More Signal. Less Noise.
I love it when a plan comes together.
I’m here in Vegas and Microsoft (MSFT) has announced that the Xbox 360 will be morphed into a set-top box, delivering IPTV like functionality. This is something I predicted almost a year ago, based on the fact it made sense and Microsoft appeared to telegraph this.
Level3 (LVLT) tries very hard to appear hip with the Web 2.0 vibe, and today’s WSJ article cites content distribution (namely video) as the reason for a resurgence of investor interest in carriers. Simultaneously, investors continue to flood liquidity into content delivery networks (CDNs) like Akamai (AKAM), trumpeting them as key enablers of the Web 2.0 content rage. It is impossible for both to be right, as each business is designed to eliminate the need for the other.
Continue reading ‘Level3 and Akamai - The Investment Paradox’
Gizmodo has a video demonstrating the new Xbox Live Video service which allows Xbox 360 owners to download and watch high definition Movies and Television. I discussed the impact of this announcement earlier.
Continue reading ‘Xbox Live Video - The Demo’
Microsoft (MSFT) just announced that on November 22nd the Xbox 360 will allow users to purchase and rent high definition television and movies. I made this call back in January of 2006, and repeatedly since then (search this site for Xbox IPTV).
I’ve pulled the plug on Tivo (TIVO) after three years of great service. With my recent FiOS TV subscription, I needed HD capability and I cannot justify paying $800 for hardware I get for free from Verizon (VZ). I just wish I had tried to cancel my Tivo service earlier as they offered to cut the per month fee in half if I stayed. That’s a bad leading indicator for the health of this company.
Akamai (AKAM) was an exception in my portfolio. I typically avoid high P/E high market cap companies, but Akamai had a unique and dominant position in the marketplace that I felt people overlooked. But I’ve synthetically hedged out Akamai holdings since September 22.
Based on dialogue I’ve had with multiple Yahoo folks, it looks like their tech support was clueless, and they are trying to figure out why. Based on dialogue I had recently with Yahoo Tech Support, it looks like they are shutting down their subscription music service.
DRM is a neccesary evil, but it won’t stop everyone. It only slows the velocity of illegal behavior. Making media easy to access and consume would have an even greater effect.
Continue reading ‘Ferris Bueller on Digital Rights Management’
An interesting piece of news speculates Amazon (AMZN) may be partnering with Tivo (TIVO) to use their DVR platform.
I’m tired of reading about Apple’s ho-hum iTV announcement. And the Microsoft Zune strategy is incomprehensible. I don’t want the new PG-13 Microsoft that everyone likes. I want the old, evil, R-rated Microsoft you’re not sure you like.
A final injunction has been handed down by the Texas court handling the Tivo-Echostar patent infringement case. Echostar will not only pay $89M in cash damages, but will also have to disable nearly all customer DVR’s in the field within 30 days.
In a press release, Echostar will now appeal at a federal level. They also indicate that existing customers are not impacted by this court order, even though a scan of the court order clearly shows that they must cease operating all but 100k+ of their DVRs. That’s right, they need to settle or shut down all of their customer DVRs.
The WSJ discusses (free link) Googles (GOOG) push to mend fences with content owners and creators and strike advertising revenue sharing deals. Google is the undisputed efficiency and size leader of connecting on-line advertisers with on-line consumers, with the exception of Yahoo! in banner advertisement.
Akamai Technologies Inc. (AKAM) is the undisputed leader (80% share) of content distrubution infrastructure. When you stream video or iTunes, it is probably coming from an Akamai server and not NBC or Apple. Akamai simply takes bits from one of it’s customers, like NBC, and ensures a quality viewer experience. NBC puts the ads into or around the video you watch.
No one, as of yet, has really started to successfully implement user-targeted video advertisements. Brightcove is trying to do this, but most online video advertisements are sold by the content creators themselves. If you watch the Sci-Fi channel online, you see ads that NBC sold to it’s existing advertising partners. In the web world, most sites outsource the selling of ad space on their sites to Google, Yahoo, etc.
It is this transition that will catalyze an inevitable conflict between Akamai and Google.
Continue reading ‘The Inevitable Competition of Akamai and Google’
There was an interesting column in the New York Times last week. The article outlines the different design approaches taken by Google (GOOG) and Yahoo (YHOO). It also provided quantitative values that reinforced a suspicion of mine.
