The closed environment

For years now, I have worried about Apple’s tendency to prefer closed environments to open ones when it came first to its iPod line of products, then its iPhone line, and now it’s iPad one. Each of the product are terrific consumption tools but that’s where they stop and my worry stems from the trend they create, one where Apple is creating an increasingly closed environment, more in line with the type of thinking that permeates the consumer electronics, movie, and telephone industry than the one that exists in the computer world. It seems that whenever Apple enters a new industry, it may have a small impact on that industry but the industry itself has a big impact on Apple.

Of course, one could see this as a natural evolution as the counter-culture 1970s Steve Jobs was booted out of Apple and, after a long exile, came back as Steve Jobs, founder of Pixar and eventually morphed into Steve Jobs, largest Disney shareholder. The net result is that the Apple leader has now learned to turn his company into the new Disney, bringing safe products to the masses in a highly sterilized environment that may not appeal to all.

And a Disneyworld version of computing is OK for most people. Most people love the magic kingdom but, for a portion of the population, Disneyworld is a place you visit, not one you live in. And that’s where conflict arises.

For people who have lived in the mostly free-for-all environment of the computing industry (and its cousin, the anything-goes world of the Internet), the idea of a Disneyified world is as close as you will get to their concept of hell. And those people tend to be the ones that develop applications.

Two Impulses

So developers now find themselves conflicted between two impulses:

• On one hand, Apple is created this Disney-like environment that increases the level of control Apple asserts in many spaces including the music, video, and mobile space.
• On the other hand, this type of environment attracts large crowds who really enjoy the safer experience. As an added bonus, the space actually looks very clean and the interface components are very slick.

The market size issue is one that larger technology companies are starting to grapple with in another arena: China. For example, Google has been trying to figure out the right balance between insisting that China stop censoring internet content and protecting its chances at getting into that market. Many of Google’s competitors, in the meantime, stood on the sideline, arguing that China is too large a market to ignore and that corporations should not get involved into politics, a position that is often at odds with their own actions in the US.

But back to Apple.

Apple vs. Adobe

For those who have not been following what’s happening between Apple and Adobe, here’s what’s happening. Adobe owns Flash, a product that allows for video or more interactive type of content  on the web. Thanks to the Flash technology, distributing video on the internet became a reality because the Flash player ran on most browsers and, thanks to strong marketing by Macromedia (the company that was managing Flash at the time and was acquired by Adobe), the Flash player became ubiquitous on computers.

When Apple first released the iPhone, it presented it as a different type of phone because it offered a browser that gave its users access to “the full Internet,” a statement that highlighted how poorly other mobile phones rendered web pages. This was a major advance  but there were a couple of things that were not included: in order to ensure that the browser ran quickly and reliably on the lower-CPU phones, Apple made a technical decision to remove Java and plugin support from its browser. For the most part, that was OK but many people started complaining that Flash was not included because a large amount of internet video was delivered using the flash player. Apple said, at the time, that its partnership with YouTube should offer with enough video content and that the other groups were pretty much fringe.

Over the years, the discussion continued in tech circles and Adobe, now owners of Flash, decided to reposition it as a tool that would allow for creating interactive content that could run on any platform. It was widely known in development circles that Adobe was working on a version of Flash that would help developers create iPhone applications with the Flash development tools. So Apple upped the stakes by banning its development community from leveraging such tools. Because of the tight control Apple has over what gets on the iPhone and iPad, it essentially killed any chances of using Flash to create programs for those platforms.

As one would expect, Adobe was very unhappy. They had made the ability to create iPhone applications with Flash a key feature of their new offering. So they huffed and puffed enough to get the tech community fired up.

The controversy has now gotten so strong that it got a response from Steve Jobs himself, which resulted in Adobe abandoning their strategy of distribution on Apple devices.

Apple: Standard bearer for openness?

Jobs’ note is interesting in many aspects. On the one hand, he does seem to address many of the issues that have been raised and explain why Apple’s position is the friendly one. On the other, people with enough knowledge of the underlying technologies can see some cracks in the arguments made:

First, there’s “Open”

That Apple would lead with the concept of openness is ironic at its best and deceiving at its worst. While it’s true that Adobe Flash is not open, Apple’s selective list of standards it is supporting reveals some of the politics surrounding web standards. Yes, HTML5 is completely open but the issue of video in HTML5 is a small developer skirmish in which Apple is backing a horse that is not necessarily the most open one.

H.264

It’s interesting that, in the paragraph about openness, Steve Jobs mentions HTML5, CSS, and JavaScript but leaves the issue of video codec for later in his note. That comes in the discussion of “the full web” where he mentions support for H.264.

That name represents a standard that is not an open one. In fact, it’s one that needs to be licensed in order to be used and, while many people use it (as Apple’s note demonstrate), it’s one that could generate royalties for many companies when the agreement to make this standard royalties-free for internet video ends in 2015. And one of the companies that would get some of those royalties is.…

(if you haven’t guessed, you must have skimmed throught the rest of the article)

surprise, it’s Apple Inc., a company that happens to own some proprietary intellectual property that is included in this standard.

And, surprisingly, the best tool for authoring content for the H.264 standard is Quicktime, a piece of software that is distributed by… Apple.

I’m not going to deny that the rest of the arguments (around security, performance, and battery life) may hold value. I’m also not going to claim that Jobs is wrong in saying that the “Touch” experience is not fundamentally different from the experience that Flash was initially created for.

But I am going to go out on a limb and say that this whole fight between Apple and Adobe comes down to a single thread: Who will control video on the web. Jobs is probably not thrilled that Flash has usurped Quicktime as the main contender on the web and is working on changing that.

Reasserting closed systems

While the war between Adobe and Apple is an amusing soap opera, the last reason Jobs gives for not supporting Flash ought to be the most chilling to the development community. I could paraphrase but I wouldn’t do it justice so here’s what he said (emphasis is mine):

We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.

…

Our motivation is simple – we want to provide the most advanced and innovative platform to our developers, and we want them to stand directly on the shoulders of this platform and create the best apps the world has ever seen. We want to continually enhance the platform so developers can create even more amazing, powerful, fun and useful applications.

At first read, an innocuous set of statements but one that has potential implications for the future of computing. If the thinking in Cupertino is that third party development tools are bad, then what about the Mac and non-Apple development tools on OSX? Where would those stand. And, while the introduction of new features are great, what happens if Apple decides to remove old ones? That is question left unanswered by this note and one that may leave the door open for more concerns.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple is the new China. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Let’s review: as far as Apple is concerned, as illustrated by the navigation in its homepage, there are three major lines of business: the Mac, the iPod, and the iPhone. And then, there’s the redheaded stepchild, AppleTV, which the company considers “a hobby.”

But while the company claims to not be interested in this market (even though the product was called out as a successful hobby on a recent analyst call), it seems odd that it would be working so hard to attempt to cater to the video-specific crowd: iTunes Extra, the rumored dealings with Disney and CBS, the increased partnerships to release movies on iTunes at the same time as DVDs (a move that Netflix consider too bold) all seem to point to greater ambitions to get some level of control over the third screen.

But what does that third screen really need? If you look at most the news coming out of the Consumer Electronic Show this week, it looks like the rise of web-based video being available either as an embedded option, or through a BluRay player, or a separate box, will soon be a given. NetFlix is one of the early winners in this but where would that leave Apple. It has strong relationship with the studios (its own CEO is the largest single shareholder in Disney) and a product that is about to become almost irrelevant.

“Send to TV”

But the function that most TV screen present still needs some form of remote control. That remote control could (and does) come as an iPhone app but what if there were a different way to experience content from the internet. Something like a “tablet” device that would allow someone to surf the internet on a smallish (maybe 10 inch) screen they could use when it comes to reading text. But, once a video component shows up, they could press a “Send to TV” button that would get the stream started on the big screen.

Attached to the TV would be a “simple” device with either an RF or bluetooth receiver, a network output (or built in Wifi over 802.11n), and an HDMI and power out. Inside that device would be electronics that would have a small internet stack, a web server or a bonjour bridge (for any form of administration), and enough video power to stream movies from a variety of format. The “receiving” end of the software could also be added to existing AppleTV software to ensure that the new tablet could talk to them.

Technology is there already

Those technologies are mostly there, by the way. Apple has another small component called Airport Express that currently can receive music from iTunes (and can be hacked to received sound from other sources). Adapting it to receive video doesn’t sound too farfetched.

And Apple just released a software update to AppleTV to improve connectivity between iTunes and the device over Bonjour. Could Bonjour be used as the mean of instructing from the tablet to the device?

Clouds

So it’s not totally improbable that the AppleTV would play an important part of the tablet’s future. It could be one of three major features: cloud computer, e-reader, and TV on steroids.

The cloud part would include web-based version of Apple’s iWork suite, along with a new iTunes focused around the offerings of lala.com, and the me.com offering for other basic services. It would also include instant on version of currently available for rent movies, leveraging the new large data center for streaming purpose. This portion of the offering would counter much of the discussion about netbooks and their effect on the device.

The option of sending video straight to the TV would also “simplify” the device in that it may not necessarily need to include enough power itself for processing the video. This, in turn could help the company lower the price-point of the tablet device (shifting the cost of video processing to the “add-on” everyone who doesn’t have an AppleTV will want to purchase).

So what do you think, is this a totally crazy idea? Chime in in the comments…

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple: Of Tablets and TVs. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Media: Advertising

The advertising industry is probably going to be one of the most affected industry this year, hit by the double wammy of a slower economy and a push to digitization.

The economic slowdown will result in a substantial drop in advertising expenditures for traditional media: Newspapers and magazines are already feeling the pinch and I suspect it is not too much longer before television, radio, and display advertising go through the same changes.

