Davis Freeberg’s Digital Connection

Since bursting on the scene 13 years ago, Netflix has been a huge ally for consumers trying to save money. For years Blockbuster had dominated the rental industry and whether it was abusive late fee practices or high rental prices, they took advantage of their strength. The value that Netflix passed onto consumers injected some good old fashioned competition back into the DVD market and led to new forms of innovation. While Netflix continues to remain one of the best values for your entertainment buck, the firm has recently started to engage in some very anti-consumer behavior.

Most notably, they’ve been trying to strike agreements with studios to delay when they offer new release DVD rentals to their customers. In exchange for lower prices, they’ve agreed to put all of the new movies by Warner Brothers on very long wait status for their customers. In exchange, they get lower prices that will help them to drive brick and mortar competitors out of business. So far most studios are only watching these experiments from the sidelines, but Warner Brothers has embraced this scheme with gusto and has followed up their agreement with Netflix by striking a similar deal with Redbox.

Ironically, Redbox actually dismissed an anti-trust claim against Warner Brothers, in exchange for being invited into this exclusive club. Now some will argue that the beauty of Netflix is their deep archived content and while 487 or the 488 movies in my queue currently show availability of now, they’re customers who do like to rent new releases. By making them wait, Netflix is creating an artificial rental window that allows Warner Brothers to charge higher prices for new release DVDs and causes the price for rentals to rise at rental firms like Blockbuster. In fact since striking these agreements, Blockbuster has raised prices on their DVD by mail program and reinstated late fees to their customers. This is a reversal of the price wars that consumers enjoyed over the last decade.

While Netflix and Redbox haven’t seen much in the way of customer defections from implementing this hostile policy, they may find their activities under closer scrutiny thanks to Susan Uman from Manhattan. In a lawsuit against Netflix, she argues that this latest rental window is nothing but anti-competitive collusion. Already, Netflix has been sued over a different arrangement with Walmart to carve up the sales and the rental markets, so it will be interesting to see how this one plays out.

According to USLegal.com, “collusion occurs when two persons or representatives of an entity or organization make an agreement to deceive or mislead another. Such agreements are usually secretive, and involve fraud or gaining an unfair advantage over a third party, competitors, consumers or others with whom they are negotiating. The collusion, therefore, makes the bargaining process inherently unfair. Collusion can involve price or wage fixing, kickbacks, or misrepresenting the independence of the relationship betweeen the colluding parties.”

While there is a fine line between collusion and standard industry business agreements, the deal that Netflix made cheats customers out of new releases and I think it crosses that line. They have in effect sold their first sale rights, in exchange for financial terms that give them an economic advantage over smaller competitors in their industry. According to this primer by the Justice Department, collusion tends to occur when we see some of the following conditions.

“-Collusion is more likely to occur if there are few sellers. The fewer the number of sellers, the easier it is for them to get together and agree on prices, bids, customers, or territories. Collusion may also occur when the number of firms is fairly large, but there is a small group of major sellers and the rest are “fringe” sellers who control only a small fraction of the market.

-Bidders who congregate in the same building or town to submit their bids have an easy opportunity for last-minute communications.”

Looking over this list, it would appear that Netflix is very much in a position to abuse their market leadership status. With Movie Gallery in bankruptcy for the 2nd time and Blockbuster getting close to a date with the grim reaper themselves, Netflix and Redbox represent the future of the DVD rental industry. This limited competition has made it easy for them to enter into agreements that wouldn’t have been tolerated by customers five years ago. If Blockbuster had the finances to actually keep new releases in stock, one might argue otherwise, but their company is in survival mode and are now having to pay Warner Brothers more for each new release then their two biggest threats.

While Netflix and Redbox may not have their headquarters located in the same town, both have been aggressively courting Hollywood for access to their movies. Since the studios are largely controlled by a small handful of companies, it gives them the ability to collude with the limited DVD renters that are left.

Prior to their agreement with Warner Brothers, Redbox was on the outside of this club and was being forced to acquire their DVDs from outlets like Walmart because Warner Brothers refused to even do business with them. Now that they’ve stopped sticking up for the consumer, they have access to all the DVDs that they want to buy. If this doesn’t qualify as collusion, I’m not sure what does.

It’s hard to say how much legal merit this lawsuit will have, but from my viewpoint, I believe that Netflix, Redbox and Warner Brothers have created an illegal cartel to try and carve up the DVD market. Warner Brother’s gets to force consumers to buy new release DVDs, instead of being able to rent at lower prices and the rental companies get cheaper supply which helps to boost their profits. While I’m sad that Redbox gave up on fighting for consumers, I am glad that consumers aren’t afraid to fight back. Hopefully, Ms. Uman takes this case all the way, instead of settling at the last minute for a million dollar windfall.

Over the past five years, there’s been a lot of debate around the topic of net neutrality and while there have been a few examples where internet providers have tried to favor their own services over the competition, by and large this has turned out to be little more than a boogey man. Don’t get me wrong, I think that it’s important to keep the playing field level, but I also believe that there are bigger issues where consumers are being harmed.

While many media companies would like to see the first sale doctrine done away with, ever since the supreme court established the doctrine in 1908, consumers have enjoyed tremendous benefits from it. The concept, which was later codified into law in 1976, allows businesses and individuals to resell goods that they’ve legally purchased. Without it, companies like Ebay, Craigslist and Blockbuster Video wouldn’t even be possible.

Having the right to resell goods benefits consumers in two major ways. First, it reduces the risks that consumers have to take when making purchases. This ultimately makes things cheaper for all of us, because companies are forced to compete with their own products and consumers have a way of recouping part of their initial expense.

When I first purchased my TiVo series 3 for example, I spent over $800 on the product. While this may seem like an insane amount to spend for television, I was able to justify the cost in part, because I sold my original TiVo on eBay for $200 and knew that one day I would be able to resell my Series 3 (currently worth approximately $400 on Ebay) to recover part of my expense. As a result, I’ve been able to enjoy a premium DVR experience for about 1/3rd what it would have cost me to rent an inferior DVR from my cable company.

The second benefit to the consumer is that by having a robust resell market, it allows more businesses/middlemen to participate. This ultimately increases demand, stimulates innovation, and drives down prices. Redbox for example is able to rent you a DVDs at 1/20th of the cost or what it would cost you to buy the actual DVD thanks in large part to the first sale doctrine. Because Redbox knows that they can get more than 20 people to share the same product, it enables consumers to save money, the media companies to sell more DVDs and for Redbox to still earn a tidy profit in the process.

