Category: Media/Tech Business Models

Google is well known as a poster child for Linux – it’s got clusters of some 10,000 Linux machines happily cranking out hundreds of millions of searches a day. SCO is well known to be a sore loser in the Unix OS wars – it’s suing IBM, claiming Linux (which IBM is pushing hard) violates their intellectual property rights. Folks have speculate for weeks that perhaps SCO would go after Google, given its high profile and imminent IPO. Google would capitulate, the reasoning went, since they’d prefer to pay off SCO and insure a big IPO payday, rather than screw up an offering with a messy legal battle over some of the most important technology they use.

Well, Rueters is reporting that the other shoe has dropped, if somewhat softly. In the story, which has been commented on widely in the Linux/blog world, a company representative says that “SCO has had ‘intermittent, low-level discussions’ with Google, which is well-known for harnessing Linux technology to run its popular search service.” Some wags say that means SCO called Google, asked the receptionist for money, and were hung up on.

Now, I am no expert on the SCO suit – it smells wrong to me – but I’d count on the opinions of Larry Lessig. He says the suit is crap. If and how Google responds will be important. I’d wager they’ll simply ignore it as long as the suit is only against IBM. If SCO sues Google, I imagine the company will join IBM and fight hard. That feels like the right thing to do.

Over at Boing Boing Cory’s got a good rant on TiVo’s attempt to free video from the opaque prison most commercial PVRs have become. But he finds the DRM TiVo has imposed too limiting.

From his post: What’s funny about this is that it’s the exact opposite of the traditional way of running a disruptive technology business: no one crippled the piano roll to make sure it didn’t upset the music publishers, Marconi didn’t cripple the radio to appease the Vaudeville players — hell, railroad barons never slowed their steam-engines down to speeds guaranteed to please the teamsters.

As a curtain raiser for CES, John Markoff gives the ever morphing MSFT strategy w/r/t search/MSN a good once over in light of recent video/access/search biz model shifts.

From the piece: The Microsoft executive who heads the MSN service, Yusuf Mehdi, said that Microsoft generated $1 billion annually in online advertising revenue and saw growth opportunities in creating a Yahoo-style Web portal and Google-style search-based advertising.

For more context, here are columns I wrote on both MSFT’s search strategies and video/advertising strategies…

A busy day in marketing land, with loads of stats and trends. First, a study shows that “cross-channelers” – folks who use both a website and a second medium to interact with a brand, do it more with television brands than with magazines. Does this mean magazines are doomed? No, it means magazines are deeply lame when it comes to the web, IMHO.
Marketing Wonk also notes more proof of a strong, search driven Holiday season, and the increasing trend of media buys favoring online and cable over network and magazines….

Media analyst Tom Wolzein has made this statement in the past, but I thought he caught a clue and stopped spreading the meme. But he’s back with it: “The protection of commercial-financed television is both a logical, and an essential place for near-term government legislation,” Wolzien says in a Broadcast and Cable article.

From the piece: Wolzien has a plan: Regulate the DVR so consumers have to watch the commercials. It’s the only way to prevent the technology from destroying a $60 billion business. The government mandates all sorts of things in TV sets, after all—from UHF tuners to closed-captioning to HDTV. He sees networks feeding their signals with codes that tell DVRs whether the commercial can be skipped, giving “control of playback parameters to the content provider who sells the bulk of the revenue-producing advertising that funds that content.”

This is just the most blinkered piece of reasoning I’ve heard in many a moon. If you want to really kill “broadcast” television, force consumers to watch commercials when they have other options – and they will have other options, like HBO and scores of other channels that will have gotten with the PVR program and figured out other ways to bring advertising into television beyond the lame, dead-end 30 second spot format. (Not to mention internet video, for more on that read this). Harrumph.

No, more like a home video/entertainment server with some TiVo-like capabilities, according to rumors reported at this Mac news site. Thanks to Scoble for the tip off. Maybe one of my dreams (see #10) will in fact come true….

There’s been a lot of noise over Comcast lately, most of it about the company’s rather restrictive terms of service for their broadband product. (It boils down to this: They make it hard to do anything but take a high bandwidth feed from them. Thus they are approaching the internet, predictably, the way they approach cable – a dumb system with intelligence, such that it is, embedded in the servers, rather than at the nodes). So watch this space: Comcast is continuing to flex its programming muscle. This means that Comcast the ISP will act more and more in the interests of Comcast the owner of entertainment programming. Which net net, isn’t going to be good for the net, at least in the short term.

More and more I’m noticing my cable lineup looks like a magazine rack. Used to be, television was a scarce resource. As late as five years ago, it was still being programmed for large audiences – at least a million, if not more. If folks wanted well-produced niche content, they had to go to magazines. Now they can go to the internet as well, but until recently, I thought magazines could still compete for a smaller audience’s attention if they stood out as a voice for a particular community.

But I now believe magazines as we understand them are eroding, succumbing to the twin tides of niche cable and what might be called the second wave of Internet publishing.

First, TV. Cable seems to have finally realized that in a 500-channel universe, not every channel can garner a 20 rating. Hence a willingness to do focused, niche content that aspires to just several hundred thousand viewers at a time. This strategy can produce breakout mini-hits like Trading Spaces and Queer Eye, but in general, it seems cable has figured out how to make money selling audience sizes based on metrics quite similar to those of magazines. Thumbing up and down my cable menu, I feel like I’m at the magazine rack at Barnes & Noble – there’s 25 different sports titles, scores of shelter books (that’s the home/hearth category for you non-magazine folk out there), plenty of music/pop culture plays, even programmatic equivalents of “Guns&Ammo.” None of these shows, save perhaps the pop culture stuff, do more than 500K in audience on any given day. In other words, TV has managed to segment audiences into the same demographic/psychographic buckets that once were the sole purchase of magazine land. PVRs only accelerate this trend, adding the convenience of search and storage to the magazine rack concept. Add in the fact that the average cable bill in the US is more than $40, and you have a subscription+ad model, just like magazines. I should also note that the advertising business has shifted in kind: production costs have been driven down by technology, and buyers now understand how to buy spot and niche cable. End game: TV wins head to head against print. Just ask the publishers of Life.

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I subscribe to Bill Gurley’s Above the Crowd newsletter, and always find his insights worth the read. (Bill is a VC at Benchmark, and a former partner of mine on the Internet Summit conferences.) His latest missive, “Cleaning Up After the Ninth Circuit in an Attempt to Save the Internet” is an exercise in counter-intuitive thinking. When I first read about this decision, I thought it was a victory against the evil cable companies, who I am always willing to believe have nothing but their own monopolies at heart. The ruling said, in short, that cable lines had to be viewed as telecommunication services rather than information services. The distinction was important, as it meant the cable lines were subject to the same sharing rules as phone lines. In other words, it could open cable up to competition, similar to what the RBOCs already face.

Given that for three of the past four years SBC felt my neighborhood was not profitable enough to offer DSL, and I had to get it from Speakeasy, which offers service on top of SBC lines, I thought this kind of a ruling was a good idea – maybe there would finally be someone like Speakeasy who could offer me cable modem speeds and who had a clue about the internet (Comcast clearly does not – don’t get me started on that one).

Bill makes the case that while the intent of the court may have been good, the result could be crippling. I am not sure I agree with everything he writes – much of it is pretty rigid anti-regulation sentiment – but he makes some good points. Among them:

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So Marc’s company will go first – the first of the companies on everyone’s list of ’04 IPOs to drop an S-1 at the SEC’s doorstep. Here’s the Merc’s story on it…