The Changing Supply Side of Media

Economic theory is based on supply and demand. A change in supply, which could be a change in the value of any key determinants such as the price of inputs, the state of technology, and the number of suppliers, causes the equilibrium price to change (Media Economics, 48-50). In the case if digital media, those elements are very much related; technology clearly changed the number of suppliers as well as the price of inputs.

What surprised me the most is the relatively little attention to consumer’s direct participation in the supply side, which appears to be among the most disruptive forces. Wikipedia is such an example. In the old days, dictionaries were the work of a group of respected scholars, who often work for years behind closed doors. Wikipedia is so successful because in many cases, the speed and wisdom of the crowd is far more dynamic and superior to limited scope offered by a few professionals. And it is hard to distinguish supply from demand – consumers are acting as suppliers at the same time.

That is not to say, consumer participation will necessarily fully replace all forms of supply in media. As the saying goes, content is king. Technology typically does not replace content; it threatens distribution. Consumer generated content can be more disruptive to the supply side.

So what makes “new media” successful? Facebook is a prime example here; it combines a technology platform with user generated content. Technology wise, it is very easy to create a similar distribution platform. But it is really the combination of supply and demand that makes its first mover advantage so powerful. Twitter is much the same way. The changing supply side of media also has a non-economical dimension which is a game changer. I hope to explore that with the learning ahead.

Reflections

If there is one word to capture the state of economics in digital communication, a lot of people would probably think of “free”. For me, the word is “change”.

There are a lot of different opinions about what is going on, and what is about to happen. Surely, a lot has already happened. Many years from now, I think we will look back at the digital revolution, and realize that its impact is no less than the introduction of printed press. The ability by human race to disseminate information is increasing by orders of magnitude, in terms of speed, volume, and reach.

I don’t take for granted that technology achievements are always positive for human advancements. But changes tend to be disruptive, and sometimes painful. If we look at job losses with a historic perspective…our ancestors had only two jobs: hunters and gatherers. Gradually we could meet the basic needs with less resources, other “professions” emerged, and the excess in human capital allowed us to expand our horizons. In this framework, I see the disruptive forces in digital communication as enablers for exploring new frontiers.

A lot of people, like me, probably wonder if the combined forces of free market, technology and globalization could be as damaging as they are powerful. As the lessons are still being learned from the recent financial crisis, we are probably at a point to reflect on what has taken place in the digital communication space, and perhaps even shape its future.

These are just some of the topics I hope to learn and engage in our discussions:

• The fundamental economic impact of the economic model from scarcity to abundance
• The changing media industries, particularly entertainment, TV and interactive media
• Does economics necessarily drive everything, particularly digital communication?

As we send astronauts to explore planets, we have come a long way from hunter and gatherer days. To me, expanding human horizon is good economics, more so than preserving the same jobs for 100 years. I hope my optimism will be validated by the learning ahead.

The Great Wall of DRM

The Great Wall of China is one of the marvels of human history. Astronauts claim that the Great Wall is the only man-made object that can be seen from space.

 

The original construction of the Great Wall started 6th century BC, and continued through various dynasties into the 16th century. It is the longest and largest construction ever completed in human history, and easily the most expensive ever. Despite of its grandeur, it was never truly successful in achieving its original objective as a defensive fortification. Yet the obsession to build walls around valued assets continued through dynasties, and to this modern day.

 

Just like the Great Wall, defensive Digital Rights Management DRM has a number of inherent weaknesses:

 

The presence of “Wall” is an open invitation for attack

The wall is an advertisement for something valuable, a challenge for the brave, a magnet for the greedy, and a prize for the brightest hackers in cyberspace. Any human-constructed form is destructible.

 

The wall is comprised of almost infinite number of single points of failure

The wall is a linear structure. Compromising any point will lead to the failure of the entire defensive system. A highly restrictive DRM system is a fragile line of defense. It may have the most advanced technology, but it will never overcome the fact that digital media must eventually be presented in its original open and free form, for human consumption.

 

The wall is static

The wall, once built, can not be moved to accommodate changing needs. DRM based on restriction locks down content, prevents creation and interaction. This severely limits the value of the content it is trying to protect.

