There is an old saying that I try to always remind myself of "When You Have a Hammer, Everything Looks Like a Nail"

Its always very easy, and even more tempting to try to take a utility that is readily available at minimal cost and use it as a technology that is the solution to everything. Has there been any of the world's ills that someone hasnt suggested can be cured by using the internet ?

From Education to Healthcare to Entertainment to Sports to Security to Corporate everything and just about anything and everything else. If Robitussin cant cure it, the Internet will. Of course the internet was not the first cure all for the worlds ills. The list is long. Im sure for the longest time fire was the cure all, but even in more modern times there is an exciting list.

In no particular order, electricity was a marval, and it benefited from Metcalfe's Law. Other beneficiaries of the network effect were the telegraph, roads and highways, railroads, airplanes and airports among others. With the exception of the telegraph, all went from technological miracle that reformed the world, to utilities that we can't live without, but we no long consider amazing. Is there any doubt that businesses and fortunes were built on these and other technologies and that kids coming out of school were considered ahead of the curve if they were educated in the latest and greatest ?

In just the past 20 years, knowing how to program in cobol, fortran and assembly language went from desirable by every major employer and a "great major" in school, to a worthy job, but with a chain to a desk and some really really old code to stare at every day. Database programming was the key to development riches. Its still valuable, but nothing like the opportunities of the 80s. Same can be said of C and Basic.

If you know everything there was to know about Novell networks and Lotus Notes, you could easily earn a living. Today, you better have expanded your skill set.

From Dbase to Clipper to ASP to PHP, scripting languages have built worthy applications on top of the network of choice of their day. The nature of scripting languages is that they always will be replaced by something better at some point. What happens to all those PHP apps in place today ?

No matter what the technology, language or platform, it has a limited shelf life and will use its position as "the Hammer" until it loses it.

For the past 15 years, everyone who "gets it" has tried to use the Internet to fix or create whatever they think "the next big thing " is. How much longer until there is something new that comes along and makes Web X.0 on the net look old and tired ?

Personally, I think Web 2.0 already is tired. When social networking or Twittering ,applications that are nice to have, but not a need to have, are the best we can do. We ain't doing much. Lets get real. As much fun as Twittering can be, shouldn't we all be able to agree that if its the latest and greatest application, the Internet has Jumped the Shark ?

We saw the same thing in the "PC Revolution". Back in the 80s, we waited anxiously as new desktops came out with ever increasing chips and hard drives, which when combined with ever improving programming languages, created an excitement over new software programs. Yes little Billy, there used to be a time when we wanted to see what new Word Processor or Spreadsheet or Database would come out to topple the incumbent market leader.

There was a time when there was an interesting, if not an exciting battle between Harvard Graphics and Powerpoint. Talk about ancient history. When was the last time you even looked to see if there were any new desktop apps available ? Ok maybe if you are a gamer you care. But thats it.

When was the last time a non gamer even cared about how fast a processor was for desktops and whether or not there were new desktops coming out ? Any excitement we have at all for is reserved for the shrinking of laptops and new hand held phones or devices

The PC Revolution is over. Dead. Its now just the PC Evolution.

Anyone who thinks the same wont happen to the Internet is not paying attention.

Which is exactly why its so much fun to write on this blog and tweak all the internet bigots out there. Yes, all of you who think that the Internet is the ultimate Hammer and that every problem that technology can touch is a nail, you are Internet Bigots.

Me, I believe that all internet sites are created equal, that the world has already moved past the Internet as magic to the internet as utility stage. I believe in morning walks, sipping diet peach snapple, the beauty of a jump shot ripping the cords and that if most of the world thinks the Internet is the Hammer, the solution to everything, that is the exact reason why it is not. I believe that there is something far, far better , that will have far more utility to all of us and is on the tip of the tongue of some kid out there somewhere and I will have a blast looking for it and hopefully finding it first, which will be a lot more fun than trying to compete with Facebook or Google.

In mean time, Im going to enjoy tweaking all the Internet Bigots out there, simply because its fun

"Google will have to turn over every record of every video watched by YouTube users, including users' names and IP addresses, to Viacom, which is suing Google for allowing clips of its copyright videos to appear on YouTube, a judge ruled Wednesday."

Viacom wants to know whether copyrighted or user generated content is more popular. Thats nice to know. What will really tip the balance of power in this case, now that every viewing instance will be in Viacom's possession, is the answer to how Youtube deals with porn.

Who identifies the porn on Youtube ? According to Youtube, its regular users who police the site. Personally, I dont believe it. Whether its individuals or technology that keep porn off of Youtube, it really doesn't matter. If Viacom can use this data to show that Youtube manages the presentation of porn in any way, then they lose their DMCA protection.

Which means they lose their case to Viacom.

I enjoyed the conversations discussing my position on NBA Players in the Olympics. The sports world is its own social network where much is said , written and quickly forgotten about anything and everything that can be argued about. My last post included.

The sports world however is on an amateur scale when it comes to arguing for the sake of arguing compared to the world of technology fanboys. They are about to see just how overmatched they are

It all starts with this "No Olympics video is allowed to be shown online on any website other than NBCOlympics.com"

Translated, this means that no Olympics video is allowed on Youtube, Veoh or any video sharing site. It means that if you are an Olympic athlete and you want to post video of your Gold Medal winning, world record performance on your Facebook or Myspace page, those sites may just get a takedown notice saying you dont have those rights, leaving the dreaded "this video has been removed....." text in its place.

If you stayed up all night to watch an amazing finish to an event that you wanted to share with friends, forgettaboutit. Unless you plan on making an expensive fair use legal argument, you re going to be running afoul of the NBC legal department.

For all things Olympics video online, its NBCOlympics.com or nothing.

All of which is fighting words to the very vocal the internet and Youtube can do no wrong fanboys. They will scream, yell and comment spam and response video to the point of hyperventilation. They will do interviews on every sports, technology and cable news show. It will become a multi platform, multi media issue. They will be loud

It will also send the message to the sports world that the Olympics is driven by money. A fact that will resonate every time someone watches the Olympics, except hopefully between the gun and the tape and the starting and ending whistles of events. Which of course means it will be sports talk radio fodder 24x7 on every radio dial in every city in America with ESPN segments everywhere covering the "controversy"

The Olympics will of course be a major topic of conversation this summer, it will be interesting to see how much of the conversation will be about the athletes and which world, technology or sports will have more influence on NBC and their policies.