Direct media will continue to do OK, however, as it is result oriented and this fully measurable.

Online advertising will continue moving towards performance-type models with CPMs dropping substantially and CPCs and CPAs becoming the de-facto standard.

Social Media will see a sharp reduction in investments unless it can prove that it can perform better than other forms of advertising, as companies will be less interested in experimenting this year. This will put pressure on pricing models relating to social media. One potential way to fight back is to highlight targeting and demonstrate as such targeting benefits ad buyers.

The net-net of all this is that advertising agencies and their holding companies are going to feel pretty squeezed this year, unless they start developing marketplaces than can help their customers purchase bundles in a more efficient and more cost effective fashion. Because ad agencies have generally been slow at reacting to changes in their industry (we’re over 10 years into web-based advertising becoming mainstream and some ad agencies buyers are still questioning its impact), I’m not very hopeful for their short term outlook and positively worried about their long term one.

Media: Print

Print media is about to have one of the worst years of its existence. Newspapers will continue to fail and at least one major newspaper will close by year end (by major, I mean one of the top 100 newspapers in the country).

Most magazines will see substantial drop in their advertising base and many will move to web-based only productions, transforming themselves from print publications into web-based ones. In the process, many of them will have to shed staff as the economic model for web-based publications tends to be much more thinly staffed than that for prinit publications.

Other magazines, like The Economist, The Atlantic, Harper’s, and The New Yorker, will continue to thrive as print continues to be a better place for long form writing than the web. As other publications depart for the web, those long-form, more reader-oriented (and by reader, I mean people who READ instead of scan articles), will continue to thrive, with their advertising base increasing in value.

Media: TV and Movies

The movie industry will, at best, remain flat, and probably see a small decrease in revenue.

TV, on the other hand, is in for a major shake-up. Just as newspapers are starting to feel the pinch of the Internet, IP-based video is going to have a substantial impact this year, eroding audiences as they increasingly choose the place and time for the shows they want to see and, in some cases, may even demand the way in which the media offerings are offered to them.

Just think of the current offerings: today, you can watch a show on television, you can buy it from iTunes or Amazon, you can stream it (or at least stream older episodes) on Netflix as part of you rental plan, or you can watch in in an advertising supported mode on either hulu.com or the station’s own site. On hulu.com, you may have a choice of advertising either watching a two-minute commercial before the show and watch the show uninterrupted or you can watch the show with some limited interuptions as you would on regular TV.

However, today, most of that experience is based on the assumption that you would be using your computer to do so. A new class of devices is starting to appear that are offering access to some of those services directly from your TV: Apple started with their AppleTV device and companies like Roku, LG, Samsung, and others also now have offerings on the market. This will become more common and continue to erase the mark of what TV networks are about. The focus will continue to shift to shows, giving more power to creatives who can deliver the goods to an audience and lowering the usefulness of aggregating middlemen, which is essentially the role TV networks currently play.

In turn, advertisers will want to pay less for TV as they can measure those audiences less than they can those online and see decreasing return on investments for their TV-based advertising expenditures as compared to their digital ones.

So the bottom line is that traditional TV will suffer as more an more of video production is moving to an IP stack.

In the next entry, I will look at general technology related trends that may emerge over the next 12 months.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2009 Predictions: Media. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

A few weeks ago, the major TV networks held several events catering to advertising, expecting to sell some advertising for the fall TV season. This period, called the upfronts, is generally a good time for TV stations to attempt to scare advertisers into paying a lot of money for advertising, riding on the fear that their competitors might pick the best spot. However, something different happened this time: some advertisers decided to not join the dance.Â

The reason I’m looking into this effect is that there seems to be a major shift under way in the traditional media business and it is one that gives only two choices to traditional media company: adapt or die.

How TV works

The interesting thing about traditional broadcast television is that its model is based on large market inefficiencies. Let me explain: When a new TV show is created, the creator generally has to pitch the TV network, in an attempt to get the network to pick it up. The network then goes through some analysis in trying to figure out how the show might fare with its audience and whether the audience it attracts is one advertisers is willing to pay for. If they determine that the show could make them some money, they agree to fund a pilot, which is essentially one show that they can take around to test. If that pilot looks like it has potential, the TV station then orders up a few episodes of the show to put it on the air. In the process, they also make their affiliates, who own a geographical monopoly on distributing that content, that the show will be coming up.Â

TV networks make money from two sources: advertisers and fees from affiliates. They use some of that money to buy the rights to a TV show, which is often produced by a separate company. While the separate company may make a relatively small margin on the initial run of the show, a success can enable it to sell the show rights to other companies after the initial run. This is why some non-network TV station can run re-runs of older shows long after those shows are no longer producing new episodes.

TV is imploding

Jeff Jarvis uses the the term exploding TV to talk about the current changes in the TV industry. I believe is contention is wrong: TV is not exploding but rather, it is imploding. The current model is predicated on inefficiencies in the way content is distributed. However, in a future where IPzation rules, TV is trying to reform itself into something new and here, it runs into some problems.

The first problem that TV networks are going to encounter is that their whole living is predicated on something being big: big shows, big audiences, big money from advertisers. But the new model is about small: single episodes, smaller audiences, and less consumption at a single time. As a result, what was once the sweet spot of 8pm to 10pm, when most people had a limited choice in terms of what show they could watch, no longer exist. This happened as a result of both external and self-inflicted factors.

The first external impact was the introduction of the VCR, which allowed people to start shifting the time at which they watch a TV show. Technology constraints, however, made it difficult for the general population to figure out how to properly set up recording of TV shows. However, enough of a critical mass was formed to give people a taste of the concept. When digital video recorders like Tivo were introduced, they simplified the process and made it very easy for people to start shifting their schedule. However, this still gave the TV an hedge: while most people could shift schedule, they were still tied to the device and didn’t know how to get the content of that box.Â

Enter companies like slingbox, which created a device that took the concept one step further by allowing people to shift WHERE they’re watching TV. The second barrier to content being available anywhere anytime shifted, making it very difficult for TV stations to figure out who is watching their shows, when are they watching them and where are they watching them. As a result, they can no longer guarantee their TV affiliates an audience and are therefore finding some pressure in terms of the fees they charge those affiliates.

In an attempt to recover some of their lost revenue, TV networks are now experimenting with putting their shows online, either via their own sites (as ABC did) or through pay mechanisms like the iTunes store (which, surprisingly, Apple still calls the iTunes music store, even though it sells much more than music now). I’d venture that this creates another potential danger for the networks. Why? Because, at the end of the day, TV networks are just re-packagers, using other people’s content to support themselves. What value do they add? At the current time, they can claim that they have the audience, and they have the relationship with the advertisers: it’s a strong advantage in the short run but what about the longer timeline?

Organizations like myspace and the web 2.0 video hosting company of the week are similarly packagers and, while the quality of the video on their systems is still relatively week, one can envision a future where they could easily compete with the TV networks for audience. In some critical audience segments (for example, the much coveted 18–25 male audience), those distinctions no longer exist and, if you extend that trend out for a decade, ABC and youtube are on the same footing. The only difference is that ABC has contacts with the advertisers, where youtube doesn’t really. One can venture that something like Google AdSense is coming for the video space and this is bad news for packagers in general as it will relegate them into the space of just being bandwidth providers (and recent technology development point to P2P networks as not being far from being able to deliver TV quality video at a percentage of the bandwidth cost)

The reason I’m thinking that the new model is bad for packagers is that the brand identification is now going to shows, not to TV networks. Most people think and talk about shows, not about a network lineup so conversations are relating to Lost, the Simpsons, or American Idol, each of which is produced by an outside company. What happens when the creators find that advertising is good enough to support their effort outside of the network system. As TV and the Internet merge (an effort furthered by the recent announcement that Tivo will put web content on your TV), the control is going into the hands of the content producers, not into the hands of the packagers: in a future where the boundaries no longer exist, what happens if the producers of the Lost TV series, seeing that they have a large enough following, decide that they are going to distribute their show on their own and use an adsense-for-video system for ad insertions.Â

So what’s a network to do?

Under this model, networks are headed for the trashbin of history but they may have a way to keep themselves relevant. In order to do so, they need to :

• Recognize that audiences will be smaller
• Focus on a core audience
• Produce your own content
• Give a platform to newcomers

The first item is probably the harder one for them to deal with. Recognizing that audiences are going to be smaller, means that they will have to go through painful reorganizations and shrink themselves to fit the new reality. Such reorganization are always painful but will give them a chance to move to step two: focus on a core audience.

That focus will put them, however, in head to head competition with some cable TV channels, which have taken than approach and have successfully mined their audience. For example, Fox News is known as the news channel for right-leaning people, or lifetime is known as the network for women. And so on and so forth. This may mean jettisoning some existing fares like, for example, the presentation of a particular sport (or going to extreme, the presentation of all sports as the sports leagues are generally the content producers, getting paid large fees for their offerings).

Another tack is one where convergence, that much used but seldom implemented word, comes in. Most, if not all, networks are part of large media conglomerate. This gives them access to production resources to build up their own content. Some of the networks have already smartly moved in that direction, giving them more control of their destiny. Â

Last, but not least is establishing your network as a platform for newcomers. Fox, now considered the fourth network, managed to establish itself by presenting fares that were edgier and different enough in a world where triangulation to get a portion of the middle of the road audience had driven shows that were mostly bland. One interesting challenge, when building up on such a strategy is how one chooses their battles. In the United States, the FCC has made it difficult and sometimes expensive to produce more risque shows. But what if, using their new internet platform, TV networks were to offer two versions of their shows: one that is cleaned-up for television, falling under the proper guidelines for “acceptable” content, and one that is produced for the freer, more unregulated internet. Edgier content is, after all, how some cable channels like HBO have established themselves as powerhouses in the content space.Â

One interesting approach in terms of providing a new platform is that of current.tv. I initially wasn’t sure of what to make of it but I think it goes to the same impulse that has driven youtube to become such a phenomenon: users love to create content and, while most of it is probably not that compelling, such systems break down the stranglehold than TV networks programmers have on distribution.