While the first sale doctrine has been a huge benefit for consumers over the last 100 years, these benefits are rapidly being eroded as media moves digital. Because the first sale doctrine was based on physical goods, it hasn’t aged very well in the digital realm. As a result, consumers have been forced to endure awkward DRM implementations, limited availability of digital content and higher prices for media services.

As the top media conglomerates have sought to seize more and more control over the distribution of their products, they’ve shifted from a world where you have the ability to “own” your media, to one where you only have the option to “license” your content.

For a lot of consumers, this distinction may not seem important, but it has profound implications on the future of digital entertainment. Since firms aren’t allowed to buy products at a wholesale price and rent them to multiple consumers, they’ve been forced to negotiate agreements one by one. This is a costly and time intensive process that has limited how quickly media can migrate online. It has also given the media conglomerates monopolistic control over prices. Instead of being forced to compete in an open environment, they are able to take their ball and go home, when they haven’t liked the terms and conditions that innovators offer them.

The result of this transition from ownership to licensing has increased costs for consumers even beyond the price of media. Take for example, the various hardware devices that we’ve seen released over the last five years. If you want to watch digital copies of old movies and TV shows, you can do it through Netflix, but only if it’s on a device that has a business relationship with them. When Sony decided to release a digital copy of Cloudy with a chance of meatballs at the same time the movie was in the theaters, consumers could only participate on select Sony TVs.

If you prefer to watch new releases from Apple’s iTunes store, you’ll need to buy an AppleTV to easily watch that content on your TV. If you want to watch a DivX file that you purchased from CinemaNow, you’ll need to illegally hack your AppleTV or purchase a DivX certified device instead. It’s fantastic that consumers have the ability to record HD cable TV through TiVo, but if you subscribe to AT&T or Dish Networks, you’ll need additional (proprietary) hardware to decode their signals.

While many of these businesses have come a long way towards opening up their systems and fulfilling the digital dream, they’ve all been limited by what content holders allow. As a result, consumers must face a digital minefield where DRM and file formats are used to limit what you can do with the content that you’ve paid for.

As we continue to move forward into the digital world, I think it’s important that consumers shouldn’t have to abandon the first sale protections that have served us so well over the last century. What I propose is a new set of rules that would allow media companies to control their prices, but would also give consumers (and businesses) a way to move past some of these restrictions.

While the DMCA has been a mixed blessing for tech companies and consumers, it is in desperate need of an update (and one that isn’t written by the lobbyists.) For example, currently, it’s illegal for consumers (or businesses) to circumvent DRM, even if consumers are being harmed by the DRM. This has led to situations where people who have purchased media, later lost access to those rights because a provider went out of business. Situations, where companies are unable to offer lifetime licenses in the cloud, because of exclusivity clauses in contracts with pay TV channels.

What I purpose is that if media companies want DMCA protection for their content, it should come with strings attached. In crafting new rules for a modern first sale doctrine, I would require content owners to set a wholesale price that all businesses would be allowed to buy content at. They could still require minimum purchases sizes and would have complete control over what they wanted to charge for that content, but they shouldn’t be allowed to sell a license at one price to one company and then exploit another company for political reasons.

What this would do is create a level playing field for all of the digital retailers. If UMG wants to charge $50 for a download, they would have the right to do this, but they couldn’t favor one vendor over another and they couldn’t punish innovators for being successful or passing on value to the consumer. This would also bring welcome competition to the pay TV market because media companies wouldn’t be able to play MSO’s off of each other.

For example, I’d love to be able to see every NFL game each season, but I can’t unless I’m willing to subscribe to DirecTV for service. Instead of making consumers fight and choose over exclusive content, everyone should be given fair access to that content. If cable companies don’t want to pay the price of admission, they would be less competitive with consumers. The end result would be more demand for NFL content by consumers and more competition for their dollars. If we allow media companies to continue with exclusive content in the digital realm, it will only makes it more expensive for everyone.

I also think that if the media wants to continue to have DMCA restrictions on their DRM, that they shouldn’t be allowed to use that DRM to discriminate between hardware partners. It’s great that I’ve got the ability to record HDTV on my TiVo, but since cablecards don’t work with satellite or U-verse, it essentially gives Comcast a monopoly on pay television for TiVo households.

As a result, Comcast is able to provide abusive cablecard support without having to worry about competition. If they knew that they had to actually compete for the $50 – $200 a month that they charge, it would encourage them to provide better service and to continue to innovate, (even if consumers decide not to use Comcast’s equipment.) Instead we’ve seen cable companies limit the ability for consumers to take their programs on the go and prevent consumers from accessing VOD services on DVRs that aren’t rented from them, all without having to worry about repercussions.

The same is true for digital downloads. If Apple wants to use DRM to help protect their content partners, they should be allowed to, but not at the expense of consumers. If other hardware manufacturers want to build support for iTunes’ product they should be allowed to license the DRM (at cost) from Apple. This would prevent Apple from offering exclusive downloads that lock consumers into their own hardware ecosystem. The end result would be more devices that could play Apple content and more competition among set top box manufacturers. This competition would cause prices to drop and would encourage Apple and others to be innovative with the features and services that they offer to their customers.

While some may be content to let the media industry continue to grow inside of these walled gardens, I’d like to see a world where someone can legally purchase media and play it on any device that they want to. By creating new laws to help better regulate the abuses of our current licensing system, consumers, businesses and the online video industry as a whole, would be allowed to flourish across many different platforms. Instead of being forced to buy the same content over and over and over again, consumers would be allowed to license their media under fair and reasonable conditions.

HBO may stand for Home Box Office, but it may as well be Hates Being Online given their objections to internet video. According to Time Warner, HBO has over 40 million subscribers and while this lucrative revenue stream allows them to produce some of the most compelling content on television, it also gives them an extraordinary amount of influence on the entertainment industry. Not only is the company owned by one of the major studios, but because of the billions that they take in each year, they’ve been able to outbid small nimble start-ups for access to content. Instead of using this power for good though, they’ve chosen to fight against consumer’s interests by restricting your ability to watch digital content that you’ve legally purchased.

With consumers clearly wanting to access content online, one would think that HBO would be the first in line to embrace this trend, but because of their status quo, they’ve chosen to fight progress instead of helping to usher in the digital age.

Over the last two years, a group of digital and traditional media companies have formed an impressive collective known as the Digital Entertainment Content Ecosystem (DECE). This diverse group of firms includes firms ranging in diversity from Sony to DivX. While each company has their own agenda, the goal of the group is to try and create a media framework that allows consumers to purchase downloadable media and to play it on a wide range of consumer electronic devices.