This is my original post on the NBA and the Olympics. One thing I will add to it is for each and every blogger who so desires to undertake a simple test. On your blog, add a picture of the Olympics 5 Rings and a picture of your favorite player in their Olympic uniform. Underneath the pictures, add the caption, "My Official Olympics Update" and then chronicle that player in the Olympics with pictures from the official Olympics website. Show your patriotism and pride... that is until the you get a takedown letter or a Cease and Desist ordering you to take it down.

Thats how much about country and pride the Olympics is these days....

A 2nd item to generate some thought is the concept of players and coaches "And 1ing" their nationalities in order to be able to participate or to better market themselves. Whats "And 1ing" ? Being born and/or raised in one country but leveraging a ancestral link to another country where your odds are better to make the team. So for instance, your great, great grandfather was born in Upper Slobobia. in order to play on the Upper Slobobian basketball or handball team, you get a passport from there. Thats "And 1ing". Adding a nationality so that you can play on their team.

Or what about giving up citizenship from your native country to come here and play on our team. Is that what we want to root for as we face an onslaught of commercials on one of who knows how many cable networks that GE will be filling with Olympic programming ?

Are we sure the Olympics is about patriotism and pride ? Or is it about commercialism ? Im certaintly not against GE and the US Olympic Team making as much money as they possibly can on the game. More power to them. But lets not lie to ourselves about what is going on.

Here is my original post from more than 4 years ago.

NBA and the Olympics

Apr 7th 2004 10:54AM

It is coming up on 2 years post my declaration that only a moron would buy Youtube and that Google was crazy for actually going through with it.

In that period of time, while Youtube traffic has skyrocketed, they have been steadfast in their admission that they haven't been able to monetize Youtube's traffic in a profitable manner. Youtube has become the poster child for the old saying "we are losing money on every sale, but we will make it up in volume". To the Youtube fan club, its inconceivable that any website with so much traffic and marketshare could be in anything but an enviable position. The fan boys would be increasingly wrong. The Youtube business model is broken and there is no light at the end of the tunnel as they are currently constructed.

The reason is Hulu.

Hulu doesn't serve up more videos than Youtube. They aren't even remotely close in number of total users or videos served. But there is one area in which Hulu is just stomping up and down Youtube, and another in which Hulu is laughing at Youtube all the way to bank.


Lets start with the 2nd, Hulu laughing at Youtube. Youtube has presented to Hulu something that we can simply call The Youtube Arbitrage. Whats the Youtube Arbitrage you ask ? Simple. Hulu posts clips, not full episodes, clips on its Youtube channel and elsewhere on Youtube. Those clips are preroll AND overlays AND post rolls promoting Hulu and its full episodes of shows and movies. All of which costs Hulu the ginormous cost of ....nothing. From which it generates traffic to its Hulu site on which it sells, to the point of often selling out, display and preroll ads. That's the ultimate arbitrage. We pay you nothing, and you send us traffic that generates ad revenue for us.

Which leads us to the one area, OK lets say two areas that Hulu is just stomping all over Youtube;
1. Revenue Per Video
2. Revenue Per User

Hulu has one HUGE advantage over Youtube, it has the right to sell advertising in and around every single video on its site. It can package and sell any way that might make its customers happy. Youtube on the other hand, has that right for only the small percentage of the videos on its site that it has a licensing deal with. For probably 99pct or more of the videos on the site, Youtube isn't supposed to know what they even are.

How can that be ? Because Youtube hides behind the Digital Millennium Copyright Act. Hulu is a media site that presents videos with advertising. It can do whatever it wants. Youtube ts a hosting service. Its not allowed to know what videos are uploaded by users and its not allowed to generate revenue against those videos. It can only sell advertising around videos it has licenses to.

Which leads to a question and a prediction.

The Question: Which site currently has more monetizable video and traffic, Youtube or Hulu ? I don't know the answer. I'm guessing that its already a close race and may even be in Hulu's favor. I do know that Youtube's need for more monetizable traffic is why they added the check box for Partner Videos. Notice that those are the only videos that you see ads next to.

The Prediction: That by next year, not only will Hulu have more monetizable traffic than Youtube, but it will have more total revenues than Youtube as well. It wouldn't sup rise me if they are already at a higher annual run rate than Youtube.

All of which puts Youtube in a VERY BAD spot. Because Hulu can monetize 100pct of their growing traffic, they should be in a position to pay for the best content available. Not a lot of money, but even with the tiniest of guaranteed payments to producers, they will not only attract better content than Youtube, but they will also increase the cost to Youtube for the content they want most to license. Furthermore, because Hulu knows exactly what they have on the site and can sell 100pct of it, their professional sales force will be in a better position to package and sell bigger and more profitable ad solutions.

It will be interesting to see how Youtube responds.

As it stands today however, there is no doubt that Hulu, if it doesn't already, will have more monetizable traffic and greater revenues than Youtube going forward.

Which means that the more traffic Hulu generates, the more money it makes. The more traffic Youtube generates, the more money it loses.. Maybe they think they will make it up with even more volume ?

I'm sure the fan boys are convinced they will.

Today is the youngest you will ever be. Act like it.

When it comes to broadband internet access, you can have speed or large volumes of data transfer. You can't have both. One certainty in the broadband world is that for those of us with cable or DSL modems connecting us to the internet, there is still a finite amount of bandwidth available. When a user consumes a disproportionate and significant amount of bandwidth, it can and will slow down everyone. I hate that.

If the choice is between your being able to download more movies or other video and my getting the best possible speed from my internet connection, I'm thrilled when you get kicked off. It can't happen soon enough. Speed is what I need. Take all your P2P downloads and get the hell off my internet.

