The Best Little Courthouse In Texas

September 25th, 2006 Davis

Over the last year, Marshall Texas has received a lot of publicity over their connection to a number of high profile patent cases. Whether it was TiVo’s dispute with Echostar or Microsoft’s patent loss to Autodesk, this small little town has found themselves at the center of the exploding patent industry in the US.

While the Marshall Courthouse has been accused of catering to patent trolls and of having jurors that tend to be overly symphathetic to plantiffs, the real driving force behind the patent lawsuits being filed in Marshall started when Judge John Ward got fed up with the long delays and problems with patent cases and set up what he refers to as “the rules.” The rules are a set of guidelines that Judge Ward uses to ensure that patent cases move quickly through the Marshall court system. They include strict time tables that attorneys must adhere too, as well as page limits on arguments being made to the court.

While these limitations were designed to help reduce the number of patent cases on the docket in Marshall, it actually ended up having the opposite effect by creating a very attractive district for plaintiffs to file for relief against patent infringers. Already patent cases can take years to make it through the court systems, but by offering a more streamline approach to patent litigation, Judge Ward went from speeding up his docket to making Marshall a patent hub in the US court system.

This weekend the NYTimes wrote a great background piece on Marshall Texas (BugMeNot) and discussed the impact that the patent gold rush is having on the local economy there. In a city where the local attorneys generally know the jurors on a first name basis, the flood of outsiders has been seen both positively and negatively. On one hand high priced out of town patent attorneys help to bring local commerce to the city and has been a boom to the local office rents and the hotel industry, but on the other hand, for a town where the biggest social event is their fire ant festival and the major news outlet is the Marshall News Messenger, the influx of outsiders is watched with a bit of distrust. Judge Ward often has to start out his patent proceedings by issuing what’s referred to as the “rattlesnake speech.” A stern warning to out of towners that they are beginning to get the judge rattled by their delays.

“Like a scene out of the comedy movie “My Cousin Vinny,” the speech starts with a polite invitation to approach the bench — and ends with a stern warning to pick up the pace or else. “He gives you a real talking to,” says Smith, a partner with the Roth Law Firm in Marshall and chairman of the Eastern District’s rule committee, a group of local attorneys that works with Judge Ward to set the guidelines for basic pre-trial and trial procedure. “He won’t bite you that first time, but if you don’t get the message, you’ll wish you did.”

With the growing importance of Marshall as a patent hub, many attorneys have tried to do their best to adjust to the small town life, including picking up a Texas drawl and attending local events, but in a town with less then 25,000 residents blending in can be pretty difficult for outside attorneys. Instead many firms have turned to local attorneys to help them navigate juror selections and the nuances of small town life.

While Marshall has taken their share of critcism for contributing the the deluge of patent lawsuits, I believe that much of this criticism is unfounded. Many of these cases would have been filed one way or another and if other court systems would adopt similar rules to help resolve these sorts of disputes quicker, we would we see patent attorneys start filing lawsuits in other areas. While many patent defendents may fear the district, if other courts were more efficient about processing their own case loads, then Marshall wouldn’t be the one the pick up the slack.

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Captain’s Log: Star Date CEDIA 2006 - Spent $600K & Cablecards Still Won’t Communicate With Transporter

September 22nd, 2006 Davis

Lake, #2 Hosted on Zooomr

The Home Theater blog has done a great job of covering developments at CEDIA all week long, but the highlight for me has been their link to the CEDIA electronic lifestyle awards. This is a list of 19 of the best home theater set ups out there and features photos and details of what the ultimate home theater fans are buying, when money is no object. These set ups range on the low end at $40,000 and on the high end will cost upwards of $600,000 for home theater enthusiasts. The prices may be out of this world, but the electronic gadgetry is very impressive.

While the amazing Death Star home theater isn’t featured on the list, there is a Star Trek replica home theater. One thing that really surprised me about the list was the number of high end digital projectors that were being used instead of big screen TVs. I’ve only seen a couple of digital projectors in the real world and have never been all that impressed with the quality. While the projectors I’ve seen have been on the low end, I’m still skeptical that a projector can replicate HDTV in the same way that a flat screen TV can. On the other hand, even if you were willing to spend the $45,000 on Samsung’s very sexy new plasma, it would still only give you 102 inches of screen. While this would likely be plenty for most people, it’s still a little bit short of my dream TV experience.

