Its hard to get much said in a 5 minute limit, but hopefully I made a few points that got people thinking.

Thank you for allowing me to offer this presentation on the Future of Digital Media. Its great to be back in Pittsburgh. A city that continues to grow in its vibrance, entrepreneurial spirit and verve to continually reinvent itself. Im proud to have grown up here.

The future of any technology can be defined by the economic opportunities it creates. One just look around Pittsburgh to see the explosion in the number of businesses built around advances in medical technology to see the importance of entrepreneurs focusing on new technology. The impact has been enormous.


Which brings us to today. What are the opportunities in front of us to get excited about in the digital media field ?

The first thing to understand is that digital media is not synonymous with the internet. There is a vast and growing world of digital media opportunities that exist outside the internet. Here are some examples:

1. While the wonders of the internet often keep us glued to our screens and at home, they also contribute to our need to get away. One of the shortest term opportunities is out of home entertainment. One opportunity that will expand is the use and implementation of 3D entertainment. While its not unusual for movies to be produced in 3D, there is a market for other types of 3D entertainment that is ready to take off. The Dallas Mavericks did a live 3D broadcast of one of our games this past season that we broadcast to a local movie theater enabled with a 3D digital projector. It was a huge success, fans loved it, 3D glasses and all, and have asked for more. We have seen the same demand for other types of content as well. Fortunately, there are not any production trucks dedicated to 3D live programming, so we are looking at building one.

From games to gaming to concerts to plays to specially developed events. 3D will be a mainstay of the future of digital media. Using entertainment as the starting point, the technology will advance, decline in price, and applications will be developed that will expand the use of 3D from entertainment to corporate to medical and personal and more. 3D is and will continue to be an exciting digital media application for a long time to come.

In order to support future digital media applications such as 3D, the networks that will carry them will need to evolve. That evolution will lead to new and exciting digital media applications, but will require new protocols and a far greater integration into the fixed routers of existing networks.

2. The second opportunity is with application specific networks. Unfortunately, the best networks cant be all things to all people and applications, which is exactly what the internet has to be. Not only does it have to be all things to all people, it has to be dumbed down to continue to be open for everyone and anyone. i believe we will see an expansion of networks that are optimized for specific protocols, performance guarantees and applications.
The most obvious example of this is are satellite and digital cable networks. These networks are optimized for broadcast and on demand applications at as high a quality as their bandwidth can support. They also have become platforms for application development and are starting to see increasingly robust toolsets. Unlike the internet, which is best delivery effort, with no promises or guarantees, the networks which deliver our digital TV are optimized to be reliable to five 9s with near instantaneous delivery.

These networks create unique opportunities for interactive applications, and for the delivery of content to mass audiences. There are open, or reasonably open standards such as Docsis 3.0/Tru 2Way that are now becoming available to any and all developers. I would strongly recommend that those of you who are looking at digital media applications to consider the opportunities available on these networks which already reach almost every home in the US.

That said, while platforming on an advanced media network is enticing, there are risks here. The consolidation of ownership among video distributors , who own both the networks and content could create roadblocks of discrimination towards their own products, or for the products of major media corporations with considerable market clout. These could preclude small programmers and entrepreneurs. Which is why HDNet is supportive of a shot clock to resolve these conflicts and to encourage those here to consider applying these same conflict resolution elements to not just content, but to software developments as well. However, even with these risks, as an entrepreneur, I think application development on proven digital media networks is a great opportunity for myself and others

There is one last point I would like to make in my allotted time. The one area of digital media that will create the greatest opportunity for entrepreneurs is the ability to develop and or control applications on fixed routers on internet connected networks. As those who want to see better performance of digital media, particularly live streaming over the internet will realize, best performance will come from utilizing application specific protocols such as multicast. This will create significant demand that will quickly and easily outstrip providers ability to support the demand. This will have the affect of putting ISPs in the role of gatekeeper for determining who gets the ability to broadcast over the internet vs who has to deliver content on a one to one, unicast basis. At some point in time, someone will realize that the holy grail of distribution of digital media over the internet will come from partnering with the many ISPs to enable multicasting and its related protocols, and to peer them as an unwired network. It wont be cheap, fast or easy, but it would be a game changer.

There is a lot of money being spent trying to turn internet video into something its not. Its not TV. It's certainly not going to be HDTV. What is shocking about the entire attempt to turn the internet into a tv/HDTV distribution medium is how much people lie to themselves about what is actually happening.