I have no sympathy for bandwidth hogs. You all are productivity killers for the rest of us. People who are working, people who are trying to play games, people who are in virtual worlds, people who are networking, people who are just trying to watch a Youtube video or their favorite TV show, you all are the reason why we get incredibly annoyed by slowdowns and buffering.

Leave and take your bit torrent client with you.

Its been amusing to read all the blog posts with the math telling all of us just how many standard def or high def movies tiered subscribers will be limited to. You can have 2 or 3 of your favorite SD TV shows per day, or X number of HD movies per month. Say what ?

I have news for all of you that want to dedicate their internet connections to downloading movies. There is a new and exciting development. Its called an Application Specific Integrated Video Service (ASIVS) . What is an ASIVS ? Its a computer dedicated specifically to downloading and playing both standard definition and high definition video. You connect it to a network that is dedicated to delivering GIGABITS PER SECOND of high quality video with ZERO buffering. Its amazing, it always works and connects right to your standard def or High Definition TV, easily. Most of the systems I have seen have a pretty good programming guide and scheduling system and they will let you download AS MUCH VIDEO AS YOU WANT , limited only by the size of its hard drive!!

If you haven't heard of the ASIVS, its because most people call it a DVR.

If downloading TV shows is so important to you, add a DVR to your cable or satellite service for 5 bucks a month and download all you want. If you want to watch those shows on your laptop, connect the composite video out in your DVR to the composite in on your laptop. Same with movies.

Cant download movies illegally, tough.

The internet is a great resource for unlimited quantities of video. Downloading video is an internet given right. Using he internet to fill up your PC turned DVR at the expense of the performance of every user around you is not.

Im a heavy internet user. I'm online hours per day. To me, the promise of the internet comes not from how many bits I can download, its in finding new ways to leverage the utility and stability of the internet as a platform for new applications. The performance of the net is key to new applications working and gathering users. Internet consumers avoid new applications that are slow. Even when they don't realize that the application is slow because the latency on their net segment has skyrocketed because of bandwidth hogs disproportionate consumption of bits.


Now some of you might think that the reasonable solution for all of this is for your provider to create as much last mile bandwidth as is necessary to make everyone happy, with no limits on use and at a low price. In a lot of respects, I would agree with you. It would be nice if every network were upgraded so that the amount of bandwidth available to us would be bottomless. Nice, but not here and now.

Until that day comes, the only real option is to push the bandwidth hogs to slow usage periods and create packages that allow for increased consumption of bandwidth during off hours, or to push them off typical ISP network. If tiered broadband offerings enable that. I say thank you.

Speed is what I need. If that means that those 5 pct of users that consume 65pct of bandwidth are kicked off or charged per bit to reduce their consumption.... so be it.

Its not often you can have two movies out that get 100pct on Rotten Tomatoes. If you dont know what that means, it means that 100 pct of the reviews on both our movies, Surfwise and Bigger Stronger Faster are postive. Its an amazing feat for one movie, but to have two out is incredible.

Surfwise is about a surfer, Doc" Paskowitz. Once an admired figure in the medical community, Doc decided while at the height of his success to do what many have dreamed of, to leave it all behind, and head to the beach. While traveling the world in search of the next great wave, Doc got married , and had nine kids.

Rather than retreating to a "normal" life to raise his kids, Doc did the opposite. He never placed his kids in school, raised his kids, and lived, all 10 of them, in an ever moving camper. The only required routine was that they surf every day and eat organic. Doc wanted to raise his family the way animals live, free of the material world. The film takes viewers on a turbulent ride through the family's complex history, first focusing on its patriarch and then slowly moving through the years with commentary by the family's seven now-grown children. Careful never to judge, SURFWISE simply presents the story as experienced by those on the inside. Scenes of complaint by the adult children are countered by a hopeful reunion at the end. Its an incredible look at a real family who tuned out, and the reality that followed.

Critics have called the movie mesmerizing, thought provoking, fascinating, absorbing, remarkable, powerful and more. For more information and where you can see it, check out the Surfwise website and see the movie. I promise you will love it.

Another amazing, favorite movie of ours is Bigger Stronger Faster. The reviews are just as amazing. RAUCOUSLY FUNNY, SURPRISINGLY COMPREHENSIVE AND INSIGHTFUL (LA Times). Fascinating ! (Entertainment Weekly), Poignant and hilarious." – Stephen Holden, NY Times, The film treats jocks like humans, not stars or superheroes, and in the end has managed something unique for documentaries these days: IT'S AS ENTERTAINING AS IT IS FAIR." – Stephen Hunter, Washington Post, Alternately funny and harrowing." - GQ,

The reviews really say it all. I love this movie because its a hysterical look at the sports world. Steroids are the common theme in the movie, but its a theme that is ripe for humor. How can a guy with guns like Gregg Valentino not be (pic below). This movie takes on everyone and takes no prisoners, pointing out the hypocrisy of how we view winning in sports.

If you like docs by Morgan Spurlock Like SuperSize Me, you are going to love , love , love this movie. Go see it and post what you think. More info and the trailer are here

A couple weeks ago i wrote about the Ala Carting of Video on the Net. The premise was very simple. To paraphrase an old saying, "If you give away the milk for free, there is no need to buy the cow". If you give away your best stuff on an ala carte basis, then the value of everything that depended on that "stuff" declines.

Some folks agreed, others searched for ways to disagree. Many in their responses seemed to think that because I own HDNet that I am biased and my judgement is clouded. In fact, its the exact opposite. I co founded HDNet in 2001 because even then, the writing was on the wall that digital delivery of content over a network that can control the quality of its service would always deliver a superior product over the open, net neutrality driven internet. Particularly when Sd camcorders were replaced by HD camcorders and consumers showed a bias towards content shot and delivered in high definition. So HDNet is the result of my analysis. My analysis is not the result of my owning HDNet. Make sense ? But I digress from the post topic.

The Ala Carting issue is a primary issue for corporate producers of content. What about the little guys ?

The newest and biggest problem for independent creators of internet video is that their financial futures are controlled completely by Google.

Google, by way of YouTube has done an astonishing job of hiding the true economics of web video. For the vast majority of internet video creators, their perception of cost is limited to their actual work and cost to create the content and upload it to YouTube. Of course, nothing could be further from the truth.

