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From TechCrunch - a chart of 34 Social Networking Firms

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PermissionTV Secures $9 Million Investment

PermissionTV has closed a new $9 million round of financing. The round was led by two new investors, Castile Ventures and Point Judith Capital, who join existing investors Common Angels, CramerOnline, Inflection Point Investors, the Massachusetts Technology Development Corp., SAS Investors and the Venture Capital Fund of New England. Castile Ventures’ Carl Stjernfeldt and Point Judith Capital’s Sean Marsh will join the PermissionTV board.

The investment will be used to accelerate the company’s position as an emerging leader in Internet video technology, expand its strategic sales team, and continue the delivery of new solutions for leading corporations, media and entertainment companies and advertising and interactive media agencies.

“Given the build-out of the Internet’s infrastructure, Castile made a decision to move up the value chain and seek a technology investment that enables high quality delivery of video over the Internet,” stated Carl Stjernfeldt, General Partner, Castile Ventures. “PermissionTV fits these goals. Its technology platform, along with the team’s deep operational experience and media connections, provide the infrastructure for rapid growth. I am excited to work with PermissionTV’s leadership team to reach the next set of milestones.”

“PermissionTV is an exciting investment for our firm as the company is proving that it understands the key digital drivers facing its customers as they deploy their high quality video content assets on the Internet,” said Sean Marsh, General Partner, Point Judith Capital. “We focus on backing exceptional teams building companies that are transforming large and important industries. Based on the blue-chip customers that PermissionTV has secured, the company fits this definition precisely. We look forward to working with the PermissionTV team to extend and grow their position as one of the leading interactive Internet video technology platform providers.”

In the past year, 30 leading content providers, media companies and agencies including Adobe Systems, Agency.com, Bob Vila, Fox’s myNetworkTV, Intercontinental Hotels, Molecular, Toyota Scion, Update Hollywood and Whitman Hart have partnered with PermissionTV to configure and manage branded Internet TV channels, create highly interactive and visually appealing video experiences, and monetize their audiences through ad-supported, pay-per-view and subscription-based services.

“The timing of this financing reflects the tremendous market adoption of high-quality Internet video, as well as the current wave of momentum behind PermissionTV,” said Bob Lentz, CEO of PermissionTV. “As we build out our infrastructure, sign additional new customers and partners, and expand our market awareness, we welcome Carl and Sean to our board and look forward to their firms’ involvement in helping to drive our future growth.”

Television 2.0 – it’s not your father’s television

    Throughout its history, television has been shaped by a combination of technology and business limitations that have made it less than it can be. Now it’s about to become much, much more as it moves gradually to Web-based delivery. Creative people are getting a whole new set of tools to explore interactive ways of telling a story and providing information. Viewers are going to be free to choose any program, any time and empowered with the ability to share and connect with other people around video. Advertisers will gain     new powers of targeting and richer, more useful forms of advertising that consumers will actually appreciate.

Until very recently viewers could only see programs when they were broadcast, unless they were among the hardy few who could set their VCR correctly or were willing to restrict their viewing to shows on tape or DVD.  DVR technology from companies like TIVO and Replay introduced a pseudo on-demand capability but you still had to remember to choose your programs in advance and few people do. The “season pass” function accounts for the vast majority of programs recorded on a DVR. On-demand from the cable companies represented the first real break from “appointment TV” but those systems can only offer a limited number of programs to a small percentage of the total audience at one time.

Appointment television also dictated that schedules had to be done in manageable 30, 60 or 120-minute blocks of programming. Advertising-supported programs had to carve out time for interruptions which have become longer and longer to the point where some people have just given up on this form of TV.

To make matters worse, television advertising is dumb; it doesn’t know anything about your needs or interests and therefore shows you lots of commercials that are irrelevant to you. Initiatives to address this problem, like Open TV, became mired in the business relations (or lack thereof) between program owners and cable companies.

It’s all about to change, but not overnight. However, now is the time to begin learning how to produce Television 2.0.  As in any wave of innovation, it’s always easier and cheaper to establish yourself near the beginning and ride it in.

One thing you need to accept is that video will become an important part of just about every serious Web site, no matter what its purpose. Why? Because it’s video, the most powerful way to tell a story, capture the imagination, argue a point, entertain and inform a population that has grown up with a preference for watching and listening over reading.

Just as the “print Web” put you in the publishing business to the point where your Web site is probably your most important form of communication, the “video Web” is going to put you in the TV programming business and now is the time to figure it out and start learning how to use the tools.

The television Web is going to be more than just video, it’s going to be an experience that combines Web elements and interactivity with TV. The first hint of the TV Web can be seen in the still primitive player/playlist combos that have replaced the even-more rudimentary players-in-a-box that littered the Web before the rise of broadband homes.

With 80% of active Web users on broadband, and 70% of the American public using the Internet every day, the elementary player is going to quickly be replaced by far more powerful video environments. This is the sandbox where the creative people will play and invent the future of television.

It’s also where a kinder, gentler version of TV advertising will transform the relationship with the viewer into something that’s much more attractive to both. Getting voluntary commercial information from Web users in order to get better banner ads has not been an outstanding success. Getting that information from viewers in order to avoid having programs interrupted by irrelevant commercials will be much easier.

And as search advertising has proven, if you can offer users useful information, they will use it to make decisions and buy things. Get ready for the rise of the infomercial! In a few years, it will be unusual not to find a video readily available to anyone considering a purchase.

In this brave new Web TV world, freed from the artificial restrictions and available completely on demand, no one has figured out exactly how users will find new programs. One thing is pretty clear however: they will help each other find a lot of them. So a critical skill for all of you about-to-be-TV-programmers is the ability to understand and support your target viewers’ need to communicate with each other.

This is a pattern that is likely to be very specific to your market and user base and it’s very important that you begin to figure it out now. If you’re successful, you will create the kind of community power around your site that the social networking sites strive for. Because viewers are now free to choose anything, anytime, you need to work even harder to make sure they choose your video.

While the death of the print Web is not likely, it will have to move over to make room for the video Web. Study after study shows that people skim rather than read. Early reports of stunning response rate increases around video versus banners are already coming in. Video is not going to be optional.

The tools that will enable you to succeed with video on the Web are different than the ones you used for text just as producing a video is different from writing a book. Now is the time to begin learning how to make Television 2.0.