Posted in Movies, TV | No Comments »

Top Secret Phone Turns ATM Into Automated Thieving Machine

September 22nd, 2006 Davis

Hot on the heels of the Diebold voting machine kiosk scandal, there is a new video floating on the net that shows a hack someone used to trick an ATM machine into giving out too much cash. Apparently, the thief had access to a secret pin code that allows you to change the settings on the ATM machine, so he tricked it into thinking that the machine was loaded with $5’s instead of $20’s. He then inputed an anonymous prepaid debit card and pocketed a quick $750.

While this was certainly a clever hack, unlike the Diebold minibar problems, you would need inside information in order to pull this off. It’s probably also not a great idea to get your picture plastered all over the internet in the process of stealing $750, but I’ve got to give the guy credit for thinking outside the box. The most amazing part about the whole story wasn’t that there is secret pin code that lets you do this, but rather that it took 9 days before someone was honest enough to tell the clerk that it was spitting out too much money.

Posted in VOD, Kiosks | No Comments »

Netflix 101 & The Future of Film Distribution

September 21st, 2006 Davis

On Monday, Sept 18th, Netflix participated in a panel hosted by Indiewire, where they invited aspiring filmmakers to come together and engage in a discussion about the changing dynamics of the film distribution industry. In the past, it’s been pretty expensive to distribute a future length film and while there has always been the straight to video route, getting the video stores to give up valuable floor space for a small untested indie film has been a tough sell for filmmakers without the right connections.

Thanks in large part to the internet, film distribution looks very different today because the unlimited nature of web real estate has helped to eliminate scarcity issues that have plauged past distribution models. Historically, if you wanted to show a film in the theaters, you needed to go through the very costly process of making a print that could only be shown in one theater at a time, if you wanted to rent your movie at Blockbuster, you needed a film with enough mainstream appeal that it could justify being one of 3,000 films that might get allocated floor space. If you wanted get your movie on television, you had to have top level connections with the studios and even then would have to compete directly against other shows that were airing during the same time slot. In short you had to have money and connections in order to successfully distribute a film. Because of these challenges, the studios have been able to successfully leverage their financial backing and their connections to exploit the scarcity problem to their favor.

Over the last decade though, the problem of scarcity has changed. With the growing popularity of digital projectors, you no longer need to press expensive prints to get your film shown in a theater. With the expanded choices available on the internet, you no longer need to be a top 3,000 film to reach the home video market and now with broadband video distribution and time shifting technology taking off, a filmmaker is no longer limited by the time and space constraints that cable and network TV imposes.

This end of scarcity has certainly created problems for the established players and while more competition has made it easier for the smaller fish to break into the business, it’s also made it more difficult for the megahits to maintain their monopoly on the consumer attention span. With the current state of film distribution in such wild flux, the Netflix 101 conference was particularly well timed. During the event Netflix and filmmakers participating in their Red Envelope productions unit met with the larger film community and discussed the pros and cons of these new distribution methods. Undoubtably, there are still many issues that will need to be worked out and with the added competition, new distribution methods doesn’t necessarily guarantee that an indie film can be a money maker, but the internet has had a dramatic affect on the film industry and the Netflix 101 conference offered a fascinating look at this change from an independent filmmaker’s perspective. While new distribution technologies won’t solve the problem of how to make a film popular in an increasingly media saturated world, it at least helps level the playing field for indie filmmakers who have had such a tough time breaking into the industry in the past.

Posted in Media, Movies, TV, VOD, Disclosure - I own stock in co. mentioned, Netflix | No Comments »

DivX Goes Corporate

September 20th, 2006 Davis

Divx Goes Corporate Hosted on Zooomr

Born amidst the backdrop of the wild west P2P underground movement, DivX was first created when a French hacker named Jerome Rota developed the codec by hacking into a Microsoft MPEG and extracting and rebuilding the code. The codec allows someone to take high quality video and compress it into very small packages for digital distribution. Because the codec allows for faster data transfer rates, it soon became a favorite on the P2P networks and drew the support of a vast open source network of programmers. Over the next two years, the format underwent a series of evolutions and in 2000 Rota started DivX Networks Inc.

For a year and a half DivX Inc. continued to work hand in hand with the open source community, but in mid 2001 an anonymous employee known only as “Sparky” brought this peace to a sudden end by uploading a new version of DivX to an open source website. DivX Inc. quickly moved to remove the file, but Sparky’s action proved to be the first shot in what’s turned out to be a long and difficult war with the hacking community. Armed with a copy of the DivX source code and frustrated with DivX Inc.’s attempts to go private, the open source community rebelled against DivX by creating a free open source alternative named XviD.