The cost of delivery of video on the net, because of its unicast or 1 to 1 mechanics increases as its audience size increases. So unlike regular TV, where as the number of viewers increase, the cost of delivery per viewer decreases, internet video is the exact opposite. As the number of viewers increase, your cost per viewer increases. Considerably.

Google , along with MySpace and other popular webhosting sites have done a masterful job of hiding the real costs of video delivery by fully subsidizing the cost. Why should anyone care if Google or MySpace is picking up 100pct of the tab ?

If you are an INDEPENDENT video producer who would like to get paid at some point for your work, you should care. A lot. Why ? Because at some point even Google and Myspace will grow tired of subsidizing all of this cost.

In the words of Google CEO Eric Schmidt "We're working but have not yet in my view gotten a breakthrough around monetization," Schmidt said during an interview for CNBC. "We're working on that. That's our highest priority this year."

Right now Google has no way of making money on content. They are experimenting. But what happens when the lightbulb goes off ? What happens when they finally find a solution to monetization ?

Thats easy: "All your video does belongs to US".

When they turn on the light, if you are a content producer who would like to get paid for your work, you will be required to license your video to Google and all those who copy what Google does. Exclusively ? Maybe, but probably not. But if you like the taste of free video hosting from Google, you will have to do what you do not have to do today, give something in return. Which is a license to your content.

Those who are even more cynical than I tend to be, will be the first to say that this is already happening. That in order to get paid by Google, you have to sign a content licensing deal. After all, the DMCA specifies that Google cant know what content is on Youtube unless its licensed to them, so there is no way for them to pay anyone unless they sign a deal. Which is of course true.

What it doesn't take into account is that 99pct of content producers have no idea how the economics have worked for the 1pct of content producers that have signed deals. if they did, they would know that the number of producers actually making minimum wage for their work is few and far between.

But it gets worse.

Selling your content through Google is a 100pct commission business. You don't get anything unless they sell something. That works great in an adsense model where your cost to produce and deliver a webpage is minimal. That works great when every word in your webpage is indexed and there are millions of SEO tricks available to drive traffic and increase your revenue from Google.

That sucks when you have to go in the hole to produce video of any quality at all. It sucks worse when there is no inexpensive way to drive traffic to your video to generate ad revenue.

Creating content is expensive. The cost of the tools may have dropped considerably, but the value of your time increases every minute you live past the age of 25, or move out of your parents house, which ever comes later. At some stage in your life, you reach a point where Mac and Cheese and free food at happy hour and buying used clothes are disapointments rather than choices. At some stage in your life, asking your friends to work for free is no longer "hanging out", its imposing or freeloading. Its at that point you are going to realize that you are working really hard and scared shitless about whether you will be able to make a living doing what you love. Then it will hit you that you are subsidizing the cost of video advertising inventory for Google or MySpace or whoever, while not being able to make ends meet.

That is the future of internet video as it stands today.

Im sure Google and MySpace and every video host is trying to find their "Overture Moment". Their cost per click equivalent that will cover the costs of video delivery to the hundreds of millions of viewers of internet video. But what about the content creators and their profitability and viability ?

In order for video on the internet to work for them, the CPMs and traffic PER VIDEO are going to have to be HUGE. Will they ?

Of course the Internet Video Fanboys will say yes. I say no.

Not only am I not convinced that video creators will get enough of a return on their work to continue to invest in working for what amounts to free, I also think that there will be competition for advertisers from digital delivery of TV that will completely blow away anything we see on the net.

Addressable set top boxes. Encoded Triggers. Video Hot Spots. Video Quality. Broadcast costs per user rather than unicast. All the features that have been promised as part of internet video and TV for years are finally starting to happen for real on your HDTV. While internet video is looking for a box to replace the set top box, Digital Cable is looking for ways to completely remove the set top box. The excitement in video over the next 5 years is not going to happen on the Net.

Deal with it people. As exciting as people watching 10 minute videos on Youtube is. As exciting as the growth patterns for those videos are, digital video is no longer limited to the internet. While Google and others are searching for ways to monetize video, its already happening on your HDTV.

Which also means that for video content producers, the money will be where the money is right now. On TV rather than the net.

OK, maybe I can't say for certain why the NFL opted out of their current CBA. But what I can speak to is the problem with salary caps as they are structured in the NHL, NFL and NBA, so that sports fans can understand why the NFL is doing what it is doing and why it could and probably will happen in any league governed by a salary cap.

The basic structure of a salary cap is that the revenues of the league are aggregated into a total pool, call it football, basketball or hockey related income.

Every league is different in the specifics of which revenue is included. Generally its 100pct of national revenue, such as national TV and marketing deals and the net margin dollars of nationally sold merchandise at the top level. In addition to the national revenue, the collective bargaining agreements for each league specify which local revenues from each team are added to the pool as well.

The salary cap for the league is then calculated by multiplying a percentage of revenue specified by the collective bargaining agreement and then dividing that result by the number of teams. So if a hypothetical league has 2 billion in cap related revenue and the multiplier is 50pct , then you take (2 billion x 50pct ) and then divide by 20 teams to get a cap of 50mm dollars per team.

Its a simple concept. The idea behind having a cap is that when total revenues for the league go up, then the amount of money available to players should go up as well. Makes perfect sense for a hypothetical league where BOTH local and national revenues per team are consistently equal.

Unfortunately, in this day and age, while national revenues per teams are split equally, the amount of revenues generated locally per team varies enormously market by market. This is a huge problem for salary cap based leagues.

Why does this create a problem ? Because in the biggest of big markets, significant increases in revenues can increase the value of the salary cap by more dollars than some other teams can increase their local revenues.

So in our hypothetical league, lets say there is a team in Metropolis, a big city, that just signed a TV deal for its preseason games, increased their ticket prices, and added a huge video board , that when all is said and done, for the next season, will add a total of $ 40mm in revenue.