You've arrived at Chef Blondies new Internet Television Channel

VisiblePath Is A Lot Like LinkedIn, Except It’s Useful

Posted: 13 Apr 2007 12:02 AM CDT

One of the better features of LinkedIn is the relationship map that shows your friends, and their friends, and their friends, and so on. It is a useful tool when you need to talk to someone you don’t know directly, or get information about them - just find a path through mutual friends.

But we all know what sucks about LinkedIn. Contacts are sorted in only a single list, and there is no way to signal that one person is a closer contact than another person. Also, there is significant social pressure to simply accept anyone that asks into your network. My LinkedIn contact list is littered with people that I don’t know and that I accepted as contacts simply to avoid turning them, whoever they are, into enemies.

Silicon Valley-based VisiblePath is a lot like LinkedIn, but it automatically determines who your real network is, and how strong each individual relationship is, based on your emails and calendar items that involve them. VisiblePath will officially launch next week at the Web 2.0 Expo.

VisiblePath obtains the information on who you interact with via a 6 MB Outlook plugin. Each connection is graded on a percentage scale that strengthens from frequent communication and atrophies over time unless you are emailing or meeting with the person regularly. The company is also creating ways to track interactions beyond Outlook, through phone calls and instant messages.

VisiblePath is engaging and insanely useful. It’s far superior to LinkedIn in measuring personal relationships, and it’s actually quite interesting to see just how close some of the people in your life actually are to you.

Here’s a look at how it works.

The Latest from TechCrunch

2007: Web 2.0 Companies I Couldn’t Live Without

Posted: 02 Jan 2007 02:24 AM CST

A year ago I wrote a post called “Web 2.0 Companies I Couldn’t Live Without” and listed thirteen startups who’s products made a real impact in my life. Those were the products that I loved, and used every day. I enjoyed sorting through the hundreds of startups that we had written about, and picking just a handful that made a real impact on my life. It was so much fun, actually, that I’m updating the list this year.

Seven of the companies are still on the list. Six have dropped off to make room for new products, and I’ve added two more to round out the list to fifteen total products. Here’s the current list, in alphabetical order, of products I use every day and couldn’t live without:

800-Free-411

Jingle’s free 411 service has saved me a serious amount of cash this last year. They now account for over 3% of the U.S. market for information calls, and AT&T has announced that they are going to copy them. That’s good news for consumers, who have to pay up to $3.50 per 411 call today. Our coverage is here.

Amie Street

Amie Street, which launched in July, has a brilliant DRM-free music sales model. Bands upload music, which can then be downloaded for free by users. As songs become popular, the site starts to charge for it. They start at $0.01 and go up to $0.99. Users looking for popular new stuff go right to the more expensive songs. More adventurous types try out lots of new music. I’m somewhere in the middle. This free-market place to set the value of DRM-free digital music could be the future. Our coverage is here.

Ask City

Bloglines dropped off the list this year, but another Ask.com property, the recently launched Ask City, has been added. In our very subjective opinion Ask City has replaced Yahoo Maps as the best mapping product on the Internet. My favorite features are multipoint directions an the annotation tools that allow you to draw and write on a map before forwarding to friends. Ask City is less than a month old and it’s already one of our favorite apps. Our writeup is here.

BlueDot

BlueDot is a social bookmarking service that is similar to del.icio.us. I’ve started using it instead of del.icio.us becasue I like the interface better and it allows sharing of bookmarks just among friends, whereas with del.icio.us you have to choose between fully public and fully private bookmarks. The company launched in July and had an update in October.

Digg

Anyone who reads this blog knows my position on Digg, where users pick what news makes it to the home page. It’s the future of news, and the most disruptive force to mainstream media since blogs were born. Digg has to continue to battle spam while pleasing its most active users, which won’t be easy. But I use the Digg site every day. Our coverage of Digg is here.

Flickr

Flickr is our first holdover from last year’s list. In the last year we’ve seen a bunch of startups gunning for Flickr, but as of now it is still the photo tagging and sharing site that we use every day. The new geotagging feature is incredible. We’d like to see facial recognition, similar to what Ookles is doing, next. Our coverage of Flickr is here.

Flock

We’ve been fans of Flock since we first started covering it during the original Bar Camp in August 2005. It just feels like a complete ecosystem rather than the hodge podge of sometimes incompatible additional add-ons that you get with Firefox. If Flock didn’t exist I’d be a happy Firefox user, but it does, and I use it as my primary browser. The rumor is that they have a big new release coming very soon. Our coverage of Flock is here.

Gmail

Despite recent problems, I think Gmail is now at least as functional as most desktop email applications (like Outlook and Mac Mail), and darn close to perfect. The reason? Lots of storage, the ability to tag emails and the recent addition of POP access to other email accounts. All for the great price of - free.

NetNewsWire

I’ve used NewsGator’s NetNewsWire desktop feed reader from the moment I switched to a Mac in early 2006. It’s not free, but having fast and offline access to feeds was worth the $30 I paid for it. Bloglines dropped off the list because of NetNewsWire, although I expect to be moving over to Google Reader in the near future. Offline access is less important now that I have EVDO cellular access, and Google Reader made significant improvements to its product in its September upgrade.

Netvibes

Netvibes is another holdover from last year. We go there multiple times per day to get a quick overview of a few important feeds. The company continues to gain users at a torrid pace, and has plenty of money in the bank after a $15 million round earlier this year. My guess is Netvibes is fending off multiple acquisition offers at this point, and may not be an independent entity at the end of 2007. Our coverage of Netvibes is here.

Pandora

Pandora is yet another holdover from last year, and a company that we’ve covered since before its launch in 2005. My bet is that I’ve racked up more hours listening to music on Pandora than any other user - it’s almost always playing while I write. Millions of loyal users agree with me. Our coverage is here.

Skype

Skype may be the single biggest productivity booster since email. I use it as my primary instant messaging client, and of course for free on the fly calls almost daily. Skype is one of the Internet’s killer apps. Our coverage of Skype is here.

Techmeme

TechMeme is the blogosphere’s daily newspaper, and one of the sites we use most often in seeing how stories develop. Stuff on TechMeme hits the New York Times and other newspapers days later. My father is as addicted to Techmeme’s political sister site, Memorandum, as I am to the technology news area. Our coverage of TechMeme is here and here.

