Content and services

Disintermediation: Who loses in the TV wars?

Submitted by acohill on Fri, 05/29/2009 - 13:19

Hulu continues to push the envelope. The popular streaming video site has a lot of TV shows on it, and it just released a Macintosh application so that you can watch TV shows on Hulu without the bother of using a Web browser. It means a better viewing experience with higher quality.

It also means that the disintermediation of the TV business is well underway. The Internet is forcing out costly middle man businesses that were vital and necessary parts of the distribution chain in the old days, ten years ago, but are no longer needed. The rise of broadband and Apple's iTunes store was the end of the music store on Main Street--there are hardly any left.

In the TV business, the cable and satellite TV companies are the middle man. They don't own the content, they just pass it along. But if you can watch American Idol on Hulu via your Internet connection, why pay $60/month for cable TV service? We've been here before. The Internet is relentless, and the new is forcing out the old. The cable TV companies could remain viable, but they can only do so by changing their business model and becoming an open access transport system. They could actually make more money by doing so. But so far, none of them seem willing to even consider it. So they will likely go the way of the music store. In ten years, cable TV will be completely gone.

Nielsen: 2000% increase in video delivered by the Internet

Submitted by acohill on Thu, 04/23/2009 - 14:15

A new report by Nielsen says time spent watching video online has increased in the past five years by 2,000%. And the number of people watching video online is increasing by 10% per year, meaning in about seven years, everyone will be watching video on the Internet. TV is dead, dead, dead.

And as I have been saying for years, the Internet business model being used today by the incumbents and smaller providers is upside down and unsustainable--bandwidth by the bucket does not work when users are asking to refill the bucket faster and faster each day, week, and month. And charging to refill the bucket does not scale up, as the bandwidth quickly becomes unaffordable when watching lots of video.

The solution is to change the business model. It's not hard, and the incumbent providers would actually make more money after the conversion. But some of them are going to go bankrupt rather than admit they need to change.

The YouTube problem

Submitted by acohill on Tue, 04/21/2009 - 09:06

A recent report says YouTube is losing more than a million dollars a day. Even for Google, that eventually adds up to a lot of money. Since Google acquired YouTube, the advertising giant has begun including advertisements on YouTube pages as well as embedding ads in some videos. But the huge cost of dishing out video to the world is still much higher than the ad revenue earned.

I think there is a longer term problem that will eventually force YouTube to change direction or even fade away: YouTube fatigue.

Remember when email first became really popular in the late nineties? Everyone you knew was busily forwarding every stupid joke they had heard, and you happily forwarded the jokes on to everyone you knew. Eventually we all tired of that and went back to work. Well, sort of. Instead of reading recycled jokes and forwarding them on, many of us are busily watching YouTube and forwarding links with "Watch this one...really funny! Ha ha!" to all our friends and family.

Here is the problem. If the average YouTube video runs 5 to 7 minutes, and you get an average of 10 "Watch this Ha ha" messages a day, you are easily spending an hour a day watching really stupid videos that you won't even recall an hour later. And you've wasted a perfectly good hour of your time--time you will never get back.

There is just not enough time in the day to watch all the video that's out there.

YouTube fatigue. Do you find yourself clicking the pause button on a five minute video 30 seconds into the video? If so, you probably have YouTube fatigue. There is only so much time in the day we want to spend watching really stupid time-wasting video. Over the past fifteen years, I've seen this "newbie" phenomenon over and over again as some new service (email, IM, chat, YouTube, Facebook, Twitter, etc.) catches on and everybody rushes to try it out. Facebook fatigue is kicking in as people realize there is more to life than getting messages from hundreds of "friends" about the most inconsequential information ("...brushing my teeth, out of Crest so had to use Gleem...").

Online video is going to grow, and it will continue to grow until it completely replaces cable TV and to a large extent, satellite TV. But alternatives like Hulu and iTunes, with better content and paid, ad-free content will eat away at YouTube.

Facebook lowers college grades

Submitted by acohill on Tue, 04/14/2009 - 10:05

A new study by Ohio State suggests a link between Facebook use and lower grades in college. The study found a link between the amount of time spent of Facebook, with a correlation between amount of time spent and lower scores (more time, lower grades). The study also found that students who did not use Facebook at all tended to spend more time studying and had higher GPAs.

Good-bye to the video store

Submitted by acohill on Wed, 04/08/2009 - 08:33

I finally signed up for Netflix, largely because the local Blockbuster has fewer and fewer movies these days. And I'm not the only one that has noticed that the video store chain seems ill. Despite the fact that Blockbuster claims it does not have late fees, the company continues to annoy customers by simply billing your credit card for the full retail value of a late movie. A recent $90 credit card charge for a stack of movies that I did not get back to the store on time was the last straw. Once you return the movies, they credit the charge back, after deducting a "handling fee." So technically, Blockbuster does not have "late" fees, but they have fees aplenty anyway.