Another big market just opened their new stadium, which now seats 100k people and has 200 suites that they are charging an arm and a leg for because their teams is on a roll, having made the playoffs the last couple years, with what appears to be a bright future. In this first year of the stadium, they expect to add 100mm in local revenues more than they had last year.

In BFE, one of the smaller markets in the league, they just had a terrible season. Although they have a stadium they moved into just 8 years ago, they have no pricing elasticity for tickets or advertising, and in fact their attendance is declining. As a result, despite the additional TV revenue they will get from the new TV deal the league has signed, they will see a decline in total revenues of 5mm dollars this year and if they don't have a good season, revenues could decline further in future years.

For the sake of this example, we will assume the other 17 teams had a net revenue impact of zero

Overall the business for this hypothetical league is good. Their national TV deal just renewed, and merchandise and advertising sales are great. At the national level, total league revenues will increase 5mm per team, or 100mm dollars.


So in this hypothetical example, to figure out the how the cap would change, we would take the 40mm increase that Metropolis had , add it to the 100mm dollar change for the 2ND big market team, add to it the 100mm dollar increase from the new national TV deal and then subtract the 5mm decline that BFE had, for a net increase of 235mm for the league. Then to get the salary cap increase, we multiply that number by 50pct ($117.50) and divide by 20 teams. So the salary cap would increase by $ 5. 875k from 50mm to 55.875mm per team.

As you can quickly figure out, for the teams with new, big market size TV and stadium deals, the increase in the cap is no big deal. For those teams from BFE, who don't have pricing elasticity or markets that can support stadiums that seat 100k, things are not so good. Every year seems to bring an increase in the salary cap , which their local fans and their own desire to win pressures them to spend up to, yet their total revenues never seem to keep up with.

Add to this pressure, the design of how contracts are structured so that teams which perform the worst and have the least pricing elasticity, get the highest draft picks and must write out checks for huge signing bonuses for their rookies, who they have no idea whether or not they will preform. Its not that they don't want the high draft picks, but there is no question that their financial risk equation escalates dramatically.

These same teams, also feel the greatest pressure to sign new free agents. Again, which carry significant financial risk with big upfront payments, and on field performance risk. There is no template for winning and the stress levels go way up when its eating up every dollar you have to try to win.

At this point, most fans argue that this shouldn't matter because teams in the NFL, oops, I mean our hypothetical league are making huge sums of money, so what does it matter ? Honestly, I don't know if 100pct of the teams are making money or not. What I do know is that with new stadiums being built in Dallas and New York that the local revenue numbers are so huge that the NFL had to ask that some of the NY stadium money be excluded from the cap calculations. There is no way for small market teams to be able to keep up with the big markets. Their sheer market size allows them to increase revenues, which in turn increases the cap by a magnitude that the small markets won't ever be able to keep up with.

This becomes more evident when you see a small market team like Buffalo smartly sell some of their home games to a much larger city of Toronto.

Which is exactly why, IMHO, the NFL opted out of their agreement. The small market teams see the writing on the Income Statement and Balance Sheet walls. They see the look in their bankers bloodshot eyes. Things will get worse before they get better, so better plan on changing things now.

Have the days of salary caps come and gone ?

The salary cap was a very smart move during an era when the scale and growth of national TV and other national league revenue sources more than compensated for the variances in local revenues of small and large markets. In those days, whatever money came to teams, regardless of source seemed to go right back out of their pockets. The cap helped protect us sports owners from ourselves, equally..

Is a salary cap still a smart move ? Or is it better to be cap less, like baseball, but with a very strong tax and revenue sharing program ?

The bottom line problem for current cap systems is that one teams financial success can have a significantly negative impact on the financial performance of another. Rather than enjoying the success of the new stadiums in the big markets, or the big local TV or advertising deals they sign, small markets are shell shocked by the annual increases in the cap they create. Increases that they can't possibly keep pace with.

When this happens, teams have to "give up" on their players and seasons more often in order to try to rebuild, which in turn hurts not only the fans and the league, but also the players as higher priced players lose slots to lower priced and younger players.

That's not a good situation for anyone. Its a huge problem that needs to be solved.

A cap can work if its based on national rather than local revenues. Even if its a higher percentage of those revenues than is currently paid. If only national revenues are applied to cap calculations then the change in the cap available to teams every year impacts all teams equally. if a team can manage their local business successfully, they will make money. If the teams succeed, the league succeeds and the national money will grow and the money paid to players will grow at the same pace.


Can a league survive without a cap ? Yes, but I think it must be a league where it takes more than 1 or 2 players to lead a team to a championship. Otherwise, the richest teams can just buy those 2 players, with a 3rd as insurance, which means the competitive balance of the league is purely dependent on finances. That is not a good position to be in. Baseball and football are 2 leagues that I can think can survive (as baseball has) quite nicely without a cap. The NBA and NHL would struggle competitively without them.

Hopefully this helps explain, at least from my perspective, why the NFL would opt out of its CBA when its doing so well

There is a very specific NBA rule that says that team personnel can not talk to High School players unless it is at an approved event or function. No one associated with an NBA team can shill, sell, preach, promise, promote or praise to , with or around High School players.

This is a good thing. A very good thing. However, the lack of open communication between anyone at the NBA and High School players and coaches creates an obvious information gap. As with any business, when there are millions of dollars available each and every year, there will be those that insert themselves into the gap with promises that they can provide the link between the have and have nots. Politicians can find every loophole available when it comes to fund raising and agents can find every loophole when it comes to enticing kids with stories of sugarplum fairies, first round picks and unspeakable riches.

Why compare politicians and agents ? Well if you have met either, you have met both. One size does not fit all, but it certainly fits many, in both worlds. Both professions thrive on plausible deniability. Neither seem to have any more than a superficial understanding of how money they direct will finally be used. Which to them is a good thing. It allows them to deny that the money they gave one of their employees to give one of their associates to give to an affiliate of a local group that truly sounded like a very worthy charitable organization was used for anything other than what they thought it would be used for: to help those far less fortunate than themselves.

In this entire OJ Mayo story, the only thing I find highly implausible is that only 30k dollars was identified as changing hands. There are far too many agents competing in the market for projected 1st round draft picks for a high school senior who some consider a lottery pick to settle for 30k. Even High School kids learn quickly to play one agent off against the other. How do you think they picked the shoe company that put shoes on their family's feet ?