Wordpress

We’ve been mostly happy customers of Wordpress since TechCrunch started. It’s the most flexible blogging platform, and their Akismet comment spam blocking service has saved us from nearly 1 million spammy comments. We’d have to hire a full time person just to moderate comments and trackbacks. Our coverage of Wordpress is here.

YouTube

YouTube is far from being a young startup, having been acquired by Google for $1.65 billion earlier this year. And even though they sent us a cease & desist letter just two months ago, we remain YouTube addicts. Fire Engines! Bananas! Humanity is a beautiful thing. Earlier YouTube coverage is here.

Agree? Disagree? Tell me all about it in the comments.

Crunch Network:  MobileCrunch Mobile Gadgets and Applications, Delivered Daily.

1 800 Free 411, Amie Street, Ask.com, Digg, flickr, Flock, Google, NewsGator, Pandora, Skype, TechMeme, Wordpress, YouTube

Tags: techcrunch, startups, web2.0, web_2.0

What is The Venice Project™?
The Venice Project™ is a new venture that combines the best elements of the TV experience with the most powerful internet technologies, in a way that will redefine the way people think about television. It is not a file-sharing application or a video download service.

Who's behind it?
The Venice Project™ is being created by some of the world's best technical and creative people. Our engineers, advertising experts and content gurus have joined The Venice Project™ from some of the world's most influential technology organisations, entertainment companies and advertising networks. Visit our blog for news on who's doing what, as well as links to some of The Venice Project™ team's personal blogs.

Where are we?
The Venice Project™ is a truly international organisation with hubs in several major cities around the world, including Leiden, London, New York and Toulouse.

Where can I get more information about The Venice Project™?
We'll be releasing a lot more information about The Venice Project™ in the coming weeks and months. In the meantime, you can sign up for our beta program to get an early taste of what The Venice Project™ is really about. If you're interested in working for us, or would like more information about becoming involved with our content and advertising platform, see the contact page for more details.

      War of the Worlds: Hollywood Opts Out of the 'Google Economy'    

   

               

Summary

Hollywood believes large-scale broadband video distribution would only destroy proven value, fail to provide alternative value, and alter a business model that is still far from being in decline. With near-total control of the most valuable program libraries and the business models governing their distribution, a shift towards broadband media will come largely on Hollywood’s terms and at an incremental pace.

Barbarians at the Gate: Fears of a “Google-like” disruption of film and television are misplaced

Google Bad

Wall Street Journal columnist Alan Murray succinctly summarized the media industry’s resentment of Google’s business model: “The Google economy is a kind of high-tech feudal system: The peasants produce the content; Google makes the profits¹.”

Another journalist framed media’s unease in the context of recent dotcom history: “…the internet is back…its potential for radical disruption is [now] married to the capacity for outlandish profits. Once again, the media village senses that the wolf is at the door. But the village suspects that this time, he’s not going away, and that he’s brought some friends. The village has been wrong before. But probably not now².”

Google, as well as Yahoo! (Nasdaq: YHOO) and Microsoft’s (Nasdaq: MSFT) MSN, have been adept at creating value (principally advertising revenue) by re-packaging and re-presenting the content of others in search- and community-driven contexts. Having reinvented the advertising business and shifted substantial ad spending its way, Google is intent on rendering books digitally accessible (as is Microsoft), providing municipal wireless broadband, venturing into online classifieds, and has even made ominous-sounding, if fanciful, conjectures about its potential role in the television advertising market.

Combine fear and uncertainty with blogger gossip about Google job postings or secret fiber optic purchases, mix with speculation about Yahoo’s media operations in Santa Monica, add broadcaster announcements about prime-time iPod downloads, and voilà: a “trend” – broadband disruption at the front gate of media’s major citadel, with Hollywood itself cast in the role of Sunset Boulevard’s ageing Norma Desmond.

Broadband Interference

The generalized fear of broadband and its power to disrupt existing business models is far from unfounded. Futurists apply it to television roughly as follows – with more broadband-connected households than ever, programming will be made available in increasingly massive video-on-demand libraries accessed over the internet, wired or wireless, fixed or mobile.

“the last thing we’re worried about is [that] we’re going to somehow miss opportunities here…we’re talking about establishing precedents for some time to come…” – Peter Chernin, News Corp.

Like newspapers being electronically disaggregated into individual stories accessed over the web, video content will be atomized into individual programs for personalized consumption. The concept of a “channel” or broadcast day parts like “prime time”, as well as even the need for traditional distribution networks like station groups, or cable and satellite systems will disappear. And an atomized, broadband-delivered video world will lead to all manner of new forms of ‘interactive’ media supplanting today’s entertainment.

Recent news flow might lead one to believe that US television networks are either: (a) boldly experimenting with broadband media, (b) starting to panic about the internet, (c) slow-moving dinosaurs resisting broadband at every turn, or (d) seeing the coming broadband threats are about to unwind their generally coöperative relationship with cable and satellite operators in favor of an “every man for himself” distribution strategy.

We believe the answer for now is: (e) none of the above.

In past weeks there have been a series of broadband-sounding announcements from Viacom’s (NYSE: VIA) CBS, GE’s (NYSE: GE) NBC Universal, and Disney’s (NYSE: DIS) ABC publicizing various forms of new programming delivery, including to video iPods.

These offers are, deliberately, about as narrow and as far as one could get from a media disruption, despite some of the accompanying saber-rattling, carriage-fee-requiring remarks about “cable bypass” from Viacom co-president and head of CBS, Leslie Moonves.

A very limited slate of prime-time shows (not coincidentally, ones produced by the networks’ captive studios) are made available in a Video on Demand (VoD) format through existing distribution channels (cable, satellite), though ABC and NBC are offering $1.99 “vidcasts” to video iPods. In the case of cable-bypassing CBS, the VoD shows are to be distributed via Comcast (Nasdaq: CMCSA), the US’ largest cable operator, and only in markets with CBS O&Os, and only in a one-week window after initial over-the-air exhibition.

These limited, ‘non-linear’ forms of prime-time program delivery signal that broadcast networks, far from capitulating to a “trend”, intend to fully protect any incremental viewing rights enabled by new technologies (VoD or otherwise). The message to distributors – cable, satellite, or anyone else: “New technology-enabled monetization of our programming will be under our control, with our consent.”