While I do think that there are some problems with their proposed implementation, I’m also pragmatic enough to see this consortium as our best chance of furthering the internet video revolution. To date, media companies have fought digitization tooth and nail, but this co-op between Hollywood and the Silicon Valley could create an environment where more new release content is made available to the public.

Anyone whose used Netflix’s Watch Instantly program knows that there is a ton of content from the 1980’s, but very few titles from the last decade. One of the biggest reasons for this, is that companies like HBO have used their vast financial resources to outbid them and other digital players for these films. With studios scared to death of upsetting deep pocket partners like HBO, it’s created an environment where consumers must either pirate recent content, set an appointment to see TV or stick to watching it on a disc.

While, HBO has made some of their content available through Comcast’s TV anywhere initiative, it’s only includes their weakest titles and you must be a cable subscriber to get access to the content. Contrast this to Showtime’s digital experiments and it’s clear that HBO is standing in the way of progress.

Like Netflix’s Watch Instantly platform, DECE has proposed a system where consumers can store their media content in the cloud and then stream it whenever (and more importantly wherever) they want to view the film. Yet, according to the industry trade publication, The Wrap (via Inside Redbox), HBO isn’t a fan of this system and is actively trying to block it’s implementation. Since they insist on legal language in their contracts that prevent consumers from accessing digital content while it’s playing on their channel, it’s possible that you could purchase a film and then be blocked from seeing it while it’s playing on HBO.

Imagine paying a steep premium to see a recently released film and then being told that you can’t watch it on certain dates, just because HBO is afraid that you might not subscribe to their channel. Clearly, this isn’t in the interests of consumers and yet HBO is using their financial resources to try and create this very scenario.

“Paying hundreds of millions of dollars a year for output deals with Warner, Fox and Universal, HBO currently restricts these studios from distributing their films digitally during its exclusive pay-TV window. Typically, that window starts six months after a film debuts on DVD and extends for 18 months. It already has presented itself as a challenge for established download sellers including iTunes and Netflix.”

HBO is free to run their business anyway that they like, but I believe that policies that are downright hostile to consumers should not go unpunished. Because of this, I’m asking HBO subscribers to call your cable company and cancel the channel. I know that this may mean giving up some great content, but if HBO starts to feel the sting from a consumer backlash, perhaps they’ll rethink their position and start to embrace the digital revolution. Currently, only 3% of the entertainment industry’s revenue come from online, but if just 3% of HBO’s subscribers were to cancel service, it would have a profound effect on the company’s profitability.

For too long, consumers have been abused by these exclusivity agreements and if you sit back and allow them to walk all over you, then you’re only part of the problem. Instead of rewarding an outdated analog business model, we need to be demanding that studios and their partners join the 21st century and make their content available online.

It’s no secret that newspapers have been challenged by the rise of the internet. Whether it’s pesky bloggers like myself giving content away for free or social networks redefining what a hot news story actually is, things have gotten incredibly competitive for traditional news organizations. As a result, we’ve seen everything from pleas for government assistance to blaming Google for directing massive amounts of traffic their way. While I’m sympathetic to anyone who is being displaced by innovation, as a consumer I’m also glad to have a ton more options for finding content.

I may have less brand loyalty to any one particular publication, but thanks to the magic of Google, it’s a lot easier to find a diverse set of opinions on topics that I care about. For the most part, I think that Google is the best thing since sliced bread, but that doesn’t mean that they can’t improve their product.

As the media landscape has gotten more competitive, I’ve noticed that publications are becoming increasingly aggressive at trying to monetize the eyeballs that they do get. This really started with the pop-up ad, but after the web browsers figured out how to turn this control over to the users, news companies seem to have switched tactics.

The latest trend is to insert an interstitial ad between you and the content. Usually, there’s some tiny link where you can bypass it or it auto-forwards after 30 seconds, but anytime I’m forced to watch an ad before knowing how good or bad the content actually is, it creates a lot of frustration with my web experience.

Don’t get me wrong, I’m actually a strong supporter of smart and innovative ways that advertisers can bring their messages to the public and I’m happier than most to support newspapers who are creating great content, but with so much bad content out there, I don’t feel that consumers should be forced to roll the dice, when there’s no payoff on the other end.

I could probably list a dozen major companies who are offenders, but my biggest beef is actually with Google. If I know that someone uses this type of aggressive advertising, it’s easy to quit visiting their site, but because Google is indexing billions of web pages, there’s no way to know which link is going to take me to real content and which link will take me to an ad.

As an example, if you search for the phrase “hardware spec for Microsoft’s pink phone” the first result is a story by ZDnet showing the first line of the blog post, but if you actually click on that link, it takes you to a page that is missing the content and only displays an ad instead. If you wait long enough you will be forwarded to the right destination, but isn’t this false advertising on behalf of Google?

If they know that someone’s browser is going to be hijacked, then why are they taking you to a different page instead. It’d be one thing if Google was trying to actively stop the process, but they’re actually helping publishers create more of these roadblocks on the web.

While Google is free to advertise (or link to anyone) that that they see fit, they should realize that this harms their own user experience while benefiting no one but spammy news publications. If a company like Bing or Ask.com were to come out with an interstitial ban, it would take me about a half a second to change my default search engine. It may be that this isn’t seen as a big enough annoyance to do anything about or it could be too late and is considered an industry standard now, but to show one search result and then take a user to an entirely different page (albeit temporarily) feels an awful lot like a bait and switch tactic to me. What do you think, would Google be better off banning these ads from their search results or is content from newspapers so valuable that it would do more harm than good to blackball offenders like Forbes and ZDNet?

Ten years ago, Blockbuster video was on top of the world. They didn’t know it at the time, but it was the golden age for the video store. After years of reminders to be kind and rewind, consumers were adopting DVD players en masse and needed a source for their entertainment needs. For better or worse that source was Blockbuster.

With the internet buzz hitting a fevered pitch, Blockbuster was already hard at work creating a digital strategy. Given their dominate position in the video store industry, they even flirted with the idea of buying a small internet start up named Netflix for a mere $50 million.

With the entertainment world seemingly in the palm of their hand, Blockbuster was positioned to make the jump to digital better than anyone, but over the last decade they’ve made a series of blunders that now threatens to bankrupt them today.

Yet, in looking at their rise and fall, it’s easy to make the quick assumption that their problems were a result of technological innovation, but the truth of the matter is that they have no one but themselves to blame for the weak position that they find themselves in today.

Of all their missteps, the biggest blunder was assuming $1 billion in debt, so that Viacom could collect an obscene dividend payment when they sold the company to a naive public. That debt now hangs over them like an albatross across their their neck and has caused them to lose pace with their unencumbered competitors.

