Archive for category Microsoft

TiVo’s Billions: How TiVo Could Spend Their Legal Jackpot In A Single Day

Money In The BankDuring their ten year history, TiVo’s obituary has been written more times than I’ve sat through an entire commercial, yet no matter how tough the climb has been, TiVo has continued to defy critics and skeptics alike by chugging along (as if by sheer will at times.)

Even though the financial wiz kids over at Engadget, still have TiVo on their “death watch”, I’m beginning to see a much different picture. With 6 quarters of EBITA profitability now under their belt, $200 million in cash (minus the zero in debt on their balance sheet), and partnerships with a significant portion of the DVR market waiting to be implemented and rolled out, it’s no surprise that TiVo has gone from being a small cap child with plenty of dissenters, to an emerging mid cap teenager looking to establish a legacy.

The last ten years may have been characterized by one rumor after another of who TiVo was going to be acquired by next, but the next ten years will be a much different chapter for the little DVR that could.

At the risk of counting my chickens before they hatch, I wanted to kick off the next ten years of innovation by highlighting a few companies that TiVo could use to transition themselves from a niche DVR provider to a diversified corporate conglomerate. Of course there’s no guarantee that TiVo will even get the billion dollars that they are asking for, but it’s still fun to spend imaginary money.

SecuriTiVo – For years TiVo has been dragged into a bare knuckle brawl with cable and satellite companies, just for the right to offer their DVR to their customers. Meanwhile, they are ignoring an important untapped stand alone market that their invention created. The home security business might not be as sexy as HBO, but the DVR has had just as big of an impact on the security industry as it’s had on Hollywood’s outdated business model.

Instead of fooling around with a couple hundred of gigabytes, TiVo should be building multi-terrabyte DVRs that can record several weeks worth of high quality footage. TiVo could also sell a consumer version of the system that connects to the DVR in your living room and allows you to see live security video from your couch.

Not only would a security DVR give TiVo a commercial product to sell, but it would also add important reoccurable monthly revenue from on going security contracts. It would also create an opportunity to add an additional revenue stream from high quality video cameras.

Potential Target = The Brink’s Company (Ticker: BCO) – With a current market cap of $1.36 billion, this top notch security outfit may be a little out of TiVo’s reach, but they could certainly consider a joint venture or pounce on them, if the market starts to get cheap. Either way, a free TiVo with your home security system sounds like a great promotion just waiting to happen.

TiVo Charge Card – In 1939, the US was reeling from an economic depression so Fred Lazarus Jr., the CEO of Federated Dept. stores did two important things for his business. First, he convinced President Roosevelt to change Thanksgiving to the last Thursday of November so that it would extend the Christmas shopping season and then he started offering store credit to anyone who would purchase through him. By giving cash starved consumers access to credit during a tough economic climate, Federated Department stores was seen as a friend and patriot during a dark economic period. The impact from these two decisions helped take the company from a struggling retailer to the Goliath that it is today.

When it comes to couch commerce, TiVo faces a similar opportunity. Currently, when you purchase something through your DVR, TiVo stays out of the transaction. Even if you want to order a pizza with a credit card, you’re not able to, TiVo makes you pay cash :( This is probably a good thing for home shopping addicts, but works against’s TiVo’s goal of revolutionizing the advertising business. If they want couch commerce to actually succeed, they must make it easier for consumers to make an actual purchase.

The beauty of a TiVo charge card is that it could be linked directly to your TiVo account once and then capture every purchase after that. If you wanted to rent a movie from Jaman or buy a pair of flip flops from Amazon, it would be the same process and simply require password authorization.

TiVo could also offer discounts on DVR service for balance transfers or for customers who carry larger balances. Extending credit during tough economic times might seem risky, but TiVo needs a better payment solution sooner than later. By putting themselves in a position to become the paypal of television, TiVo could lower the barriers of entry for advertisers, in exchange for a cut of every transaction.

Potential Target = Bank of the Internet (Ticker: BOFI) With a current market cap of $50 million, TiVo could easily acquire this sleepy little bank from San Diego, CA and immediately serve a national audience. Not only would they have the infrastructure in place to start offering credit card services, but TiVo would be picking up a high quality loan portfolio in the process. BOFI’s conservative approach to lending may have hurt investors during the boom years, but when the credit bust hit, it proved that there was wisdom in their prudence.

SlingTiVo – When Sling first introduced place shifting to the DVR community, TiVo choose not to implement the functionality directly into their software. My guess is that they were concerned that a feature enjoyed by the fringe, could spark a lawsuit with the media giants, who’ve had their business model disrupted by TiVo’s fast fowarding powers.

Holding off on introducing place shifting may have been the right choice when the technology was still young, but internet video has changed a lot since Sling was founded. While the legality of placeshifting still hasn’t been affirmed by the courts, even Sony is selling a placeshifting device to their customers. With placeshifting starting to reach a more mainstream audience, now is the time for TiVo to introduce this capability to their customers.

Potential Target = Echostar (Ticker: SATS) – Without the ability to manufactuer DVRs for Dish customers, Echostar may find that their business isn’t worth all that much. With a market cap of $1.31 billion, TiVo could offer an olive branch to Dish, in exchange for the Echostar/DVR side of the business. Frankly, I’d rather see them bankrupt Dish and buyout the satellite business in a vulture sale, but the poetic justice alone makes this one worth consideration.

TiVoPages – One of the problems with TiVo’s current advertising setup is that they are kind of taking a walled garden approach to selling the ads. There are strict requirements on the content allowed on the service and only certain agencies are really given access to the inventory. This may be necessary to butter the toast of their Stop Watch customers, but it also limits what TiVo can become.

Why not make it so that anyone can upload a video ad to TiVo and inexpensively reach the TiVo audience based on screening criteria similar to Google’s Adsense program? I may be a small business, but if the costs are low and I can target local viewers or people who fit a certain demographic profile, I’d advertise through TiVo in a heartbeat. TiVo should play to their strengths and become a video Craigslist for the time shifted generation.

Potential Target = Razorfish – Two years ago, Microsoft paid $6 billion for the company. Today they are rumored to be looking for $600 – $700 million to spin off the ad agency. Owning an agency might ruffle some feathers with some StopWatch customers, but Razorfish would give TiVo the infrastructure they need to their take their advertising program, beyond major, one time, national partnerships. By better implementing their advertising programs, TiVo could create a platform where local businesses could reach local viewers in their markets.

DigiTiVo – TiVo may be one of a handful of solutions for letting consumers watch digital video on their televisions, but they could go a long way towards improving their current implementation. One of the problems with trying to watch various internet video types on your TiVo is that TiVo needs to transcode the video before it will play on your screen.

Currently, customers can either hack their machines for free access or they can pay $25 for a copy of TiVo Desktop plus. While I don’t expect TiVo to support every flavor of codec out there, it would be nice if they threw their support behind a standard and tried to come up with a more seemless experience for their customers. It may be too late for them to get a piece of Adobe or to crack their way into Quicktime or Silverlight, but there are still smaller codec companies that could help.

Potential Target = DivX – (Ticker: DIVX) with a market cap of $175 million, TiVo could easily afford to buy the digital video company and use their contacts to adopt more of a licensing approach to the DVR business. By taking advantage of the profits from the codec business, TiVo could help to subsidize more robust codec support for their subscribers.

HuluTiVo – One of TiVo’s advantages is that they’ve managed to remain neutral despite competing in some pretty tough battlegrounds. In the past, TiVo has taken on the media giants, but now may be the time for them to lay down their arms and secure a stake in the next generation of television.

Love it or hate it, the Hulu cartel has been able to establish themselves as a major broadcaster in the narrowcast world. To date, other media companies have been reluctant to share Hulu on the television, but with TiVo’s relatively small subscriber base, they could be seen as a safe testing ground for experimentation. By implementing direct response ads into the actual programming, TiVo and the major media companies could finally benefit from working together instead of against each other.

A Hulu ownership position might make it harder for TiVo to sign more deals like UnBox and WatchNow, but I think if they stayed focused on advertising supported programming, they could still attract plenty of premium and subscription based partners.

Potential Target = Hulu – The company has raised $130 million to date at a billion dollar valuation, but with the market being down its hard to know what it would be valued at now. Given the “digital dimes” that Hulu is producing, one could argue that the weak market should offer new investors a discount, but one could also argue that given Hulu’s growth, a billion may be cheap. It’d be hard to convince Hulu’s current owners to sell or even innovate to the television, but I know more than a few TiVo customers who would love to see Hulu show up on their Now Playing lists.

NinTiVo – Even with TiVo’s new found purchasing power, buying out one of the three video game companies simply isn’t going to happen, so TiVo would either need to invest in building out their own billion dollar console or license one from Nintendo, Sony or Microsoft to create a killer DVR/PC/Console compatible platform. With three major companies fighting for a highly competitive industry, a partnership with TiVo would be highly sought after and could at least give them a seat at the negotiation table.

Potential Target = Take Two Interactive (Ticker: TTWO) – Take Two’s bad boy Grand Theft image wouldn’t compliment TiVo’s KidZone initiatives, but it would give them access to an instant powerhouse in the video game industry. With a market cap at $690 million, TiVo could easily acquire the company for a billion and tone down the bad boy image. With an exclusive on several of the hottest games out there, a partnership with a major console manufactuerer and a beefed up TiVo that acts more like a high end gaming PC/DVR combo then a VCR, TiVo could create a big splash with the gaming crowd.

Hotel TiVofornia – One of the biggest reasons why TiVo isn’t more popular with consumers is because it’s hard to know how much you’re missing until you’re actually a customer. Getting someone to buy a DVR in the first place is tough, but getting them to give it up is even tougher. What TiVo needs is an easy and cost effective way to introduce their DVR to the masses.