No one, including US broadcast networks, would disagree that video content is well suited to broadband distribution. And we can expect to see accelerating innovations in both broadband-tailored content and distribution models. But dreams (or fears) of a “Google-like”, rapid upending of the television and film industry are misplaced.

What Hollywood really believes was summarized best and most directly by Peter Chernin, News Corporation’s (NYSE: NWS) President and Chief Operating Officer in their last quarterly earnings call. Speaking of Fox Television’s notable absence from the recent flurry of announcements, he observed: “the last thing we’re worried about is [that] we’re going to somehow miss opportunities here…we’re talking about establishing precedents for some time to come…”

We believe change will come largely on Hollywood’s terms and at an incremental pace, for reasons we outline and quantify below. Before doing so, one caveat or disclaimer. As with the history of telecom innovation, it is very likely that broadband media’s first high-performance examples of both business models and technology deployments will be provided outside the US.

In particular, we have in mind the UK television market which already has a mix of: high levels of TV viewing, forceful public policy, lower dependence on advertising, very high degrees of digital video penetration (including digital terrestrial service), and early adoption of interactive services, among other factors.

2006 promises to make the UK the much-watched bellwether market. Among the milestone events, the BBC is expected to move aggressively towards broadband content distribution, and BT Group (NYSE ADS: BT) is expected to enter the video services market with what promises to be a significantly differentiated television offer, unlike its US telco counterparts.

For better or worse, Hollywood dominates the global filmed entertainment business. And in markets where American products are in the minority there is almost always media concentration, and hence library control, comparable to or greater than that found in the US. This occurs via quasi-governmental entities, media oligopolies, or both. But there are also substantial local variations in media business models, and so our opinions and analysis below have only the US media market in mind.■

¹ GoogleLibrary Is Great for the World, The Wall Street Journal, October, 26, 2005

² Googlephobia, New York Magazine, December 5, 2005, John Heilemann

Rational Hollywood: Broadband is cast in a supporting role for now

Show Me The Money

The vast majority of desirable mass market video content and the business model for its distribution are still firmly under Hollywood’s control. While residential broadband penetration continues to grow, other important catalysts for a shift towards broadband media consumption, from new syndication windows, to broadband-connected televisions or their set-top boxes, to suitable home networking technology, are still on the horizon.

Hollywood can afford to plant a few seeds, monitor fledgling competitors, weigh in on still-emerging delivery technologies, but wait for broadband media opportunities to become more clearly big enough and profitable enough to warrant serious mind-share or capital.

In the meantime, Hollywood’s agenda is to realize further gains from vertical integration and use broadband in a supporting role. Broadband technology is used to reduce marketing costs and reinforce viewer involvement with existing products (enhancing advertising and syndication value). Over time, Hollywood will reassess broadband opportunity in light of three major barriers—production and distribution economics, and market size and evolution:

1. Production – broadband is far from economically viable

US television studios almost always lose money on their expensively-created content until it is resold after initial broadcast network licensing. DVD sales account for an increasing, if still small, proportion of incremental revenues and this window is likely to be the first to transition to lower-cost broadband distribution.

But the real turning point in television series profitability occurs with off-net syndication. This resale occurs in relatively large program blocks, often 110 episodes or five seasons worth, enabling “stripped” syndication in which programs are re-exhibited in the same time slot five days a week.

These off-net syndication rights, which don’t allow for broadband distribution, have often been locked up for years to come. And given the wholesale nature of the business, it is not unusual to license practically the full slate of a studio’s output for a multi-year period. A broadband carve-out for newly-available syndication rights is certainly possible, but with fees running well above $100 million for a hit one-hour drama, the existing syndication model sets an enormously high bar for replacement or separately-negotiated incremental revenues from broadband rights (Exhibit 1 – Series Economics).

“If you want to get added to the windowing scheme, you have to pay your way in …There’s no benefit to any of us doing business with those guys [i.e. Google et al] on a micro-transactional basis.”

Prime-time TV fare will not join the Google Economy because, for some time to come, widespread broadband distribution would only destroy proven value, fail to provide alternative value, and alter a business model that is still far from declining. As one network distribution executive said recently, “If you want to get added to the windowing scheme, you have to pay your way in …There’s no benefit to any of us doing business with those guys [i.e. Google et al] on a micro-transactional basis.”

Hypothetically, say Google or Yahoo! did “pay their way in” to create a broadband window. Rather than tackle the issue of a parallel window and how much it must pay to compensate for discounting the value of traditional off-net syndication, let us assume a straight-up replacement in order to shed light on the economics.

Aspiring to marquee fare, our hypothetical broadband media buyers are bidding for the domestic syndication rights for the police drama “Law & Order.” To successfully compete against cable channels, they might pay on the order of $150 million.

Having taken the show off the cable market and put it instead into broadband distribution (and hence a more ‘internet-like’ business model), they might treat that expense, at least conceptually, as part of traffic acquisition costs (TAC). Then, to match their current profitability Google or Yahoo! would have to find a way to deploy this video content (just one show, remember) to generate around $350M in advertising, subscription, or some other kind of revenues, well over a $100 million more than comparable cable syndication would be likely to generate.

In the US, significant broadband distribution of top shelf television fare is, to put it mildly, highly unlikely any time soon. What’s on the line is not just the syndication revenues themselves, but an entire business system for which broadband distribution is, as yet, unable to provide a compelling alternative or even complementary path forward.

But cheaper, independently-created or older content, less constrained by complex syndication and rights structures will gradually find its way to broadband, with still unknown demand or results. This is already happening via Time-Warner’s (NYSE: TWX) AOL unit and their planned ‘In2TV’ broadband offer, as well as early content agreements with entrepreneurial broadband video distributors such as Akimbo, Brightcove, and Maven Networks.

2. Distribution – broadband plays a supporting role
Beginning in the early ‘90s, the US television market has been increasingly deregulated and, partially as a consequence, more vertically integrated. With the disappearance of regulatory restrictions, most notably ‘Fin-Syn’, media companies have integrated their production and broadcast businesses, created new forms of distribution (DVD sell-through, captive cable channels), and managed advertising sales and program windowing to optimize returns across this integrated portfolio³.