Facing a brutal stock market implosion and a less then stellar reputation amoung mainstream companies, in 2002 DivX Inc. turned to the infamous Gator to help fund their on going cash needs. While the version of Gator that they installed was an opt in version, the open source community still was furious about the relationship and consistently attacked DivX over the issue until the company finally relented in 2004 and promised not to partner with anymore adware providers.

Going legit turned out to be the right move for the company and since abandoning the spyware strategy the company has seen their revenues grow from $16 million in 04′ to $33 million in 05′ to $27 million in the first half of 2006. While many of these gains have been driven by increases in CE licensing revenues, distribution of the more legitimate Google toolbar has turned out to be a much better solution and now makes up about 20% of the company’s revenue.

While the DivX of today looks like a very different company then the DivX of the past, they didn’t make it through these turbulent events without collecting some battle scars. They face significant competition from better funded rivals, they still have an uphill task in trying to convince Hollywood to trust something that was born from the P2P movement and if you think that the digital underground has forgotten about DivX, all you need to do is visit their own video sharing site and you can see that there is still strong resentment against their brand.

Nonetheless, Hollywood is starting to take downloading seriously and with Microsoft and Apple’s DRM having already been cracked again, frustrated studio execs could warm to the idea of a DivX with DRM solution. All it takes is the right deal and DivX could quickly become a significant competitor in the digital distribution space.

DivX is also currently engaging in alpha testing for a mobile video product and with the cellular companies salivating over the thought of new revenue streams, DivX’s remarkably efficient compression technology could allow them to make significant in roads into the bandwidth strapped cellular industry.

To date, DivX’s biggest sucess has been with the consumer electronic manufacturers. In exchange for a royalty, DivX allows DVD, PVR and portable device manufacturers to license their software so that consumers can play DivX files on their electronic gear. In total, the company has seen over 46 million DivX Certified devices ship to consumers and has had their software downloaded over 200 million times. While most of their licensing agreements are only 1 - 2 years in nature, DivX has been sucessful in negotiating these agreements with the CE manufactuers in large part because of the sheer number of people who are are actually watching pirated content on their DVD players. As the company moves more mainstream it will be interesting to see how they end up balancing the rights of the content holders with their dependence upon piracy to secure their CE deals.

The company’s stock will also face significant hurdles. Their business model is anything but easy for investors to understand and despite not having a connection with the other DIVX (Digital Video Express), Many investors won’t be able to differentiate between DivX the codec and the DIVX that went bankrupt during 1999 in a failed attempt at creating a DVD format war. The company also faces some litigation risk and has registered only a single patent to their name.

Despite everything that could go wrong with this confusing tech company, I’m actually pretty excited about the potential possibilities for the DivX brand. There are still many question marks, but all it takes is the right deal and all the pieces could come together very quickly. With $100+ million in new cash, it will be very interesting to watch what direction DivX takes with their acquisitions. They could use the money to help beef up the content on their stage 6 website or they could use the funds to try and expand their distribution agreements with new VOD providers. In the end, the company may end up being a crap shoot, but between the small float, the expanding revenue and the media frenzy surrounding digital video, it will be fascinating to watch whether Wall St. ends up getting caught up in the blitz or if they end up focusing on many of the doubts surrounding their business model.

Posted in DivX, Media, VOD, DRM | 5 Comments »

Web Reservations Coming Soon To A Redbox Near You

September 19th, 2006 Davis

TNR Entertainment may have been the first one to make use of online reservations for DVD kiosks, but Redbox has just announced that they will also be offering online reservations beginning on September 25th, 2006. In an era of broadband connectivity and advanced inventory management systems, this is a development that was a long time in coming. While most DVD rental kiosk purchases are still largely an impulse decision, as we see more and more consumers adopt the DVD kiosk as their primary rental method, online scheduling will make it infinetely more conveinent for consumers to ensure that they get the film that they are looking for.

Now instead of arriving at the Redbox location, only to see the last copy of Pirates of the Carribbean sold out, consumers will instead be able to reserve a copy of their movie, pay and arrange for pick up all just a few clicks away.

Redbox’s announcement follows a similar announcement by DVDXPress last month, who started offering their own web reservations on the first of September. With technology starting to come together and with burn-on-demand kiosks beginning to appear on the horizon, it’s a very exciting time for the DVD kiosk industry. With Redbox and TNR both preparing to quadruple their locations next year, 2007 should turn out to be an important year for the DVD kiosk industry.

Update - I contacted Redbox’s PR department and they confirmed that the webervations system was in fact launching on 9/25. They also pointed me to a press release on the announcement. I couldn’t find a copy of the press release online yet, so here is a copy of what they sent me.