Whenever I stay at a hotel, the television is awful. If a national hotel chain were to partner with TiVo to let me schedule programing while I’m there, I know that they would become my default choice when I traveled. To date, TiVo has dabbled with these types of programs, but with the extra money they could kick this program into hyperdrive. By building out more support for hotel rooms, TiVo could secretly expose millions of travelers to a commercial for their DVR without travelers ever realizing that it could be the last ad that they’d ever have to tune into.

Potential Target = Boyd’s (Ticker: BYD) – With the Vegas economy still dealing with the after shocks of the credit crisis, Boyd’s market cap has fallen to $760 million. With a little bit of elbow grease and some slick marketing, TiVo could buy the hotel and pick up a casino as a bonus. With a Vegas style monument to the DVR, TiVo could let you gamble from your hotel DVR. You can check out anytime you like, but you can never leave.

TiVoTube – Over the last few years, a lot of people have mocked Google for their $1.6 billion acquisition of YouTube, but in retrospect, it’s starting to look like a brilliant acquisition by the search giant. Not only did Google continue to expand their dominance on the web, but they picked up a major future broadcaster in the process.

It’s too late for TiVo to get their slice of YouTube, but it doens’t mean that other video sites wouldn’t be a good fit for them.

Potential Target = – With TiVo looking to expand DVR service into Europe and Asia, Dailymotion could very well be the beachhead they need with international audiences. This one would probably have the biggest risk associated with it because of the hosting costs and potential copyright headaches, but with Dailymotion having only raised $43 million so far, TiVo could probably offer $300 million and set aside the other $700 million to figure out the business model.

1-800-TiVo-Fon – I wish that I could take credit for this idea, but I originally found out about TiVo-Fon two years when a research report surfaced online by two teams of University students studying the idea. Unfortunately, I lost track of the link so it will have to remain internet legend for the time being, but the system they described worked similar to the Movie-Fon hotline that you can buy theater tickets with.

To use the service, you would link your DVR to your cell phone number so that you could call 1-800-TiVo-Fon and immediately go into the main menu choices. Currently, TiVo does have a cell phone app, but it costs money to use and doesn’t allow you to schedule things at the last minute. With TiVo-Fon any cell phone could call and a voice recognition system could be set up to take you to the program you want to schedule. This way if you’re at dinner and someone mentions that there is something good on at home, you could order your recording and have it pushed into your box, so that you can watch it when you get home.

Potential Target = Fandango – Fandango is a fellow .com mania survivor who managed to scrape together an impressive business by being early and disruptive. Early on, TiVo and Fandango partnered to offer movie ticket reservations through the DVR and may even represent their first couch commerce transaction. Two years ago Comcast paid close to $200 million for the ticket company, but I think TiVo could buy them for less than $150 million. With the right budget and some slick marketing, TiVo could use Fandango to take on TicketMaster and StubHub.

TiVo Video Conferencing – It’s 2009 already, but where are all of the video phones. Making it easy to attach a camera and Microphone to your TiVo would really change what it means to reach out and touch somebody. By adding VOIP and business support, TiVo could expand their services into the commercial marketplace.

Potential Target = Skype – When you consider that Ebay paid $2.6 billion for Skype in 2005, this one may seem like a longshot, but telecommunications has only gotten more competitive since then and Ebay’s already signaled their intention to exit the business. By picking up the popular program and making a subsequent acquisition for a small relationship management company like Zoho, TiVo could build a multimedia telecommunications solution that would rival

TiVo Networking – One of the biggest challenges that TiVo faced early on was trying to convince consumers of the benefit to plugging your DVR into the internet. Owning a networking company wouldn’t necessarily make this any easier, but it would help to further wedge TiVo into the center of the digital media experience. If there were enough synergies for it to make sense for Cisco to buy Scientific Atlantic, then it makes just as much sense for TiVo to acquire a networking company.

Potential Target = Netgear (symbol: NTGR) – A few years ago Netgear had a market cap that was almost four times larger then TiVo’s but today they weigh in at $540 million. With a profitable business model and revenue that is nearly three times what TiVo is currently bringing in, a $700 million bid wouldn’t be ridiculous.

TiVo Extender – Over the years, TiVo customers have loved the service so much that many of them have purchased multiple units. TiVo charges an extra fee to add an additional DVR, but doesn’t really make much of a profit because they are forced to subsidize the hardware purchase with smaller multi-room viewing fees.

Instead of trying to get their customers to buy multiple DVRs, TiVo should instead allow the first DVR to act like a server and then have extender devices inexpensively tap into the main DVR signal. This would allow TiVo to sell hardware at a profit and give away multi-room viewing to their customers. With companies like AT&T making a big deal about their muti-room capabilities, TiVo could use an extender strategy to undercut them in pricing.

Potential Target = Roku – Netflix may have put Roku on the map, but the company is headed for greatness on their own. We don’t know a lot about their valuation, but if you consider that they’ve only raised $6 million in VC backing, I think that it’d be easy for TiVo to pick them up for less than $50 million. Not only would the other TiVo video services compliment Roku subscribers, but it would be an easy and cost effective way to solve the multi-room limitations.

Some of these ideas are admittedly a bit far fetched, but you have to admit that they would make interesting mergers. While I don’t expect that we’ll see TiVo go on any big shopping sprees soon, as their cash bulks up and their legal victory pulls through, expect to see more people asking what they plan to do with the money.

What do you think, if FakeTomRogers stepped aside and you were hired you as the new CEO of TiVo, what would you do with a billion dollar jackpot?

Fear Of A MiKrosVft Planet

Microsoft Planet

“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.

Night Of The Living DivX

Night Of The Living DivX

The last couple of years may have felt like a bad dream to most investors, but for DivX shareholders it’s been nothing short of a nightmare. They don’t hand out Oscars for businesses, but if they did DivX would have won hands down for best horror flick.

When the company first went public, expectations were high. YouTube had just been sold for $1.6 billion, DivX was demonstrating 75% gains in their high margin core licensing business, and their unique business model looked like it offered a very strong moat from competitors like Apple and Microsoft.

At one point DivX’s market cap exceeded $750 million, today it barely closed above $150 million. Over $600 million dollars in capitalization wiped out by one misstep after another. Admitedly, the tough economic environment can be partially blamed for DivX collapse, but the sad truth is that much of the value destruction could have been avoided.

Suicide Kings

Shortly after DivX went public, Jeran Wittenstein wrote “DivX was founded just before the dotcom bust in February 2000 after Greenhall managed to convince Jerome Rota — a French software engineer who created DivX’s founding technology — to join him in building a company. Including Greenhall and Rota, eventually there would be five co-founders, all of whom are younger than Greenhall and still with the company.” (Note: bold print added by me)

They may have been able to survive the dot com collapse, but DivX’s founders weren’t able to survive the success of going public. In December 2007, Jordan Greenhall, Darius Thompson, & Tay Nguyen all left the company after DivX’s board of Directors made the inexplicable decision to cancel their spin off of Stage6. Joe Bezdek officially left the company 10 months later and now I hear that Jerome Rota, DivX’s original creator, resigned from the company on February 6th of this year.

While Rota remains on the DivX board of Directors, the loss of his day to day influence can’t be understated. I only had the opportunity to meet him once, but was impressed by his remarkable vision. These five individuals may not have had the spit and polish that Wall St. expects from traditional executives, but they weren’t afraid to take risks and knew how to motivate the troops beneath them. The impact from the loss of these employees goes well beyond their individual contributions and investors have already seen shockwaves from these loses ripple through DivX’s employee base.

Two and a half years later, investors have voted with their feet, all five of the founders have now left the company, cracks are beginning to form in their moat and their franchise is very much in danger. The company has gone from being an innovative risk taker to a zombie of her former self. DivX now stands at a crucial crossroad. Are they willing to risk potential annihilation to save consumers from their zombie masters or do investors have Dawn of the DivX in store for a sequel?

“Affliction comes to us all, not to make us sad, but sober; not to make us sorry, but to make us wise; not to make us despondent, but by its darkness to refresh us as the night refreshes the day; not to impoverish, but to enrich us.” – Henry Ward Beecher

There are many instances where management has stumbled, but the end result all comes down to a loss of confidence. They’ve lost the confidence of their shareholders, the analysts, their employees and most importantly, the consumers who drive demand for their products.

Without a dramatic turnaround, I fear that this lack of confidence will spread to their manufacturing partners and we’ll see DivX lose their digital video franchise. While there is still plenty of cash flow left to milk from the DVD market, without aggressively expanding their market position, DivX’s influence will be over before they have a chance to finish the revolution they started.

Barbarians at the gate

When DivX went public, investors were willing to pay a premium to get exposure to the stock. At one point investors were paying more then 10 times sales, a P/E over 30 and over five times DivX’s book value. Based on the midpoint of DivX’s 2008 guidance, DivX is now valued at 1.15 times book, 1.66 times sales and a p/e ratio of 9.5. When you consider that DivX is holding $120 million in cash and short term investments, investors are pricing them more like a blank check IPO, then a strong growing company. You can argue that this is a result of the poor financial markets, but I think it speaks volumes about the lack of confidence that shareholders seem to have in management.

DivX’s response to their problems has been to try and slash and burn their way out of it. When they closed Stage6, they also layed off approximately, 10% of their staff. After Yahoo! backed out of their toolbar arrangement, DivX fired another 10% of their staff. If DivX was struggling to get by, I could accept these types of sacrifices, but the reality is that these cuts are only designed to boost earnings for the company.