So why this long piece?

There doesn’t seem to be much new in that piece to people who are interested in that space but I would contend that, when you look at it in perspective, it explains a lot about why TV stations are so interested in ending net neutrality. The fight over net neutrality is about imposing artificial barriers in order to protect monopolies. However, the new threats presented by upstarts like youtube are upsetting the apple cart and traditional companies are now trying to find a way to ensure that their monopolies are protected. Of course, they’re never going to say it that way but, ultimately, the fight over net neutrality is a fight over what content will be available. As I’ve mentioned in my earlier piece on net neutrality, the battle is primarily one happening around the future of the internet in the United States. And, in thinking some more about it, I’ve come to the realization that, at the end of the day, the US companies opposing net neutrality may be fighting not only for the benefits of the telco providers but also for the benefits of the large content producers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Reshaping TV. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

We are already starting to see the beginning of that phenomenon with Voice Over IP, which moves the traditional phone communications over to the Internet. Similarly, television stations are starting to experiment with distribution over the Internet, moving what was once running on a different network to the Internet.

IPzation represents a threat to a number of existing business models because it represents a shift from traditional inefficiencies that were taken advantage of by large providers to the Internet.

Assuming users won’t catch up

Telephone companies were safe in the knowledge that, as long as they had control of the telephone infrastructure, they were assured a near-monopoly over that type of business. They have managed to parlay some of their initial advantage into a position where they are offering a way to access the Internet (via DSL, for example) but are starting to see competition from other entities with access to the home, like cable companies, for example, which have managed to use their access to household’s TV screens to create another way to access the Internet. Because the communication layer is happening over IP, the applications can run on either network without any problem, creating a more competitive market.

However, built into the business model around providing DSL or cable access to the Internet were large subsidies to the telecom providers. For example, a DSL line currently only takes a couple of dollars to provision and maintain. The same economics are true of the cable industry. The reason for that low a cost is that the assumption, based on previously established Internet usage patterns was that users were not going to use the full service they were provided all the time. As such, providing what looked like large pipes to the Internet was predicated on a model that assumed that users would use those pipes in a sporadic manner (fetching email or downloading a web page) which could balance access to the larger pipes and distribute it across users.

As more bandwidth-heavy applications are arriving, the telecom providers are starting to complain that they cannot support users following that model. Basically, what is happening here is that they have sold a good they cannot deliver at a price point they cannot offer. Because they have overpromised, they are now starting to worry that users will actually use what the telecommunications companies claimed to offer.

The inefficiency they had assumed was wiped out by Internet Protocols because such protocol allowed for offering services like the telephone or video over the network, something that telecommunication providers had assumed would not happen. Because telephony and video went through an IPzation process, the telcos need to rethink their business model.

Assuming a geographic hedge

Television companies used the geographic boundaries in terms of distribution of content from a TV station to create affiliate networks of TV stations that each had their own business protected in terms of their local area. As such, one could not find two stations offering the same show at the same time in the same geographic region.

There are a number of assumptions here: assumption about physical space, assumption about time, and assumption about monopolies. The economics of television are now faced with challenges as IPzation takes place because those assumptions are no longer valid. Digital Video Recorders have broken through the notion of time-slots and new devices like the SlingBox are breaking through the notion of space. The TV networks are trying to fight back by starting to offer some of their products over the Internet.

However, in order to fully understand the long term impact of IPzation on the TV business model, one needs to take a step back and start thinking about what business TV stations are in and that business is one that is based on another set of inefficiencies. I am talking here about the advertising business which, when it comes to television, relies on delivering an audience to advertisers and charge a premium for it. John Wanamaker, the father of the department store and the father of modern advertising was known for saying “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” TV advertising models were largely based on that old model. The came Google and advertisers started demanding more information about what it was they were getting from those audiences. As Internet advertising has become more prevalent, the notion of of measurable results has gained mainstream acceptance among advertisers and they are now demanding similar types of metrics from other business and TV station find themselves in the cross-hair.

This is another effect of IPzation. As more and more businesses get transacted over the Internet, the common standards created around IP technology force the companies to rethink their approach. IPzation is ruthless in its dissection of core business practice because it is technology and, ultimately, technology does not care about people because it is not sentient.

This is the third article in a 6 part series. You can read the following parts here:

• Part 1: Intro
• Part 2: Always on
• Part 3: IPzation
• Part 4: Sensors
• Part 5: Participatory Applications
• Part 6: Conclusion

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Future Tense — IPzation. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Broadband penetration

Broadband penetration will continue to increase in the United States and Europe. Large scale deployments of city-wide broadband efforts in several large cities will start making internet access similar to phone or electric service, widespread and the type of thing few people think of. On the bleeding edge of the Internet access development world, some large scale networks, most probably coming from phone companies, will break the 10-Mbps barrier and close in on the 100-Mbps speed, making internet access on par with regular local network access.

The downside of this widespread deployment of high-speed internet access will be in the phone industry, where next generation (3G) rollouts of high speed wireless networks will prove costly and offer lackluster service considering its high price. This will force a drastic reduction in prices towards the end of the year or early 2007, in an attempt to recover some revenue from the large investments.

Implications of increased broadband penetration

The increase in broadband penetration will have several large implications, including the rollout of more voice over IP services, video services, and the infrastructure security.

Voice Over IP

Voice over IP will continue to see widespread deployment and large phone companies will start migrating their full networks to IP-based traffic. This will make VoIP the primary form of telephone communication for wired lines by the end of 2006, though few people will be aware of the change as it will largely happen behind the scenes, not touching people’s independent system.

Telephony services will increase as the VoIP phenomenon continues to increase. Expect early efforts in video telephony to start rolling out and becoming more mainstream towards the end of the year. Also expect to see the rise of wireless devices that can bridge the gap between computer and regular telephony, providing access to the network in a number of different ways.

Video

Video over IP will be very hot in 2006, with several major changes in the industry. First will be the announcement, by Apple, of its new mac-mini intel-powered platform designed specifically for the living room. Following on the success of the iPod, Apple will market the device less as a computer and more as a video consumption tool that will include stunning high definition resolution and will offer direct access to the iMedia store (formerly known as the iTunes music store) where one will be able to download movies and TV shows, as well as content created by amateurs.

Google, in partnership with AOL (and its sister companies within the Time-Warner world), will offer a pay-per-view system, mirroring some of the iMedia store offerings. The system will be available both in the AOL closed garden client (where it will use some level of acceleration to speed up delivery) and on the web through a new client package offered by Google and largely developed by the AOL client software team. The strength of the move will generate enough positive buzz for AOL that Time-Warner will be able to spin-off the unit and will be considering an IPO towards the beginning of 2007.

Seeing their advertising revenues eroding, TV stations will start offering more content online, also sponsored by advertising. New types of online video ad insertion and tracking system will be created by several companies, with Google, Microsoft, and Yahoo! offering aggregated model based on something similar to Google AdWords but offering not only targeting based on keywords but also based on certain demographic information.

New video aggregators will start appearing, offering a way to customize your own TV station. Some will be acquired by the major portals (unless the portals themselves have already developed that capability by the time this trend manifests itself). Meanwhile, Tivo will recast itself as one of those portals and will be acquired by Microsoft and merged with MSNTV (unless it is acquired by Sony, and merged with the PlayStation 3, or Panasonic, and kept as a standalone.)

Having lost in the bidding war for Tivo, Yahoo! will decide to acquire NetFlix and merge it with some of its video offerings, providing not only distribution of DVDs but also online streaming of content.

On the strength of revenues from online ads, some small cable or local TV stations will start offering their complete programming slate online, for free, and adverting supported. This will rankle a few of the cable companies and syndicators who looked to those companies as another revenue stream. Meanwhile, on the same basis, most local TV news will be available online for free through an advertising supported model. During one major story, a local TV station’s feed will compete with the national networks in terms of reporting, as more viewers flood its website than watch the same story unfold on television.

The competition for those types of stories will continue to increase, as citizen journalism provides raw unscripted video of events. Videocasting, following on the success of podcasting, will start seeing some traction with a few podcasting and vidcasters signing deals with traditional media. Traditional media will look at it as an interesting set of development but one that ultimately won’t be trusted by the public because they do not have the right seal of approval; their prediction will turn out to be wrong.

Infrastructure

The rise of broadband and the increasing numbers of basic services running on the internet infrastructure will give rise to fear that the infrastructure is under-protected. From a technical policy viewpoint, electronic infrastructures will become a major national security matter with fears that the very openness of the internet could represent a large security risk. This will be seized upon by the network providers (phone companies, cable companies) and some security consultants as a way to push for policy that will allow those incumbent communications services to administer their networks with tighter control, with decision as to what they are willing to let run on the network and what they are not willing to. A subsequent battle will ensue as VoIP companies and media companies will complain about the network providers squeezing them out. No decision on any of this will be made in 2006 but the debate will continue through 2007 and beyond.

Growth and Scalability

2006 will be an explosive year in the Web 2.0 sphere. Explosive because it will see triple if not quadruple digit growth in number of users but also explosive because it will see several popular sites unable to deal with the capacity issues relating to that explosion.

On the RSS end, the explosion in growth will really start when Internet Explorer 7.0 becomes a priority upgrade on windows stations. The inclusion of some RSS feeds as defaults in the browser will prove to be too much for some sites which had not expected the onslaught of millions of new hits. Readership from RSS readers will increase as more users realize that they can get their favorite sites delivered to them instead of going out and checking to see if they are updated.