As exploitation of integration synergies continues and entertainment-related business models further converge, distinctions between “broadcast” and “cable”, for example, become less meaningful⁴. The much publicized decline in broadcast network ad sales in the “upfront” (i.e. forward) market – which accounts for over 80% of inventory – means a lot less when NBC Universal, for example, in addition to studio assets owns or controls Bravo, Telemundo, mun2TV, USA, SciFi, MSNBC, and CNBC.

Controlling cable channels is an industry-wide strategic response of diversifying away from network television’s gradual, secular decline (Exhibit 2 – Share of US Upfront Market) and squeezing further scope and scale economies across production and broader range of programming outlets. And Tier 1 cable operators, most notably Comcast, are pursuing similar strategies of diversifying across content ownership, programming outlets, advertising, as well as their infrastructure businesses of video distribution, high-speed internet access and telephony.

The work of expanding such a portfolio and optimizing its revenue yield still has a good deal of remaining upside and strategic work ahead of it. This form of ‘convergence’, not the technical/broadband kind, is the front line of television competition.

The sharpening of audience measurement technologies, the packaging of media buys around more clearly measurable demographics and focused channel mix, the arrival of ad tagging and insertion systems, the more efficient aggregation of fragmented advertising inventory in regional interconnect systems, and the value-added services potential of digital terrestrial television – all of these provide a full agenda with plenty of profit-enhancing opportunities before addressing broadband as a mainstream delivery medium.

For now, broadband media has a well-defined and growing role in Hollywood, and it is to play a supporting role in the business model convergence agenda, not the other way round. Broadband creates additional ways to involve, sustain and build viewership, thus increasing the value of the core products themselves, including broadcast advertising. For example, a broadcaster may wish to:

1. further monetize proven viewer demographics by adding an interactive component to a targeted media buy (above average CPMs for, say, visits and/or click-throughs at Fox’s ‘American Idol’ website)
2. sustain broadcast advertising value by using web-based presence to draw in additional viewers or further involve existing ones (‘American Idol’ voting, discussion groups)
3. reinforce and build additional value for future monetization (DVD sell-through and/or program syndication) of captive studio programs by increasing viewer involvement through web-based and mobile interaction (Fox’s ‘24’, for example)

Reflected in, for example, recent News Corp. internet-related acquisitions, the effect of Google’s success has been to sharpen interest in adding another portfolio element – internet presence and advertising as a complement to, not as a disruptive replacement for Hollywood’s core business.

³ Financial Interest and Syndication rules expired in the early ‘90s, unleashing a major shift in the economics of filmed and television entertainment, starting with consolidation of TV production. Fin-Syn had previously restricted broadcast networks from having a financial interest in programs beyond first-run exhibition, and prohibited the creation of domestic syndication arms.

⁴ At this point, it is hard to tell what effect Carl Icahn’s on-going “break up the company” campaign will have on one of the integrated giants, Time-Warner. Viacom’s proposed split, while largely separating broadcast and cable assets appears to be geared at preserving CBS’ production economies.

3. Market Evolution – a niche for some time to come
The final and perhaps most limiting characteristic of broadband media as a mainstream opportunity is that it is too small, and is unlikely to compare favorably even to television’s existing niche audience outlets for quite some time. The combined effects of special-interest channels (e.g. FoodTV), conventionally-delivered on-demand programming (e.g. cable or satellite VoD), and DVRs (channel disaggregation, time shifting) leave comparatively little room for separately-sourced programs which happen to be delivered as IP packets over broadband connections.

Our view of broadband media’s addressable market is that is must account for three factors:

1. adequate bandwidth
2. propensity to consume broadband media
3. network-attached televisions

First, bandwidth. Despite generous growth in at least downstream bandwidth, principally led by cable’s high-speed internet services, we believe it is likely that the US median bandwidth per broadband household will stay flat, or even decline. This is because as the market matures, new subscriber additions are principally at the “value” end of the broadband offers.

broadband media…is unlikely to compare favorably even to television’s existing niche audience outlets for quite some time

While offers with headline speeds in the tens or even hundreds of megabits are also likely, consumer need for this level of performance is very limited in the medium term. As broadband connectivity continues to be commoditized, performance levels will be tiered, and consumers will purchase according to price/performance requirements. Some time in the future, it is likely that broadband media may become the application which drives upgrades of broadband connectivity.
In the meantime, roughly 60% of today’s broadband households have ‘adequate’ bandwidth (say, 3Mbps downstream as the minimum) for imagined broadband media offers, with this percentage possibly declining to below 50% in the next five years or so, as broadband penetration into late-adopting households continues. Then, as broadband media becomes a known, desired consumer service, and as DSL (the main source of low-end broadband connectivity) improves, median household bandwidth will turn upward again.

Second, propensity to consume broadband media. Since this market doesn’t exist, this is basically anyone’s guess, but as with any new product category, the idea that more than say, 30% of potential qualified consumers will adopt it in less than five years, is quite extreme. So let us posit a generous starting point of 20% of broadband households with adequate bandwidth will consume broadband media, and let it grow upward from there.

Third, ‘network-attached’ televisions. This is a proxy for being able to watch broadband media, sourced independently from “walled garden” cable or satellite content (even if via those operators’ set-top boxes), on an actual television in your living room, not on a computer or handheld device. There are certainly a large number of technical enablers on their way, beyond today’s awkward offers such as Microsoft’s Media Center, adding an independent “broadband antenna” to the living room TV. TiVo’s recent announcements of broadband content delivery are a small step in that direction, for example, and this capability is the very definition of entrepreneurial broadband television services such as Akimbo.

But for the near- to medium-term, cable or satellite set-tops will dominate the “last inch” of connecting televisions to digital content. Given the fledgling and awkward state of video-enabling home networking technology, we would doubt that even 5% of today’s qualified broadband households have what it takes to directly display network-delivered broadband media on their primary televisions.

Even with what we believe to be generous assumptions, applying these three limitations to define an addressable broadband media market results in some pretty small numbers (see Exhibit 3 – Broadband Media Households). By comparison, the US’ largest cable operator (Comcast) and largest direct broadcast satellite service (DirecTV – NYSE: DTV) together have in excess of 35 million subscribers.