Opponents of DRM calls it “Digital Restriction Management”, probably for good reason, because traditionally DRM attempts to control the use of digital media by preventing access, copying or conversion to unrestricted formats. This is essentially about the control of content, a perfect legit cause, but when pushed hard onto the users often creating resentment and severely impacting the flow of information. Whether to protect value by prevention, or to create value by open interaction, is a delicate balancing act.

As long as there are those who build artificial walls, there are those who break them. To avoid becoming ancient relics, DRM needs to change from its foundation, starting from the mind set.

The Disaster that Never Happened

Sliverlight, windows media’s little brother, has found a world stage to announce its arrival, thanks to NBC’s Summer Olympics website. Contrary to a lot of predictions, it hasn’t been a disaster, part attributed to a successful implementation, part due to the still complimentary nature of online media.

 

Over the first four days of the Games, NBCOlympics.com had 291 million page views and 13.5 million video streams, surpassing any previous records. Even the relatively lower video volume is impressive, considering the hurdles the new site faced:

1. Silverlight’s low installed base
2. No support for certain platforms (Windows 2000, older MACs)
3. Requirement for user to fill in broadband provider (more on this later)

 

Clearly, those users who had the right platform, and the savvy to complete the installation process, were rewarded with a rich set of contents “on demand”. As the game goes on, the number of users will likely increase during the next several weeks.

 

I have watched mostly recorded videos over the last several days, on a wireless internet connection. The user experience is good enough for sustained viewing and repeat visits. However, the interface is not all intuitive. It’s easy to browse, but hard to find target contents. Great site when you are outside or roaming around, but it’s clearly not a replacement for TV yet.

 

Strength:

• Silverlight appears to be bandwidth efficient and adaptable, delivering a fairly smooth user experience in varying conditions. Considering the volume to date, NBC has already proved its scalability and robustness
• NBC was very smart to play a low resolution Ad upfront, therefore gaining more time for progressive download
• The user interface is simple and quite intuitive, a simple feature such as showing related TV schedule adds value to the online experience 

Weakness:

• The biggest drawback is the confusing process of asking the user to identify broadband provider during install. As a student in the coveted UW streaming media class, after listening to a lawyer talking DRM for an hour, I still don’t quite understand the intricacies here. The point is, this step has probably turned away a lot of users.
• There are few “live” streaming videos
• User control features are non-existent, for example, rewind will start buffering all over again. This is very inefficient for the streaming provider. 

The Games are far from over, so far both NBC and Sliverlight have proven skeptics wrong.

Brightcove BitTorrent a Match Made in Heaven?

There is no question Brightcove is quickly becoming the darling of outsourced streaming media.

Brightcove provides the technology, framework, pipes and even Ad channels, everything a content provider want, so they can focus on what they do best, creating content. No wonder Brightcove’s client list is starting to read like a who’s who in online media.

So with that kind of success, you really wonder what Brightcove’s infrastructure is like already. Are they building data centers like crazy? At the current growth rate, they will need to build or buy some huge content delivery capabilities ahead of the demand.

Unicast delivery of streaming media is very capital intensive, and requires a lot of upfront and operational cost. What could help Brightcove to manage the infrastructure cost while still delivering the quality that its customers want?

Enter BitTorrent, once the badboy of media, now wants to be a white knight.

BitTorrent came up with something called DNA (Delivery Network Accelerator), which is essentially a P2P “helper” for CDNs. In other words, a hybrid model that uses peer-to-peer to carry some of the distribution burden, while letting the content distributor retaining control of the user experience.

Guess who is the first to sign up? Brightcove. Here is the press release, which states:

“Brightcove Show takes advantage of new advances in the Adobe Flash Player technology, high-quality video encoding, and content delivery acceleration technology from BitTorrent, to enable full-screen video playback of broadcast-quality content streamed through the Internet.”

Note this is a hybrid model. Brightcove controls when and how P2P comes in the picture. A user session may effectively be receiving multiple streams, from Brightcove and from peers. To mix those streams effectively and control the quality in real time is no easy task. That’s probably why there are still no clear signs of the technology being used heavily by Brightcove since the announcement.