I believe that DivX’s management is under the impression, that if they can increase earnings enough, investors will reward them by returning to their stock. The problem with this strategy is that it may be easy for DivX to position themselves to feed off of years of hard work, but without continuing to invest in the business, they have little chance of realizing meaningful growth. When DivX presents their 2008 earnings in early March, I believe that their focus will be on strong earnings results. This may look impressive from a distance, but don’t be distracted unless it’s accompanied by strong revenue growth. Earnings are certainly nice for investors, but if DivX has stopped growing, then investors won’t pay a very high multiple.

When DivX presented at the Thomas Weisel technology conference earlier this month, they used the following graph to illustrate their past growth. On the surface, it’s hard to criticize the progress they’ve made.

DivX Revenue Company Perspective

While there’s no doubt that DivX has accomplished a lot in a very short time, where they are going is more important then where they’ve been. Sadly, over the last year they’ve seen their progress come to a screeching halt. Another way to illustrate, the same information that DivX used in their Thomas Weisel presentation, is to graph the percentage that revenue has grown each year. Even if we exclude things like the Yahoo! toolbar fiasco, the trend for DivX’s core business doesn’t offer a lot to get excited by.

DivX Historical Revenue Growth

In 2003, DivX grew their core licensing business over 700%, in 04′ they saw 184% growth, in 05′ they saw 84% gains, in 06′ they almost experienced a 76% increase in growth. In 07′ signs of danger started to appear, but they still realized 40% growth from their core business. If we use the midpoint of their guidance for 08′ revenue, DivX should see a 13% increase in core revenue for 08′.

As DivX’s business has grown, there is an expectation that the law of large numbers will start to kick in, but if current trends continue, it would appear that DivX’s core licensing revenue will hit near term maturation sometime this year.

Jordan Greenhall said that 2007 would be a building year for DivX, Kevin Hell said the same thing about 08′. With the company in self destruct mode, how optimistic should investors be for 2009?

Trouble In Never Never Land

Some investors may cheer the savings in earnings, but make no mistake, it has had a tremendous cost. The coup to get rid of Greenhall, the divisive nature of current management and the layoffs have all had a tremendous impact on employee morale. DivX may claim that their employee relations are normal in their SEC filings, but there is too much evidence to suggest that DivX now suffers from Yahooitis! These creative individuals are the soul of the company. If DivX continues in their zombie state, more and more employees will leave, feelings will become even more bitter and the company’s progress will be stalled.

If you want to see proof of how bad employee relations have become, take a look at DivX’s reviews on Kevin Hell’s current approval rating is 15%. That’s worse then GW’s numbers, when he left office. To put this into perspective, Hell’s ranking gives him the dubious distinction of being the 18th worst CEO of the 7,185 companies that Glassdoor is tracking.

If you read the comments on the site, it’s very revealing about what’s going on behind the glass curtain.

“It’s party time…if you are a VP or above…”
It’s a fun atmosphere and very social if you are of the right mindset. Lot’s of cool people and talent…
Watch your back…I didn’t trust any of the management at all after seeing my boss’ team cut without her knowing beforehand. Very closed, “open environment”… If you are looking to complete a project to add to your portfolio…think again…my projects changed scope every 3 weeks. The strategic direction changes everytime the wind blows.
Advice to Senior Management
Hire new management that cares more about the company’s success than their cushy compensation packages… Layoffs in 2008 were taking place while senior management was cashing in on millions of $$ in stock…even at very low strike prices….Something very fishy is happening here…”

or this one from a current employee who goes by the name anonymous

Anonymous in San Diego, CA: (Current Employee)
“Great company, TERRIBLE management.”
You get a chance to work with a lot of cool, talented people.
All the cool, talented people are getting laid off/fired/quitting.
Advice to Senior Management
DivX had so much energy and drive but the management seems to have succeeded in beating that out of the company almost completely.

Here’s one that calls out DivX CFO Dan Halvorson

Developer in San Diego, CA: (Past Employee – 2008)
“DivX was a fun place to work…. at one time”
DivX has a wonderful group of bright engineers. The camaraderie in my team was superb and we made the best of the otherwise dismal situation. The HR department is better than most in that they truly seem to care about the needs of the employees. There is an opportunity to do something big, and that can be exciting as well.
I’m not sure where to start! The CFO Dan Halvorson has a reputation for layoffs and cash-outs. He was rumored to have said, “I love it when people quit”. It’s gotten to the point where Halvorson avoids the office and never sticks around at company events. I suppose he knows he isn’t welcome. The constant layoffs and lack of openness to employees gives people an sense of uneasiness and all you can really do is speculate what they’re upto. At least with Jordan, he would be straight with you. The Hell regime seems pretty secretive and sometimes dishonest most times. The Stage 6 debacle was a train wreck. So much of the company’s resources were thrown at this pig and look what came of it? Nothing. A number of long time employees left around this time? Coincidence? Maybe, but not likely. I am guessing the founders got tired of the games and politics.
Advice to Senior Management
Get rid of Halvorson, he is dragging morale down all on his own. No one likes him or wants him there. Be more honest and forthcoming with employees.

The most accurate of them all though, is the bittersweet summary of DivX’s short history.

Anonymous in San Diego, CA: (Past Employee – 2007)
“Good While It Lasted”
The culture, when it first started was remarkable. There was a great vibe in the office and you constantly felt that you were being challenged and motivated.
After they went public, and Stage 6 launched, there was a massive series of mistakes that killed morale.
Advice to Senior Management
Listen to your employees.

It may be tempting to write off comments like these as disgruntled employees, but there’s obviously friction between labor and management. Shareholders may not want to acknowledge it, but they would be foolish to ignore it.

If DivX’s reign of Hell is allowed to continue, labor problems will only get worse. Lower payroll may be good for the bottom line, but it does nothing to boost their revenue, long term potential or the health of the underlying business. Going into zombie mode may be the safest way for management to keep their jobs, but zombies move slow and now is the time for action, not caution.

DivX’s digital eco-system is shifting like quicksand beneath them

Like the DVD, DivX’s codec is being made obsolete by high definition. To DivX’s credit, they saw this trend earlier than most and had the foresight to buy MainConcept to help manage this shift, but even there we’ve seen talented defections.

Support for H.264 doesn’t automatically mean that their codec won’t be skipped over in lieu of generic HD certification. The biggest threat to DivX’s business model is that CE makers will use the DivX to HD transition as a way to build support for generic certification. If consumers aren’t demanding DivX support, it will make it easy for them to cut DivX out of the equation. Managing this change to their eco-system, should be the company’s top priority. If DivX can’t convince device makers, that consumers really want their product, more and more manufacturers will leave DivX for cheaper alternatives, creating a downward spiral on their licensing business.

Winbox COO, Niklas Samios shares his rationale for choosing to skip DivX certification

Since Hell took the helm of the company, DivX has been focused on licensing premium content from the major studios. They have scored agreements with Sony and Time Warner, but between their P2P reputation and their Stage6 experiment, one can understand why some of the studios would be reluctant to dance with them.

Last August, they announced a partnership with Cinema Now for showcasing DivX content. While it’s unclear as to when their collaboration will start, it sounds like they are working on creating some kind of new entertainment destination.

According to CEO Kevin Hell DivX is “actively working with retailers to launch sites that can sell content leveraging our DRM in the marketplace. We announced Cinema Now last year and we are actively working to launch a retail offering with Cinema Now and other parties that are out there. The whole idea being that we want to bring content and allow that content to move to all the different devices out there that have our DRM inside.” (Note: Bold added by me)

While I’m of the belief that there can never be too many internet video sites, I did find it curious that Hell used the word “launch” to describe their initiative. When you consider how difficult it’s been for businesses to gain traction in the online video space, it’s a little surprising that DivX wouldn’t be using Cinema Now’s own flagship website as their distribution system.

What the need for a brand new site reveals about DivX content initiatives is a fatal flaw in their Hollywood ambitions. Even with a third tier internet video provider, they can’t convince Cinema Now to incorporate DivX into their main site, because they’ll never be able to get a license from all of the content providers.

Even if they could get a couple more studios on board, their lawsuit with UMG will effectively torpedo any hope of them ever being able to offer a comprehensive catalog to consumers. If you think UMG has any intention of backing down on this one, take another look. Read through DivX’s latest dust up over whether or not UMG should be allowed to use Audible Magic on Stage6′s 60 terrabyte database and form your own conclusions as to how far UMG seems willing to take this.

In the past, DivX management has argued that access to premium content was a key component to their growth, but at the Thomas Weisel investor conference, Hell backed away from previous comments.

“this space does I think take some time to play out, I think that there’s a lot of interesting opportunities out there right now in the premium space, but they’re taking time to really play out, so we’re making sure to pace ourselves in this space and not get ahead of the market”

Going after the studio content is a mistake in my opinion, it’s like ditching the girl you took to the prom for the cheerleader that all the jocks are already trying to make a move on. If DivX had a clean record and was bulging with cash, they might have a shot at some of that hot mainstream content, but when their P2P ex-girlfriend is more horrifying then Carrie to the content providers, it seems foolish not to stick with the girl you took to the dance.

DivX doesn’t need Hollywood content, they need consumers to DEMAND support for DivX in their consumer electronics. Supporting the dark side of the content business wouldn’t earn them any friends in Hollywood, but it would win them the hearts of consumers and would rebuild their moat in high definition.

One of the biggest challenges that Blu-Ray players have faced, isn’t so much the high cost of the hardware device, but the extra money that studios are insisting for Blu-Ray content. DivX could turn themselves into a recession play if they’d be more vocal about advertising the “free” content that people can use on their devices. As Paul Sweeting so aptly put it earlier this year, “hardware makers are adding all sorts of other gimmicks to their Blu-ray players, too, from wireless connectivity, to portability, to, wait for it…VHS playback. Yep, anything to try to avoid slashing the price of players. And anything to try to give consumers options beyond paying $30 for Blu-ray movies.”