“REDBOXT LAUNCHES ONLINE MOVIE RENTALS

About Redbox
Redbox Automated Retail, LLC is a leading renter of DVDs through automated
kiosks. Redbox continues to revolutionize the DVD rental industry as it
expands its footprint inside grocery stores, McDonald’s restaurants and
other locations. More information about redbox can be found at
www.redbox.com.”

Posted in Movies, Kiosks | 1 Comment »

Move To India With Six Friends And Get Free Netflix For Life

September 19th, 2006 Davis

SeventyMM is a DVD by mail company that is trying to tap into the emering DVD market in India. Recently, the company announced that they have received $7 million in additional funding to try and help build a movie service similar to Netflix only in India. The service itself runs about $8 per month and currently they offer about 10,000 title to residents living in Delhi and in Bangalore. The service is very similar to how Netflix operates in the US, with subscribers building an online queue and then using prepaid envelopes to ship their movies back and forth. What makes the service so interesting is how they are using word of mouth to spread the service.

Rather then engaging in witty commercials or heavy online advertising, the company has instead decided to implement a referal program where if you recommend the service to a friend, then you will save 1/6th of your bill each month. As long as that friend remains a member, after 6 referals, you will start receiving your movies for free.

I think that this is a really smart idea for growing their service, but am not sure how costly it could end up being. Currently, they only have about 7,500 subscribers, so using the program to leverage word of mouth could really boost subscriber growth, even if the incentive program only ends up being temporary.

With a little over a billion residents, India could be a very hot market for the DVD industry. Given their clear obsession with Bollywood films and their emerging middle class economy, there is a lot of potential for the company that gets it right. SeventyMM may be a young company, but they’ve already attracted $10 million in venture capital backing as they attempt to reach their initial subscriber goal of 1 million people and with 7,500 customers are off to a good start in trying to replicate Netflix’s sucess in India.

Posted in Disclosure - I own stock in co. mentioned, Netflix | 1 Comment »

Dating 2.0

September 19th, 2006 Davis

BLaugh is out with another great comic. This one is about what it’s like being single in San Francisco. If Emily was really into geeks, she would’ve figured out a way to bluetooth her contact information to him.

Posted in Web 2.0 | No Comments »

Cable Cards - The DRM of HDTV

September 19th, 2006 Davis

And Then There Was HDTV Hosted on Zooomr

I had to fight, I had to live without cable, I had to leech off of public networks, but finally I managed to get ahold of the two cards that have been stopping me from enjoy HDTV content for much too long. My battle with Comcast started a month and a half ago when TiVo first published their coming soon letter to the cable companies. Having just moved and expecting to see the series 3 launched anyday, I called up Comcast to have them install my cable and internet. At first things went smoothly enough, but when I asked the operator about bringing two cable cards, she suddenly got really confused. At first she tried to pull a Time Warner on me, but once I got her Supervisor on the phone, she clarified the situation. She also told me that I couldn’t get the cards without the box.

So for a month and a half I did my best to live without TV and internet. I made it about a week without the net and then broke down and bought a wireless access card. With the card I can actually tap into Cnet’s public wifi from my building and did my best to survive off of slow internet YouTube downloads while I waited. The minute I heard about the series 3 release I was on the phone with Comcast pushing my appointment up as soon as possible. I knew there would be a stampede and while I had to wait on hold for 50 minutes for an operator I got my move in date for the soonest possible day that I thought I could get my hands on the box.

Well as it turned out TiVo sold a few more of the series 3 units then they expected and everything’s got screwed up with their shipping systems, so by the time Friday rolled around, I still didn’t have my unit. At first I thought about trying to push out my appointment, but by that time I knew that everything would be out another week, so instead I choose to meet my installer and to see if I could con him into giving me the cards without actually having the box.

The minute he stepped into the lobby of my building he brought up the cable card issue. “You Want TWO cable cards installed?” My response was to tell him that I was sure and had in fact already purchased a TiVo. He tried to tell me that it didn’t matter that I had purchased a TiVo, that without VOD I was missing out on all the Comcast had to offer. I tried to tell him that with TiVo I could get program suggestions and wishlists, but he didn’t understand. When we got to my apartment the conversation was starting to heat up and he was pretty adament about not wanting to have to install TWO cable cards, when I told him that I didn’t want him to install them, but just give them to me. Immedietely his entire disposition changed. He hesitated for a second, told me I would have trouble trying to install their guide and I told him that TiVo had already taken care of that.

After that he was really happy and our conversation warmed again. He later sheepishly admited to me that of all the cable cards that he’s been asked to install, he’s only installed three and has talked everybody else into a DVR just because of how difficult it is to coordinate Comcast’s own program guide onto the television set. When I told him that TiVo has his own guide, he felt much more comfortable with the prospect that other customers were going to have him install these terrible cards that bring such beautiful HDTV.