As more people discover RSS, more of them will start valuing blogs and many will start their own. However, the concept of becoming a professional blogger will decrease as many people who thought they could make money off their blog will find that the effort in doing so was higher than they had expected and will abandon their blog.

Meanwhile, other web 2.0 subjects will fail: Tagging services like del.icio.us will be see as too complicated by the general public (although they will continue to thrive in the more geeky world) but tagging of pictures (as in Flickr) will continue to grow. Most blog networks will fail to attain the amount of traffic required to play seriously in the advertising world and will be forced to either merge or shut down. Meanwhile, companies offering only a set of web services with the idea to generate revenue solely from advertising may find themselves in a bind as advertising revenue will fail to grow at the same pace as the new offerings.

Implications of Growth

The explosive growth in traffic see during 2006 has implications across a number of players in the blogging world and metadata space. It also has implications in terms of scalability, business, and trust.

Blogging, podcasting, vidcasting

As blogging takes better hold in the mainstream (your parents WILL be blogging), the number of subscribers per individual blog feed will drop into the low teens, with blogs being read by close family members and friends only. A few breakout blogs, specializing on particular narrow subjects will manage to increase their readership but the world will largely consolidate around less than 1,000 major blogs: of those, the vast majority will not be from any members of the Technorati 100 or any other such list. The vast majority of those mainstream blogs will be the ones created by mainstream media outlets, which will use their existing reach to heavily promote their own blog.

Radio stations will increasingly start offering podcasts and TV stations will offering vidcasts. Most, however, will do so through centralized hosting capabilities provided by their parent companies. Smaller podcasters and vidcasters will have a hard time to compete with those larger companies as they are forced to look into ways to support their own bandwidth costs and will sign contracts with hosting services promising a share of advertising revenue in exchange for doing the hosting: that share will largely go to the hosting service with many podcasters/vidcasters finding they are not really making more than a few 100 dollars a months from all their hard work.

Crash and Burn

One of the hosting services will crash in a major way, taking with it a few days worth of the hard work of thousands of people who were hosting on it. The provider will initially recover but suffer a subsequent crash that will seal its fate as a doomed company. The majority of its users will leave and join one of the larger hosting services provided by Yahoo!, Microsoft, and Google.

Beyond the hosting world, scalability will also be a hot buzzword as more services, ranging from RSS hosting providers like FeedBurner to search engines like Technorati and Feedster to analytics providers like Google and MeasureMap will experience temporary failures and growth pains.

The cost of upgrading the service infrastructure will be too much to bear for some companies, which will be forced to shutter their door, sell out, or merge with a similar service. Meanwhile, many web-based service companies will fail to generate enough advertising revenue to continue upgrading. A flurry of mergers and closures will happen over a few months, leading people to wonder if this is bubble bust 2.0.

The downside of all those fears about a bust will be in the increased number of negative stories about technology in the mainstream media. Stories will mention the hubris of web 2.0 founders and will showcase Google as a typical example of this hubris, highlighting its free lunches and other things that were thought cool in 205: As a result of all those negative stories (and others but more on that later), Google will loose several billions (possibly even tens of billions) of dollars from the high of its market capitalization, shedding anywhere from 10 to 25 percent off its high.

After the consolidation, there will only be one or two independent players in each of the following (notwithstanding the fact that there will also be offering from the bigger portal players): blog hosting , vlog hosting, podcast hosting (WordPress and Typepad will either be the two in these three sectors or will have merged), blog search, social networks (speaking os social networks, Yahoo! or Microsoft will buy LinkedIn (if it’s Microsoft, LinkedIn will quickly be integrated with Outlook and offer Plaxo-like features).

Meanwhile, a sector which will have been decimated will be tagging. Following slow adoption by the mainstream, largely due to the complexity of adding tags to pages, many tagging companies will fail. Tagging, as a concept, however, will remain and be adopted by most major search engines: as Metadata entry is simplified with the introduction of Windows Vista and Office 12 (both of which will be delivered by Microsoft to a relatively lukewarm market), and tagging becomes a browser feature, it stops being a differentiator.

Trust is hot topic

Fear of Google knowing a little too much about people will bring a slate of bad press for a company that was the darling of the mainstream media in 2005. The introduction of its Google finance service, hooking up into people’s bank accounts and payments systems will be seen as the company becoming too large a player, with fear of it becoming a monopoly. The backlash will first start in silicon Valley, with many tech luminaries starting to tear down the company. It will continue with publications that were once its biggest cheerleader becoming its biggest detractor. As a result, many of the companies that relied on Google for key services (advertising, analytics) will try to distance themselves from it and start looking for other providers (meanwhile, companies looking for funding will excise Google from their business plans, in order to avoid being associated with it by VCs). Yahoo! will pick up some of the adsense/adwords business, along with Microsoft, which will offer a similar service.

Meanwhile, in the analytics space, new companies will be formed and attract a lot of venture capital. Many of them will offer ways to opt-out of their tracking and some will offer added incentive to people willing to provide them with more information. New models in the space will emerge and at least one player will provide a revolutionary approach that will change the analytics landscape.

In the blogosphere too, trust will be a major subject as some of the top bloggers will grapple with issues surrounding defamation of character, libel, accuracy, and reliability after a top-name blogger is sued for something he/she said or linked to. Furthermore, some of the top bloggers will grapple with issues relating to invasion of privacy as they become more famous in the mainstream media.

On the Wikipedia end, anonymous editing will be abandoned after the revelation of a major hack altering minor facts over several months in an automated fashion has rendered a core version of the wikipedia unusable. The wikipedia trustee will revert wikipedia to an earlier date, erasing all changes performed during that period of times and destroying several significant entries on 2006 current events. The mainstream press will pile on about the inaccuracies of wikipedia, bringing back earlier scandals as proof that no information on the internet can be trusted unless it comes from a reliable source (incidentally presented as being a member of the media establishment).

Conclusion

In late 2006, a substantial portion of these predictions will be wrong and some may turn out to be dead on (although most of the ones mentioning companies by name will most probably be wrong).

Meanwhile, on a personal level, 2006 will be a year of big changes. However, I promise it will also be a year of continued writing on TNL.net, even if it is at the same substantial post every week or two rate that readers have gotten accustomed to. I hope you’ll join me for the ride.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2006 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The power of the network and links

Many in the blogosphere say that traffic is not a good measure of what blogs are but that conversation, as represented by links and indexes like Technorati, represent a more accurate view of the value of a blog. As a result, I decided to look at how may sites were linking to sites in the WeblogInc empire. Jason and Brian have been doing a great job at building a stable of blogs but it seems a large portion of their success comes from a single blog. Let’s dig into the numbers.

In the following table, I took a look at the list of blogs listed on the weblogs Inc. main site and ran the Technorati site numbers against them (duplicate entries in the weblogsinc list were removed as well as entries that pointed to sites which no longer exist).

Once you have this data, you can start doing some quick analysis. For starters, I started to analyze what percentage of the overall network linkage each blog represented. I then took that percentage figure and used it against three different financial scenarios which have been floated around: some people say the company received 25 million dollars in the acquisition, and others have mentioned a figure of 30–40 million dollars. The details look as follows:

However, in order to get a cleaner picture, I started to dig into more details. First, I analyzed the different segment performance:

What’s interesting here is that the consumer segment is responsible for the majority of linkage so I dug in much further. What I found is that the sum of the EnGadget linkage represents over a third of the overall network traffic (the actual number is 15,529 links for a 35.07% share of the network).

Data for the rest of us?

In acquiring Weblogs Inc., AOL has now provided us with some numbers traditional media are willing to pay for a blog. Looking at the numbers above, one can try to guess at the value of a link from an external site. a single link on the weblogsinc network represents 0.002258559942180087 percent of the overall network.

At the different rumored price points from AOL, it looks as follows:

I don’t know if those values are based on any real rationale but it’s nice to dream up the value of one’s blog based on this.

Should we now assume that traditional media companies are willing to pay between $500 and $1000 per site that links into a blog?

Not quite. The incremental value is in the size of the network and the underlying tools. Jason and Brian have been working on developing a blog authoring technology, called BlogSmith, that sits at the core of their network and one has to believe that AOL saw some value in the software too. However, one can easily say that blog valuations are going to be easier to make after this deal since it provides the first yardstick in that space.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Doing the numbers on the AOL-WeblogsInc deal. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Some History

Before I go into details about Apple’s new offering, I want to give a little background that will clear up some of my confusions. I’ve been involved in the RSS community since 1999, way back when it was just the domain of geeks.

Back in 2000, I made a few suggestions as to how RSS could be improved. At the same, the main version of RSS was version 0.91 and there was some interest in making a new version that would be called RSS 0.92 (yes, it was the alpha days of RSS). So five years ago, I was pushing for crazy concepts like adding a date to an item or finding ways to attach sound files and video files into RSS feeds. Because of that, some people have asked me to opine on things like podcasting and my general contention is that podcasting is a good thing and that the way support for richer files is implemented in RSS is much sounder than what I had offered in the past.

Subsequent battles created a fork in the RSS movement, with one of the main issues being the use of namespaces in RSS. From there came the great split, with RSS 1.0 breaking rank with previous versions of the format, and RSS 2.0 breaking rank with RSS 1.0. Two formats, which moved in parallel. Dave Winer did a great job promoting the 2.0 format and eventually, a majority started supporting it. Since then, a third syndication format (known as ATOM) has popped up and its making its way toward a 1.0 release. With all this, we’re seeing a lot of smart people basically trying to solve some of the same problems, without really working together.