As a point of reference, we also display estimated US Telco TV subscribers – that is, households subscribing to the new generation of phone company television services, not their satellite resale offer. With slight discounting to AT&T (NYSE: T) and Verizon’s (NYSE: VZ) announced expectations (since they have already slipped), we assume these offers demonstrate some market success in 2008, leading to additional investment and growing to around 25 million homes passed and 15% penetration by 2010. This penetration level is representative of any third-player undifferentiated offer, and is a typical market share for overbuilders in existing cable markets.

If Telco TV is in fact able to match or exceed the number of network-connected television broadband households, this gives US phone companies a very significant and potentially disruptive opportunity to move to a next-phase differentiated video offer, transforming a me-too offer into one of the leading edges of the broadband media insurgency. We will return to discuss this point a bit later.■

A Confounding Revolution: How we will know it is coming and how to keep score

Interactive Headache

Interviewed several months ago by, of all people, long-time friend and nemesis Michael Eisner, IAC/InterActiveCorp (Nasdaq: IACI) CEO Barry Diller described the complexity of the broadband media challenge this way: “In this interactive, internet world, I mean, you have a headache twenty minutes into the day… Films and television, [are] not a business that, so to speak, confounds you – you’re telling stories. But this is. …we’re in a revolution, we’re absolutely in a radical revolution.”

The seeds of a broadband media revolution are already being sown by entrepreneurs unknown and well-known. We have shown why neither Hollywood nor its cable and satellite distribution networks are likely to spark or give much early encouragement to that revolution. Not surprisingly, they have well-functioning business models with much at stake when the revolution takes hold. So where might change come from, and how is it likely to proceed?
Early video wins are likely to share two characteristics: they will check as many boxes as possible in our ‘NewTV’ wish list below (Exhibit 4 – NewTV Wish List) and, through experimentation, successfully match niche audiences or communities with types of programming, just as television does today.

Let’s imagine you are pitching a new, surefire approach to broadband media distribution – you just need something to distribute and are far from having the resources of, say a Mark Cuban, to build both an independent production company and an independent programming and movie distributor.

To put it more bluntly, you will have to redistribute content developed for television until such time as you can develop your own, or a broadband content renaissance arrives. Your value proposition to consumers is about immediacy, convenience, choice, and price, not cool new shows unavailable elsewhere.

A bit more disappointing news – despite wanting to break out of traditional media concepts you will probably have to package what you offer in something very analogous to a “channel” in today’s television world. This is because (a) without some thematic organization and brand, you will (like ineffective web sites in today’s internet) simply disappear into the noise, and (b) you will very likely need a fixed subscription fee as part of your revenue model for you to stand a chance of becoming economically viable.

So, you will go to library owners and pitch your business plan, at minimum convincing them that by renting their programs to you their net revenues will be higher by adding you as a distributor than not (see “Incremental Revenue”, “Low/No Cannibalization”) and that their content will be protected from theft (see “Content Protection”).

If your entrepreneurial venture plans to rely on ad revenue, you will need to persuade both library owners and potential advertisers that your financial projections are based on targeted, demographically-valuable reach (see “Contextual Sponsorship”, “Exclusivity”), perhaps even with the potential for national scale comparable to traditional media (see “Breakout HH reach”). Finally, for certain classes of content (independent films, for example), you may need to demonstrate your distribution method appropriately showcases, or at least does not degrade, the viewing experience (see “Optimized Viewing”, “TV Endpoint”).

As to which libraries and types of programming, we’ve ruled out more than token access to marquee programming at any stage of the syndication pipeline. This leaves three broad approaches, lifted from today’s television world, which can be used individually or in combination to match potential audiences and programs:

1. special-interest based: aggregate a collection of themed programming, often low-cost material that has already run through cable channel syndication and/or is independently marketed
2. demographically-defined: reverse engineer a possibly eclectic programming line-up from a set of desirable demographics with a high propensity towards broadband usage but low involvement with traditional television (the pitch meeting might go: “it’s G4 meets SpikeTV, with a FoxNews sensibility”)
3. ‘We Media’: roughly, a video equivalent of blogging in which audience involvement and viewer-created content (“VC2”, as it is known on the recently-launched ‘Current TV’ channel) creates both an interactive feel and low-programming costs. This two-way characteristic, for which broadband innovation is ideally suited, is either used as an enhancing differentiator or becomes a central, defining element of the programming.

Keeping Score

Barry Diller is probably right that “we’re absolutely in a radical revolution”, if for no other reason than he is Barry Diller. But how can media, internet, or telecom company strategists separate competitively-important news from noise, and what should investors look for in determining future company prospects?

The list will always change, and probably the most significant events are entirely unforeseen. But the scorecard should focus on anticipating and identifying events signaling meaningful economic developments. Some examples:

• Have major independent program developers (e.g. Crown Media, Playboy Enterprises, etc.) made significant library syndication commitments in a broadband-related format? What is the depth of the library under license? How does this deal complement or compete with “linear” exhibition?
• Is Big Media adding significant depth to broadband-available libraries, on what terms, for what distributors, across the board or by genre?
• Are ads or interstitials being inserted in broadband content? Who are the advertisers? Are these barter, in-kind promotional, or cash deals? What audience measurement and reporting, if any, is being employed?
• Is licensed or syndicated broadband-media delivery being linked to a paid-search or internet community model, and if so, how?
• Is anyone developing new broadband-specific content supply (either by re-purposing, similar to wireless carrier ‘mobisodes’, or with net new production)? What are the reported production costs, who is financing them and how (brand sponsorship, product placement, etc.)?
• Is there any evidence of broadband-related restructuring of rights and windows in lower-profile (cancelled series, cable channel originals, etc.) syndication deals?
• Is there any adoption of “programmer neutral”, open devices which can conveniently display broadband content directly on televisions (e.g. TiVo Series2, etc.)?
• Is one of broadband media’s potential advantages – à la carte consumption – being eroded by the rise of less-tiered and/or lower-priced subscription services from cable or satellite?
• How are broadcast networks planning on using ancillary spectrum at their O&Os once digital terrestrial television is launched?

Afterword: TelcoTV

Earlier, in discussing the potential size of an independent broadband media market (Exhibit 3 – Broadband Media Households) we made passing reference to Telco TV’s potential leg up and said we would return to that topic later.