In the end, I got my analog cable turned on and my high speed internet back and my hands on a pair of hot cable cards, but like always I’m still waiting for series 3 to come out.

Posted in Media, DRM, Disclosure - I own stock in co. mentioned, TiVo | 3 Comments »

Netflix Could Learn A Thing Or Two From Pandora

September 18th, 2006 Davis

Over the last few years, Pandora has emerged as one of the premier radio stations on the net. The service allows listeners to set up online accounts and then rate music according to their tastes. What is so neat about the service is that Pandora uses an extremely detailed rating system for every single song and knows that I like Nina Gordon’s version of Straight Out of Compton because it’s a great cover song and it knows that Thomas Hawk likes it because it features gangsta rap lyrics that he identifies with.

In creating their recommendations, Pandora screens “everything from melody, harmony and rhythm, to instrumentation, orchestration, arrangement, lyrics, and of course the rich world of singing and vocal harmony. It’s not about what a band looks like, or what genre they supposedly belong to, or about who buys their records - it’s about what each individual song sounds like.”

What I’ve noticed about Pandora is that it offers a very good unbiased way to discover new music. Whether it’s the elaborate rating process that they do or the fact that they don’t allow advertisers to bias their recommendations, the service has been great for discovering songs and artists that I’ve never heard of and their recommendations have been spot on about 95% of the time.

Netflix also offers a similar recommendation system for movies, but 31 reasons thinks that their ratings are fundamentally flawed and has resorted to giving Netflix false information in an attempt to try and trick Netflix into offering better recommendations.

31 reasons seems to think that part of the issue with Netflix recommendations is that they give too much weighting to genres and not to the different aspects found in movies. While undoubtably, Netflix’s rating system could be vastly improved by allowing their members to rate 20 different categories on each film instead of just a one to five star rating, I also think that Netflix’s problems may be deeper than just having a too simplistic recommendation algorithm.

My issues with Netflix are two fold, first and foremost, ever since I stopped rating movies at Netflix, my movie recommendations have become meaningless. Now this may end up being my own fault because I stopped using the site, but the reason I stopped was that I maxed out my queue at 500 films and it doesn’t do me any good to keep rating (or even considering using the recommendations) if I don’t have a way of flagging the films that look interesting as something that I might want to watch in the future. While I can understand some of the business reasons behind the 500 queue limitation, I fail to see why Netflix is unwilling to build support for some type of wishlist functionality that would allow their members to build a queue above and beyond the 500 movies that they can rent now.

I think my second reservation with Netflix’s recomendation system is that, over time, I’ve started to question how unbiased Netflix’s recommendations really are. For the most part, I think that Netflix ratings are tied to an algorithm that looks at my film ratings and not their inventory, but I can’t tell you how many times they’ve suggested Memoirs of a Geisha to me and how many times I’ve told them that I have zero interest in seeing that film. Knowing that this film (and many other recomendations) are from films that are part of Netflix’s Red Envelope production group makes me suspicious that Netflix may be engaging in a little envelope stuffing by promoting their own films in lieu of better recomendations that might be more appropriate for my movie tastes. If this is in fact the case, I think that it is a huge ethical issue for Netflix.

Advertising has turned out to be a popular area for Netflix and while I’ve been critical of some of their forced banner ads, I’ve also accepted them as a customer and know that if I click on one that I’m leaving Netflix’s site. If Netflix is in fact engaging in movie payola with their recommendations, than this is an even more serious concern because customers believe that those recommendations are unbiased and are trusting Netflix’s algorithims to show the most relevant results and not what they happen to have in stock at the moment. In the past the company has sent emails promoting their independent films to members who liked similar movies, but they give you a clear way to opt out of these advertisements, if you’d prefer not to receive them. If Netflix is also giving these films an unequal weighting within their recomendation software and then are failing to inform consumers or to give consumers a way to opt out of payola recommendations, then there is a bigger issue that needs to be addressed here.

In the end, Netflix’s recommendation software is certainly better then walking into a video store and suffering from brain freeze, but at the same time there is so much room for improvement that I’m surprised that the company hasn’t already created an update to their algorithm software. Maybe at some point they will remove the 500 dvd cap and clarify their recommendation policies, but until they do, I will continue to use other sites to find and discover movies and will manually add them to my queue as I find new films that I know that I want to see.

Posted in Marketing, Disclosure - I own stock in co. mentioned, Netflix | 1 Comment »