2009 is not 1949. Modern consumer electronics and the Internet have ushered in a new economy of plenty. Production costs have decreased at an astounding rate. Distribution has become ubiquitous. It is no longer necessary, for all but the most ambitious projects, to seek out a studio to bankroll your pilot and a network executive to green light you for a time slot. Your talent and work ethic are now greater predictors of your success than who you know."


I think [Boxee’s] current differentiation is based primarily on giving users the features and content they want in the form they want it, which is mostly a function of Boxee not being encumbered by the legacy business models of the incumbents.
Well, today those legacy business models came knocking on Boxee’s door in the form of Hulu pulling its content from Boxee at the request of its conventional media incumbent content partners. Though the very diplomatic (but still genuine, which is a hard line to walk) blog post from Hulu CEO Jason Kilar doesn’t say why, I agree entirely with TechCrunch’s assessment that the content partners weren’t so keen to see Boxee getting all this great press for doing an end-around the legacy value chain these guys are fighting tooth and nail to prop up. Boxee was a stand-out at CES in early January and I don’t think it’s any coincidence that Boxee first heard from Hulu on this matter just 2 weeks after the NY Times ran a very high-profile and positive article on how Boxee was so awesome for delivering major media content to the tv in the way consumers want (which also happens to be exactly what the major media companies have been fighting against). When you think about it, this timeline pretty much matches what it would take for the content companies to read the NY Times article, bitch about it to each other, decide to go to Hulu, get push-back from Hulu, and then steam-roll them.
Steve Raymond has a great post on why this is such a short-sighted move by the content providers, with which I totally agree. So, I won’t rehash it here. But, I will say that this issue is only the tip of the iceberg threatening Boxee. Though they have effectively found an un-endorsed end-around to the legacy living room value chain, this shows how dependent they still are on the goodwill (or at least ignorance) of the incumbents. They have poked the bear and it is now awake. The networks obviously don’t want to lose the high CPMs and concentrated audiences they get from broadcast tv, which can arguably be replaced by online ads at some point in the future. But, what can’t be replaced is the increasingly valuable fixed revenue stream from the carriage fees paid by cable and satellite operators (NBC and Fox, the primary content providers to Hulu, both own ~10 widely carried cable networks). A product like Boxee is a direct threat to cable and satellite operators because it eliminates their positions as programming gatekeepers and turns them into dumb data-delivery pipes. So, I wouldn’t be surprised if this move was driven more by the cable and satellite companies than the content providers.
In my original comment, I predicted if Boxee succeeded in pioneering this space they were likely to end up like TiVo. Now I think they’ll be lucky to get that far.
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). They pioneered the concepts of open developer platforms and mash-ups that are all the Web 2.0 rage today, they just did it on the desktop. By the time I joined the team nearly a year after Konfabulator was acquired by Yahoo!, they had built a thriving ecosystem (yes, it was a real ecosystem, so I can say that without being buzzword compliant) of thousands of independent developers and millions of users worldwide.
As we continued to build the team and grow both the user and developer bases, we began to learn and build things that we realized had much broader applicability than just Widgets for your desktop. With the help of our marketing all-stars, Brady Wood and the awesome Shan-Lyn Ma, we started to create best practices and tools for building and cultivating a community of independent developers around an open platform and helping connect them to users. This work resulted in the relaunch of the Yahoo! Widget Gallery (which, for the sake of that douche over at VentureBeat, pre-dated the iPhone App Store) and a number of other improvements for the desktop Widgets product. But, it also became an essential part of the launch of Yahoo! Mobile Widgets at CES, the TV Widget launch at IDF last week, and some other stuff that’s still in the works down in Sunnyvale. It was also a great opportunity for us Konfabulistas, many of whom got to work on some of these fun projects and some of whom even moved on to these new teams.
So, in addition to being happy for my friends, who have been working on the TV Widgets project these last few months since I left, I’m proud to see the work we started (finally) coming to fruition. Way to go guys (and girls)!