Instead of promoting their latest licensing scheme as an H.264 solution, DivX should be pointing out that DivX Plus certification offers “Blu-Ray quality” high definition without this $30 cost. Again, it wouldn’t help their content negotiations, but it would help drive consumer demand back to DivX Plus devices, which is what ultimately drives CE interest and powers DivX’s business.

Content deals make sense as a way to extend their eco-system, but only if it’s on DivX terms. Instead of begging studios for access, DivX should be developing their consumer pipeline and rewarding the content companies who recognize the benefit of being able to access millions of consumers at their television sets. DivX greatest opportunity is the caos caused by Hollywood’s licensing terms. If they go through official channels, it will be years before they can reach their core fans, but if they fight against the system, they will be the only international solution for a very long time.

How much buzz could DivX get, if they actually spoke out about their lawsuit against UMG or if they ran some kind of “pirate” friendly promotion like giving free ISOhunt toolbar installations, while trying to find a replacement for Yahoo! These moves wouldn’t make them any money, but it would be a clear signal about who their end customer really is. DivX does almost zero marketing because their consumers have built their brand. By going hostile against Hollywood, DivX would magnify the strength of their signal. When consumers show passsion for the DivX brand, CE companies will quickly fill the void.

Fat Tube and little DivX

DivX other big “growth” initiative has also turned out to be a flop. Despite two years of pitching the concept, DivX has yet to see Connected integrated into other consumer electronics. The sad part is, that I believe Connected could radically transform DivX’s value proposition.

Currently, if you want to play a DivX movie on a DVD player, consumers must find the content, transfer it to a portable storage device (i.e. burn a DVD or move the file onto a memory stick) and then physically transport the media to their DVD player. If you’re a hard core fan, it’s worth going through all this trouble to get access to your media, but I’d be shocked if more than 5% of users were taking advantage of this feature.

The beauty of the Connected business model is that it dramatically simplifies the process. If consumers buy a TV that is powered by DivX Connected, they’ll get curious as to how to take advantage of the functionality. Not everyone will adopt DivX, but if even 25% of those customers plug their television into the internet, it would drive mass adoption for DivX content.

Compared to their DVD licensing, DivX Connected could have an atomic impact on the content industry. Make no mistake about it, if Connected takes off, it will be a weapon of mass piracy from the studio perspective. Because Connected makes it so easy to access your content, it has the potential to turn mainstream customers into rabid file sharing animals. Why it hasn’t already taken off remains a mystery to me, but it could have a serious impact on the demand for DivX, if they can ever get it released into the wild.

Last fall, I had the opportunity to meet Hell in person and I asked him whether or not he felt that the premium they were asking for Connected had anything to do with manufacturer resistance.

His response was “I wouldn’t attribute it to the pricing, I think it’s more an issue of implementation and the fact that a lot of these guys are still trying to figure out what they’re doing there. They either have their own initiatives or they’re confused about it, they want to try X, they want to try Y, anything that’s out there to figure out what it’s all about and in my mind it’s a lack of coherent focus and understanding by the CE partners.”

Since then, CES has come and gone, but it looked pretty clear to me that the CE industry isn’t all that confused about their connected television plans. The fact that DivX hasn’t been able to get their product in the door may or may not have something to do with their pricing, but deep discounting may be their best option for jump starting the program again.

In 2002, DivX was struggling to convert their company into a licensing business. Manufacturers were skeptical that consumers would pay extra for the support. To prove the value of DivX certification, DivX signed a licensing agreement with a little know third tier DVD maker known as KISS. It was officially certified in August 2003. The product, immediately began to pick up buzz and less than six months later, Phillips signed on to have DivX included in their own DVD players as well. After Phillips made their move, other CE companies were forced to follow and by mid 2004, DivX DVD players were pretty much available anywhere on the globe. To this day, the Phillip’s DVP642 remains one of the most reviewed DVD players on Amazon.

A couple years after DivX helped to put Kiss on the map, Cisco bought them out for over $60 million. I would argue that there are many similarities between Divx’s initial efforts to convince DVD player manufacturers to licensing their technology and their current struggles in the Connected market. Rather then continuing to hold out for a premier deal, DivX would be well served in signing a teaser deal with a small television provider. When large CE companies see proof that DivX Connected can move TV sets, they’ll quickly begin signing contracts to ensure that they remain competitive. While heavy discounting is less than desirable from Divx’s perspective, getting more Connected devices in the wild, would at least give them an opportunity to prove that there’s still value in the DivX brand.

Death of a Salesman

While I support discounting when it helps to secure DivX’s moat, it’s hard to be encouraged by the cracks that we’re seeing in their value proposition.

To help take a closer look at DivX’s pricing erosion, I reached out to Jack Wetherill from Futuresource Consulting for data on global DVD player sales. According to Mr. Wetherill, “DVD players in their broadest sense (ie set-top players, recorders, integrated home theatres, DVD/VHS combos and portable DVD players) totaled 122m in 2006 and 127m in 2007. We expect the market to level off at 127m in 2008, although year end numbers are still being finalised.”

When DivX first went public, the company said that they had a 25% penetration rate in the DVD player market. This translated into approximately $47 million in core licensing revenue for 2006 or approximately $1.54 per DivX certified device.

In 2007, DivX grew their global DVD player market share to 37%, which translated into approximately $66 million in core licensing revenue or $1.40 per unit.

At the Thomas Weisel Technology conference, DivX said that they’ve now captured 50% of the DVD player market, but according to their own projections they are only expected to grow their core licensing business by 13% in 2008. With core revenues around $75 million, this would suggest that DivX is now earning a unit licensing fee of $1.18 per certified device. A decline of approximately 23% in pricing power since the company went public.

When you consider that consumer trends have been much kinder to upscaling DVD players (where you almost always find DivX) vs. traditional DVD players and when you consider that DivX’s core revenue numbers include other electronic categories and Main Concept revenue, one could argue that these calculations are much more conservative then the actual results.

DivX has always said that they provide volume discounts to partners, but with over half the market now captured, it would appear that DivX’s DVD upside is somewhat limited.

Saving Private DivX

Along the way, DivX has made their fair share of mistakes, but they’ve also achieved tremendous wins as a result of the risks that they’ve taken. Compared to the mainstream studios they may only be a tiny mouse, but when you look at affect that their technology has had on the media landscape, it’s clear that they’ve been able to frighten the Hollywood elephants.

The good news is that it’s not too late to turn DivX around, but without some kind of action, I fear that DivX will remain in cruise control while their franchise continues to lose value. What does DivX need to do in order to return to their glory days of growth? It all comes to restoring confidence in the company.

First and foremost, DivX must put a stop to the bleeding from employees leaving the company. Given their labor issues, I don’t believe that this can be accomplished without replacing their management team, so I believe that new leadership needs to be a top priority.

Once a new team is in place, I would take .25 cents worth of earnings and commit to investing it in DivX’s growth. DivX’s employees are more accustomed to the culture of a start up then a publicly traded company. DivX should be playing to these strengths. Spend $500k per month building out new businesses. Adopt a Google model where employees are encouraged to spend 15% of their time thinking outside the box. Become a technology incubator with the long term goal of spinning off divisions when the markets recover. Start funding a profit sharing contribution to the company’s retirement plan, so that DivX’s success is shared by everyone instead of those lucky enough to get options. Take the time to listen to your employees and address their concerns.

Secondly, DivX must restore faith to their investor base. New leadership could help to accomplish this, but it will likely take more than promises of growth, to soothe the rattled nerves of their investors. Reinforce DivX’s long term commitment to shareholders by paying a .25 cent dividend as a way to reward investors while they wait for evidence of a turnaround. Taxes on a dividend would be better avoided through a buyback, but further buybacks would only reward short term shareholders and would increase volatility by reducing an already low share count. With a 5% yield, a dividend should help to establish a floor on DivX’s share price until earnings multiples expand back to growth levels.

Finally, restore confidence in your consumer base by speaking out for consumer rights. Use the UMG trial as a way to create passion in your fans and to drum up support for digital rights. Squeezing marketing leverage from the lawsuit would at least help to justify the costs involved with going to trial. Focus on Divx Plus’ quality advantage for HDTV consumers. Instead of throwing good money after bad, abandon your content plans until you have better leverage. Use small independent content providers to show how powerful DivX user base can be to progressive studios. Sign a sweetheart deal with a small CE television manufacturer to put pressure on the rest of the market.

If investors do nothing, DivX won’t necessarily go bankrupt, but it will torpedo their brand and market position. DivX CFO Dan Halverson said that their #1 goal in 09′ is to protect the balance sheet. This may seem prudent during such difficult economic times, but sleepwalking through a format change won’t position DivX for the long term. There will be a time for Divx to cash in on all of their hard work, but to try and do so at such a crucial point in the digital transition seems foolish and short sighted.

Why Isn’t There A Redbox For Video Games?

Hot DonkeyConsidering how much time I’ve spent writing about DVD kiosks, some may be surprised that last week was the first time I ever rented a DVD from Redbox. I was at the grocery store and saw that they had the most recent Indiana Jones movie. Indiana Jones has always been a favorite of mine, so on an impulse I made the rental. I probably would have rented from Redbox sooner, but between TiVo, Netflix and the internet, there has been no shortage of content for me to check out and I just couldn’t justify spending even a measly buck, when I already had too many options for movies and TV shows.