A proposal

Looking at this, I pity the fact that it took us so long to get as far as we’ve gotten. However, with large players now dancing in the syndication space, I am starting to worry that things are going to get worse before they get better. As a result, I’d like to offer a modest proposal: let’s merge all this work and come up with established data sets that are compatible. The use of namespaces for each vendor use is a great idea but shouldn’t one first think about what they are trying to accomplish and look at prior art before trying to reinvent the wheel? Let’s look at the example of today’s announcement from Apple.

RSS Does Media

So podcasting is becoming much bigger. And videocasting is coming soon. How about looking at media use in RSS. Wait, what do you know: Yahoo! has done some of the work already with the media RSS specification (I know this is the second time in as many week that I’ve pulled out the Yahoo! name but it’s because they’ve been doing good work). The specification provides a number of interesting things so I would suggest that Yahoo! and Apple developers sit down together and come up with an agreed upon set of definitions. Here are a few things that I would put on the table for discussion by both entities:

1. A common namespace: it would be nice if they both agreed to a common namespace. I’d reccommend something that does not include a version number (a mistake made in the Apple spec) but it might be nice to have it set as a DTD, which could ease validation.
2. Add media:group to the final specification, it looks like a very valuable one, especially for content that is encoded in more than one way (this will probably be something Apple does not want)
3. Retain media:category and have it replace itunes:category. Here, the Yahoo version seems to provide for more flexibility
4. Replace itunes:explicit and media:adult with media:explicit. What is defined as an adult varies from country to country whereas explicit is well, more explicit.
5. media:text should replace the itunes:subtitle and itunes:summary but it should also get something added to differentiate the two (maybe a content attribute?)
6. itunes:author could be taken care of with media:credit. Maybe this one could be required. The role of owner should be added to it and an extra attribute could be added for email which would cover the whole itunes:owner section
7. itunes:images and media:thumbnail could be merged
8. itunes:block is a good idea and could be created as a new media:block element which would also have a distributor attribute. This distributor attribute would allow to block different distributors moving forward so a creator could decide to distribute certain content only to certain channels.

If both Yahoo! and Apple were to agree to do this, they would end up with a much stronger joint specification and I believe it would also represent a show of good faith from both companies and an understanding that cooperation is good for everyone. I may dream but I hope that we will see this kind of partnership happen, which is why I’d like to ask everyone to make sure to tell their friends about this entry. Together, maybe we can get Apple and Yahoo! to work together on cleaning this stuff up (and anyone else who wants to play in that space, including Microsoft and Google). Otherwise, we will see increasing fragmentation of the markets, which will result in less content for each of the specification proponents.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title RSS and Media: Can’t we all just get along?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

I know mac users will probably flame me for this but I believe that the direct result of this is the need for Apple to start taking a serious look at more of a cross-platform approach. Before you send me irate emails, however, realize that I am a mac user (we have several macs at home and I use an iBook as my primary machine, largely due to the small footprint factor (there are previous few 10 inch screen computers in this world and I am among the list of oddballs that prefer that form factor when it comes to portables)) and that I only want to see the best for Apple, a company that exudes coolness when it comes to marketing and design but one that may be losing the war in the consumer space.

Why I feel now is the time for Apple to consider a change

Over the past few years, Apple has made great headways in the music business, first with the iPod, which now holds a substantial lead over all of its competitors, and later with the iTunes Music Store, which has solidified the company’s position in the emerging world of digital music. Much of that success, I believe, stems from a smart decision to look beyond the mac and start offering like-for-like products on the windows platform. First, it was an iPod that could work with Windows, and then it was iTunes for Windows. Historically, Apple has had many successes on the Windows platform. Look, for example, at the success of Quicktime, which still represents a dominating force in the world of digital video. I believe the embrace of either Windows or Intel as a platform (in the examples I’ve given, it is the combination of both) always benefits Apple as a company. Every time Apple has offered a product on those platforms, it’s been successful. Let’s look at different combinations and the advantages and/or pitfalls of that approach.

Apple and Intel

It’s hardly a secret that Apple has switched CPU providers in the past. While their relationship with Motorola sustained them through the 80s and 90s, the move to the G5 architecture showed a willingness to switch provider. In that case, the provider became IBM, ie. the other provider of PowerPC chip. Who’s to say that Apple could not start holding discussion with Intel, looking to them as a provider of chips for their platform?

One of the possible combination here would be to port the Mac OSX operating system to the Intel platform. The bottom line would be a new market for Apple software product and a third alternative to Windows and Linux on the Intel platform. Darwin, the underlying core of OSX, is based on BSD. It has already been ported to the Intel platform and BSD itself has a rich history of distributions running on Intel processor.

The advantage of this approach is that it would make OSX available to a much wider public. This could translate into higher software sales for Apple (which provides a more end-user focused product than Linux at this time and a more secure product than Windows at this time) and could allow for a rise in the number of developers for the OSX platform as the potential of a larger market could enlarge the whole eco-system. One could foresee a time when iLife would be offered on that platform and Apple could use this as a seed for their new product offering.

On the downside, is the competition presented by Windows and Linux. By some accounts, Apple is now in danger of becoming the third most popular Operating System, behind Linux and Windows. However, one could look at this approach as a way to stem some of the losses. Another downside would be that Apple hardware would no longer be tied to the OS itself so people who want the features of OSX would not have to buy Apple hardware.

By offering their operating system on Intel processor, Apple could find itself with a growing market again in the OS world, providing a solid mainstream consumer alternative to Windows. On the downside, it could be cannibalizing its own hardware sales.

Apple and Windows

All this brings me to part two of the Wintel Strategy: Windows machine from Apple. It is undeniable that the look and feel, the design, and the marketing of Apple hardware exude coolness. The hard work that the Apple design team puts in its products is a large part of the company’s continued relevance in the market and few companies (Sony and Alienware are the only ones that come to mind) in the industry have the kind of following that Apple hardware enjoys.

If Apple started offering hardware that ran with Transmeta CPUs and could run Windows software, one could see an upsurge in the sales of laptop and desktops as part of the Apple business. For the last few years, sales of macs have been sluggish at best and I believe that part of the problem is a skittishness on the part of consumers to be locked into the Apple world, forced to use only Apple hardware and software. With the software being liberated, Apple could look to a slow migration of its hardware platform to Transmeta processors (AMID or Intel could also be contenders).

Why Transmeta? Well, my thinking is that the Transmeta approach is to do software-based processor units through code morphing. If they were to offer a G5 equivalent of their morphing software. This would establish a base line in terms of offering equivalence with current hardware. The next step would be to offer the same hardware but with the Transmeta Intel-based chips, which could then run the windows or Linux platform (or any other Intel-based OS). Users who want to experience the coolness factor of owning a mac would be able to do so and still run the apps that somehow kept them from moving to OSX.

On the downside, Apple would not necessarily hold much of a lead with the operating system. As more and more Intel-like systems go out the door, Apple could loose some of the remaining market share they hold in the operating system. Another potential downside would be the commoditization of the hardware platform. However, I believe they would still be able to hold patents on their designs and continue producing products that look cool.

Sounds crazy, doesn’t it?

Some people will probably dismiss these concepts as plain nuts and I have to admit that it takes quite a leap of faith. To me, however, that leap of faith was made by Apple with the iPod and I believe that they can make it again as a way to increase their overall market share.

The overall downside of this strategy is that it might anger fans, who are notoriously devoted to the company. However, Apple has not really worried about this much in the past. In the 90s, the company started OEMing their hardware platform but decided to pull back when some vendors started representing real competition (remember PowerComputing?)

The question is whether Apple wants to remain a niche player in the computer market. Based on the last quarterly report, it seems that most of the growth is coming from the music business. So maybe this would be a good way to reinvigorate the computing part of the business.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Why Apple should consider Wintel. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Apple

Apple will come out with a new lower-powered, lower-cost version of the iPod. The idea here is that they want to extend their lead in the digital music space and use the iTunes music store as a leverage for selling more iPods. From there, I suspect they will introduce a new low-end iPod which will follow the existing iPod line and offer less hard drive space at a lower price. In conjunction with this announcement, they will introduce a new line of iPods that offer support for both audio and video. From there, we might see a tentative move into the digital video space, with the possibility of their extending the offering on the iTunes music store to include downloadable music videos. Later on in the year, rumors will go uncofirmed as to whether Apple plans to introduce a downloadable movies service.

Apple will also announce the release of a new class of laptops powered by the G5 chip but offering lower speeds than their desktop counterparts, due to issues relating with chip cooling.

Convergence: Music Stores

As more music store follow Apple’s lead, we will see at least one other site (probably Wal-Mart’s) offering downloadable AAC files and follow Apple’s lead. On the other side, Apple will announce that it is solidifying its relationship with AOL and offering the iTunes music store as a component of AOL.

The recognition that the online music business is a low margin one will force many players to reassess their strategy, with consolidation ensuing in that market and solidifying across two standards: Windows Media Player files and AAC files.

Convergence: Voice over IP

2004 will be a big year for Voice over IP with many companies offering Internet telephony products in both the small and medium business arena and the consumer one. As major telephone companies unroll their offering in that arena, thoughts will go to redefining what a telecommunication company is about and new consolidation and splits will see phone companies reorganizing around two business models, either as utility providers, providing the infrastructure (the hardwired lines that go into a house or office), or as service corporations, providing services that run over those lines (the voice telephone will begin to be thought of as a service instead of a utility).

By year end, there will be a lot of discussion as to what those companies are about and calls to reshape the regulatory dialogue on what a telecommunication infrastructure is about. The other discussion on regulation will go towards figuring out how to deal with pricing models on communication services as the new services will destroy the concept of local and long distance.

Wireless: WiFi phones and integration everywhere

A big surprise will be the rise of mobile phones that use Wireless Internet connectivity (Wi-Fi) and voice over IP to allow users to place calls using the Internet infrastructure.