]]>This past Sunday, I had a long discussion about the NY Times article on Time-Warner’s new content-centric strategy with my father, who happens to be in the film business. While the article touched on some of the complexities that exist in the legacy value chains for both movies and tv, I thought it glossed over important details and ended up being somewhat contradictory. On the one hand, the author labels the move to spin off T-W Cable as “eviscerating the once-popular corporate notion peddled by business consultants and merger specialists that content and distribution should reside under one roof.” But just a few paragraphs down, he talks about T-W’s interest in NBC Universal, primarily as a distribution outlet for the tv shows T-W produces.
In theory, a pure-play content company would *just produce content* — it wouldn’t program (i.e. tv network), it wouldn’t distribute (i.e. movie studio), it wouldn’t deliver (i.e. cable/satellite provider). This type of horizontal focus (or modularization) is advocated by Clayton Christensen once a market of vertically-integrated solutions has reached a “good enough point” for consumers, because it enables the firms at each layer in the value chain to focus on what they do best and exploit best of breed solutions available in the rest of the stack to do the rest, thus maximizing overall efficiency and profit. In our terms, a company purely focused on making the best content is free to choose *whatever* distribution solutions will make it the most money from that content. In NewTeeVee’s analysis of this same NY Times article, they said “How we watch is all the same. What we choose to watch, however, is a different story.” In other words, distribution is the commodity and content is the differentiator. I couldn’t agree more if the only channel in question is online. But as long as content creators want to exploit their content beyond the Internet, there is a different set of rules, and those rules generally extend to what those creators can do with their content on the Internet as well.
Studios can no longer claim ignorance of what consumers want — Jeff Bewkes (T-W CEO) tells a story of how he was told by file-sharers “We’ll pay for movies if you give it to us the right way” — but, they are now claiming (however ironically) impotence to deliver it —  that the major stakeholders in their other (more lucrative) means of exploitation, like Walmart (DVD), theater owners (theatrical, duh), and cable/satellite operators (PPV), won’t let the studios innovate too much online for fear of cannibalizing the other channels. As much as this may be true, the studios are pretty happy to have their hands tied because they already know how to (and do) make a lot of money from those other channels and they have barely started to figure out how to make real money online. Going back to Christensen, this is a classic example of an entrenched incumbent seeing disruptive innovation coming a mile away and doing nothing, as epitomized in this quote from the NY Times article:
But until technology forces Hollywood’s hand — Mr. Bewkes suggested that it would take three to five more years before high-definition videos are delivered conveniently over the Internet — the industry will retain its grip on sequential windows of release.
This all stems from the fundamental discontinuity of extending an offline media business online. In the offline world, control is the key to success — it is what enables the winners to exploit the inherent inefficiencies in the system at the expense of the losers and, to no small degree, consumers. In the online world, attempts to retain control generally stifle growth by limiting exposure — you have to be willing to let go of your content to a certain degree and you need to build business models designed to take advantage of that approach. Not only is this counter-intuitive to a lot of conventional media executives, who have built careers (and personal fortunes) retaining the tightest controls possible, but it may also be in direct conflict with other important revenue streams, as we see with T-W above.
Unfortunately, there is no easy solution for those trying to bridge the gap. Some companies, like the NY Times itself, are leaping across this digital divide while they still can and largely abandoning efforts to artificially protect their offline business from the specter of cannibalization. And, they seem to be having some success. This past Sunday evening, there were five NY Times stories on the front-page of Techmeme (the next closest sources were TechCrunch and CNET with two stories each), which should be driving some solid traffic to nytimes.com. By making their high-quality content available for free on the web, instead of holding it back to drive paying offline subscribers, the NY Times is aggressively driving readers (and thus ad revenue) to its online business. While those online readers may not be as lucrative as the offline subscribers today, there’s lots of room to improve online monetization if you have the readers, and offline readership is only going down and fast. On the opposite end of this spectrum is the Philadelphia Inquirer and their recent moves to consciously make their online offering *less* competitive in preservation of their offline business. T-W and the rest of the film industry seem stuck somewhere in the middle — keeping abreast of what consumers are demanding and giving them just enough incremental progress to remain satisfied without actually doing anything really disruptive to the studios’ other businesses. Christensen would argue that waiting too long on the offline side will preclude one from successfully making it to the online side when it’s finally more attractive (see Recording Industry). I guess we’ll see which side Bewkes and company end up on when “technology [finally] forces [their] hand.” ]]>