The entire rental process was very easy and only reinforced my belief that Redbox will be wildly successful with their business model. In fact, just this morning I noticed that 7-11 has even begun testing Redbox at their stores. I’m not sure if it was the convenience of using a machine instead of dealing with long lines and surly video store clerks or the convenience of being able to make a rental as I was finishing up my grocery shopping, but now that I’ve gotten a taste, I’m sure that I’ll be back.

While it would be hard to improve on the kiosk experience, in thinking about my own entertainment needs, I realized that there is one area of the kiosk market that is still being ignored. When it comes to DVDs, there have been a number of firms who’ve thrown their hat into the kiosk ring, but so far we haven’t seen anyone introduce a kiosk system that dispenses video games.

As a casual gamer, I tend to prefer purchasing my games over renting, but every now and then I end up buying a bomb and get upset that I’m out $60 for a weak title. When it comes to movies, I have no interest in watching the same one over and over again, but I could play a video game for a year and still get just as much enjoyment as the first time I picked it up. While the cost of video games would be higher, I have to imagine that there would be a lot of people like myself who would love to be able to rent a game and keep it, if it happens to rock. In fact, if Redbox (or Gamefly, Gamestop or even [shudder :-? ] Blockbuster) introduced a rent to own kiosk system, I’d probably start buying 100% of my games from them.

Because video games tend to appeal to a more niche audience, it would be harder to introduce these kiosks in places like grocery stores of coffee shops, but I do think that companies like Burger King would love to have junk food loving adolescent males visiting their stores on a regular basis, so that they can check out (and return) the latest gaming titles. The extra cost of the video games would mean that they’d probably need to be charging closer to $3 a rental vs. the $1 bargain that Redbox offers for movies, so it’s possible that kiosk operators would see less demand for this type of service, but I would have to imagine that the sell through rate would be significantly higher, which could go a long ways towards making this idea economically viable.

Another issue that a video game kiosk would face, would be having to stock multiple versions of a game. When it comes to DVDs, a single standard allows you to play your movies whether your DVD player happens to be made by LG or Toshiba, but with video games, you’ve got Sony, Nintendo and Microsoft all battling for the living room, which would mean that you’d have to carry less titles to handle more formats or you’d need to have a company like Sony build kiosks that would exclusively support just PS3 games, even if it meant reducing the pool of potential customers.

While a video game kiosk would have some challenges, I think that most of these could be easily solved. I’m not sure why we haven’t seen anyone come out with a product like this yet, but I believe that there is a great market opportunity for the first one to make a move. Currently, it takes about 9 months for a Redbox kiosk to completely pay for itself. Even if it took twice as long for a video game kiosk to pay off, it’d still make an incredible investment for most businesses, even before you consider some of the extra benefits like driving more traffic to the retailer. I’m not sure whether or not someone will seize on this opportunity, but if they do, you can bet that I’ll be a customer. While I may have more then enough solutions when it comes to getting movies, getting a video game can still be a hassle.

What do you think, if someone allowed you to rent video games from a kiosk for $3 a day (or buy them for $50 – $60), would you be interested or is this just a niche market for people too lazy to drive to Gamespot?

Hot Donkey! DivX To Support The Matroska Video Format


Good news web video fans. Hot off the presses Doom9′s forums, we learn that the upcoming release of DivX 7 is going to support the Matroska video format! Now I know that many of you are probably asking yourself Matroskwho?, but believe me when I tell you that this is a big deal for both DivX and Matroska fans.

A DivX / Matroska hook up will not only give web video creators even more options over how they want to present their content, but it will also ensure that consumers are able to take advantage of these advanced features with their favorite consumer electronic products. In the past, Matroska fans have had to go through a painful and complicated process in order to get their MKV files to play nice with their DivX hardware devices, but with the 7.0 release, it should be as easy as hitting play on DivX 7.0 gadgets.

So What Exactly Is Matroska?

Matroska is an open standards project that is aiming to replace existing media formats like AVI, ASF, MOV, RM, MP4, and MPG. The project had their official launch in February of 2006 and while it may not be the most well known video container, they’ve still been able to rack up over 3 million downloads since that time. While you can find many different genres utilizing the Matroska format, it’s seen it’s strongest support from the Anime community, which tends to be one of the earliest adopters for web video advancements.

In the past, Matroska’s popularity has been limited because there are very few devices that allow you to watch the MKV files outside of your computer, but the 7.0 rollout should give the format a huge boost. According to the Doom9 post announcing Matroska support, it doesn’t sound like older DivX DVD players will be able to support the .MKV format, but I bet it won’t take long before the PS3 updates their firmware to offer support. This would give Sony a big advantage over Microsoft, among the millions of fans who are passionate about the file format.

At first glance, it’s easy to mistake Matroska as a competing video format to DivX, but in reality it’s a different animal entirely. DivX is a file compression format that helps to reduce the size of your video files with minimal impact on quality, whereas Matroska is a container that can hold many different video compression schemes. To use an analogy from the DVD world, DivX would be the actual videos that you see when you watch your DVDs whereas, Matroska would be like a blank DVD. In and of itself, a blank disc doesn’t contain any data, but by inserting DivX or H.264 into the Matroska container, it allows you to enjoy a more interactive video experience.

In his post announcing Matroska support, DivX team member DigitAl56K discussed the balance that DivX has tried to maintain between supporting high end features and also keeping it inexpensive for CE partners to be able to decode the video files.

“It’s important to remember that what brought compatibility across many devices for DivX 5 and 6 was balancing certain bitstream properties so that we allowed for efficient coding with a standard that many devices could work to adhere to. Nothing prevents manufacturers from going above and beyond if they choose to – it happens today. What is important is that there is some known baseline that is consistently implemented and thoroughly tested so that you know if you adhere to it during content creation your file is going to play reliably on any certified device.

If you think back seven or eight years DivX was really the first company to try to find a standard that was designed around bridging the gap between high quality video on the Internet and the general consumer in the CE space. To do this we had to constrain certain properties of the encoder and there was a lot of pushback from many people who wanted an unconstrained MPEG-4 ASP format. I think that now there is a clear precedent that shows what can be achieved if we can find a good compromise.”

What About .AVI?

In the past, DivX has supported the .AVI container for their files, but .AVI does have some limitations. Most notably, it doesn’t support high def content encoded in the H.264 format. Perhaps even more importantly, .AVI doesn’t allow you to insert non-video data into the container.

Matroska on the other hand, not only supports H.264, but it also allows you to include data files with your videos. This means that you can create a video file that includes options like DVD menus, closed captioning data and subtitles for global audiences. It also allows you to include multiple video files into a single download. This would allow a content creator to take one of their popular videos and bundle less well known content along with it. Whether it’s including things like Director commentary and bonus scenes with a download or having the ability to attach an upcoming pilot episode to a more popular season finale download, there are many different ways that content creators can leverage this technology in order to create a more compelling video experience for their fans.

What Are The Drawbacks to Matroska?

Before you start ditching .AVI for .MKV there are a few things that you should consider. So far, we don’t really know when DivX 7.0 will be released, so it may be awhile before you can actually play your Matroska files on your TV. FWIW, I did notice that DivX recently started hosting on their servers, but the web extension currently redirects back to their main site.

Another limitation of the Matroska file is that you need to have a decent computer, in order to be able to playback your files. If your computer is more three years old, you are probably better off sticking with the .AVI format to ensure a smooth experience.

Whether or not you use the Matroska format, DivX’s decision to support the container will have big implications on the future of video downloads. By working with CE manufacturers to ensure that their processors are powerful enough to decode the format, DivX is paving the way to bring new interactive services to the video download market.

The Pros and Cons Of Media Center Vista

Caution Objects In Vista Are Less Entertaining Than They Appear

Over the past few months, I’ve finally started to get a feel for Media Center Vista and while I haven’t tried out every feature in the program, I have played around with it long enough to have some initial thoughts. Before I tried the software, I had low expectations, but after actually using the program, I’ve been really impressed with what the Media Center team has put together.

Media Center Vista allows you to perform some pretty advanced tasks without having to be a computer geek in order to figure out how to use it. I initially had some reservations about the user interface, but it only took about a week, before I found it growing on me. There are still improvements that Microsoft needs to make, but they’ve made a giant leap forward, compared to the original XP version.


-Media Center Vista is wicked fast at finding new programs. In the XP version, the software was painfully slow at trying to search for shows. As soon as I would start typing in the name of a show, XP would freak out from trying to sort through so much information. In Vista, the program still starts searching immediately, but the indexing has been turbocharged. Instead of having to wait for the menu, the results will appear as fast as you can type. This faster indexing shows up in a number of areas. When you are browsing, you can hit page down and scroll through programs as fast as you can read them. If you want to rearrange the priority of your recordings, you can make changes and move onto other areas of the program without having to wait forever while the system checks for conflicts.

-The interface looks fantastic. Microsoft has done a good job of creating a clean and intuitive DVR experience. The program is easy to navigate and has lots of extra features. On the surface the design appears relatively simple, but you can tell that Microsoft has paid a lot of attention to the little details. Whether it’s being able to double click on the picture in picture window, in order to bring up the full screen or being able to see the DVD art for upcoming movies, there are a lot of subtle features that make for a more enjoyable media experience.

-Vista comes with 30 second skip enabled. TiVo fans know that you can hack your remote to add this feature, but the big studios were able to scare TiVo into disabling it for the masses. In the past, I’ve never really used the 30 second skip feature because it meant giving up the skip to the end button on my remote. After spending some time with it on Media Center, I’ve been really surprised at how much I’m enjoying it. Hitting a button six times is a lot easier than trying to guess when the program is about to start again.