With revenues in steep decline, it will only get harder and harder for Blockbuster to continue to meet their obligations under this debt. Without the firepower to compete on a level playing field, their situation will only get worse

With the precariousness of their position becoming increasingly clear, Blockbuster has done everything from paying a high price to refinance their debt to hiring a bankruptcy specialist to help salvage what is left of their business.

Yet, despite the clear and present danger of their situation, Blockbuster has continued to keep their head buried in the sand. Over the years, I’ve offered my fair share of suggestions criticism for how they could improve their business model, but we’re now at a point where a tourniquet won’t save them, they must do massive surgery and Stat!

In an effort to try and preserve a dying part of the entertainment industry, I present to you, my plan to save Blockbuster.

With the future looking pretty bleak for just about any video store, how can a company like Blockbuster save themselves? By sacrificing their media business in exchange for an opportunity to reinvent their retail business.

What I’m proposing would be tricky and the devil really would be in the details, but with the right execution, Blockbuster could shed their legacy of debt, future proof their business and position themselves to take market share, instead of losing it.

Essentially what they’d need to do is create a “good Blockbuster” and a “bad Blockbuster” to isolate their problems.

On one side you would have their DVD by mail program, their DVD kiosks and their digital business. On the other side, you would have Blockbuster’s traditional video store business that so many are quick to write off.

Together, the two businesses are slowly strangling Blockbuster, but split apart, they could free them from the impact of years of stagnation and ineptitude on their part. What I’m proposing is that they spin off their good assets and use that money to pay off their debt.

In the past, Blockbuster tried to launch an aggressive initiative to boost their DVD by mail program, but by doing so, they only ended up cannibalizing their in store customers. As a result, they’ve all but abandoned the program and have allowed their future to slip away.

If an independent Blockbuster.com doesn’t have to worry about that cannibalization, they could focus on going head to head against Netflix. They could create a subscription program for their kiosks that could offer value that Redbox couldn’t match. They could be price competitive without having to worry about their legacy stores. The result would be a smaller Blockbuster with less meaningful revenue, but it would represent profitable revenue instead of losses.

Neither Netflix nor Redbox would be able to offer DVD exchanges at the kiosk level and through the mail, but Blockbuster could capitalize on both strengths. Yes, the company would be a mere sapling in the larger entertainment industry, but Netflix was once a sapling and they’ve been able to grow into a very large oak.

From the video store side of the equation, Blockbuster could focus on what they do best, maximize cash flow while transitioning their stores into a new business. Whether that means turning their stores into modern day Starbucks or a replacement for the now defunct Circuit City, there are still plenty of opportunities for smart and nimble retailers.

To date, Blockbuster CEO Jim Keyes has made this transition a priority for the company, but when they are forced to forgo tens of millions in capital expenditures, just so that they can service their debt, it limits how quickly they can make this jump. As a result, they continue to face pressure to close stores instead of turning them into cash flow producing machines.

Given all of the negative media attention, it may be hard to believe, but Blockbuster still does a ton of business. For the first 9 months of 2009, Blockbuster brought in over $1.9 BILLION in revenue. By comparison, Netflix brought in $1.22 billion during the same period. Yet, when you look at the differences in market capitalization, Netflix is over 20 times more valuable than Blockbuster.

Perhaps even more surprising is that Blockbuster would have turned a profit of $38.4 million during that 9 month period, had they been able to ignore their debt. Instead, that $38.4 million profit turned into a loss of $131.6 million for the company. Now you don’t need to have a Phd in math to know that losing over $100+ million per year starts to get expensive fast and perhaps even more damaging than the loss of the cash is the effect that these interest payments are having on their competitive ability.

Instead of being able to invest in their future, they’ve been forced to make cut backs. Instead of retrofitting their stores, they’ve been closing them instead. Instead of stepping up the marketing, they’ve been forced to dial back. The result is that more revenue shifts to Redbox and Netflix and their cost to acquire customers has plummeted. If this trend continues, you don’t need Dr. Doom to tell you that it will be curtains for Blockbuster. They must stop the bleeding and they must stop it now.

Now I know what you are thinking, if Blockbuster is a penny stock today, how are they going to come up with $1.6 billion to pay off their long and short term debt. Part of it comes from the assets that they are holding today. With $980 million in current assets, they should be able to keep a good chunk of their leverage in check. The remaining $620 million worth of debt would be paid off by spinning off their new media divisions.

According to the most recent data, Blockbuster currently has 1.6 million online subscribers. As of last September, they had deployed 1,000 kiosks, but were anticipating that they would have over 10,000 deployed by the end of 2010. While Blockbuster doesn’t break down their digital revenues, I think that it’s reasonable to suggest that this division would be worth anywhere between $25 – $75 million based on their market position and intellectual assets.

If you look at Netflix’s current valuation, it works out to be approximately $255 per subscriber. Assuming that you discount Blockbuster subscribers by 30%, it would value Blockbuster’s DVD by mail business at $285 million.

In February of 09′ Coinstar completed their purchase of Redbox at a valuation of approximately $350 million. At the time, Redbox had 12,500 kiosks suggesting a value of approximately $28,000 per kiosk. Assuming that Blockbuster can get to 10,000 kiosks, even at a 50% discount to what Coinstar paid at the bottom of the market, one could assume that this stake would be worth approximately $140 million without Blockbuster’s legacy stores or debt.

What these numbers suggest is that if Blockbuster were to do a spinoff, it’s easily conceivable that they could raise at least $500 million in the offering. Assuming that they start to market their DVD by mail and get it up to 2.5 million subscribers, it would value their new media business at approximately $660 million.

If they did the spin off in the form of a convertible bond, I believe that this number goes even higher, because bond investors could be given the option to return to their current position, if the spin off flopped.

While this sort of transaction would create a new competitor for Blockbuster Video, by getting rid of their debt, it would enable their stores to become profitable once again, which in turn would make it easier for Mr. Keyes to raise money for the marketing and store improvements that Blockbuster so desperately needs.

While I believe that this rescue plan could make Blockbuster competitive again, I don’t believe that their current management is willing to sell off their future, even if it means saving themselves. Despite all evidence of a dying industry, Keyes continues to insist that the video store is the cornerstone of what they do and has consistently defined Blockbuster’s competitive advantage as being able to offer entertainment across multiple channels. While it’s easy to point to Netflix and Redbox as the source of Blockbuster’s kryptonite, I believe that it is their own unwillingness to let go of the past that is preventing them from being a video superhero of the future. Only time will tell how indestructible they really are, but if they continue down the same path, they’ll end up as a mere footnote in the history of the entertainment industry.

