Archive for October, 2010

How Google TV Could Hand Netflix the entire streaming universe

October 22, 2010

I personally can’t think of anything stupider for the big broadcast networks to do than give their shows to Google for free. Why ? Because they are finally getting BILLIONS of dollars in retransmission fees from their distributors.  This is new money. It is found money. It is money they are fighting for.  Just ask Fox and Cablevision what they think of each other this week.

The idea that they would take and fight for money from their distributors, who generally are the same ISPs that Google TV delivers content over, and then offer the exact same shows for free through Google TV, or any aggregator that expects that content for free is probably one of the dumbest concepts ever.

Now if Google were to go to those networks and offer them money per month for every buyer of a Google enabled device or TV, that would be different. Then they would be a tv provider competing with the rest and they should take their money. Think Google will ever do that ? I don’t.

So giving the same content  they not only charge their distributors for, but also charge their local affiliates for to Google for nothing or for a share of revenue  ? STUPID.

If Google sticks to their guns of not paying up front for content like Netflix does, they will have handed Netflix the entire streaming universe on a platter.

Did anyone else see the report that Netflix streaming consumes 20pct of download throughput during weekday primetime hours ?

If this is true. Its one more reason to think that Netflix has won the streaming wars and those broadcast networks would be moronic to give their content online away for free. Why ?

First of all, do you know the difference between Netflix and Google when it comes to content ?  Netflix pays up front and offers minimum guarantees.  Google and everyone else for that matter, pays a commission based on ad sales. (which works wonderfully on Youtube for them)

So riddle me this batman. Netflix is on Google TV , correct ? Given that Netflix pays and Google TV doesn’t, why wouldn’t/shouldn’t the broadcast networks offer all of their shows to Netflix as a way to reach Google TV users, knowing that they will get paid for their content. Paid HUNDREDS OF MILLIONS OR MORE for their content.

All you internet pundits want the broadcast networks to give the content away for free. THAT IS STUPID.  Get Netflix to pay you on a per subscriber basis on a par with  what your other TV providers pay you. Netflix becomes a competitive TV provider. BRILLIANT. You get paid. You reach Google TV users and non Google TV users.

Of course you basically cede to Netflix  control of the streaming content world. You give their streaming only subscriptions a unique value beyond old shows and movies. Goodbye Hulu as well.

Of course once they get the broadcast nets, how long until they add the cable nets like ESPN, Disney, etc., etc. ?

Back to the Netflix using 20pct of bandwidth.  Now that they have gotten there, it is going to be easier for Netflix than anyone else to grow their bandwidth usage. They can add streaming subscribers at a controlled level and it could work.  Growing their usage as a percentage of total bandwidth consumption quickly becomes a trojan horse in the streaming wars.  They are consuming so much bandwidth, they literally are blocking out the ability of anyone to compete with them.

If Netflix gets to 25pct do you think Google is going to be able to also get to 25pct during primetime and all of the sudden 50pct of the internet’s bandwidth during primetime  is allocated to streaming tv originated shows, movies and other video ? Of course not. And that’s before consideration for Youtube. How much bandwidth in primetime does and will Youtube use ? After you combine Netflix and their growth to Youtube and its growth, what kind of internet bandwidth  is going to be left for anyone else for streaming TV to millions ?

There will be big problems and lots of quality and delivery issues long before we get close to those percentages. Leaving Netflix in a phenomenal position.  They get to adapt to a declining available bandwidth environment  with an existing product , revenue and subscriber base. There is no such thing as equal access when you are blocking up 25pct of the lanes on the highway 24×7. The others can’t even get on the ramp.

Their competitors have to figure out how not only how to overcome the technical hurdles of reduced available bandwidth, but also a business model since no one will want to give content away for free when Netflix can pay them.

Netflix is smart as shit.

Netflix is also great for traditional TV providers. TV works. TV works for any number of subscribers or viewers. 100pct of the digital bandwidth that TV uses is designed, managed and operated purely for the distribution of TV and complementary features. It will work.

Netflix should end up as the only “TV” provider that truly works on the internet,  Which means that content providers like the broadcast and cable networks can be paid by Netflix on a per sub basis for their subs  who want to subscribe via the net, and from traditional tv providers for those who want buffer free, (relatively) full quality TV the old fashioned way.

Oh, and one more thing. Expect your internet bills to go way way up as ISPs make it clear that all this video over the internet is going to require billions in upgrades. The irony is that while you may not like paying for cable channels you don’t watch. You will end up paying for cable channels on the internet that you don’t watch as well. In this case you will be paying via higher net bills for the extra bandwidth required to stream cable channels that your neighbors like to watch



Business Process Patents Must Die

October 14, 2010

I was looking at investing in a technology company the other day. As I normally do I was searching the web looking for potential competitors and also reading up on competitors the company had identified for me. One of the companies I started reading about was very proud of the process patents they had acquired.  The company itself wasn’t a competitive threat to the company I was looking at. In fact, I didn’t think this competitor was going to be able to stay in business for the long run. I wasn’t impressed with them at all.

But the question I had to ask before I invested was “what was their plan for when this competitor used their patents to sue them for patent infringement “.  The company was adamant that they didn’t violate  any of their patents and that they knew some of the people over at the competitor and they weren’t litigious people at all.

Yeah right. I made it very clear to them that if the competitor saw them as the least bit threatening, which they would, they would sue the shit out of them.  “How could they ?” was the response.

How naive. Companies and people don’t sue over patents because they should. They sue because they can. They sue because lawyers know that they always have a punchers chance of winning a lawsuit. They sue because they know it can tie up a competitors most valuable resources, time and money.   They sue because its become a growth industry in and around Tyler Texas (sorry Tyler, but you know its true. Tyler has been branded with the mark of the Troll) and  I’m guessing every person in Tyler knows that  is their civic duty to make ridiculous jury awards. What juror wants to kill the number one growth industry in the area and face higher taxes ?  IMHO, they don’t and won’t.

This company was going to get sued.  I know it. They didn’t want to face it because there was absolutely nothing they could do about it.  There is no proactive approach a small company or investors can take to fight patent trolls.  So I didn’t invest.

I have never walked away from an investment because of taxes.  I have never even considered taxes in making an investment.

I walked away from this investment because I knew they would be sued and I knew in one fell swoop the courts in the wonderful city of Tyler Texas could wipe them out.

That is just wrong.

Not only is it just wrong, every single investor is going to walk away from investments or refuse to put more money into technology companies simply because of the threat of Patent litigation.   In this case, I can at least give some credit to the competitor for having a business.  That makes them the lesser of evils compared to  Patent Trolls.

Patent Trolls are people/companies who don’t have operating businesses. They aren’t trying to protect anything. They have a collection of patents and they actively try to legally intimidate companies large and small into paying them.  That is their only mission. Extort as much money as possible using the legal extortion materials our government granted them through the patent office. Patent Trolls  are a far bigger threat to the technology industry than anything the Federal Reserve, The Congress or The President of the United States could ever do via our tax system.

Patent Trolls kill companies. Patent Trolls kill investment. Patent Trolls kill jobs. Patent Trolls will prevent the technology industry from taking its place as a source of jobs in our struggling economy  because NO COMPANY is safe from patent trolls. Any technology company with any net profit WILL BE SUED BY A PATENT TROLL at some point in its future. Its inevitable because there is nothing to protect them from it. NOTHING

Without question patent trolls and patent law will extend the great recession this country is facing.