-There is minimal interference between you and your recordings. One of my biggest frustrations with the generic DVR was that it required too many unnecessary steps, before I could interact with my content. It felt like I had to hit ten buttons before I could schedule a movie, delete a recording or even watch a show. With Vista Media Center, it’s an entirely different story. The entire experience is built around the content that you are interacting with. You can’t do everything from all levels of the software, but each step is intuitively linked to the task that you are focused on. If you are watching a TV show, then by right clicking you can delete the program or burn it to DVD. If you are playing music it’s one click to pause, skip, repeat, shuffle . . . .

-You can watch TV while surfing the web. Media Center is really designed for the living room, but I’m primarily using it in a desktop setting. I didn’t think that I’d watch a lot of TV at my desk, but I’ve found it to be the perfect compliment to streaming Netflix and YouTube. This isn’t ideal for shows with intense action and complex story lines, but its perfect for tuning into the news when you see a story break online or for listening to late night talk shows, while you’re multitasking on the web. This feature won’t benefit you, if you plan on using Media Center on your TV, but it’s a good reason to add on a TV tuner, the next time you upgrade your PC.

-You can use the XBox360 as an extender. I’ve read a lot about the Xbox extenders, but I had never actually seen one in action. Connecting my Xbox to Media Center took an extra registration step, but it was well worth the time to get it set up. When I first heard about Microsoft’s extender strategy, I was skeptical that it would stream videos without problems or program lock ups. While I didn’t test the connection using WiFi, my experience using the Xbox was almost identical to having the PC directly connected to the TV. No lag, no stuttering, just instant access to my content on my big screen tv.

-You can watch TV while using the menus. TiVo uses picture in picture technology on their Comcast download, but you won’t find it on their stand alone DVRs. I had forgotten how much I enjoyed this until I started using Vista as a DVR. Whether it’s a live show or a recording, Vista will minimize whatever program that’s on, when you want to dig deeper into the menu settings. This isn’t good if you’ve accidentally stumbled onto a football game and are desperately trying to avoid the score, but it is nice for when you’re not exactly sure what you want to watch.

-It will help you find programs that are on right now. Vista Media Center allows you to search for programs in a number of ways, but its their support for upcoming television, that impressed me the most. When it comes to searching for things like TV series, kid shows, etc., it allows you to browse alphabetically or by date. They’ve also built a separate section for movies and for sports where they’ve packed in some extra bonus content. In the TV and movies section, they offer plugins for various movie download services and in the sports section Vista will let you check the box scores or add fantasy players to track.

-You can skip automatically skip commercials. DVRs make it easy to skip commercials, but Vista Media Center takes things one step further by supporting plugins, that can edit out those pesky little ads entirely. It’s not easy to set up and it’s not something that is enabled by default, but it’s still a pretty sweet feature to add.

-You can placeshift your TV. The Slingbox is great if you have a cable DVR or a TiVo, but with Media Center you can download a free plugin that will let you watch your content wherever you can connect to the net. I haven’t actually used the program yet, but it’s still a great feature to have access to.

-You can burn DVDs. Normally, I’m pretty good about watching all of the shows that I record, but when it comes to boxing, I just don’t have time to see every fighter. It’s my favorite sport, but since I record every fight (even the ones on the Spanish channels), there isn’t enough time/hard drive space, to get caught up. Since I’ll never really know which fighters will end up making it big, I’ve decided to use my Media Center to archive all of the fights. By saving them to DVD, I should be able to go back and watch the fights that mattered.

-It supports external storage. Media Center gives you a lot of control over how you want to set up your storage. Since I’m using it as a secondary DVR, I’ve set it up to record a maximum of 100GB on my internal drive. If I need more, I can add an external drive or increase my internal hard drive allocation.


-You shouldn’t have to reboot your TV. One of the things that I love about my TiVo is that it just works. You don’t have to be a tech geek to figure it out, you plug it into your TV and it records everything. In the entire time that I’ve been a TiVo customer, I can think of very few occasions where TiVo failed to record my programing. When it comes to Media Center, it’s important to remember that it’s a PC first and a DVR second. Over the last few months, I’ve found the program to be mostly reliable, but it hasn’t been smooth sailing either. Whether it’s been dealing with poor DRM design, troubleshooting a bug that refused to let me download the guide data or having my computer crash while recording television, there have been several times where I’ve missed recordings, because of PC related problems. While I can’t blame Microsoft for all of my problems, it’s still frustrating to miss a show because of technical difficulties.

-Internet video support is weak. Media Center includes support for services like Vongo and Showtime on Demand, but it involves registering and downloading a separate program before you can get it working. As a Netflix subscriber, I was looking forward to being able to use Watch Now inside of Media Center, but Microsoft has left it up to the fans to build support for this. Microsoft includes some MSN internet video content, but they make you watch pre-roll ads before knowing whether or not it’s something that you are interested in. The Xbox may unofficially support DivX, but you can’t access it inside of media center. If you prefer to use a media extender instead, it will support your XviD files, but it’s set up to block your DivX content.

-It won’t record radio. XM may have just settled a lawsuit over their radio DVR, but recording radio shouldn’t be any different than television content. Media Center will let you listen to OTA radio, but it doesn’t let you record any of the programs.

-Fast forward is a little too powerful. It may be, that I’m just used to TiVo, but Vista’s fast forward speeds are hard to adjust to. They’ve got slow, almost fast and then it jumps to hyper speed. I can’t tell whether or not they are using a five second skip back, but when I hit play, I’m usually way past the start of the program. If you stick to the 30 second skip it’s not a problem, but it’d be nice if there was some kind of a way to adjust the timing on this.

-You can’t skip to the middle of a program. One of the things that I like about downloaded video is being able to immediately jump to the middle or the end of a program. Since this is a key feature in Window’s media player, I was surprised to see this missing from Media Center. There is also no way to jump 15 minutes ahead. If you happen to fall asleep during the middle of a program, you’re stuck with fast forwarding in order to get back to where you were at.

-You can’t rate your television. As television continues to involve, it’s becoming increasingly personal. Media Center does a good job of recording TV, but it doesn’t do a very good job of getting to know you. You can sort movies by the highest rated, but its using someone else’s criteria. Because you can’t tell Media Center what you do and don’t like, there are no suggested recordings or personalization.

-It doesn’t support auto-recording of wishlists. I’m a big basketball fan, but I’m really only interested in seeing the Laker games. Media Center will let me search for the next time that they are playing, but it won’t automatically record the game. It would be nice to be able to use media center to record programs that are customized to my interests.
Al pointed out in the comments that you can actually uses wishlists, you just need to set it up from the add recording field. Thanks for the help Al. This one definitely should go in the pro category.

-Vista’s DRM doesn’t play nice with HD. I’m still fuming over this one. I knew that recording HDTV on Vista would be a hassle, so I stuck with standard tuners when I customized my computer. After upgrading to an HD monitor, Vista disabled my Netflix Watch Now and put Media Center into lock down. If Apple’s DRM wasn’t just as bad, I would be thinking differently after this experience.

-It takes forever to burn a DVD. I was really jazzed up over being able to archive shows onto DVD, but the sluggishness of the DVD burning capabilities has me rethinking this game plan. It took me 2 and a half hours to burn a one hour program to DVD. It’d be one thing if I was using lousy hardware, but it takes less then 4 minutes for me to burn a 2 hour DivX film. It’s nice to be able to save your TV, but it should never take more time to burn the disc, than it does to watch it.

-Good for early adopters, complicated for everyone else. Vista Media Center offers a lot of unique features, but it takes too much tweaking to set these up. Placeshifting and auto commercial skipping are available, but it’s up the consumer to find and install these programs. Even if you know what you are doing, the setup can still be complicated. Instead of making consumers seek out these programs, Microsoft should be including them as part of the package. It wouldn’t be popular with the media companies, but it’d win the company a lot more fans.

-The recording quality is terrible. It’s probably not fair to compare a cablecard connected TiVo with an analog cable media center set up, but the TiVO SD recordings on my 60″ screen, look way better than the Media Center recordings on my 22″ monitor. This probably has less to do with Media Center and more to do with the tuners that I’m using, but it still takes away from the user experience. Unless you want to spend the big bucks on a cablecard media center, you may end up having to deal with poor resolutions.

-There’s no turning back once you delete – As careful as I am, sometimes my DVR instincts go on auto-pilot and I’ll accidentally delete a show before watching it. With TiVo I can recover that program, but in Media Center it is gone forever. The file isn’t even in the Recycle bin. Media Center will always ask you to confirm before deleting, but this also creates one more button to push when you are done with the shows that you have watched.

So there you have it, the good, the bad and Media Center Vista. There are some rough spots around the edges, but it really is a fantastic program. I’m hoping that we’ll see better support for HDTV and for online video as the program continues to evolve.

Forget Streaming Video, How Do I Stream My PC Instead?

A Jolt to The Operating SystemOver the last week, I’ve put a lot of thought into how I plan on networking my home entertainment system. After bouncing around for the last few months, I’ve finally found a place to call home (for now), but haven’t figured out my digital strategy yet. 10 years ago, this would have involved hooking up a DVD player and forgetting about it, but today things are far more complicated. While doing an inventory of my entertainment options, I was surprised to realize that I now have eight different devices, that are capable of bringing digital entertainment straight to my television.

Having to allocate electrical outlets is a tough enough problem, but figuring out how to network each device has proved to be even more challenging. Despite having a plethora of choices, I still can’t figure out the best equation, for maximizing my entertainment experience.

My current plan is to set up the Media Center PC in my office and stream the videos to an Xbox360. Because I don’t want to deal with slow WiFi, I plan on drilling holes through the walls (don’t tell my landlord) and running ethernet cable straight into the living room.