Data services will become more prominent in mobile phones, led by camera-phones, which will increasingly be used for multimedia messaging, and the introduction of some videophone services. As mobile phone companies see more pressure on their voice services, due to the introduction of WiFi phones and continued pressure relating to number portability, they will look to data services as a new source of income.

Business: Revenge of the Internet companies

Internet business will be in the headlines again as Internet companies show they have built successful business models based on profit instead of promise. As a result, investor confidence in Internet stock will return with an increase on stocks of companies that show they can use technology to lower costs and increase productivity.

In parallel, venture capitalists will start investing in new technology companies. Much of the money that has stayed dormant for the last few years will be invested in new companies that focus on services in the infrastructure, security, and interconnectivity arenas.

Of course, the big initial public offering of the year will be Google, which will generate enough excitement in the investment community to have a coattail effect on other Internet stocks.

On the downside of the investment picture, the stocks of Amazon, Ebay, and Yahoo will loose value as investors realize that their price/earning ratio are out of proportion compared to the rest of the market. Amazon will try stemming the losses in their share price by announcing that they are moving to a new strategy: offering a complete set of hosted services for retailers who want to lower their cost, instead of just being an online retailer on its own.

Business: Sun in trouble

Sun microsystems will see itself in a difficult situation as it finds itself squeezed on the lower end by Linux, which will continue to eat Solaris’ marketshares, and on the higher end by Linux, which will increasingly be seen as the way to go when it comes to large scale applications. Companies like IBM and HP will offer utility computing as a “better approach” for large scale applications, running them on mainframes instead of large numbers of blades.

On the educational end, Sun will lose marketshares to Apple, which will be pushing its G5 and OSX platform as a better alternative.

In a dramatic announcement to save the company, Scott McNealy will announce that Sun will abandon Solaris and move completely to Linux by the end of 2005. The company will also look to sell its SPARC processor business, with either HP or IBM picking it up, and announce that it is moving to a new hardware architecture, based on chips produced by another company.

Development: Standards at the forefront

Many large scale businesses will realize the value of building Internet applications on open standards like XML, XHTML, and CSS. As a result, the redesign of many major corporate sites will support those standards and an increasing amount of time will be devoted to making websites more accessible.

RSS will also experience a major growth curve as more and more people become aware of the power offered by such a subscription model. Much discussion will be paid to defining business models for delivery of RSS with media organizations trying to figure out how to distribute advertising in their RSS feeds. Initially, the Internet community will denounce the introduction of ads in RSS feeds but will come to admit it as a necessary evil later on in the year.

Society: Social Networks at the core

While services like Friendster, Tribe, Ryze, and pluggedin received a lot of coverage in the tech sector last year, many investments in the sector will fail as companies just look at social networking as yet another feature to add to their site. The existing players will either merge or be sold to companies like AOL, Yahoo, or Microsoft, which will add social networking as another component in their online product offerings.

Apple will be the surprise player in this new arena, using OSX as the basis for a new social networking platform that will merge their address book application with mail, calendaring and chat services to provide an end to end solution on user’s desktops and offer added services through their .mac platform.

Politics: Internet comes of age

Much of the US presidential campaign will be using the Internet as a political tool to organize supporters and raise funds. The early lead taken by Vermont Senator and democractic presidential candidate Howard Dean will help him win his party’s nomination. Using the same tools during the general election, Dean will try to ignite the general democratic base in a fight against George Bush. The Republican party will enter the election season with a similar set of tools and much of the campaign will be fought online with some potential scandal arising out of one of the candidate’s site being hacked. As a result of the Internet battle, record numbers of voters will show up at the polls in November.

Of course, TNL.net will continue reporting on all this and show how wrong all those predictions were at the end of year.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2004 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

While companies from Intel to Microsoft are talking about how they plan to implement digital rights in the future and are taking tentative steps in that direction, Apple is working on a strategy that covers multiple platforms beginning today. The iTunes music store may be an interesting story in terms of the consumer market but it seems to me that there is also an interesting play at hand for a business to business model. If Apple succeeds in its implementation of the music store (and there is little doubt that they will), they could turn around and start offering a set of products and services to organizations dealing in digital goods.

I believe that the iTunes music store will eventually drop the music part of its name in the future, when video becomes the thing to download. The underlying data structure already points to Apple’s ambition to move into other media format. So let’s look into the future…

As broadband becomes more pervasive, video becomes an attractive thing to download. At that point, Apple start offering TV shows and movies in a store similar to the Apple music store. They can then decide that there are areas they want to play in (read: where they want to manage the store) and other areas where they might want to offer customized system. Showing the iTunes music store as a proof of concept of their way to do DRM, they approach large studios and/or labels. From there, they can show that their store is running on Apple hardware and runs a server version of their operating system. Much like they are packaging streaming solutions with that software, they could start package digital rights management solutions.

So who’s the market here? Well, for starters, Apple is probably not going to want to create too much competition with its business to consumer segment so I think looking at movie studios may not be the right thing to do. However, they could look at TV stations, both in the US and abroad and start offering on-demand video services, wrapping QuickTime (as a streaming format) into their own proprietary DRM flavor. Going beyond that market, they could also look at the corporate market for companies that want to do internal presentations but ensure that only certain groups have access to certain presentations.

Another potential direction for Apple would be to look at software delivery. Using their proprietary DRM and an infrastructure similar to the one powering the Apple music store, they could deliver software packages either on a per-use basis, or as complete package. Now that they have crossed the divide between the mac market and the windows PC market, there are a lot of potentials for them to figure out how to mine the field.

Bottom line: Apple now has a strong cross-platform offering for distributing protected data. As the early lead in the market, they now have potentials to expand a lot beyond the world they run in.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple: Cross Platform DRM. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

That’s a lot of things, if you think about it, for a single device but it points to a variety of possibilities. For starters, it makes it pretty clear that gaming consoles are growing up. With this device, Sony is signaling its intent to take its leadership in the gaming world and extend into a more widespread all/media space, serving as a home server for any bits that gets into the house.

The broadband connection, combined with DVD burner, hard drive, and an interface that includes video seems to point to the possibility of their offering a video on demand service in the future, as well as music on demand or something similar. The presence of the memory stick slot increases that chance as people could buy music online, burn it on the memory stick and play it in their Sony Clie or other Sony MP3 player. Alternately, this slot could be used to upload pictures from cameras that have a memory slot (and those cameras are made by… Sony)

The demonstration on the interface video seems to also point to the possibility of integrating video and music. Could it be the beginning of an integrated suite that would allow people who bought a Sony video camera to quickly edit their films, add some music from the Sony music store, and then burn it to a DVD or ship the movie over a broadband connection?

The presence of a TV tuner and hard drive should definitely send shivers down Tivo’s back, as it points to a built-in digital video recorder being pretty much a sure thing with this. With the DVD burner, one could easily then copy the shows to a DVD too!

There seems to be so many possibilities. Considering the fact that Sony owns movie studios, music studios, and gaming companies, it will be interesting to see how they shape their business model around this. Furthermore, it’s going to be interesting to see what Microsoft will try to do as a counter-move.

One question remains though, why is Sony coming out with such a device in late 2003-early 2004, when it is supposed to come out with the PS3 in 2005. Is there a chip in there (or maybe there’s something in the software) that would eventually allow for an automatic upgrade to the PS3 engine? Or could it be that the PS3 will be delayed to late 2005-early 2006, leaving this box as a stopgap measure before Microsoft comes out with Xbox 2?

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Sony to Introduce Media-centric Gaming Box. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

As many of you already know, the game station is a small box that attaches to your TV and on which you can play video games. However, the firepower of new generation boxes now on the market is now equivalent or higher than that of most computers. The main logic behind this was that gamers wanted a more realistic experience and crunching 3D representation in an ever-changing environment required more and more processing power.

Playstation 2 opens the gate

Last year, Sony introduced the Sony Playstation 2, a new gaming system that included a built-in DVD player and a 3D graphic engine that made computer video card look ridiculously outdated. At that time, Sony admitted that their goal was to go beyond games and control the digital living room. Recent partnerships with Macromedia, AOL, and Real Networks seem to show that Sony has established a clear roadmap as to how it would get into the online market. And with a growing installed base of (8 million so far, and an expected 34 million by 2004), Sony could become a major online player.

Microsoft unveils the Xbox

Having survived the browser wars with Netscape (Internet Explorer now controls 80% of the market), Microsoft is starting to worry. If one could download music and exchange videos via a gaming station, as well as play video games, where would the home PC go? And where would that leave Microsoft’s ambitious .net strategy?

As a result, Microsoft had to play in that field and to do so, it went to game developers. After much discussion, the result is here for everyone to test: it’s called the Xbox, and is essentially a PC packaged as a gaming station. If you read the documentation, the Xbox becomes more difficult to classify as simply a gaming box. For starters, there is a DVD player, which was added just to match Sony’s Playstation 2 DVD player. But Microsoft goes further by building a Dolby decoder within the system as well as adding parental controls to the box.

The second thing they added to the box is the ability to put in a CD, play it, and burn it onto the built-in hard drive (through what they call a music manager). All of a sudden, the Xbox becomes a music stereo box.

Going further is the matter of the Ethernet port and the mysterious broadband network touted by Microsoft. Early inside reports point to the first broadband gaming network that might go beyond gaming. At the current time, there are rumors of a network that would also allow for Internet browsing, email, and instant messaging, as well as gaming.

The messaging portion is an interesting one since it would include and optional plug-in for the box called the communicator, a headphones and microphone device people would use to communicate either via IM, or while playing online games. The unit includes a wireless headset with microphone, which could easily be used to make phone calls if Microsoft uses some of the technology it is currently building into the Microsoft Messenger. Long term, the Xbox could become another entry point into MSN, and into the web as a whole.