Everyone I talk to seems quite content to watch much if not most of their in-home entertainment (TV shoes and movies) via the Internet, rather than via cable or satellite. The other phenomenon I notice is that even as there is a continued trend toward buying big, flat panel HD TVs, more and more people are reporting that they are watching "TV" on their laptop, mainly because it's so darned easy. Nearly all of the interesting TV is available via the Internet, any time you want to watch, so why even bother with the old-fashioned TV thingy in the basement?

The telephone and cable companies have a bright future only if they realize they can't be both monopoly content providers AND monopoly transport providers. There are simply too many new content and service offerings out there, and no one company can provide the quality and breadth businesses and residents are going to demand in the next several years. Only open access, open service networks like The Wired Road will be able to meet the community and economic development needs of regions. And open access can be done easily by the existing incumbent telephone and cable companies, and they would make more money than they are now. But they are resistant to change--which begs the question: Will they change before they go broke? And if your local cable company goes broke, what is your community's Plan B for offering telecom services?

Is TV doing "fine"

Submitted by acohill on Fri, 02/27/2009 - 11:20

Ed Dreistadt reports on a New York Times article that says that TV is doing "fine," despite the fact that other old media like newspapers are dropping like flies. As Ed notes, some of us are not so sure. I'm regularly bumping into people that are telling me they hardly watch TV anymore. They get news online, and they can download most TV shows and watch them whenever they want. And of course, a lot of what we used to watch on TV can be accessed as short snippets on YouTube or the network sites. Why stay up and watch Saturday Night Live when you can simply check the blogs on Sunday morning, see what was funny, and then watch just the funny segments on the NBC Web site?

I have been predicting the death of TV for a long time, but it is happening faster than even I expected. I really don't know how the cable TV companies will stay in business, and the bad economy will likely accelerate the problem. If you have to cut household costs, which would you cut first? Internet or TV?

Twitter coupons

Submitted by acohill on Wed, 02/25/2009 - 09:27

Amelia Brazell tells the story of sending a Twitter message to someone about the curative effects of an over the counter cold remedy called Zicam. A bit later, she received via Twitter a coupon for Zicam.

It's an interesting example of how new communications tools are changing advertising. A simple Twitter search by the Zicam folks allowed them to identify an individual customer and then at virtually no cost, send that customer a coupon. Try that with TV, radio, or magazine advertising.

It also demonstrates that using tools like Twitter may require some circumspection, as anything you share on Twitter is available to anyone via the Twitter search tools. Some Facebook users are finding out, to their chagrin, that posting certain kinds of intimate life details to virtual "reality" of Facebook sometimes has concrete (not virtual) consequences in the real world.

Will the Kindle rekindle the newspaper?

Submitted by acohill on Mon, 02/09/2009 - 14:05

Amazon has released its updated version of the Kindle, the portable book reader. The original Kindle was ugly, heavy, and had too many sharp edges. The updated Kindle has been slimmed down and smoothed. It has longer battery life, and much better graphics (still black and white, though). This new version may actually catch on.

The Kindle comes with 2 Gig of memory, enough to store over 1,000 books, and new books can be added via Kindle's wireless interface to the Sprint cellphone network. This new Kindle seems to be right in the ballpark for technical manuals that change quickly and for one time reads like most best-selling books. But I think this could also be the future of newspapers. I could see sitting down to breakfast with a cup of coffee and the Kindle and browsing the local news. It might even be worth paying a subscription fee to get the news formatted nicely to work on the Kindle.

If Amazon wants to win in the bookreader game, it should study all the early missteps Adobe made with the PDF file format back in the early nineties. It should be easy to get all kinds of common formats on the Kindle, especially PDFs, and it needs to be dead simple for content owners to transfer files and documents to the Kindle.

The newspaper really is dead

Submitted by acohill on Tue, 02/03/2009 - 09:25

Here is a clever analysis of the financial woes of the New York Times. It turns out the Times, which is mired in red ink, would do much better financially if they gave most of their subscribers an ebook and let their readers download the paper every day.

The newspaper has had a long and important run, but we don't hand write books on sheepskin anymore either, and no one seems to mind that. Things change. Hardly anyone under thirty subscribes to newspapers anymore. Where do the papers think their customers are going to come from?

I still think the news reporting and editing function is an important one, but the little exercise in thinking differently about distributing the efforts of reporters and editors suggests papers can survive if they let go of, well, the paper.