My only reservation in using this set up, is that I won’t be able to get the real internet, directly on my television. This is important, because I want to be able watch YouTube, Stage6 and Netflix videos on my big screen TV. In order to solve this problem, I could hook the Media Center PC, directly to the TV, but then I miss out on all of the computing functions, that are more ideal for a desktop environment.

It may seem like I’m asking to have my cake and eat it too, but the experience has made me wonder, if Microsoft has their extender strategy backwards? Instead of being able to stream video files to the living room, why not let me stream the computing functions to an office monitor?

This would unlock the media experience in the living room, while preserving the PC functionality in the home office. Instead of selling media extenders, Microsoft could be offering a networking dongle that connects your monitor, mouse and keyboard to the living room PC. They could even set it up, so that someone could watch the media center, while another person was using the computer. While I know that a lot of consumers don’t want a PC in their living room, a bizarro media extender would be more practical for me.

A few years back, I had a friend who used some kind of networking equipment to cut back on the number of PCs in their office, but this was more expensive and complicated, then what I’m trying to accomplish. I tried to find out more about desktop extenders, but wasn’t familiar with any of the companies I found online. If anyone has ever used a remote computing setup, I would love to find out more about your experience. Is this even possible and is there a solution for the home consumer market? Is this something that would even work or am I better off hooking up an Xbox360 and an old computer to my television instead?

Is DivX and the Xbox 360 About To Become A Reality?

DivX and XBoxDivX followed up last night’s earnings report, with a presentation at the JP Morgan SmMid cap conference. After having just undergone their quarterly confessional, I didn’t expect to hear any new information, but wanted to tune in anyway.

Luckily, I was rewarded when midway through the Q&A session, JP Morgan analyst Paul Coster, coyly probed Kevin Hell about whether or not we were about to see DivX support on the Xbox 360. The question seemed to catch Hell off guard and while his initial reaction was enthusiasm, there was something about his tone, that suggested that Coster might be onto something.

Here is the exchange verbatim, but in order to appreciate the awkwardness of the exchange, you should really listen to the quote at the 24 minute mark of the presentation and make your own decision as to whether or not you hear a sense of urgency in Hell’s response.

Coster – “Just a minor point here, but there was a recent Microsoft conference where I believe their media extender now incorporates the DivX codec on it, is that correct? Can you confirm that and does that mean we’re soon going to see Xboxes with DivX on them?

Hell – “Yes! that, uh, we’re in discussions with Microsoft on that at this point in time, so I can’t go into any great detail on that. Um that is not a certified, that is not a certified or licensed product at this time.”

At that point DivX CFO Dan Halvorson jumped in and quickly changed the subject.

It was only a brief exchange, but after pretty much giving up all hope of seeing DivX on the Xbox, I found the news to be very encouraging. When I originally saw that Microsoft was going to support DivX on their media extenders, but not on the 360, I took this as a sign that negotiations were over and that Microsoft didn’t want to pay for their entire Xbox360 population. In retrospect, Microsoft may have really been engaging in the subtle art of negotiation.

In thinking about some of the leaked XviD/360 rumors over the past summer, I can’t help but wonder if Microsoft could have intended to leak this information, in order to gain leverage in their discussions. An Xbox that supports XviD, but not DivX, is a less then optimal experience for consumers, but the downside would be far worse for DivX then Microsoft. Could Microsoft have been flexing their muscles in an attempt to get a better licensing deal with DivX? I don’t have the answers to these questions, but I do have advice for both companies.

DivX – I know that you have responsibilities to your shareholders, but as a fan, I urge you to engage in some fiscal irresponsibility and give in to whatever Microsoft is demanding. DivX support on the Xbox is one of the top requests from your community and would make a killer extension for your codec. Don’t make us hack into our Xbox to get at the DivX love. The platform would give you instant access to millions of television sets and would energize your entire community.

Microsoft – Have you looked at how much cash you have in your bank account? Why are you even playing this game of chicken? We should have had DivX support years ago. Offering XviD, but not DivX would be a huge hassle for your customers and isn’t worth the money you would save on royalties. The publicity from adopting an open strategy would more then pay for your investment. Your strategy to treat media extenders differently from the 360 is an obstacle to mainstream adoption and one that should be abandoned. You should listen to consumers, even if it means overpaying DivX for their certification. With a consistent extender strategy and DivX support on the Xbox 360, you could crush the PS3 and create a more compelling reason for people to adopt your Media Center technology.

It’s hard to say how negotiations will turn out, but I have a feeling that it won’t take long to find out. The “fall” update is rumored to be taking place sometime in December and if it doesn’t include DivX support, it will likely mean that these discussions broke down. If it does include DivX support, it will be a huge win for DivX, for Microsoft and most important, for their customers.

Dude, I’m Getting A Media Center

The AccessoriesI don’t like to think about it, but the death of my PC, could have ended much more tragically. When I first woke up and thought that I had lost all of my data, I went through all 5 stages of grief. At first, I tried to deny that there was a problem, then I got angry at myself for not listening to Thomas Hawk’s advice, this was followed by plenty of promises to be more diligent, if I could only figure out how to fix it and when I ultimately realized it was toast, depression set in over the loss. When I finally realized that my problems had nothing to do with my data, acceptance was easy because it meant that I was going to be able to transfer my digital life into an entirely new media experience.

Three years ago, I made the mistake of buying a computer from my work. They had extra ones lying around and I liked the idea of having access to Windows Office. The computer was old, but still an upgrade from my Windows 98 PC. At first I thought that this was a good solution, but what I didn’t realize, was that my work had stripped out all of the media related functionality. It ran on just a half a gig of ram, had no CD or DVD burner, the video card couldn’t support higher resolutions and somehow they managed to disable the microphone :(

As a media nut, this was a brutal mistake to make for a home PC, so when it came time to get a new one, I wanted to make sure that I had access to everything. Whether it’s being able to handle PC gaming or being able to stream digital video straight off the web, I wanted to make sure that I had as many options as possible.

Here are the specs for the gadget fans.

DI-700-XFIRE: Intel 700-class Crossfire workstation
Case: Cooler Master Centurion 5 Mid-tower
Processor: Intel Core 2 Duo E6850 3GHz Dual Core 1333MHz FSB 4MB cache
Motherboard: ASUS P5W DH Deluxe (Intel 975X)
DDR2 Memory: 4GB Dual-channel: 4 x 1024MB DDR2 667 MHz PC5300
Hard Drive with Serial ATA 2 interface: 320GB 16MB cache 7200RPM SATA2 Best value
Hard Drive #2 with Serial ATA interface: 320GB 16MB cache 7200RPM SATA2 Best value
Serial ATA RAID: RAID Level 1 (mirroring)
Optical Drive : 18x SATA Dual-Layer DVD±RW w/ Software
Crossfire Video Card: Two X1650 Pro 256MB for Crossfire mode
Removable Storage Device(s): Internal 8-in-1 Card Reader
Sound Card: On-board high-definition sound system
Network Card: Integrated LAN with 10/100/1000 Fast Ethernet Controller
Input/Output capabilities: Refer to the motherboard chosen.
TV Tuner: Dual-channel TV-Tuner with PVR software
Additional Case Fan: Extra case fan
Power Supply: 500 Watt Crossfire/SLI ATX power supply with 120mm fan
CPU Cooling: Manufacturer’s CPU Fan
Operating Systems (OS): Microsoft Windows Vista Home Premium Edition

I’m looking forward to the extra horsepower, but the dual tuners excite me the most. Even with two tuners in my TiVo 3, I still run into recording conflicts. I don’t know why certain nights are so popular, but I don’t like having to make choices because of bogus :03 start times.

Media Center will be a change of pace over TiVo, but I’m looking forwarding to seeing the progress they’ve made with the Vista platform. Initially, I plan on using my Xbox 360 as an extender, but care far too much about having access to the internet, to stick with that for too long. Microsoft’s WebTV may have never taken off, but for me, open access is the killer app.

I’m also excited to finally be able to start exploring some of the other DVR solutions out there. Over the years, I’ve read an awful lot about SageTV, BeyondTV, and MythTV, but have never been able to fully evaluate the differences in their approach to the DVR. I feel like I made the right choices on the components that I selected, but won’t know for sure until, it finally arrives and I get a chance to test it under real world conditions :)

Software You’ll Need When Your PC Hits The Big Start Over Button In The Sky

ComputerRecently, I suffered a computer meltdown and the good news is that I still have my data, but the bad news is that it’s cheaper to replace the PC, then it is to fix it. Since I was already in the market for a laptop, I decided to purchase one, while I took the time to figure out my home PC strategy.

It’s been a long time since I’ve had a new computer, so I was a little surprised at how long it took me to recreate my unique PC experience. Getting the right mix of bookmarks and software is key to taking full advantage of the horsepower that your computer has. At first, I thought that setting up my new laptop would be quick and painless, but I misjudged the sheer number of programs that I would need and forgot about the pesky bloatware to deal with.

Even after an aggressive campaign, I am still finding things that I need to uninstall. I did manage to get rid of the McAfee pop up that warned of my computer being comprised because I wasn’t paying them money :roll: but I’m still trying to remove the Vongo free trial offer that shows up in what seems like every menu.

Since I know that I’m not the only one to experience some frustration in setting up a new PC, I decided to keep a list of all the programs that are helpful, when you are doing a fresh install.

Web Browsing

Firefox – I’ve tried the new internet explorer browser, but it still can’t beat this open source underdog. Step #1 – fire up IE, so you can download Firefox, then delete all IE shortcuts, so you never accidentally launch the software again.