Rumors have been coming fast and furious over the last month about Microsoft’s (MSFT) entry into the digital music player business. The NY Times broke the story today with multiple confirmed sources, turning rumors into fact.
Engadget has dug up some interesting rumors that go beyond what was reported in the New York Times today.
Continue reading ‘Microsoft’s iPod Killer Emerges’
Installed it this weekend. Very nice. You can install it on your own Windows XP machine by downloading here. It can be uninstalled by using the Windows ‘rollback’ function. If you don’t know what that is, then don’t install this Beta!
I have not tried the URGE online music service, I am completely in-hock to Yahoo! and their music service- changing at this point would require that I identify and re-download all of the subscription tracks I currently own. Lucky for me, WMP11 plays all of the downloads from Yahoo.
Yahoo’s software interface is horrible - if the URGE service is as good as the player itself, Real Networks Rhapsody/Yahoo Music/Napster are in for some tough sledding.
I’m not going to make the “Apple iTunes is Dead” statement as the device has legions of committed users (I use the word ‘users’ in the same way a heroin addict would). But this player, combined with the new syncing infrastrucutre built into Vista will certainly stop the bleeding.
Davis Freeburg, the best Tivo (TIVO) blogger on the planet, has a thoughtful post at Thomas Hawk’s website. He draws parallels between the advertising ‘upfront’ media buys and where Tivo is eventually heading.
All and all it is interesting watching TiVo as the vanguard of where advertising is headed on your television. Advertising, ironically enough for an ad zapper, is probably more important to TiVo than just about anything for them right now. While TiVo makes far more money from a standalone subscriber, the explosion of TiVo users in the years ahead are more likely to come from the major cable deals that they are striking with folks like Comcast (and many more surely to come shortly). In these deals TiVo makes much less money per subscriber but is entitled to valuable advertising revenue from a far greater audience.
Davis appears to be of the opinion that Tivo can have it’s cake and eat it too - win big deals with companies like Comcast while extracting ad revenue bundled with broadband content distribution.
Continue reading ‘Tivo - The Road Not Taken’
Hu Jintao, China’s President, visited the US a few weeks ago. Fifty years from now, political historians will devote little attention to the visit. Economic historians will feel otherwise.
The most remarkable thing about the visit was the degree of involvement by private sector American business, and the general absence of a political agenda on the part of the federal government.
Continue reading ‘China - Economic Kingmaker of Microsoft’
As Godzilla thunders across Japan, the guardian monsters move to stop him. Baragon is the first to challenge Godzilla. Though he struggles valiantly, the burrowing reptile is no match for the overwhelming power of Godzilla. When Godzilla marches on Tokyo, the two remaining guardians, Mothra and King Ghidorah, combine their power in a final battle against the unstoppable juggernaut. Will Admiral Tachibana and the military be able to tip the scales in favor of the guardian monsters? Can Yuri stay alive long enough to tell the story? Can anything stop Godzilla?
Does anyone really care?
With all of the hype surrounding Blu-Ray and HD-DVD, you would think that Hollywood was trying to write a new Japanese B-movie script.
First, we get the trash talk from Matsushita (Panasonic) indicating that reconcilliation is impossible, and “The market will decide the winner.” Then, rumors abound that Sony (SNE) plans to ship the Playstation 3 in November, complete with Blu-Ray drive and $399 price tag - never mind that no working Blu-Ray player is on the market right now. It isn’t clear how $399 is economically feasible given Toshiba is wrapping $100 bills around every HD-DVD player it ships out at a $500 ASP. And even this is shocking given their HD-DVD player is commodtiy IDE PC drive disguised as home electronics.
I’m still sticking with the opinion that both formats win in different applications. This opinion appears to be echoed by Reed Hastings, CEO of Netflix Inc. (NFLX), during their latest quarterly conference call.
In Q2, both HD DVD and Blu-ray are soft launching, in preparation for a larger retail push in Q4. We believe Microsoft (MSFT) sees studio support of HD DVD as very important to their game format battle with Sony (SNE). We also believe that X-box and Vista will support HD DVD more directly with every one of their product updates.
Therefore, since neither Sony nor Microsoft will concede nor win in this format war for at least several years, there will be a protracted competition which will hurt the adoption of high-definition DVD, despite everyone’s best intentions to avoid a format war.
There is, however, a practical solution. If all studios were to embrace both formats agnostically, consumers would be reasonably comfortable buying either format and presumably making their purchase decisions based on hardware, price and features.