A couple of months back, I received my monthly bill from Comcast and almost had a heart attack. Over the course of one month, my bill went up over 50% and while I’ll admit to loving TV more than your average bear, after years of fee increases, it became hard to justify paying over $50 a month for the small handful of channels that I actually watch.

When I called Comcast to inquire about the increase, they told me that instead of extending their “promo” deals like they have in the past, they would rather lose my business than extend my discounted rate. After much hand wringing, I finally decided to cut the cord and figured I could always go back.

Sure enough, less than one week after discontinuing my cable TV service, Comcast had a change of heart and sent out a 12 month promo offer bundled with internet. While the deal looked tempting, I didn’t want to keep trying to play musical chairs when it came to how much I paid for television and I didn’t particularly appreciate Comcast’s policy of screwing existing customers until you actually quit. At first, I tried going cold turkey and figured I’d have withdrawals, but much to my surprise, I found that I didn’t really miss cable TV all that much.

Thanks to sites like Netflix, Megavideo, Amazon and Hulu, it was easy to stay up to date via the laptop and with less distractions, I found that I was actually accomplishing a lot more in my life.

Over the holidays, it became clear that cable TV simply wasn’t offering a very good value for what they were providing. In the past, there’s been talk of allowing consumers to subscribe to channels a la carte, but Comcast has consistently resisted offering this to consumers. As much as my laptop provided a reasonable solution for finding content though, I still felt like I was missing out on the high definition experience that I had grown to love, so after the holidays were over, I purchased an Audiovox HDTVo antenna to see what kind of free OTA signals I could get.

In the past, I’ve seen plenty of negative reviews on HD antenna’s, so I half expected that I’d be taking the product back, but despite a few difficulties in getting it set up, I couldn’t be more pleased with the reception that I’m getting.

When I was a kid, we had a giant antenna mounted on top of our house. Not only was it ugly, but every time a storm blew in, we’d lose all reception. On the good days, we were lucky to get three channels and even then it was intermittent with static. While the price for OTA signals hasn’t changed any, technology sure has.

Not only did my Audiovox antenna allow me to pick up signals that were over 50 miles away from my house, but they provided the signals with incredible clarity. No static, no glitches, just pure high definition goodness. When you throw in the ability to time shift my programs with my TiVo, it creates a remarkable user experience.

In comparing my season passes from cable to post-cable, I found out that there are approximately 15 programs that I’m missing out on. Of those programs, 10 of them are available through Hulu or Netflix. While I do miss some of the Laker games that are broadcast on ESPN and some of the original programing on USA and TBS, with over 45 programs being recording each week, there is more than enough high quality content to keep me busy. If you throw in Netflix’s watch instantly integration via the TiVo, there are another 250 movies or shows that I’ve got waiting in my queue.

While my overall impression of the AudioVox HDTVo antenna was positive, there were a few drawbacks. While the antenna is fairly small, it does look a little obnoxious sitting on my roof. Because of the location of the broadcast towers, in order to capture the signals I could only install it on one side of my house. This makes it hard to camouflage from the neighbors and could present problems to those who live next to tall trees or buildings.

Another difficulty that I had was that the installation instructions were very poorly written. They referred you to web addresses that didn’t exist, didn’t provide the names of each part, but referenced the parts like you were supposed to already know what they were and when I first hooked it up to my TV, I couldn’t get any signals because by five year old HDTV did not include an HD receiver inside of it. Luckily, My HDTiVo did and was able to translate the signals perfectly. I also thought that the name HDTVo was a little bit deceptive and made it seem like this was a product designed specifically for TiVo. While I’m not sure that it would amount to a trademark violation, I do think that the way they’ve chosen to market the antenna could lead to a bit of confusion on the part of consumers.

Despite my frustration setting it up though, the final experience exceeded my expectations and I wouldn’t hesitate to recommend the product to anyone who are looking for a way to save money on their television. At $65, it takes about 5 weeks before it becomes cheaper than paying Comcast for lackluster service and when you consider that you can save over $600 in the first year that you use it, the savings can add up pretty quick.

That $600 could be spent on two movies a night from Redbox or a Blockbuster rental every other day and I’d still end up ahead. While antennas in the past may have been a disappointment, the new generation of digital antennas make it easy to cut the cord and make it awfully hard to justify the expense of pay television. I don’t expect that we’ll see everybody cancel their cable bill, but if enough people begin to take advantage of this type of equipment, hopefully we’ll see some of the cable companies begin to rethink their fee increases.

I know that I’ve been critical of DivX’s efforts to woo Hollywood in the past, but I’ve also got to give them credit for a win when I see one and I think they knocked it out of the park when it comes to Paramount.

Recently, Paramount announced that they were going to be distributing content on USB sticks. At the time, they didn’t say what format it would be in and even on DivX’s conference call there was no mention of this realization of their strategic vision, but Electric Pig is reporting that the Paramount movies will in fact be encoded in DivX.

With only 20,000 memory sticks for sale and at a price of approximately $33 US, Paramount is still clearly in the testing phase, but the fact that they choose DivX demonstrates the clear advantage that DivX has over all of their other digital competitors. They have the only real solution for brick and mortar retailers.

If Paramount tried to do this with a proprietary solution, it wouldn’t work because it wouldn’t give them a way to get that movie to the television. They could try to do it with Apple, but Apple doesn’t have the same reach to the TV, especially in Europe where this is being launched.

To date, most of my thoughts on DivX’s courtship of Hollywood have centered on the futility of trying to win enough support, so that online retailers could adopt their technology for digital distribution. If you can’t get a Disney or UMG to license DivX’s format, it makes it tough for someone like Netflix or Blockbuster to use their codec even with the other 80% of the content owners on board.

The beauty of the USB distribution strategy is that they won’t need 100% industry support in order to move their plans forward. Shelf space is limited as is, all they need is for a single studio to want to take advantage of this and there will be more than enough titles to tempt you with while you are waiting in line at the cash register.

Now I know what many of you are thinking, movies on USB are pretty lame. When Paramount made their announcement, there were more than a few commenters who zinged them for being out of touch with current trends. While there’s no doubt that the world will go digital, I also realize that the major studios aren’t going to abandon the retail partners that deliver the majority of their profits each and every year. It may end up becoming super easy to buy movies straight from your home, but if you have millions of consumers visiting a store each day, you can bet that the studios will want to reach those customers where they are hanging out. The shelf space is too valuable to be abandoned.