IE Firefox Plugin – As much as I try to avoid IE, sometimes there are services that are only supported by Microsoft’s browser. In order to avoid having to fire up IE, I install a firefox plugin, that allows me to use IE, in my preferred browser.


– I normally use web based email, but still like having Thunderbird, in case I need to archive my emails. I actually prefer Microsoft’s Outlook, but am not willing to spend the money when there is such a great open source product available.


Skype – I don’t use Skype as much as I should, but think that it’s a great alternative to cable telephone or Vonage. I’m still looking for a good program that can record my Skype calls, but this is still a pretty robust service.

TrillianThomas Hawk turned me onto this one. Why run separate Yahoo!, MSN and AOL instant messaging software, when one program can handle all three? Instead of being forced to choose your friends, you can show up on all three major networks easily.

System Resources

AdAware – This one isn’t fun to play with, but it’s important to have on your system. It can’t stop a full blown virus from invading, but it can help you find programs that are trying to sneak their way on board.

Spy-bot Search & Destroy – Spy-bot is a lot like AdAware, but I like to keep both programs available. One time I came across a download that blocked AdAware from starting, but was no match for Spy-bot. These services can’t replace the paid ones, but they go a long way towards helping to improve the security on your computer.

Google Desktop – I’ve had mixed feelings about Google Desktop from the get go, but still continue to use it. On one hand, it’s really helpful to be able to search my hard drive easily, but on the other hand, I also feel a little weird about Google desktop tracking me. I figure that the functionality is worth it, as long as I make sure that I’ve got a strong password for my login.

Java – I’m not even sure that I can tell you what Java does, but I do know that it is at the heart of some pretty cool applications. I’ve used the technology to play games, watch videos and watch live streaming content online and I don’t think that I’ve even scratched the surface of what it’s capable of.

Greasemonkey – GreaseMonkey allows you to mash up different parts of the web inside of your browser. It’s a very powerful plugin and is worth downloading, even if you’re not sure how you’ll end up using it. My favorite GreaseMonkey script is a plugin that allows you to see which movies in your Netflix queue, will be airing on TiVo soon.

Social Web

Commentful – This software will change the way you interact online. It allows you to leave comments on web entries and then notifies you when someone has added something to the conversation. In the past, I would comment, but would never follow up to see if there is a response, now I use Commentful to help me continue dialogues that would have normally fizzled out.

WordPress – There are lots of blogging packages out there, but I use WordPress. I like it because it has great fan support and offers a lot of functionality, that I can’t find in other blog packages. My favorite part is having the ability to completely change the appearance of the site, with a simple click of a button. With plenty of WordPress widgets, it’s easy to customize templates, to fit any personality. – There are many different bookmarking sites, but I primarily use By downloading their firefox plugin, all you have to do is right click and you can clip articles. This is a great resource for archiving things that you want to view later.

Google RSS – A good RSS reader can help you keep track of your favorite sites. Without it, I wouldn’t see a tenth of the content that I track. In the past I’ve used Bloglines, but when Google introduced RSS search capabilities, they won me over. This feature alone, allows me to track 1,000 times more content, then what I could handle in a more basic RSS program.


Picasa – Photoshop is great, but there are still free alternatives, if you don’t want to spend the cash. Picassa not only has a decent photo editing feature, but also allows you to post your photos online.

Zooomr – I visit Zooomr several times a day, in order to check my Zipline. I also use Zooomr to host my photos for this blog and play web games in their forums. There isn’t any software to download, but if you drag and click on the Zooomr link, you can add a bookmark to your toolbar.

Flickr – Flickr is another great photo sharing site. They are one of the largest photo sharing sites, so they have an even better selection of images. There isn’t anything to download, but they do have a bulk uploader, if you plan on hosting a lot of images.

Remote Computing

Orb – You need a TV tuner and media center software for this one, but if you have these components, then Orb is a no brainer to install. It allows you to placeshift your content, anywhere you can get a broadband connection.

UltraVNC – Even though, I upload a lot of things online, there are still times where I need access to my home computer. UltraVNC allows you to log into your system remotely, so that you can access your files, even if you happen to be on the go.

Digital Video

Adobe Flash – YouTube is one of my favorite sites and in order to see their videos, you’ll need the flash codec. Because of the sheer amount of content encoded in flash, this one of the most essential downloads on the list.

DivX – Flash is great because it has broad support, but I prefer DivX because it offers a high quality experience that you can take with you. You can download support for just the codec, but I prefer to download the DivX web player, so that I can watch Stage6 content as well.

Quicktime – I’ve never spent a lot of time using iTunes, but I do come across a lot of Quicktime movies on the net. If you already have iTunes, you won’t need this one, but if not, then this is a helpful plugin.

Real Player – I’ve had so many problems with Real Player, that I almost hate to download it, but there are too many interesting things in Real format, to completely ignore this format.


Pandora – This is one of my favorite places to find new music. Over time, Pandora will start to figure out your interests and will suggest a lot of things that you don’t hear on commercial radio.

Foxy Tunes – This is a great program for finding and sharing music on the web. It not only allows you to search for cool music, but you can also insert FoxyTunes links into emails that you send to friends

Last FM – I prefer Pandora, but use Last FM because it is supported on my TiVo. I’m not sure how to describe a technology whose roots are based in scrobbling, but once you get the hang of it, you can start to find some really cool music.

Word Processing

OpenOffice – This open source software package contains all the features that you would expect to find in a high priced business software package. It works transparently with Microsoft files and is a great alternative for those on a budget.

Google Docs – I don’t think that it can replace Microsoft in the business world, but Google docs is a free alternative for home users. It allows you to create and share documents, spreadsheets and presentations.

Foxit Reader – Most people use the Adobe reader, but I only turn to it as a last resort. Adobe’s reader is an important program to have too, but it always takes too long to load and asks me if I want to update way too often. Instead I stick to Foxit and no longer have to wonder if my system will crash when I’m closing a .pdf file.


Yahoo! Calendar – When choosing a calendar system it’s important to choose carefully, because the more time that goes by, the more you will be locked into that system. At this point, I have most of my important dates scheduled on Yahoo!, but still yearn for a better solution that offers me true data portability.

30 Boxes – If you love Ajax, you’ll be a fan of 30 boxes. The site allows you to open up your calendar to the social web. This is helpful for planning and sharing events. It’s an interesting concept, even if I’m still not ready to turn over my schedule to bill collectors and ex-girlfriends.


TripleA – I highly recommend downloading this one, but don’t blame me if you drop out of society from playing it. TripleA is an Axis & Allies emulator that replicates the original game to perfection. It’s entirely fan built and is a great resource for playing out your own World War II fantasies.

FreeCiv – Sid Meier’s Civilization game had a huge impact on video gaming and this program validates it’s place in the pantheon of PC based programs. The program is a Civilization emulator where you can raise and develop your own society. I always try to be nice, but invariably, I end up attacking my neighbors.

ZSNES – This is a great open source emulator for replicating old arcade games. It won’t come in handy, if you want the modern day gaming experience, but it is useful if you ever wish that you could go back and play games from your childhood. Finding the games can be a little tough, but reuniting with an old friend, can make the journey worth it.

Peer 2 Peer

Limewire – If you don’t want to spring for the pro version, Limewire can be a little spammy, but it’s still a good resource, for those interesting in taking a bite of the forbidden fruit.

Emule – Another powerful P2P client. It doesn’t have access to the largest number of files, but it does offer a clean interface and is a good resource for when you can’t find things on the other P2P networks.

Bit Torrent – It’s one of the most popular programs on for a reason. This robust p2p system allows you to download and share tiny bits of content from multiple users at once. This helps to speed up the download times and helps to get around some of the uploading restrictions.

Fox Torrent – Fox Torrent isn’t as fast as the original Bit Torrent software, but it’s easy to use and makes downloading a breeze, when you don’t mind waiting for the content. The software integrates nicely into the Firefox browser and adds bit torrent capabilities to an already powerful internet browser.


Stumble Upon – I’m not a huge fan of the toolbar plugins, but I make an exception for this one. You can find some amazing stuff on StumbleUpon. It’s a great time killer, if you are ever bored and still have access to the internet.


Wikipedia Firefox Plugin – I like to use the search bar that is built directly into the Firefox browser. The default supports Google, but there are a lot of other sites that will let you install plugins on your browser. It’s probably a good idea to double check the facts that you find on Wikipedia, but this plugin, makes easy to search the site, without having to go directly to their home page.

Stage6 Search – DivX Labs has built a plugin for Firefox and IE browsers, that allows you to search the Stage6 website, directly from your browser. I’ve found that this plugin comes is especially helpful, when I know that I’m looking for video content. – Most of the time, I prefer to use Google, but can help you find articles that wouldn’t show up in simple keyword searches. I never know quite what to expect, but search results tend to focus less on style and more on function.

Technorati – I love Technorati, even though the site only seems to work part of the time. I’d like to find another blog search plugin, but this is the only one that I know about.

MusicPortl – This search plugin allows you to enter the name of just about any artist and you can instantly find a wealth of information on your favorite band. MusicPortl aggregates their information so that you can see the latest YouTube clips, blog entries and Wikipedia information. This is a must, if you enjoy researching music.

Spout – If you love movies, you’ll love Spout. The site is a great resource for finding out information about your favorite films and for connecting with other film fans. This firefox plugin makes it remarkably easy to focus exclusively on movies, with your search results.

There are a lot of programs on this list, but I’m sure that I’m still missing some of the most important ones. f you know of any other services that should be included on this list, feel free to contact me or leave a comment and I’ll keep this post updated with other helpful programs that people suggest.