Studios have supported VHS and DVD for years, so supporting two formats is not something new.
Embracing both formats is exactly what studios will do, and they will use the formats to price differentiate their product.
The reality is that 10 years from now getting your media on a silly plastic disk will seem as ridiculous as…. watching a Godzilla movie marathon. Movies are going to be downloaded to your set-top-box/DVR/home theater PC.
Tivo (TIVO) won the patent infringement lawsuit against Echostar Communications (DISH).
Tivo wasn’t starved for cash before, and having a lot of money sloshing around typically doesn’t help companies focus on solving their core problems. While winning anywhere between $73.9MM and $220MM at the litigation roulette wheel (there will be appeals, and the judge can treble the $74M in damages) can hardly be positioned as a bad thing, it doesn’t help solve, and worse, may fundamentally distract Tivo from the core problem they face- they are not growing as fast as the DVR market.
From the WSJ today($$$ link):
The common explanation for this is that the cable companies have developed their own clone systems that are inferior but cheaper than Tivo. Perhaps they even egregiously violated some patents in the process. They didn’t take these risks and get into the equipment business because they didn’t want to pay Tivo $1/month in licensing.
The bottom line is the Cablecos and other Video transport companies know that letting Tivo control the set-top-box, particularly one with a broadband uplink, is effectively allowing Tivo to roll a Trojan horse into the living room of every one of their subscribers. If the DVR patents truly are bulletproof my guess is the cable guys would rather not offer DVR’s than let Tivo get between them and their customers.
With this legal victory, my concern is that Tivo will now seek market penetration by legal bludgeoning rather than innovation and market leadership. Rambus (RMBS) is trying this, and will eventually fail, because it is an awful and painful strategy. It’s analogous to terrorism. Customers refuse to be coerced in the long run and will eventually find their way to freedom through technology or legal means. Companies that get sucked into this business model eventually realize it is just as bankrupt as it’s political counterpart.
Tivo faces a decision, one we have outlined before. Either they need to become friendly with cable/telco/satellite video providers and swear up-and-down to never compete with them. Or they need to mount a full scale assault and convince consumers that the Cableco DVR represents the old media model by offering truly innovative downloadable video and content services. Getting Yahoo! Weather and amateur video blogs on my TV doesn’t count. This would require making nice with the content providers and showing them a path to generous revenue models.
Tivo now has more cash (note the difference between cash and cash flow) but that doesn’t necessarily mean they will use it intelligently. What they do in the next year will be critical.
Apple Computer Inc. should have anticipated that the exclusive union of its iPod music players and online iTunes store would be challenged in France, Trade Minister Christine Lagarde said.
Anyone else find it incredibly ironic that Apple (AAPL), who lobbied tirelessly and endlessly, both domesticly and in Europe against Microsoft’s (MSFT) monopoly power, is now finding the same accusations leveled against themselves?
A copyright bill before the French parliament on downloading music and films could lead the online music store, Apple’s iTunes, to withdraw from France because it would be reluctant to opening up its proprietary system, experts say.
Apple Computer Inc. has always refused to allow its paid-for music files downloaded via iTunes to be converted into another format, which would allow them to be listened to on a music player other than its iPod.
We’re not Apple investors. I don’t own an iPod because I refuse to buy into the ‘roach-motel’ model of iTunes, where any music purchased is locked up in the iTunes universe ad infinitum. But I admire how Steve Jobs cleverly used sexy hardware and ease-of-use to convince millions of consumers to lock themselves into the Apple DRM model.
I love the hardware too, and if they had a subscription model I would jump. I think the only reason Apple has not offered a subscription model is that they want consumers to buy songs on iTunes in order to landlock them as Apple customers, eventually migrating them into other areas like Video and the digital living room. Nice Job Mr. Steve.
Now, having obtained near market share dominance of 80%, his Steveness has now encountered the same antitrust forces he helped unleash years ago in his battles with Microsoft.
(Minister Christine Lagarde) met with Charles Phillips of Oracle Corp., John Chambers of Cisco Systems, and Scott McNealy of Sun Microsystems, but not with any Apple Computer Inc. representatives.
McNealy. Oracle. Sound familiar? This was the same wrecking crew that went after Microsoft.
Comme on faict son lict, on le treuve.
Translation: “You’ve made your bed, now lie in it”. It is of 16th century French origin.
How appropriate.
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