DivX on USB also opens up new business models for the studios. Instead of selling three DVDs, they could package all the Godfather films on one stick to justify a higher price tag or they could offer an entire season of television on an 8GB stick instead. If a retailer can sell something for twice the price, they will take smaller margins from the studios for the larger transaction. With the studios under pressure to develop new revenue streams, this will be too tempting for them not to exploit.

There’s no doubt that DVD is moving to Blu-Ray, but DivX memory sticks allow their Hollywood partners to reach consumers who may not have upgraded to high def just yet. With the industry in a state of flux, being able to sell a device that can be read by any computer and over 200 million devices gives DivX broad reach when it comes to the world of disconnected playback.

Paramount may be approaching this market cautiously, but I think people have greatly underestimated the size and the impact that USB films will have. It may not be cutting edge technology, but there are too many powerful companies who need it to succeed for it to fail. At the birth of this industry, it’s encouraging to see Paramount actively supporting their partnership with DivX, instead of just taking a licensing payment and then ignoring what their technology can offer.

USB movies won’t necessarily solve DivX problems with their shifting business model, but it does underscore the significance of the platform that DivX has built. As much as DivX is threatened by the obsolescence of the DVD, they can also benefit from the format shift. So far, they haven’t done a very good job of managing this transition, but this deal proves that even an old dog can learn new tricks. If retailers start asking for DivX as a weapon against Blockbuster and Netflix, other studios might also understand the benefits of using open and popular technology to make more money.

Normally, I tend to think that most regulations are bad. In a free market, businesses should be allowed to operate with a wide degree of latitude. At the same time there is a pragmatic part of me that understands there can be exceptions to this. Everyone should have the right to free speech, but that doesn’t make it right to run cigarette ads on Saturday morning cartoons or to claim that you’re a Doctor when you only bought your degree from an internet spammer.

For the most part, the television world has been forced to accept reasonable restrictions in exchange for the public bandwidth they use to deliver their content. In the internet world though, the content rules are more like the old west because consumers are opting into the service by paying for it. As long as you have the quickest draw, your behavior doesn’t matter as much and so far companies like Netflix have been more concerned about digital market share, then doing what’s right.

Maybe this is because internet audiences are still small compared to television or it could be that it takes time for rules and standards to develop and emerging markets don’t tend to care about these things. Whatever the reason though, there are parts of the television experience that aren’t making the jump to the internet.

Specifically, I’m talking about closed caption data. For years, television studios have been legally required to provide this information, so that people who are hard of hearing can also enjoy the content. While there are some technical issues associated with adding this kind of data to a movie file, technology is at a point where it could easily support this. The Matroska container for example, is able to include optional sub-title information along with video and audio data. Alternatively, because online delivery can microstream to people, files with the embedded sub-titles could made available to viewers who opted into them. This would involve keeping multiple copies of the same movies though and so far the digital movie industry hasn’t wanted to bear this cost.

While I’m loathe to suggest new regulations on a burgeoning industry, I also feel like we have a responsibility to consider the needs of everyone. It costs companies extra money to include wheel chair ramps at their physical locations, but we pay for that as a society because we want to treat everyone as equally as we can. As the traditional line between telecommunications and entertainment becomes blurred, it’s important that we don’t leave behind those less fortunate in life. Having a law that requires subtitles in order to qualify for DRM legal protections wouldn’t be popular with the entertainment industry, but it would fill a void that the market isn’t interested in addressing. Personally, I don’t know whether or not I’d actually support a legal mandate for firms like Netflix, Amazon and Apple to require this data, but I am interested in hearing your thoughts on the issue.

Update – Interestingly enough, I found out that the FTC is actually hosting a hearing (not sure if there was a pun intended) on this topic on Friday Nov. 6. It sounds like the entertainment industry’s position may not be represented, but they will have several prominent members of the deaf community weigh in on the topic. The event will run from 9am – 1pm EST and will be broadcast on the web at the FTC’s website.

“I need not fear my enemies because the most they can do is attack me. I need not fear my friends because the most they can do is betray me. But I have much to fear from people who are indifferent.” – Russian Proverb

Now I know that most people don’t really care about the mechanics behind playing video files and I can’t say that I blame you for caring more about your content than the technology behind it, but while this post will get into some of the more mundane mechanics of the codec industry, I ask that you stick with me because behind the scenes a war is being fought for control of your very television.

This particular battle has been going on for over 10 years now and centers around something called a codec.

When J.D. Rockefeller set out to monopolize the oil industry, there were several crucial areas where he attacked. He knew that he couldn’t control all of the oil fields because it was literally bubbling out of the ground, but what he could control was the distribution method for getting oil to the end customer.

In building his monopoly he seized assets used to transport oil from raw material to the end consumer. Whether it was owning all of the oil pipelines, so that he could control what oil cost him, owning the railroads so he could dictate how far his competitors could reach or owning the distribution points where consumers bought kerosene to light their homes, he made sure that he had control over every aspect of it. This was good for Standard Oil investors, but wasn’t very good for competitors or consumers.

Online video may not seem like it has a lot to do with the oil industry, but if you look at it’s early development, there are many similarities. So much content is bubbling up that the real challenge isn’t finding video oil, it’s getting it to consumers. Instead of pipes, now we have internet access, instead of railroads there are CDN networks, instead of gas stations, there are operating systems ready to serve us 24 hours a day.

In all of these industries, competition has been limited to a handful of big companies, but the industry that I’m most interested is much smaller than any of these. In the grand scheme of things, codecs (and the filters that go along with them) are the refineries of the video world. They take digital signals and convert them into the flickering magic that appears on our screens. Consumers may not understand the technical details behind it, but they are a crucial chokepoint in your digital video experience.

This battle has been fought on many fronts, but in the end it always comes down to one issue. Those who think consumers should have a choice and those who think they know better. It’s about control over your entertainment experience. Who, What, Where, When, and How you are allowed to consume YOUR media. On one side, well funded corporations with huge financial stakes, on the other, an unorganized patchwork of misfit companies and an army of guerrilla volunteers desperately fighting for a better entertainment experience for all of us.

The war over how video is transmitted may not make it to the front pages, but how it turns out will be important for the success of digital video. In order to better understand how this battle is going, I reached out to interview one of the Colonels in this digital revolution.

Dan Marlin is the CEO and Co-Founder of CoreCodec. His company has built many of the tools necessary to play video files. Before starting his company, he worked for DivX and over the years has contributed extensively to the open source codec movement. He also sits on the board of the Matroska Foundation, an organization dedicated to enabling high definition digital video support for as many consumers as they can.