So what should be done ? I can tell you that an NBA study, as well as an NBA / NCAA joint effort would be meaningless. Why ? Because the root of the problem is that there will always be those that try to profit from other people's dreams. It may be a dream of playing in the Olympics. It may be a dream of playing in the NBA. It may be a dream of being rich. It may be a dream of going to college. Unless there is an efficient market of information going between those who can make the dreams come true and the dreamers, which I don't think is possible given the way the NCAA and High School organizations interact with student athletes, then there will always be room for the scammers to capitalize on those dreams.

Fortunately there is a simple solution.

Bring in the IRS. I think I can say with certainty that there were not any contracts signed between the parties giving and receiving money on the behalf of High School students. Agree ?

I think I can also say with certainty that those who gave more than 10k dollars in gifts did not pay any gift taxes on amounts given to individuals. If the amounts were given to charities, I'm guessing some, if not most of those charities were either not qualified or did not live up to their certification requirements.

Get the IRS involved, and I bet not only would the investigation pay for itself with untold millions coming back to the US Treasury in taxes and penalties, but the agents would clean up their acts very , very quickly. It would also clean up much of what ails "amateur" basketball. Its a world that has become dependent on a thriving underground economy. its a cash business. Just the kind the IRS should and could step in to clean up.


Hey, it worked on Al Capone, and the reality is, some of the agents in the game today, are not much more legit.

Is there anything more fun than sitting around, growing your hair, drinking a Bud while listening to Jethro Tull and pondering how to change the balance of power in the search world and unseat Google ?
Better search ? Too subjective. Better monetization ? After the fact. Better User Interface ? Will we know it when we see it ? A new and different search ? Semantic ? Human powered ? We won't know till we know.

But what about the Google Index, all the websites that are indexed by Google ? What is it worth to be in the Google Index ? What would you, as a website owner require in order to remove your site from the Google Index and no longer be available when someone does a google search ?

It should just be a matter of dollars and cents and sense, shouldn't it ?

How many websites would have to recuse themselves from the Google Index before Google Search was negatively impacted ?

Mahalo.com thinks it needs to support the 25k most common search terms in order to be successful. What would happen if MicroSoft or Yahoo or a MicroHoo went to the 5 top results for the top 25k searches and paid them to leave the Google Index ?

A theoretical maximum of 125k sites, but with overlap, probably closer to 100k or less, times how much per site on average ?

The math starts to get interesting. At $1,000 per site average times 100k sites, thats only $ 1 Billion Dollars. The distribution would obviously favor the larger sites, so of that billion dollars, would the top 1k sites take 500k each and the remaining 99k split the rest ?

Given the stakes, why stop at $ 1 Billion Dollars ? Would the top 1k most visited sites take a cool $1mm each, plus a committment from MicroSoft or Yahoo to drive traffic through their search engines to more than make up for the lost Google Traffic. After all, once consumers realized that Google no longer had valid search results for the top 25k searchs, that traffic would most likely go to MicroSoft and Yahoo.

And why we are at it, why not require that these 100k sites switch from Googles Publisher Network to Yahoo's or MicroSofts ? It would start to earn back the $1 Billion paid out very quickly.

On top of that, in order to grease the skids even further, why not issue advertising credits to the sites that switched off Google ? Its soft dollars, that would sweeten the pot and drive more traffic.

IN essence, its no different that any other content aggregation play. Its paying for content . But, It would take some big ones to go for it and see if it worked. However, without question, every search engine has some number of core sites, that when removed from its index , destabilizes the value of its search.

The question is how many ? What would it cost to get that number of sites to turn Google off and stay off, and would the traffic created as users switch from Google more than compensate for the cost ?

Or would Google recognize the risk and jump in and offer more to websites to stay ?

Sure would be interesting to find out.

Craig Moffett of Bernstein Research wrote an amazing report entitled And Now for the News...The Emperor Has No Clothes". If you can get a copy, read it. Starting with the disappointing but expected news that journalism is no longer a service consumers desire to pay for, he moves on to the problems facing Internet video. He does a far better job than I ever did explaining the failings of Internet video and the expectation of free content. This is the report I wish I had blogged.

From the report:
Ironically, we are headed down the same self-destructive road for other kinds of traditional media,as well. Five years into the video-over-the-Internet revolution, we have learned two things. First; consumers won't pay for content on the web, so it will have to be ad supported. And second; it won't be ad supported.

In the cable TV network world, half of all revenues come from affiliate (carriage) fees paid by the Comcasts and
DirecTVs of the world. The other half comes from advertising. But in the TV world, a typical half hour show supports an ad load of about 8 minutes.

On the web, early evidence suggests that consumers will tune out – click away – if they are forced to watch more than 30 seconds or so of advertising up front, and maybe another 90 seconds of advertising over the next thirty minutes. Hulu.com, for example, which has already been lionized by many as the future of TV, serves two minutes of advertising for every 22 minutes of programming(i.e. the programming duration of a typical half hour show from television). Assuming identical CPMs for web video and TV, and after accounting for lost affiliate fees, a 30 minute program on the web with two minutes of advertising yields approximately 1/8th as much revenue per viewer.

Are content producers prepared to reduce production costs...by 88%?

In fact, the actual economics of web-based video are far, far worse than this. Our 88% decline ignores the corrosive impact of à la carte on traditional video economics. In the public debate in Washington, the phrase à la carte refers to the idea that a few strong networks demand the carriage of a host of weaker ones, effectively subsidizing a much larger family of channels.(From MC: This is something HDNet vehemently opposes and is working towards ending) But there's a much more important aspect of web-based àla carte that is rarely mentioned–that is, the "à la carting" of the few best shows from the rest of the day's schedule. Or even worse, of the best few moments (news stories?) from the rest of the show. On the web, watching SportsCenter not only robs ESPN of its ability to pull through carriage fees for ESPN Classic and ESPN U (and SoapNet and Toon Disney), it also, and much more importantly, robs ESPN of its ability to use SportsCenter to support the economics of the rest of the 24-hour ESPN schedule. And watching just the best 30 seconds of SportsCenter robs ESPN of its ability to support the economics of... well, you get the idea. Expecting a few ad supported shortclips on the web to substitute for the affiliate fee revenues lost by multiple networks 24 hours a day is lunacy. "

Great job Craig.