Moving forward: the Playstation 3

Sony, however, is not resting on its laurels. Now that Microsoft is entering its turf, the company is seeing its dominance on the digital living room being challenged.

With the PS3, originally slated for mid 2003 but possibly being released earlier, Sony plans to integrate offerings from its music and movie divisions into the system.

Considering the fact that the company already offers a suite of MP3 players, it is easy to see that the company will build that functionality into the next box.

Rumors are that the company will build a large hard drive within the box, which would make it a perfect storage area for an MP3 collection.

But going beyond music, the company is also looking at packaging a digital TV recorder within the unit, turning it into a device that would compete with Tivo and Replay in the market for customized television.

Also built into the box would be a TV tuner, and rumors has it that the system would also include a satellite TV decoder. In order to counter the online capabilities of the Xbox, Sony will release an online pack for the PS2 but will build that functionality directly into the PS3 box.

The unit would be offered in two different version: a light version, which would focus on gaming and be sold for around $250-$300 and a more expensive full featured convergence version which would retail for $400-$500.

Games Only: The Game Cube

Meanwhile, Nintendo believes that games and only games is what consumers want out of their boxes. As a result, the GameCube is a smaller, less pricey gaming box. However, this does not mean that it is offering less performance. It’s just that it’s a different take on the world. As far as Nintendo seems to see the world, gamers will want to pay no more than $200 for a gaming box but may be willing to pay extra for new features.

In a concession to Microsoft and Sony, the box will soon sport two different modem adapters: a 56k module for people who use a phone line and a faster broadband module for people who have a network at home. Rumor has it that Nintendo is preparing a membership network with services like online video game, full Internet access, and the distribution of music data. Since the GameBoy advance can interface with the GameCube, it seems that Nintendo is working on a hardware strategy that will make the gamecube a connecting station into the home, while the GameBoy will become a roaming device that can get updates from that box.

Convergence is here

Based on those recent developments, it seems pretty clear that hybrid boxes are now starting to pop up and that we will soon see more applications (initially in the gaming world but eventually in other areas) become the norm. I would strongly recommend that TNL.net readers who are involved in developing online consumer applications pay attention to the gaming space as it is the next arena for which we might have to format our outputs. Based on early showing, I would say that Playstation 2 will keep its predominant position for the next year or so but may be getting some competition from the new underdog in this arena: Microsoft.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The Convergence Game. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

At the item level

: This would allow us to specify a particular date for an item. I think it would be nice for those of us who have several days’ worth of content in their RDF channel.

At the channel level:

These could be encapsulated in to an section that would include all links to outside of the channel.

: Much like points to the page the channel is for could point to a page of information about this channel. this could link to a FAQ or more information about the channel.

: Points to a page where wireless devices can go.

: Points to a page where broadband devices can go.

: Points to a page where narrowband devices (browsers for blind people, text-only browsers, etc..) can go.

: Points to a P3P page to check the privacy rules.

: Points to either a VXML source file (which can be read by a VXML browser) or a sound file. For example, it could serve up a radio feed related to this story.

: Same as above with video or SMIL file.

That said, here’s what a source could look like (changes are bold and URLs are fictional (but I cut and pasted my .91 channel content for speed reasons)):

Suggested RSS .92 code starts here

NewDocTypeLinkGoesHere
>

92
">

foo@email.com
            Copyright 1999-present, Me.

            My channel description>/description>
            en-us

http://www.tnl.net/images/TNLpalmlogo.gif

            125
            44
            My channel description


http://www.tnl.net

http://www.tnl.net/about/

http://wap.tnl.net

http://www.tnl.net/100MBpage.html

http://www.tnl.net/under1kpage.html

http://www.tnl.net/p3p.xml

http://www.tnl.net/myvoicebasedchannel.vxml

http://www.tnl.net/myvideofeed.smil

http://www.tnl.net/newsletter/anewstory.html

            Story 1 is described

10/13/2000

http://www.tnl.net/newsletter/olderstory.html

            Happy New Year

01/01/2000

More Details

As part of the deal, I’d also move the original channel link and image link into the external field under a single link header (unless some people can tell me where they have a different link for the image and the channel.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Suggestions for RSS .92 spec. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Hybrid World Lives!

Many of you may remember the February 10th issue about Hybrid Computing. While talking with Birger Steen, CEO of Scandinavia Online, I discovered that the concept is not that far off the market. It is his contention that WAP-enabled phones are largely a pain in the back when it comes to interface. Having to key in every letter on the small phone keyboard is far from the easiest thing in the world. As a result, Scandinavia Online has developed a set of services that allows users of their portal jump on their site and configure their WAP view on the web. From his point of view, this is the best service he can offer now to wireless users.

The point was reiterated by a few people around the conference that told me that going to the web to configure a cell phone was the best way to deal with the small screen interface problem encountered by most WAP phones. Anne Rasmussen, of WAPportal.net demonstrated how their company plans to offer a similar service in a hosted fashion for corporate sites and others. The word around Scandinavia is that if you want to find the best way to configure a WAP phone, you have to go to the web via a computer to do so.

M-Commerce Huge … but not for Etailers

Another significant trend is the rise of M-commerce. In Finland, and to a lesser extent Denmark, Norway and Sweden, people can already use their WAP phones to buy from vending machines. The vending machine has a telephone number on it. You dial that number and a credit is added to the machine, to be billed on your phone bill. With the introduction of security in the new WAP standards, a few people were talking about how in the future the question “will it be cash, check, credit card, or phone?” may not sound silly.

What they envision is that WAP phones could become the new credit card.

A recent survey found that in Scandinavian countries, 82% of the people would go back to get their cell phone if they forgot it before leaving home, while only 64% would do the same thing if they forgot their wallet. The basic concept is one that may be foreign to those of us who live in the United States and revolves largely around the fact that GSM phones are equipped with a small identification chip called a SIM card. You can take the chip out of one phone and put it in another and you don’t have to worry about changing phone number or contact info.

Because of the emergence of such a way to do billing, some of the speakers at the conference predicted that the long run path for mobile phone operators would be to merge with financial institutions as their services will increasingly resemble those of credit card companies.

However, few people were optimistic about the prospects of etailers when it comes to mobile phones. “When I’m in a store buying something, I’m not going to go up on the web to check if it’s available at a web store,” told me one attendant. “I want to get it now and not wait a few days for it to show up in the mail.”

As a result, the promise of m-commerce is good for software vendors (who will sell packages that allow operators to set themselves up as currency clearinghouse) and mobile phone operators (who could become the next big financial force) but unfortunately, current etailers will not fare as well.

Content is King… in a Wireless Republic

The promise of advertising supported content on wireless phone has been hailed by some as a new way to support content sites. Unfortunately, few content providers will survive in the wireless space as demand for those services does not seem to meet expectations. Talking with people from the Scandinavian arm of large American companies who have tried to go the wireless route as a distribution channel, I discovered that there was not much demand for those services. “Sure, people do check the price of their stock on the phones but they still call our voice line to place their order,” said one executive from an online trading company.

As a general rule, the demand for content seems to be limited to a few areas: entertainment (bars, clubs, and restaurants locators), financial (stock prices) and sport-related (latest scores). However, many of the people involved in those areas told me that they were still looking for a proper business model. The locators are looking at a coupon-like scheme, whereas bars can offer a special coupon and people can go to a bar and show the phone coupon to get a rebate on drinks (“It appears that beer is the hot wireless app” quipped one panelist). Financial services and sports services are currently looking at possible subscription based models or at deals with operators whereas they would share a portion of the revenue they are generating for the operators.

CN U RD THS

On the other hand, communication in the hot wireless app. SMS has clearly become the hot app when it comes to wireless service across Scandinavia and across Europe. Because operators are charging lower rates for data services than they are for voice traffic, short messaging has become the quickest way for people to get in touch. A new lingo is starting to pop up around SMS as people are trying to economize the number of keystroke they type (SMS messages are limited to 160 characters). As a result, the headline for this section would translate from CN U RD THS to Can you read this?

Convergence in the Making

I also talked to a bartender who told me that the previous night a woman was in the bar looking for some of her friends and asked him if he could change the TV channel to a particular teletext page (in a lot of European countries, TV channel use the extra bandwidth to carry data. As a result, while watching the BBCyou could switch to the BBC teletext channel and read the latest news, etc… on there). The channel this woman was using allowed her to converse with several of her friends in a TV-based chat room by using her phone and an SMS gateway. True convergence in my book but the problem here is where revenues for an online operator are. Unfortunately, the only operators who will make money on this will be the phone operators who are racking up extra data minutes of usages.

Smaller, Faster, Cheaper

The good news, from a user’s point of view, though, is that those services are coming in a smaller package. A lot of the phones I saw over there would put our American phones to shame. On average, European phones are now weighing about 2.78 ounces (79 g.), a form factor of 3.9 X 1.75 X .6 inches (101.5 X 44.5 X 17 mm.), and a battery life that allows for either 150 hours of standby time or 4 hours of talk time. Of course, they come equipped with voice recognition (so you can have the number dial based on a name you give to it), predictive text input (a new set of tools for SMS which allows the phone to predict what word you’re going to type based on your input), and are WAP ready. The most interesting thing is that they usually are priced under $200 which makes me feel that we’re overpaying in the US.

The future is now?