US telcos have four fundamental problems with their TV offers:

• undifferentiated clones of satellite service (i.e. “bargain” cable)

• uneconomic based on programming costs alone

• no access to advertising revenues (no subscribers = no audience to sell) at the very moment in the industry when cable operators are booking double-digit advertising growth and ad insertion technology has the potential to raise CPMs by 50-100%.

• timing – drivers of price competition are likely to increase, just as (and partially in consequence of) Telco TV comes to market: e.g. emergence of “value” tiers or quasi-à la carte channel line-ups, no-frills competitors, digital terrestrial service

But telcos also have two valuable advantages: First, a direct path for broadband content to the living room television, not through “Windows Media Centers” or a “Slingbox” or other marginal attachment methods. Second, with no subscribers and high programming costs, telcos do not share cable and satellite’s vested interest in “going along” with the Hollywood business model.

The checklist (Exhibit 4 – NewTV Wish List) and scorecard immediately above are, among other things, a partial framework for how US telcos might differentiate their me-too video offers at comparatively low incremental cost and establish a modicum of market power in the programming supply chain. Instead of focusing on yesterday’s definition of multi-channel television service, a stripped-down offer, supplemented by broadband-enabled library innovation may be Telco’s best long-term bet for a sustainable video business.■

   

Download this article:: WotW - Broadband Media.pdf [908.1kb]

   

    

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Uh Oh, Gmail Just Got Perfect

Michael Arrington

35 comments »

Google quietly added a small feature to Gmail this week called Mail Fetcher. When that feature launched, Gmail became perfect.

Mail Fetcher allows users to access non-Gmail email accounts from within the Gmail interface. If you have a Yahoo email account, and a work email account, etc., you can simply access that email from within Gmail, using POP settings. Gmail will now work in a very similar way as Outlook does on the PC desktop.

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11.24.2006

Net nightclub entrepreneurs

Jonathan Abrams, founder of Slide, is far from the only web entrepreneur to dabble in nightlife. One cynical take: They're just trying to buy glamourous lives; too bad their clubs are in the SF area. But we're inclined to be more generous. As sidelines go, a nightclub investment is at least less pretentious than developing a taste for fine wine. The roster of Silicon Valley nightlife investors, with the customer ratings for their venues, after the jump.

Jamie Zawinski, a programmer who worked on early versions of Netscape's Navigator browser, owns DNA Lounge.

Jonathan Abrams, as one was reminded in his recent television appearance, is behind Slide Lounge, the downtown club, about as fabulous a venue as San Francisco is capable of supporting. Friendster founder Abrams, who famously turned down an offer from Google, is also an investor in Mamacita.

Trevor Traina, socialite son of the Napa winery owner, co-founded Compare.net, an early comparison shopping site. He's now more often in the society than the business pages. With Gavin Newsom, he's an investor in Matrix. In the nightlife business, he's overshadowed by his brother, Todd, who is a partner of Ashton Kutcher and Wilmer Valderrama in various L.A. restaurants.

Peter Thiel, co-founder of PayPal, the online payment service, and an investor in other ventures such as Facebook, is one of the backers of Frisson -- an upscale restaurant-bar with a co-ed bathroom.

Ken Howery and Luke Nosek, two partners of Thiel in the former PayPal founder's venture capital fund, are said to be investing in a Manhattan nightclub.

Doug Dalton, one of the founders of BranchIt Corporation, is behind Anu and Swig.

... New tools are coming out to make sharing videos online even easier. Both Video Egg and Grouper (TechCrunch posts here and here) have downloadable clients that allow encoding to flash on the desktop (saving users from uploading very large files to the service) and some very basic editing features. Grouper also allows users to string together multiple video files (VideoEgg does not yet allow this). Also, while working from the desktop is easier than online, you must install the software.

From TechCrunch - story here and link to Motionbox here

To Blunt the Web's Impact,
TV Tries Building Online Fences

 
WSJ - March 16, 2006; Page A1

TV giants are now working to build electronic fences to protect this new way of conducting business. The television business has even coined a term for restricting video content to certain geographic areas: "geofiltering."

"The whole business model in the broadcast industry is based on geographic exclusivity. ... The potential use of the Slingbox fractures that,..."

Netscape.com will be revived again by AOL, and will relaunch soon as a Digg-like user-driven news/aggregation site with Jason Calacanis at the helm, sources have told paidContent.org.  -story here from Paid Content.org

The Net's New Age

Technology that aims to revolutionize how surfers use the Web is fueling a new wave of Internet investment and challenging established media

In a small deal that signals big changes on the Internet, Google announced Mar. 9 that it has acquired a Silicon Valley sensation called Writely. The online word processor is still in the testing stage, but it's attracting attention as a free alternative to relatively expensive desktop applications like Microsoft Word. Business Week Article

Hungry Media Companies Find a Meager Menu of Web Sites to Buy

The likely acquisition prospects listed in the story include WebMD, Bankrate.com, Hollywood Media, TheKnot.com, PlanetOut.com (which has been making its own acquisitions), Infospace, Technorati, Feedster.com, numerous gaming, mobile and photo sites. Paid Content LINK
-- Sharon Wienbar, a managing director with BA Venture Partners, said a site has to have at least 5 million uniques a month to be considered a major takeover candidate. NY Times Article HERE

Google deal highlights Web 2.0 boom Details

In the area of Web applications, the last two years have seen an explosion in Web services aimed at consumers or small businesses. These services, many of which are still in beta, span many areas and companies. Here's a sampling:

• Online Calendars: One of the more active areas, with offerings from 30 Boxes, CalendarHub, Trumba, Joyent, Kiko, Planzo and Spongecell.

• Productivity application suites: Full-blown applications bundles offered by the likes of HyperOffice, gOffice and ThinkFree.

• E-mail and collaboration: Examples include Goowy, Zimbra, Meebo (Web-based instant messaging) and Jotspot (hosted Wikis).

• Project management and personal organizers: AirSet, 37Signals.com, Zohoplanner and Stikipad.

• Multimedia social software: Includes sites like the popular Flickr photo sharing service, Riya (photo search), You Tube (video sharing) and Podbop (music podcasting).

Why the sudden boom in Web 2.0 companies? There are a few reasons, both technical and business related, say investors and analysts.

More people have high-speed Internet connections, making applications such as photo, music and video sharing feasible. The underlying software to build Web services is being upgraded as well, lowering technical barriers that existed only two years ago.