The concept he defines as the "ala carting" of the best from the rest is the web video consumers favorite feature, but it's also the biggest risk to professional video content producers everywhere. On the Internet, the producers of the most popular content don't have the promotional platforms that traditional media does. There are no lead ins for Internet shows. So there is 100 pct uncertainty as to how many people will watch any given video. For those videos that do become popular, much of the popularity is viral, limiting the producers ability to monetize the escalation in popularity.

The Darwinian response to this problem has been to serialize shows. The hope is that if a viewer liked a show, they will come back for more. Which of course means they are copying traditional TV's approach to content presentation and absorbing all of the same problems. The constant need to refresh a show is not only difficult, its expensive. The constant need to promote the show to stand out in an ala carte universe of an unlimited number of shows is even more difficult than it is expensive.

So where does this leave independent video content on the Internet ? Right in the hands of Google and Youtube and black and white hat SEOs.

The ala carting of video on the net will benefit those who enable the search for content and can monetize that search. The economics of supporting content will force independently produced Internet content to be dumbed down to levels that create a perfect match for Youtube. There will be SEOs that come up with arbitrage solutions that will drive traffic to parked videos. Content creators will partner with SEOs and create budgets that reflect the CPMs they can earn in and around the video hosted on Youtube against the costs of the SEO driving traffic to the video. SEO support will be the only even marginally effective way to create baseline traffic to a video/show.

Who could have guessed that creating financially succesful video on the net would require the same marketing skills as driving traffic to parked domains ?

Content created by and for TV networks will have to make some important decisions. Why wouldn't advertisers want to be one of only 2 minutes of ads in a 30 minute TV show rather than one of 8 mins of ads on traditional TV ? Will they pay correspondingly larger CPMs to be online ?

Are TV networks making a huge mistake by putting their current TV schedules online for free ? If a streamed TV show only has 2 mins of commercials, will that drive some viewers to prefer watching online ? Will it force networks to reduce their TV show ad load ? If so, by how much ? Particularly if and when over the top video enables Internet video to be presented right on TVs. Will shows be forced to introduce different versions of shows, say with different ratings as a means of differentiating TV from streamed shows ? The R rated version of Friday Night Lights online and the PG version on TV ?

Bottom line is that something has got to give. Business as usual is not going to cut it. The question is whether the dollars the big TV and media companies are creating online from the streaming of their current TV lineups are sustainable incremental dollars ? Or is streaming the video a collateralized video obligation ? The video equivalent of the collateralized debt behind the sub prime mess. Money that looks good while its coming in, but could lead to far, far bigger problems ?

There is no worse feeling in sports than being eliminated in the playoffs. It's an exclamation point on a disappointing season. Like everyone else, I try to look back and see what we did right and wrong and look forward to see where we stand for the upcoming and future seasons.

We made mistakes, no question. We took the start of the regular season for granted. The entire staff wanted to avoid another meltdown like we had against Golden State, so we started off the season with a willingness to experiment. We wanted to try different combinations of players to see what worked and didn't work, thinking we would still win games, but that we could evaluate players and let them try new things. Unfortunately, we didn't win as many games as we thought we should. To make matters worse, we lost games we thought we should have won easily, particularly on the road.

When we didn't win those games, we put more pressure on ourselves and tried even more lineups. We just couldn't find the right combination of players that allowed us to click. We used 556 lineup combinations. (by comparison, the Lakers used 313, the Suns 231).

One of my favorite history books from High School was Why Men Rebel, its point is that the further a person's reality diverges from their expectations, the more likely there are to be cultural problems. Which is exactly what started to happen to the Mavs. Everyone had their own solution to the problems. Some were voiced, some were internalized. Some were ignored. All made it harder for everyone to get on the same page.

You could see how these issues manifested themselves in games as well. We track pct of possessions that were stopped on both sides of the ball. In the 1st quarter, the Mavs were the most unstoppable team in the league. We scored on 55pct of our possessions. By the 3rd quarter, we were 16Th, dropping to 50pct, before improving some in the 4Th. On defense ,it was the same kind of thing. We got stops 51pct of the time in the 1st quarter,(4Th in league) dropping down to 47pct of the time in the 4Th (24Th in league).

We thought we would get on a roll at some point, but that point never came. The disparity between our home and road record really drove home the point that we needed some level of change. That without it, things could possibly get better, or they could get worse. But there was no denying the amount of pressure and tension that was being felt by players, coaches, management and fans. We all stayed optimistic, but we all had an element of doubt as well.

When we got to the trade deadline, the entire organization realized that we weren't "just going to turn it around". We needed a spark.

In discussing trades, Avery and Donnie take the role of determining which trades can help the team. Its my job to manage the financial and long term impact. No trade is done unless we all agree we should do it. We all have veto power.

We had the opportunity to make a trade with the Clippers, but contrary to reports, we turned that down immediately. There were a lot of preliminary discussions with different teams, but nothing really seemed to take hold. Even the discussions with New Jersey didn't get very far initially.

One thing about making trades, as Nelly told me early on, 99pct of them that you think might happen, never happen. Here is what does happen. GMs get on the phone and talk and talk and talk. But rarely is the GM actually empowered to make a trade. So they play the game of "having to go back to their owners". I would tell Donnie all the time, "You have the authority to say yes, when they get to the point of commitment". When we thought things would get close, we would get the "Now I have to get my owners permission". Its almost comical how unable some GMs are to pull the trigger in the NBA. Its a game they all agree to play. They pretend they have authority, until its go time. I have never seen so much time wasted in my life. i feel sorry for Donnie having to deal with all that nonsense.