First of all, 100pct of the internet video that you see offered on the net as HD, is not HD. Plain and simple. What is HD video ? HD Vidoe is video you can watch on a screen of ANY size and say..."that looks good, almost as good as it can get ". What is currently being passed as HD, is video that looks pretty good because its being played on a small PC or Laptop screen and for the big timers, even a 17" screen. Well guess what, everything and anything coded at 2mbs and above is going to look good on a small screen. But looking good on a small screen doesn't cut it. In fact, video that looks its best on a 27" TV is not going to cut it. For those of you who don't see it that way, do some research on fhe history of Fox's Wide Screen broadcasts and see how owners of HDTVs 40" in above felt about those broadcasts compared to what they got from other networks. In a nutshell, WideScreen is gone. The quality wasn't good enough.

I'm not going to go on my 19th nervous tangent about why video over the net has problems and HD over the net is not going to happen. Instead, I will give the quick and dirty on what should happen.

There are already multiple digital distribution systems in place that distribute video, in SD and HD to our homes in place. Not only can they get the signal to our home with 99pct uptime and zero buffering but there are any number of systems in place that allow the signals to be distributed around our homes. In other words, Tv as TV works.

Which leads to the solution.

Move the video cloud to the node and encode and insert into the traditional video distribution systems.

Rather than Hulu sending its video directly across the net to your PC, and let the end user figure out how to watch and distribute from there, it should send it to a box hosted by your cable/telco and possibly even satellite provider, which then transcodes the video and places it on the existing TV distribution system and sends it across a channel branded with your name and the name of the file to your TV.

The net result is that having subscribed to this "Internet Video to your TV" system for a buck or two per month, you will notice that on your electronic programming guide there is a subset of channels with your name on them. When you click on a video at your favorite site, that video can easily be rerouted to the server at the node, transcoded into the right format and shown on your TV's programming guide as "mark cuban channels" - 001 Diet Coke and Mentos -002 Cat Flushing Toilet 003 - Softball game, etc. All you have to do is watch cable/telco/sat TV like you have always watched tv. Watching video anywhere in your house will be that easy.

Of course it will take coordination between the video sites and the video distributors, but that really should be easy. Even FTP would get it done.

This approach should result in a far better use of capital for them, and more importantly, it moves video off of the last internet mile, where bandwidth is constrained, to their new Switched Digital Video last mile , which is far less constrained now, and should quickly become completely unconstrained for long tail content.

if done right, it could also replace all local DVR storage. If you think about it, its pretty stupid to have redundant storage in every home. Paying for those ever growing hard drives, even with falling cost per bits, adds up to a lot of money . Moving that storage to a video cloud at the node or even on the backbone would make set top boxes smaller, cheaper and more flexible. The Network DVR , with space for remotely loaded internet video should be the way of the future.

In addition, this approach could expand our ability to customzie our TV viewing experience. Why cant we create playlists of our favorite shows? I personally would love to create a playlist, customized with a picture of my daughter, her name as the channel name, with a playlist or on demand list of shows that are appropriate for her. When there are videos of group activities like her ballet recitals, it would be great if we could mark the video as sharable with others we designate, or other parents could do the same, and we could easily watch them on our TV.

The video distribution networks already in place are designed to move gigabits of data simultaneously to millions of homes. As these distribution networks go to IP and Switched Digital Video, they will be able to integrate back to internet sites and to interact and offer more advanced customization and cloud based applications with far more sophistication and flexibility than the internet and the web can offer around video. As middleware like Tru2Way becomes more popular, and more TVs support it, the applications on our TVs will multiply quickly.

There is no reason to re invent TV over the net when TV distributed as TV works, and all the technology is in place to move video from the net to TV distirbution networks.

Everyone wants to give everything away for free. Thats the way the internet should work, right ? Wrong. Let me change the conventional wisdom a little bit with this :

Free is only good if someone else is paying for it.

We dont want to waste our time with a product or service if its not worth anything. We want things of value, and we dont want to waste of lot of time trying to determine if what is being offered is something we would use or consume. The easiest way to make the determination ? See if anyone else is using it and paying for it.

When we see enough other people actually paying, and how much they are paying, that becomes our "due diligence" and market pricing mechanism. It also becomes part of the decision tree as to whether or not we would prefer a free version , or are willing to pay. For some, it becomes the determining factor on whether or not they are willing to steal rather than pay.

Which translates to the conventional wisdom that free is the way to go on the web as being wrong. I think many websites are making a huge mistake by going free only for their products. The real upside comes from being a hybrid, with both free and for pay versions.

