coming to an end, and are just cash cowing their existing business models? It’s clear the “movie” channels are weaning themselves from studio fare. They continue to expand their original programming efforts — and doing it quite well. But what about the cable companies? Beyond caller ID on my TV for the phone line no one in my family uses, we’re not seeing a lot of innovation from Comcast, Charter, and company.

A more disruptive deal from Netflix would have forced big cable’s hand. We’ll just have to wait until the next round of studio deals with distributors to expire.

Apple TV’s next moves?

Before the Christmas holiday, rumors of Apple’s overtures to the networks abounded like so many visions of sugar plums. Journalists and bloggers posited about the effect of Apple’s entrance into the subscription television market. Most of the analysis was solid. The Seeking Alpha blog featured this succinct write up. Most expect a successful Apple offering would threaten cable and satellite subscription models. Others note that an invigorated Apple TV could put the pinch on the Netflix Roku service. Light Reading’s Cable Digital News noted the following.

While cable operators likely won’t face an immediate threat from the subscription service Apple Inc. (Nasdaq: AAPL) is purportedly pitching to major content suppliers, the offering may instead put the hurt on over-the-top video service providers like Boxee and Roku Inc.

It should be noted that Apple TV employs a hard disk. Content is downloaded before it’s played. Roku receives streams, so it’s a lower cost, lower footprint device. Most importantly streaming allows more delivery flexibility. Netflix doesn’t care whether I watch my content on a PC or a TV. Apple TV is anchored to a television. While an iTunes account can be managed from multiple devices, content needs to be downloaded to each to play it. Even with improved progressive download performance, this model has its limitations. One blog noted that a full season of an HD network television series can take up to 50 GB of hard disk space. So there’s a limit to how much content can be delivered to an Apple TV.

For Apple to leverage the strong iTunes brand it has to unhitch content from the device – a fundamental change in business model for a device manufacturer. But if any company has shown the ability to adapt to the digital media marketplace of the early 21st century, it’s Apple. If Apple succeeds at getting content deals in place, I expect a next-generation Apple TV to emerge shortly thereafter.

IPTV’s quiet revolution

RokuPolitical revolution’s have their defining moment – a statue is toppled in a public square, a wall comes down, somebody’s head is removed. Technology revolutions are (thankfully) a different breed. The revolution is declared, nothing happens for a long time, and then the trickle of change begins. That’s been the case with IPTV. For all the hype, a lot of nothing has been going down. Maybe the ground is beginning to shift.

Saturday my Roku arrived. Roku is a Netflix-enabled set top box, capable of streaming directly from your Netflix to queue to your TV. Only a relative few Netflix DVD titles are available for streaming, but at $99, the box was worth a try. Set up took more than the three minutes the launch screen promised due to a flash update, but still easy enough. Using your existing Internet connection, the box accesses the Netflix queue. Unlike Blu-ray disks, Netflix has yet to charge additional for this functionality. (Of course Blu-ray began at no extra charge, then cost $1/mo., and now runs $4/mo. per standard account.)

Netflix did what I wanted Apple TV to do, bring IPTV to my living room. After a year and a half of Apple TV, I’ve bought less than a handful of titles and rented none. Apple TV in my house is nothing more than an expensive iPod with a nifty screen saver for my HDTV. The family already watched more titles on Roku than Apple TV. Until Apple changes the Apple TV business model, Apple TV will remain moribund.

Though initial reviews and customer testimonials have been overwhelmingly positive, it’s too early to declare victory for Roku. There are still rough patches ahead for Roku – or any potentially successful IPTV platform.

  • Pricing model Netflix will have to begin charging for the service. It’s too easy to spend the day streaming titles. Serving up scores of titles per account may become more costly than maintaining DVD stock and using the USPS to act as a governor.
  • Network performance As these services gain in popularity, large areas of the country will suffer network performance issues. I can already tell when school’s out every afternoon in my neighbor based on increased network latency. It can only get worse.
  • Cable providers will want a piece of the action Roku’s using all that bandwidth to compete against cable’s on-demand offerings. Cable is going to want a piece of the action or things might get ugly.

The larger point is that my family is already hooked on IPTV. There’s no turning back.

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