As streaming standards inevitably moves to HD and other higher bandwidth formats, P2P will always remain a very attractive model economically. Content distributors such as Brightcove will seek to leverage the technology while retaining control, likely with a hybrid model.

On the other hand, P2P does come with its usual pitfalls, client intrusion, security, control. It’s also got a bad rep that is maybe just too risky for average media consumers. To make it work with main stream business, would be a bit like making a family man out of a rock star. Makes you wonder how far the flirting between Brightcove and BitTorrent has really gone?

Quicktime is dead

If it wasn’t for the assignment, I wouldn’t have known that QuickTime as a streaming option is so… shall we say, passé.

Yes, I know there is the apple site, which has some fantastic trailers (check out Jolie in “The Wanted”). But I challenge you to find any major site that uses QuickTime.

In fact I did try. Went as far as picking another Steve Jobs’ brainchild – Pixar. Creator of some of the most creative animated films (Toy Story), Pixar was bought by Disney, which effectively made Jobs a major shareholder with a seat on Disney’s board. So does Pixar use Quicktime?

Yes, indeed. Pixar features trailers for its latest creation – Wall.E. Here is Pixar’s Wall.E site. There is only one word that can describe the layout, plain. It offers four different streaming sizes, which is good for the viewer. QuickTime streaming quality is acceptable, although not fantastic (compared to Apple sites). The rest of the user experience is almost non-existent. It’s hard to make it less attractive, with tons of wasted white spaces filling the blanks. While there is some other content on the web site, clearly they are mostly static. Nothing to attract the user for repeat visits. Pixar is a first class animation shop with amateur web designers. Pixar site, as it appears, is there purely to prove that QuickTime is still alive outside Apple.

In sharp contrast, is the Official Wall.E Site created by Disney. It’s lively, integrated with animation, and it uses Flash! So even Disney, the company Steve Jobs owns a big piece of, prefers Flash over QuickTime.

This is significant, considering some of the better known online media sites are used to be predominantly QuickTime (MTV among others). Now they are mostly flash, plus others (NBC’s bold venture with Silverlight).

What happened to QuickTime, at least as an online streaming option? Lack of installed client base? No integrated features favored by web designers? Cost of licensing? It’s probably better suited for an MBA class to analyze, hopefully soon. Somebody hear the whisper, wake up, Apple.

Live Search outshines Google with Embedded Video

Microsoft Live Video Search is definitely one step ahead of Google, at least in terms of effective use of embedded streaming media.

 

What’s the big deal about embedding streaming media into the web page? If I’m watching HD content, I’d definitely want it to be in a separate window, not constrained by limited real estate and format of a web browser. But embedded streaming media has some unique advantages:

• Association: it allows other static or dynamic content to be displayed along side with video, therefore enhancing the whole user experience
• Multiple content: it can display multiple sources on the same screen, even simultaneously
• Interactive: it can use the existing browser technology, to control the playback of media based on user feedback (mouse movements) 

Video search is a prime example of where embedded format shines. A search comes back with multiple contents, which needs descriptions alongside with them, and ideally it should provide a user a preview without leaving the screen.

 

Microsoft Live Video Search returns search results in 160×120 “thumbnail” sized clips. The clips show as static images. But the magic happens when user moves mouse over it. The thumbnail actually starts playing (with sound). The size of the video combined with voice is good enough to provide the user a preview. And without leaving the search screen, user can get an excellent feel for the content of the stream. The compact size of the format may prove to be a particular hit on mobile.

 

It is very easy to move the mouse between clips, and controlling the start the stop of thumbnail videos. As a result, users are more likely to try more clips. In addition, user is more likely to find the desired content, while at the same time generating less aborted and wasteful resource utilization. This is definitely a win-win for both the user and provider.

 

How good is it? It actually works for all videos, including those search results from youtube. And as far as I have checked, none of these features are available on youtube or google search. What does this mean? Because of the use of this technology, users are more likely to use Live Video Search as starting point for media!

Midomi – media streaming creates new dimension

Vast majority of media sites play one way streaming. Gaming is “interactive”, but even in that case only small pieces of control commands are sent to the server. And all user interactions are through mouse and keyboard.