The new thing around that space, though, is not a smaller phone or a better way to do e-commerce but a new set of services around higher speeds of access. The first step in that direction is GPRS, which offers about 20kb per second and has been rolled out around Europe. This is seen as a way to distribute such services as music and better news on the phones. However, the real discussion is centering on UMTS which promises wireless throughputs of 2Mb per second or more. Portions of the UMTS spectrum have already been allocated in the United Kingdom, Germany, France, Spain, Norway and Finland, with the rest of Europe moving quickly on allocating this space. UMTS proponents envision the use of wireless video conferencing and a better Internet experience to result from this new development.

Euro Fighting

One of the big challenge in terms of doing business in Europe is location. Because most of the European countries are too small to create an actual market for digital services, European operators usually have to provides sites in multiple languages, and support multiple currencies. As a result, European etailers tend to be in favor of the Euro, which would make their lives a little easier. However, as the currency is slowly deflating in the currency market, opposition to the Euro is growing across Europe. On September 26, Denmark is holding a vote on whether to join the Eurozone or not and this election is seen across Europe as a big test for the Euro’s power.

The reason it the Danish election is so important in Europe is that if the Danish vote fails, England’s upcoming vote will probably do so too. As a result, there is a lot of concern across Europe about this election. Many etailers I met in Copenhagen told me that they were trying to organize themselves to push for adoption and work across borders when it comes to those election. Danes I talked to told me that British conservative politicians (who are opposed to joining the Eurozone) had been lobbying in Denmark. This is a race that etailers both in Europe and the United States should pay attention to as it will most probably dictate the viability of the Euro as a currency and, if the Euro succeeds, could mean less headaches to all of us.

Going beyond Economic matters, support or lack thereof could mean either an acceleration or a slowdown for eEurope, a new initiative by the European Union to become a force in the information age by normalizing rules related to e-commerce across the difference members of the EU and offering incentives to companies that want to bring net services to the EU marketplace. Among the initiative supported under eEurope are net access in public schools and public centers, lower access costs for businesses and individuals, agreement on common specifications for a smart card infrastructure, financial support for emerging tech companies and a number of social support and government services becoming available to all via the Internet.

All and all, what eEurope would mean is that countries would work in the EU government to set up rules about the Internet. I do not need to tell anyone reading this that it would be better for those of us in the industry as we would not have to lobby several governments in order to get the proper support for our industry.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title From Scandinavia With Love. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Yes, L.A. is starting to feel that it has now has to open war on a second front as its leading industry is starting to get threatened by the Internet. The noise is nowhere near as strong as the one you can hear about music but as bandwidth continues to increase, so does the risk of movies becoming widely exchangeable on the Internet. Napster-like tools Gnutella, Freenet and Scour Exchange are the new contenders to the title. Coupled with a new compression format called DivX (not the failed DVD format but a new codec), this spells disaster for the movie industry. So let’s look at this challenge and see what can be done to face it.

For starters, expect the movie industry to sue. It’s already happening and it will end up in failure. Witness the recent case over napster. Sure the music industry won the right to eventually shut down napster but it hasn’t yet managed to shut down similar services. As a result, lawsuits against distribution of digital media have become the equivalent of a giant game of whack-a-mole: take down one company and a slew of others will pop up.

Actually, the lawsuits are only furthering the problem as they bring increased publicity to the subjects and potential users start flooding the new services in increased numbers. Napster, Gnutella, and Freenet were relatively fringe movements until the Napster trial propelled them to the front page, increasing each of those services member base an thus increasing the amount of pirated content available. Confirming the principles of Metcalfe’s Law, the value of those networks increases exponentially for every new user that is in the network and is added to the network. Hence, lawsuits are only making matters worse.

The music industry may be trying to avoid the issue but it will not go away. In the case of the movie industry, it gets worth. In the current world, copies of recent movies are relatively difficult to come by in most places. If you are in a city center like New York (where I live), you can get videos of recent releases on the street, taped by people who sneaked into the movie theater with a video camera. Generally, the video and sound quality of those second-hand productions is less than stellar and they are not worth the $5 they retail for.

However, I’ve noticed that a new phenomenon is starting to spring up: people making digital copies of movies with digital video cameras. What surprised me more than anything on this particular matter was that some of the copies I’ve seen are not made off cameras pulled into a movie theater but off actually production reels. I was recently visiting a hacker friend of mine who recently showed me a complete copy of “The Art of War”, a new movie starring Wesley Snipes which is not going into wide release until… next week! When I asked him how he had acquired it, he told me that it was available for download on IRC a couple of weeks earlier. He then went on to explain to me the nomenclature for some of those files:

• wp usually means workprint, or an exact copy from studio original production reels, as was the case of this movie.
• a screener is a movie that was taped in a movie theater with a video camera.

Generally, the files are available in a variety of formats but there has been an increase in the use of DivX, a new format that makes fairly compact high quality video files (on average, a 2 hours MPEG-encoded movie takes about 1 Gb of space, while the same movie in asf will run about 500 Mb. DivX film can offer the same quality as MPEG for about 1/10th of the size (about 100 Mb per movie).

Of course, 100 Mb is not something that you’re going to download with a regular modem but on a cable modem or DSL line, it is something you might consider. After all, if you can get a movie in less than a half-hour for free a few weeks before it is released in the movie theater, it becomes a very tempting prospect.

Coupled with the increasing distribution of P2P tools, this format makes movie pirating the next big Internet trend.

So how should the movie industry deal with this? Here are a few way to deal with it.

First, continuing the crackdown with lawsuits against companies will not work. How about starting to work with those companies in terms of identifying potential problem area. If a new film pops up, alert the service immediately instead of suing them.

However, if you are dealing with services like Gnutella and Freenet, you are not dealing with companies. In order to alleviate some of that, spread the wealth: start packaging complete clips of the film in some ad packages and flood the networks with them. In a way, this can become an extended 5–10 minutes trailer. DirectTV already does that to some extent with their pay-per-view channels: you get the first 5 minutes of a movie for free but have to pay if you want to continue watching.

The other thing to do is to cater to the fan base: seek out their input. Listen to them and see what they would want. Maybe they do want to see the movies directly off the Internet. Offer that as a potential option. Maybe a high speed website with ticketed access to the site (let’s say $5–10 for a first run movie). That might alleviate part of the user base, which will only watch the movie once anyway.

Then start cutting deals with large ISP. In the case of AOL, it seems that WB could start offering an extra “channel” for an extra fee. Think of it as a premium cable channel. Imagine offering a movie of the month package as part of AOL Extra, a new service that would include high-speed access and offer a new movie on demand every month. Look at experiments like Intertainer, which intends to become a premium service for Internet cable subscribers.

But dealing with the problem online only does not solve it completely. Provide incentives to go to the theater, as you have done in the past with DVDs. Back in the 30s and 40s, movie theaters use to offer cartoons (where do you think all that Looney Tunes came from) and news reels, all of which created the movie experience. Nowadays, going to the movies feels more like going to a place with a very big TV: you end up with the same boring concession stand and the same theater-seats in pretty much every movie theater.

However, if you see pictures of movie premieres back in the pre-war era, you are treated to lavish (and almost outrageous) movie houses that were as carefully crafted as regular theaters. Back then, the industry was trying to create an experience. Now, it’s “here’s your ticket, the theater is this way, thanks for coming”: as a movie watcher, you feel like cattle, and the magic is gone.

Some of the bigger theaters are starting to get the idea, though. For example, one theater here in New York had displays of “Titanic” artifacts, when the movie by the same name came out. How about having some props displays go along with a new release? However, those would not be accessible until after you paid your ticket.

Other possibilities include giveaways (when “The Matrix” came out, they were giving away comic books that included some extra back story) or contests (if you keep your ticket, you will be entered in a raffle to win a free trip to Hollywood or some of the props from the movie!). The winning ticket would have two codes: the first one would be the number of the ticket. The second one would be a random list of numbers and letters. Once a week, you would publish the winning number on your site. People would check out the website (and see more ads for your movies) and if someone had the winning number, they would have to enter the second key from their ticket to confirm that they have the winning ticket. At that point, they would have to enter some contact info and details on how to claim their prize. You would contact them to verify that they really are holding the ticket.

Cut out the product ads before the movie. I don’t mind seeing movie trailers when I go to the movie theater (after all, they help me form an opinion as to what I want to see next) but do I really want to see ads for cars? Does anyone? They may be a great source of revenue for the movie theater but to be frank with you, the only impression they make on me is that they are wasting my time. Maybe you can replace those 5 minutes of ads with a “making of [include upcoming movie here]” featurette. This won’t cost you much more as you are already creating those segments for DVD and premium cable channels anyway.

Those may seem like silly ideas (but who knows, they may work), but they could become a starting point for new concepts.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Fear and Loathing in Los Angeles. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

ReplayTV, which was the first of those services to come to my attention, offers a VCR-type remote control for live TV and customized television viewing.

Using their services, you can create your own TV channel by choosing the TV programs you want to watch from an easy to use programming grid. Soon, they will also add previews that will allow you to look at the first few minutes of a TV show and decide if you want to add it to your personal channel.

Tivo offers all the same feature but also include a thumb up and thumb down button that will allow it to know what kind of programming you enjoy. As a result, it will make recommendations as to the kind of other programs you might enjoy. While the unit in themselves may be far from perfect, they seem to herald the death of BROADcasting.

When the services they offer are built directly into VCRs, recordable DVD drives or cable boxes, everyone will start creating their own personal channel and time shifting their programming diet. As a result, the long trend of getting people to watch the same program at the same time may die off, creating all kinds of new headaches and opportunities for the TV industry: headaches because they won’t be able to charge a premium for the Thursday evening spot (traditionally one of the busiest nights) and opportunities because they will be able to garner audiences for certain TV shows around the clock.

In the long run, I believe this could be a new way to watch TV. Definitely a technology to watch.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Digital Rewind: Replay TV and Tivo. You can follow him on twitter here or receive his weekly newsletter by subscribing here.