Data doomsday, or the datapocalypse

Submitted by acohill on Tue, 01/13/2009 - 17:53

A blogger named Jason Scott, among other online writers and discussion groups, has been talking about a new problem--over-hyped Web services and Web sites that have failed financially and are shutting down without giving users of those services or sites an adequate opportunity to make copies of blogs, pictures, and other materials posted to those sites. It is likely to be a growing problem as the economy slumps and many poorly thought out "Web 2.0" business plans fail. Scott talks about the need for a "digital bill of rights," but given much larger economic and business issues, this is not something that is likely to get much attention from legislators.

As I have said for a long time, this is a buyer beware situation. "Free" services still have to pay their own bills, and if their business model is not working, they will pull the plug on the services. Yes, they should give users some notice, but if they are out of money, it's impractical to expect them to magically find the funds to keep their servers online for a year (or some other period of time) while users of the free service get around to making backups.

Users of free services need to recognize that you get what you pay for. If you keep all your photos on Flickr without making any backups, and Flickr shuts down, you have little recourse because you paid nothing to Flickr--so what do they owe you?

Hard drives are cheap, and every household should have two inexpensive external hard drives where you keep copies of all important materials and documents, including any items you have posted on "free" online sites. And it is also wise to use an online backup service for some things, but skip the "free" backup services and pay a few dollars a month for a fee-based service; because they are actually collecting fees from their customers, those companies have a more predictable revenue stream and the payment of even a small fees gives customers some legal recourse for poor (or no) service.

The collapse of free services is likely to continue for some time, as online advertising is slowing down. The sites most affected are the "free" services that rely not on customer fees but the much more fickle ad revenue. Buyer beware.

Sharp drops in online advertising predicted

Submitted by acohill on Mon, 01/05/2009 - 08:53

Ars Technical has an article that reviews several signals that suggest the boomtown days of online advertising are about to come to an end. The sharp drop in the sales of high end electronics is bringing a related drop in advertising for those devices, but the article suggests the bigger driver in online ads is a maturing of the marketplace, where businesses are finally figuring out just what an online ad is worth with respect to click throughs and sales. Businesses that are not getting results with their online advertising are cutting back, and that drives prices down. The article makes a particularly interesting point about the difference in value between a TV show or a movie and a Web page--the Web page has significantly less value because it occupies the viewers attention for a much shorter period of time and also has many outbound links. A TV show or movie, by contract, has the viewer's attention for a more predictable (and usually longer) period of time. That makes TV and movie ads more valuable.

The year that newspapers died, part two

Submitted by acohill on Wed, 12/31/2008 - 09:16

2008 will likely be remembered as the year of the tipping point for newspapers. A new study by the Pew Foundation indicates that more people now get their news from the Internet than from newspapers, a sharp increase over 2007. 59% of young people (under 30) use the Internet as their main source of news and information, a figure that has doubled in the past year.

This has important implications for communities and community leaders, who are often more comfortable communicating via press releases and TV news conferences. Younger voters, literally, are not tuning in to traditional news sources. Unless communities find ways to connect with younger citizens regularly and consistently using newer information channels, community decision-making will become more and more difficult.

Revenue share model works for iPhone software

Submitted by acohill on Tue, 12/30/2008 - 09:29

I have long advocated a revenue share model for community broadband, in which a single community-owned digital infrastructure is made available to private sector providers to deliver services like voice, video, and Internet access to customers. Service providers would pay a share of their revenue to the network to cover the cost of build out and maintenance.

Critics of this approach argue that it is too "risky," and "unproven," although it has worked successfully for years in other countries.

We have a data point that hints that this can work. Apple has used exactly this approach for marketing software for the popular iPhone, and the results have been nothing short of astounding.

Apple made and continues to make a huge investment in the basic infrastructure needed to market and deliver applications to individual iPhones--the iPhone App Store. Software developers can place their software in the store for free, and pay nothing until they make sales. They pay Apple 30% of their revenue, so an application selling for a dollar means Apple gets thirty cents to cover the cost of hosting that application in the App Store.

This approach is exactly the same as an open services broadband network:

The key concept is shared infrastructure. For both broadband networks and the software marketplace, everyone wins, including service providers and software developers, because costs are lower across the board. In the case of the iPhone marketplace, it is much less expensive for a start up developer to place a product in the Apple App Store than to design and fund a stand alone marketing effort. In the case of broadband, it is much less expensive for a service provider to deliver services like Internet access over a shared network, despite increased competition, because the costs are so much lower than building a private (non-shared) network and because the marketplace of potential customers is much larger.