In our interview, we discussed the growing momentum behind the MKV format, his thoughts on DivX and the competitive landscape of the codec industry and had a passionate discussion around a controversial decision by Microsoft to prevent outside developers from using alternative filters in Window’s Media Player.

In regards to MKV, Marlin had many positives things to say about the momentum that they are seeing. When I asked him about interest in the format, he said that over the last 8 months, they’ve seen a “20 fold increase in the inquiries in regards to more details, about usage about enhancing the current feature set.”

This interest should mean good news for consumers. As more and more customers ask “where’s the MKV?“, hardware companies are starting to respond. When I asked Marlin about how long it would take before we see MKV reach critical mass he said,

“If you look at the adoption scale, you’d probably have to say that we’re at the Ubber Geek stage right now. It will probably take 2 – 3 years. We’re just starting to see the penetration now and it’s been three years since our last release. I would probably have to say two years. Not this Christmas, but the following Christmas you’ll probably start to see more devices.”

One of the more interesting things that came up during our conversations was some of the trends that Marlin is seeing in the MKV adoption curve. It’s no surprise that the anime community was one of the first ones to start using the technology, but I was surprised to learn that countries in Asia and Europe have been more enthusiastic in adopting MKV then in North America. In fact, the trends for MKV adoption mirror the original DivX adoption curve exactly. It’s almost as if the people who’ve been long time DivX users are the first ones to upgrade to an HD experience.

“Absolutely, as a matter of fact it’s mirrored exactly. You could look at DivX in the early days when I was there going back to 2001 and you can actually see the same adoption happening, the anime, the ripped releases from the AV heads, it’s mirroring it, but you have to ask why they are doing it? They are doing it because of the flexibility that it brings to what they’re doing. They can add, especially when it comes to some of the guys that rip DVD and the like and Blu-Ray, they kind of make it their own. They can add menus, there are menus out there that even though they are text, they do very basic things, but there can also be a ton of files inside the container itself, there are info files and pictures you can group.”

While Matroska was technically created by CoreCodec, Marlin told me that he has plans to spin it off into a foundation similar to Mozilla. They plan to offer sponsorships to companies that want to tap into their early adopter customer base. One of the things that I found fascinating throughout the interview was the openness behind such a transformative piece of technology. Instead of monetizing their creation, CoreCodec is building a business around the open source eco-system. Big media companies that believe you can’t build a business around “free”, would be well served in looking at how Core Codec has been able to position themselves by giving a good portion of their technology away.

“we looked at it not looking to make money and that wasn’t really the intention, but even what has been proven now and maybe not so much back then, open source and the ecosystem around open source, there can be profit. Even in a non-profit foundation or a not for profit foundation I should say, which the Matroska Foundation will eventually become, you know is pretty much the same thing. You still can be profitable and make money to support what you developed.”

When I ask Marlin about his thoughts on DivX and how they are positioned in the codec industry, his thoughts were bittersweet, “it’s a love-hate thing.” On one hand, having DivX adopt the MKV container does a lot towards making it a standard. It also helps to speed up the amount of time it will take to get into hardware devices. On the other hand, not a lot has changed since DivX and XviD split paths and now that the open source movement has taken the upper hand, he doesn’t like to see confusion between X.264/MKV and DivXHD.

“Obviously they’ve rethought what they had to do with H.264 which is a migration, but they’re not providing anything of value to what’s already out there. As a matter of fact, it brings more confusion than anything else and that’s the frustrating part because they have their own eco-system with certification and us as a solution provider like with CorePlayer or the CorePlayer platform itself is working with third party OEMs and they are asking questions in regards to DivX and DivXHD and we say the same thing we’ve been saying all along. DivX is Mpeg video and DivXHD is AVC video.”

Of all the topics that we discussed though, the most controversial was the decision by Microsoft to restrict how third party filters work within Windows media player.

To fully understand the issue, you need to know how your computer reads media files. When you click on your file, filters take a look at that data and tries to figure out what to do with it. If it’s audio, they’ll send the data to an audio decoder so your soundboard can play it. If it’s video, then it gets sent to a splitter where the audio stream and video stream are separated. From there a decoder looks at the video data, decodes it and sends it to a renderer for display on your screen.

The controversy revolves around how Microsoft prioritizes filters when you play back content. Currently, if you have several filters installed that can all handle the same job, WMP will look at the merit value of each filter and give preference to the highest one. Since you have the ability to prioritize which filters you want your computer to use, it allows you to create the ideal settings based on your hardware.

This comes in handy if you’re trying to play H.264 video in WMP and it happens to conflict with your video card. Since the user has control over the priorities, you’re able to create a better (more credible) configuration.

With the Windows 7 RC, Microsoft has taken away your ability to prioritize which filter you can use. From their perspective, they get a ton of complaints about filter problems and by making it a closed system it improves the experience for their customers. For the codec industry though, it will reduce the incentive for engineers to continue to work on filters because Microsoft has just essentially seized the entire filter market.

Microsoft will argue that because they allow people to install whatever filters they want on their own media players, that this restriction is somehow reasonable. After all, they’re not preventing customers from downloading another media player and configuring the settings anyway you like, they’re controlling their own product.

The problem with this argument though, is that while consumers have shown that they’re willing to download a codec, by and large, they’ve been very reluctant to download an entire media player. It’s a big commitment to mess with the default settings on Windows and because Microsoft bundles a copy of Window’s media player into every operating system they sell, it drastically minimizes the potential market that companies like CoreCodec, DivX and Nero can serve. This ultimately leads to less investment in codec technology and lower quality video for consumers in the long run.

Take a look for yourself at a real life comparison between video played using Media Foundation’s preferred filters and an open source combination. While the differences may be subtle, there is clearly better focus and definition in the open source solution. It might not be much, but it makes a huge difference when you put it on a 60″ screen. Today, you’d have the option of recreating the ideal settings in WMP, but with Windows 7 Microsoft is now in control.

While Marlin wouldn’t go as far as to accuse Microsoft of using their dominance over the operating system as a way of stifle third party codec competition, he did agree with me when I suggested that this may have more to do with preventing competition then securing their media player for consumers.

“You said it I didn’t, but essentially when it comes down to it, that’s what it is. It’s just frustrating that we all have to go through what we have to do and they could have provided an integrated solution without having to lock out third parties. Period.”

Now we can argue over whether or not Microsoft had an evil intent when they choose to shut down part of the codec industry, but regardless of the motives, competition is hurt by their decision to close media player to third party vendors. When I asked Marlin whether this would hurt his company or whether it was a dam in the river that would fork around the issue, he had conflicting thoughts.