When people actually pay for your product, you define a value to everyone. First you have to keep your paying customers happy. They want their money's worth. Which in turn, keeps you improving the product and the service surrounding it. Just as importantly, it creates a revenue stream for your company. Always remember this. Without a revenue stream, you have no company.

Of course, you can sell advertising around the product. But while culture of the web is such that most of us understand that if you get something for free, you accept advertising or limited features in return.

The challenge for businesses is figuring out what the right balance of price vs features and advertising is.
At Filesanywhere.com,an online disk storage company, we have a variety of offerings from free to thousands of dollars, depending on the needs of the customer. It works great because the perceived value of the free version is off the charts because everyone knows they are getting a subset of a product that is worth thousands of dollars to corporations. Its a bargain to them when they can start with the free version, see if it meets their needs, and then choose the higher end offerings if they need or want them.

On the other hand, I have tried versions of competitors of theirs, that are offered exclusively for free, and some of the products were good, but the advertising was so intrusive, it wasnt worth the hassle and I didnt have an option out.

The challenge of pricing and product options is going to become more and more complex in a digital world. Because the cost of creating and distributing one more unit of a digital product, whether its a song, movie or piece of software or anything else is essentially nothing , its very , very tempting to want to give it away and generate revenue via advertising or elsewhere. Thats a huge mistake.

Whenever you have people willing to pay for a version of your product. Take their money and return them a great product and value. Not only will that revenue act as a cash source foundation for your company, but it will define the value of your product to those who only want a free version. That in turn will create even more demand for both and leave you with happier customers

It appears that Youtube can only monetize about 4pct of its content. Which leads to the question of "how can Youtube monetize the other 96pct of its content ?"

The answer, believe it or not lives within Youtube and begins with another question: "Can Youtube generate enough traffic per video to cover the cost of reviewing content for copyright violations ?" After all, Google is the king of traffic generation and monetization, right ?

Now before you go all crazy and flaming about how many gazillion hours per minute of video is uploaded to Youtube and how it would be impossible to determine what videos had materials that is public domain, has already licensed content , is fair use, etc, etc,.. do some basic math.

If its estimated that Youtube will generate about 200mm in revenue around 4pct of its content, is it feasible to think that using a combination of manual and automated review, they could jump that to 20pct and increase their revenues by 500mm dollars ?

Would it cost more or less than 500mm per year to hire, train and put in place a datacenter that has enough people to take a quick look at the 10minutes or less videos, and if they are unsure if its copyright clean for any reason, run it through the content fingerprint database that Google already has in place? If the video passes, it goes to encoding and gets posted. If not, the same process that takes place when a takedown notice is posted againat a video is initiated. Someone has to prove they have the rights to the video before its posted.

Its that simple.

Realize that they are aleady doing this process for the 4pct of videos they do monetize.The 4pct have licenses from the content owner/distributor to Youtube. Youtube has to make sure that the person representing himself as the owner truly is. So they go through this process already and 4pct of videos is no small number. So they think the numbers work for those videos, so why shouldnt it work for all videos ?

At this point, someone says... why not just look for the videos that are starting to generate the most views and get in touch with them , sign a license and glom on some advertising ? Thats a problem under the DMCA. Youtube employees pretty much are not allowed to review their site for unlicensed user uploads. If they take a peak, and the video they look at has what appears to be obviously infringing content, they have to check it out and if its infringing, take it down.

So the Youtube cure is simple. Review videos first. Run them through the same process they use for the 4pct they have confirmed and only post those that pass.It should be a no brainer. After all, If Google cant leverage all their traffic and monetization skills to allow Youtube to continue to thrive after this change and finally generate revenue, who can ? IF Google cant generate enough traffic for qualified videos to cover this cost, why would content owners want to license their content to Google to put on Youtube ?

Of course, there is the risk that by introducing this process, Youtube loses its crown as the ultimate video destination. Its a tough situation to be in, when your mind is on your money and your money is on your mind..But sometimes you have to decide between the crown and the cash

I just want to put it out there to save everyone and anyone who deals with me time. If at any point in time you utter the words "Just Don't Get It" or "Just Doesn't Get It" in any conversation with me, I will not do business with you.

If you try to justify your business, idea, proposal or whatever and in the course of conversation you utter these words, you have just proven to me that you are lazy. That rather than discussing the merits of another position, you think I'm stupid enough to dismiss that position because you want me to.

If you truly understand your topic its really easy to stand behind your position with facts and well thought concepts. If you have no idea what you are talking about, the other side "just doesn't get it"

Call it a Mark Cuban rule of investing. If these words come up in any way shape or form, they just dont get "it". "It" being an investment of my time or money

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