Mobile phones driving social networking, the Web

Submitted by acohill on Tue, 12/23/2008 - 16:11

A new report says that mobile phones are playing a bigger role in Web use, especially with social networking sites. Users are updating their social network information directly from their cellphones, adding commentary, pictures, and video with their phones. The iPhone and other iPhone competitors have much improved Web browsers, allowing fast and easy access to social networking Web sites, and the integrated cameras make it easy to upload multimedia content.

The death of TV, Part 5

Submitted by acohill on Thu, 12/18/2008 - 16:22

Here is a first person account from someone who just canceled their cable TV service (but kept the Internet connection). They have what is becoming the same old story, "Who needs it?" Almost any show you want to watch can be watched via a broadband Internet connection, so you can save yourself forty or fifty dollars a month by just skipping TV altogether.

Ad revenue on social networking sites down

Submitted by acohill on Mon, 12/15/2008 - 18:13

This article discusses falling ad revenue for social networking sites. That probably explains why the ads on FaceBook seem sleazier lately. About every other time I log in, I get pummeled with an ad to meet "sexy singles in Blacksburg," along with what is supposed to be an example of a "sexy single" in a bikini. Bottom fishing ads like this one may be helping to pay the bills on these sites, but as the sleaze factor goes up, more parents are going to start declaring the sites off-limits to their kids.

iPhone beginning to drive shopping

Submitted by acohill on Mon, 12/15/2008 - 18:09

WalMart is the latest company to build a special iPhone-compatible interface to its Web site. As the iPhone becomes more popular, more Web sites (news sites, particularly) are adding content designed to work well with the iPhone Web browser.

The year that newspapers died

Submitted by acohill on Tue, 12/09/2008 - 10:05

The New York Times is taking a mortgage on its office building in Manhattan because it can't pay its bills. The LA Times has filed for bankruptcy. Many local papers are quietly going out of business. The newspaper is a venerable icon, but smearing ink on dead trees is, well, dead. Newspapers have failed utterly to adapt to the Internet, largely because they have been unable to distinguish between their core competency and their historical distribution medium. Newspapers have stubbornly clung to the notion that it is their job to throw wads of paper in driveways every morning. They have continued to do that long after there have been better and different ways to distribute the news (e.g. the Internet). Tweaking the font size of headlines, adding color pictures, and reposting news articles to the Web for a day or two before making them disappear are strategies that have only slightly delayed the inevitable.

The core competency of newspapers has always been to filter the news for readers; printing that news on dead trees has simply been the expedient way to distribute their work efforts for the past couple of hundred years. But we still need editors and reporters--in fact, we need them now more than ever--we have more news, from more sources.

The blogosphere has risen to the challenge while the old guard of reporters and editors have simply turned up their noses and pounded their chests about how they are "professionals" and bloggers are just sitting around in their pajamas. To coin a phrase: "Whatever...."

We still need news organizations, and there is plenty of ad money sloshing around online, but the newspaper business has just refused to adapt. It will be interesting to see how the void is filled.

The year that TV died

Submitted by acohill on Tue, 12/09/2008 - 09:53

2008 may be the year that TV died. Lately, I have begun meeting and hearing about people that have simply disconnected their cable TV service. They can get whatever shows they want to watch off the Internet, fee or free, with less effort and with more convenience. If you are willing to pay a buck or two, you can watch a one hour TV show in forty minutes because the commercials have been removed--is twenty minutes of your time worth $2? Or put another way, if your cable TV bill is $60 per month, you can download and watch 30 hours of TV--without any commercials--for the same amount of money. If you don't mind the commercials, you can download and watch as many hours as you like for the cost of your Internet connection.

TV is dead. Cable TV is dead. Satellite TV is almost dead (satellite will hang a bit longer because in rural areas Internet access is still awful, so many rural residents can't switch to downloading TV shows). NBC has announced big cutbacks in staff and is likely to cut back programming hours as well--because fewer and fewer people have any reason to watch network TV.

The complete transition will likely take another ten years, but at the end of it, TV as we know it will have gone the way of the music store.

More Web 2.0 social networking failures

Submitted by acohill on Fri, 12/05/2008 - 10:46

With the downturn in the economy, we are likely to see many more weak social networking business ventures fail. It Died is likely to do very well for the next year or so as it documents flops like People Connection,, and Pownce. It's like the remake of an old horror movie--The Return of the Dot.Com Swamp Thing.

As I have said many times before, the fact that you can mash up Twitter, file sharing, and instant messaging (the Pownce strategy) does not mean you should, or that there will be a market for it. Social networking tools and sites have a place in the digital world, but there are so many that we can make use of at any given time. For the time being, FaceBook and MySpace have probably won.

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