More Web developers are using a programming technique known as AJAX, which stands for Asynchronous JavaScript + XML. The end result of using AJAX is interactive Web pages and sites that can automatically refresh information from a server. Overall, it makes for a better user experience, say developers.

      

 

Firefox Earned $72M in 2005 from Google?

So the rumour goes.... Well let me tell you from my experience that this number is not far off. How do I know? Well you see I helped Netscape montetize it's new FireFox-based browser with search revenue from Google. Google paid TimeWarner-AOL about $350 million last year for search and took a 5% equity stake in AOL for $1 billion dollars in Dec 2005. The Mozzilla org was originally funded by a grant from my employer (TimeWarner). Firefox got traction in the market early and surpassed Netscape 8 and took a big dent out of Microsoft's dominant share of the browser market. Google help spread the open source Firefox and the browser incorporated Google search (as did the Netscape Browser).

Most people have no idea of how much revenue is generated by search in browsers and toolbars. In 2005 JP Morgan expected $780 million in revenue (up 65% year over year) and in 2006 the projection is $1.1 billion (up 44% year over year). The outlook for 2009 is 2.3 billion.

The following excerpts  are from Jeremy Zawodny & Jason Calacanis (Weblogs-AOL):

The browser business isn't a half bad place to be, it seems.

What an amazing business: make a kick-ass browser for $10-15M a year in expense and make $72M (and growing) in revenue. It's such a good business that the folks at Flock.com are trying to do a similar thing by building a wrapper with value-added services (like bookmarking tools) on top of Firefox.

Makes you wonder how much Microsoft income is derived from Search in Internet Explorer, doesn't it?

Someone should make a "cash cow" skin for Firefox. :-) Link to Jeremy Zawodny

Here are some examples of Web 2.0 companies categorized based on their business models and where the money comes from.

• technology/infrastructure/service companies who can charge for their services in various ways.  Examples: Technorati, Eurekster, BrightCove, VOIP services, FeedBurner
• transaction oriented companies who aggregate and connect various types of buyers and sellers in a marketplace or data-driven service (think real estate, jobs, travel, etc) and often take a cut of the sale. Examples: SimplyHired, Ether, Edgeio, FlySpy
• content/community companies who aggregate a big group of people around interesting, entertaining, or useful content in one or more vertical markets and rely on advertising. Examples: Digg, RawSugar, Memeorandum - Om Malik

Addressable IPTV Advertising: How to Reach Consumers And Generate Revenue

In contrast to conventional terrestrial, satellite or cable, TV delivered by IP does not need to be “one size fits all”. Because IP is addressable the source and destination of every packet of information can be uniquely defined: whether it is going to your television set-top box and TV set, or your next-door neighbor’s.

A study by Continental Research for Sky has found – unsurprisingly - that households with PVRs do tend to skip ads. But the report also discovered that the degree to which the message was received was largely the same in households with PVRs and those without: underlining the fact that relevance is the most critical issue in creating brand recognition and driving consumer response.

The addressability and bi-directionality of IPTV make it a perfect delivery mechanism for tailor-made ads. During the same ad break, neighbors watching the same IPTV channel can receive totally different ads – say toys and diapers for a young family, and gardening equipment and cruises for a retired couple next door. Advertisers can even use real-time and behavioral information to fine-tune the selections of advertisements: designing ads according to the viewer’s demographics; geographic location; program content; time of day; language and a raft of other factors. And the ads themselves can change to new, interactive forms like narratives, telescoping and web-based ads.

Even outside the IPTV arena, the value of targeted advertising has been acknowledged.  Comcast Cable has already begun to explore addressable advertising but have been hindered by the nature of the tree/branch structure of cable networks, which only enable relatively large geographical areas to be covered by any particular advertising profile. But with IPTV many hundreds - or even thousands - of different ads can share a single ad slot. This gives the potential to increase the value of the slot – or ‘avail’ - significantly, opening up new revenue-generating opportunities for telcos and service providers.

I'll be putting up a link to my white paper that outlines a system design for an integrated ad targeting system in my next post.

The Buzz about Microsoft's announcement slated for March 9th is reaching a fever pitch in the underground tech community. This video advert shows typical uses of this Ultra Mobile. It's the perfect match for location-based web services! Somehow this video leaked out early giving you an early sneak peak at the ULTRA MOBILE PC UMPC - code named Origami. Also check out Endgadget. Is this the real deal ?-is it MS viral marketing? is it a hoax? you determine.

Technology is dramatically remaking many industries around the world, but none more than telecommunications and media. The mass adoption of high-speed Internet has blurred the lines between communications services and media distribution in ways that are finally bringing to fruition the vision of "convergence". In this space we are already witnessing massive disruption of traditional business models and the birth of swift new players who understand the new efficiencies of digital distribution and web services. The opportunity in front of us has never been greater as the playing field continues to be leveled. For more than 13 years I've been an active participant in this space, living on the bleeding edge, never disbelieving that this transformation would come - (it was a matter of when, not if). The experience has armed me with a depth of understanding of what works and what doesn't in this new world. Evidence of a new world order forming? Look at the business headlines. Networking firm Cisco buys Scientific Atlanta for $6.9 billion, Rupert Murdock's New Corp buys MySpace.com for $580 million and of course Google's wildly successful efforts at transforming the advertising industry. I expect even more unlikely partners to pair up in the coming months as companies choose to be either part of the steamroller or part of the road.

In the initial phase of this transformation several years ago, the infrastructure was the focus. Building the new super fast data highways that back in 1999 provided broadband for just about 15 percent of the US population. Today that has crossed 45 percent and is having a profound effect on just about everything in the Telecommunications, Media and Entertainment world. Since that time we have seen ABC open up its content for distribution on the iPOD (Lost, Desperate Housewives), CBS giving Google access to some of it's video library and Time Warner offering free VOD web access to its archive of classic TV shows. The Movie and Television industry does not want to see itself follow the same declining fate that the Music industry has encountered since the dawn of Napster.

The worldwide revenues from the advertising industry are between $600 and $800 billion for all forms of media. Google has yet to show its hand in the $52 billion Television ad market - but I susspect we will see something very soon. The pieces are starting to fall into place. When Google combines the power of on-demand digital distribution with ad targeting and pay-per-view revenue streams - a $500 stock price will be cheap. Check out the Google Investor webcast here.