Midomi is different that it uses two-way streaming. It is a music site that adds a new dimension of user interaction through the effective use of uplink streaming and voice recognition.

It allows the user to search for music in four different ways:

• Sing or hum a few seconds of the song, midomi will find it
• Say the name of the song or artist
• Type (the traditional method)
• Grab, use a sound source like radio

Sound feeds into the microphone and sent uplink to the server, the voice recognition software dynamically finds the matching song and plays it. According to user feedback, it works amazingly well. I guess you have to try it out for yourself J

Looking beyond its song recognition features (which is cool but not for everybody), midomi can really give us a few hints about the potential power of media streaming not just for content playback, but also user interaction:

Discovery

Just like google not only give “a” result, but hundreds of finds for exploration. This is really provides the foundation for a voice search engine. This new search paradigm creates a lot of new opportunities.

User participation

The model can be adapted to some sort of online contests and shows. Users may also create their own music or sing/mix their sound.

Mobile

Midomi is already supported on iphone. Speech recognition becomes a very powerful tool particularly in mobile setting. We should envision the day when

Check it out, live your “American Idol” dream online.

The Wimbledon Test

I quickly found out researching for streaming websites can be a highly distracting (although enjoyable) experience. It’s really hard to stay on one site while there are hundreds of others screaming “click me”! In fact, what starts with one site often leads to elsewhere, and onto other subjects totally not where I started.

 

I did manage to focus on one subject, catching some Wimbledon actions. Tracking the little tennis ball on screen turned out to be a good test for streaming.

 

I wanted to see a few players and actions in the earlier rounds. I started with MSN Video, and to my disappointment, the search hardly came up with anything. What it did have was mostly “network” content, Fox, NBC etc. Not easily giving up on Microsoft, I went to video search on Live, and it came up with more results, still most are similar short news stories from the media outlets…At this point it’s hard to resist the temptation of, what else, youtube. This is really where the richness of user generated content shines. The result definitely looked promising. Well, after watching a few clips, my initial excitement waned quite a bit. Interviews were great, player actions were ok, but I can’t track the tiny (and fast moving) tennis ball!

 

After watching a few clips (hours?) of standup comedy, which clearly doesn’t demand the same video quality (talking about distractions). I finally came up with a comparison of two sites:

 

	MSN Video	YouTube
What I like	·    Excellent video quality ·    What appears to be a rather structured layout (and consistent user experience) may appear to older (more affluent) audience	·    Rich content (user generated) ·    Very international, which is a big plus for the content ·    Good cross references (why average user stay on youtube longer!)
What I dislike	·    Too little content ·    The same structured layout maybe unattractive to younger audiences ·    Search often came back blank with a blank screen (waste of opportunity to engage user) ·    Advertisement in front of every clip (not a big deal)	·    Most clips are of barely viewable quality ·    Too much content, no good classification/rating mechanism. User tend to randomly hop around and subject to instincts and distractions ·    “Free for all” feel is great for user who want to “kill” time, but not so for user who values their time (even for entertainment)
How it could be better	·    Seriously expand the footage beyond a few media outlets ·    Differentiate from YouTube by quality of experience ·    Consider creating special interest “channels”, open up for third party and users to bring rich content	·    Improve overall quality of experience to the point that it can be shown in living room TV ·    Label high quality video and make them searchable ·    Use ad to fund HD

 

I’d summarize my experience from a user point of view:

·       Content is still king, but the days of internet video as pure amusement are probably numbered

·       Quality experience has the real “wow” factor, users’ expectation can be raised almost instantly when they see HD

·       Obviously, combining rich content with high quality video provides an unparalleled user experience. This is the key to go from “dorm room” to “living room”.

·       As users grow older (more emphasis on work, family and structures), random surfing and short clip model is not sufficient for their entertainment needs. These users value their time and will demand a high quality experience (and pay for it)

·       Advertisement is ok. Users are willing to accept that in exchange for quality (think choosing between HD/Ad and low res/no ad). In fact, a short funny commercial maybe an attraction to the audience.

 

I came across some really interesting sites in the process (vuze), topic for next time.

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