““I think it’s going to be both. Microsoft will probably tell you that there is no problem and then the Core people will fork around it, but you’ve got to question the value of it though. You could still have embedded DirectShow filters, why have them under media foundation?”

Later on in the interview he extrapolates,

“I would say that as long as the default decoders are not set as the default and can be overwritten, I think we’re OK. The question is what steps will you have to go through and will Microsoft allow those steps. Right now you can edit it, they posted the solution online, but Microsoft could bypass that solution with the next RC. So that’s kind of like a wait and see thing. It does affect our business though, it does affect DivX’s business, it affects everyone’s business. “

Now Microsoft is free to run their business in anyway that they see fit and while the issue over filter compatibility within WMP may be an inch in the grand scheme of things, with each inch consumers lose a little bit more control. What’s so surprising to me about Microsoft’s behavior though, is how bold their actions are given the current regulatory climate.

Someone should nominate them for Alpha Dog of the Week because it takes giant brass balls to use your ability to bundle software, in order to shut down an entire industry, while you’re being accused accused of abusing your monopoly by bundling software within the operating system. If the EU understands even a little bit about codecs, I would expect them to be up in arms over this issue because it essentially proves the argument that they’ve been trying to make. Microsoft’s dominance in the operating system is having a detrimental effect on competition in other areas of the software industry.

It could very well be that Microsoft has good intentions here, but given their long history of doing whatever it takes to gain control of the codec industry, I can’t believe that this is by happy accident. This is a company that just spent a ton of money to exclusively webcast the Olympics in their Silverlight codec. The lack of MKV support in Windows 7 prompted the Hack 7 MC blog to write that “Microsoft’s support of the format is borderline neglectful.”

The decision to interfere with the priority filter settings is so Machiavellian I still don’t know what to make of it. My cold banker heart says yes! yes! yes!, but the consumer in me says dear God no. While I understand that these issues are hard to figure out and that there are many ways to look at them, I hope, for the sake of the entire codec community, that Microsoft will rethink their decision to exclude third parties from Windows media player.

For a complete transcript of my interview with Dan Marlin, please click here.

If you ask the big content owners, they’ll argue that the only content on YouTube has either been stolen from them or is some kind of a lame cat video uploaded by your crazy neighbor. Unfortunately, in my seemingly endless quest to collect and document the best cat videos on YouTube, I keep getting distracted by some pretty amazing independent content producers. Here are ten of the artists who’ve impressed me the most, over the past few months.

Wicked Awesome Films – Kevin & Bobby create movie trailers of pop culture events. Whether they are remaking the latest films, riffing on popular internet memes or teaching underaged kids how to get alcohol, their quick 2 minute clips will keep you entertained and laughing. They tend to be a little over the top and crude at times, but that’s a big part of their charm. They are usually NSFW so be forewarned, but if you enjoy listening to shock jocks on the radio, you’ll love their videos.

Jack the Danger Bunny – Filmed in a style that is part documentary, part sitcom, and pure genius, Cait and Dan share moments of their dysfunctional relationship with the rest of the YouTube community. If their relationship in real life is anything like the show, I’m not sure how long the series will be around, but take advantage why you can because their silly antics make for some of the best videos on Youtube.

The Big Time Show – Gabe and Dave moved to Hollywood with a dream to make it big. Along the way, they’ve been documenting their progress towards trying to break into the world of show business. They’ve got the looks, are willing to work hard, sell themselves out and have no shortage of motivation. The only problem is that they seem to be lacking talent. Filmed as a reality TV show, their videos take a satirical look at the movie business and features a wacky cast of characters including their sleeze ball agent, a clueless photographer and a student director who isn’t even willing to cast these guys in a student project unless they’re willing to pay him. If you’ve ever wondered how bad b-movies end up making it to the big screen, this mockumentary provides all of the answers. Spinal Tap fans will especially love this series.

Scenic Videos – I tend to prefer watching Youtube online vs. taking advantage of it on my TiVo, but the Scenic Video channel was made to be displayed on a big screen television. They film relaxing nature scenes and let viewers play them in the background. If you play their clips while you sleep, you’ll have fantastic dreams. Most channels get attention by flashing lights or using loud buzzer sounds, but the low key nature of their videos is what makes this channel really stand out.

Rejected Jokes – This sketch comedy channel is produced by Ben Schwartz, a writer who has worked for Letterman, SNL and Robot Chicken. While not every one of his jokes ends up on television, his unique blend of dark humor fused with pop culture leaves you laughing even if his YouTube jokes are the leftovers. Sometimes Schwartz will do a stand up routine, while other times the skits are a little bit more complex, but either way they’ll make you smile.

Daneboe – Whether your watching his award winning expose on the Kool Aid serial killer or his LegoMan job inquiry, Daneboe’s Gagfilms will keep you entertained with his seemingly random videos. He doesn’t produce a ton of content, but when he does it tends to be very high quality. It’s one of my favorite channels for when I need to quick bite of comedy.

Visible Mode – Watching the Visible Mode channel is kind of like watching a car accident in motion. You know it’s terrible, but you just can’t stop your self from watching the destruction. Visible Mode has some pretty crazy ideas, but his demented sense of humor is a good fit on YouTube. After watching his experiments at bringing the combover back in style, I feel much more comfortable about my own receding hairline.

Timbotantrum – This channel is producing the excellent LA I.C.E. web series. It’s about a couple of immigration agents trying to clean up the streets of LA. In addition to the series, Timbotantrum also produces some very funny clips that tend to mock the pop culture we live in.

Sloncekandrej – Sloncek is a legend in the P2P community, but is relatively unknown on YouTube. At one point, his website SuprNova was the most popular torrent site on the net. Sadly, it all had to end after he started to receive a little too much attention in the local Slovenian press. After shutting down the site, he gave the domain to the Pirate Bay and started focusing on making videos instead. Recently, he’s been working on an excellent P2P news vidcast with Torrent Freak. The program is very professional and is a bit like watching the local news for people who care about P2P.

Beet.tv – Beet.tv is a good example of what modern TV studios must do if they want to succeed amidst the fragmentation of the internet. Most of their videos are interviews with influential people in the tech community, but they’ve also begun to cover other industries like healthcare. After filming and editing unique niche content, they then hyperblast it through a distribution system that includes sites ranging from MySpace to the New York Times. The combination of high quality unique content and fragmented mass distribution has worked out pretty well for them so far and I’m optimistic that the model will prove to be successful. Viral stories don’t always have the same immediate punch that you get from live TV, but if they end up being seen by just as many people, it can be even more powerful than traditional television.