So back to the trade deadline. We went back and forth about whether or not we should trade Devin. We knew he was a good point guard, with the potential to be amazing. What we didn't know was how long that would take. On one hand, we didn't have enough confidence in him to let him call his own plays, but on the other, he is a one man fast break, his shooting was improving by the minute, he is a good defender and his potential was undeniable. In Jason Kidd, we felt we would get a player that would make ti easier for Dirk, Josh, Jet to get open shots. That Avery would no longer have to scream to push the ball, that JK was the best in the business at pushing the ball in the open court. Plus, our rebounding had suffered this year vs last, JKidd is a great rebounder and the presses that had caused us problems, would no longer be a problem.

None of the other guys in the initial versions of trade were playing much at the time, other than Stack.

It wasn't an easy call. Between AJ, Donnie and I, we would change our minds by the minute. I don't think there is any doubt that the pressure and closeness of the Western Conference race had something to do with our decision making process. In my mind, this season was becoming analogous to the most agonizing season I had been through, the 04-05 season. We were having the same home vs road record delta, multiple players asking to be traded and even more internal tension about our lack of consistent performance than we had in 04-05.

But the current year wasn't really my personal deciding factor. Looking at our future cap structure was. In doing a deal for JKidd, we created a situation where Devin, Mo Ager, Hass and what we would have paid Ghana would no longer be on our cap. Which put us in a position for the future that I looked at as follows:

2008-9 We have a full training camp with a very motivated JKidd, the rest of our starters back, an improving Nasty Bassty (had to get that in there :), plus anyone we can add. We all thought (and still do), we would have a very strong nucleus to build around. We would also have a 1st round pick.

2009-10 Depending on how the previous season went, we would have several last year contracts available, the option of potentially having some cap room, and other options to improve the team. With the much lower potential salaries, not only could we use cap room if we went that direction to enable roster flexibility, we could also buy a pick. (there are almost always teams willing to sell a pick in the 20s for 3mm dollars)

2010-11 In this year we only have 2 fully guaranteed contracts and in 2011-12 We dint have any fully guaranteed contracts. So the options are endless in both years. Plus , its in one of these years that the new CBA comes up. With so little committed, depending on how hard a line the owners take, things could get very, very inter sting. Having so little contractually committed could be a great place to be when other teams look to dump salaries to avoid the risks of a lockout.

So with the changes, while we lost a great player in Devin, we felt like we were picking up someone who could spark the team and add energy on the court. At best, we re energized, at worst, it doesn't help, but we have improved the roster flexibility for the future and improved our opportunity to re invent ourselves, just as we had after the 04 05 season. And as far as the draft picks, there is no question there is risk there, but in the NBA, there is always the option to buy low first round draft picks, so we weren't as concerned there.


So from my my viewpoint, we accelerated salaries, which wasn't cheap, and in exchange, got a player that our basketball people thought could energize and help us.

The only thing remaining to be done was to actually execute the trade. About this time, the theme song to the Benny Hill Show comes to mind. I can't go into all the details, but there should be a rule in the NBA that any trade that is offered is considered a binding contract and the team is required to stick to it. This thing went from 2 teams to 3 teams to maybe 4, back to 3, back to 2 with players changing, players talking, players that wanted to be traded being told by their agents not to approve the trade, players who wanted to be traded excited to be part of the deal, then being worried that they we rent in the deal. it was crazy. There were many times I thought it was dead. But it finally got done.

Do I think we might the right deal, you never know till you know, but I know I would make the same deal again. i also know what I learned from Nash leaving. As great an offensive coach as Nellie is, Nash wasn't playing at MVP levels with us. A change of scenery and coaches and system, some payback motivation and he became a very, very deserving 2 time MVP.

My hope, is that with the changes that have taken place with our Mavs, we will see the same effect with JKidd this coming year, and that will lead to another great year and another and a Mavs championship along the way. If it doesn't work, we hopefully have limited our downside

And one last word on something. I have never, ever raised my voice to any coach or player on this team. Ever. I've been screamed at. which I have no problem with. I have no problem with someone venting at me or to me, even about me. In fact, if its necessary, I prefer it be to me. Its a sign of passion. In fact i wrote a blog post about it 4 years ago

Its going to be a fun summer, Go Mavs !

And BTW, here is hoping for a Stars vs Pens Stanley Cup !

For all of you who missed it, which is pretty much everyone, FIBA, the international basketball body modified many of their rules to parallel those of the NBA. Here is an overview:

"BEIJING - International basketball is going to look more like the NBA after two major rule changes take effect.

The three-point line will move back and the three-second area will change shape starting in 2010, the sport's world governing body announced Saturday.

After Oct. 1, 2010, FIBA will begin using the new rules for major events such as the Olympics and world and continental championships.

The three-point line will move from 20 feet, 6.1 inches to 22 feet, 1.7 inches. The NBA line is 23-9.

FIBA general secretary Patrick Baumann said it was likely FIBA would move toward the NBA distance in the next 10 years.

FIBA also will reconfigure the three-second area to match the NBA shape, going from a trapezoid to a rectangle. "

The only major disparity that won't change is that there will be no "cylinder" above the rim as there is in the NBA. The current FIBA rules will stay in place.

This is important news for several reasons:

1. Maybe with American kids growing up playing and practicing by rules that closely mirror NBA and college rules, we can use younger, amateur players rather than having NBA owners pay for the salaries of players so that GE can make millions of dollars and show a couple games on CNBC at midnight. Do I sound bitter here ? I of course am. Nothing dumber. The Olympics is not about national pride, its about billions of dollars. Ok, off that soap box.

2. If the rules are close enough, it creates the remote, but still possible opportunity for international officials to become NBA officials. That would expand the talent pool by thousands , which is a good thing.

3. What I am guessing is the real reason behind the change is that it makes it easier to franchise the NBA brand of basketball internationally and for American basketball fans to get understand it and get behind it. That is a good idea. (I'm all for international use of NBA players when we get paid for our players to participate. It's that old American capitalistic concept of I Pay, You Pay)

4. It creates an additional development league for the NBA. If players who are too young for the NBA want to earn a living playing basketball, they can go to Europe, prove themselves, get paid and learn the game in an environment comparable to the NBA. That again is a good thing.

4.