Last week, Greg Meyer fired the first shot in a proxy war by submitting paperwork to have his name considered for a position on Blockbuster’s board of directors. To win, he’ll need to take on board of director incumbent, James Crystal. In the proxy filing, Meyer makes a strong case that he is the more qualified candidate for the position.

-In 2001 Meyer started a DVD kiosk business at a time when most thought the idea was crazy. Eventually, DVDXpress was sold to Coinstar and later merged with Redbox. Mr. Crystal on the other hand has spent his career running an insurance company and doesn’t have any DVD industry experience.

-Over the last year, Meyer has put his own money on the line by purchasing over 600,000 Blockbuster shares on the open market, Crystal on the other hand has less than $50,000 worth of Blockbuster’s stock and only because it was given to him for serving on the board of directors.

-While Crystal’s full time job is his insurance business, he also serves on 7 other boards for various insurance companies. Meyer’s only other board position is with a non-profit that uses movies to help reach young kids.

-Perhaps most damaging of all though, is the related transaction between Mr. Crystal and Blockbuster. Last October, Blockbuster made Frank Crystal & Company their exclusive insurance broker for the company. At the same time, Mr. Crystal, who sits on the compensation committee, was helping to award over $1.5 million in bonuses to Blockbuster executives in a year where Blockbuster lost over a half a billion dollars. Given that Blockbuster CEO James Keyes was awarded $400,000 of that bonus, perhaps it isn’t all that surprising to see him come out against Meyer’s nomination.

In a press release, Keyes rejected the idea of adding Meyer to the board and wrote,

“While we have an appreciation for Mr. Gregory Meyer’s investment and interest in the company, those are not sufficient reasons for his candidacy for the board. We are disappointed Mr. Meyer is pursuing a costly and disruptive proxy contest. A proxy contest can only serve as a distraction to the company when attention and resources would be better used in creating value for stakeholders by implementing our strategic plan. We assure all of our constituencies that we remain committed, as always, to doing what is right for our shareholders, debt holders, employees, and customers,”

Distraction or not, it’s understandable that Blockbuster’s shareholders would be disappointed in the current board of directors. Since bringing on Keyes, Blockbuster has seen their stock fall from $4.46 to $0.29 per share. During that time, they’ve seen Netflix and Redbox take market share from them, while they were concentrating on trying to figure out a way to save Circuit City from bankruptcy. Instead of focusing on offering an all you can eat streaming service, Blockbuster spent their operating income on redesigning their stores. Meanwhile, they’ve continued to lose the confidence of both the stock and bond market.

Given that there aren’t many people who’d be willing to run into a burning building in order to save a video store, I reached out to Mr. Meyers to help better understand what he hopes to accomplish with his proxy run. Below is a transcript from our interview.

Davis: I guess the biggest question on my mind is that with Blockbuster clearly hurting pretty bad right now, why you would even want to get involved with the company. You’ve already proven that you can build a DVD business from scratch, what is it about the challenge of turning the company around that appeals to you, instead of using your time and capital to create another new business?

Meyer: When our team was building the DVDXpress business early on, we spent years struggling to make customers aware of the fact that it was possible to rent DVDs from a kiosk and encouraging them to do so. Blockbuster was such a dominant force at the time that we felt like we were constantly swimming upstream against this 900lb gorilla.

Fast forward to today and the tables have turned so that many people say ‘Why would I ever go to Blockbuster?’ I think the pendulum has swung too far and believe there is an enormous amount of intrinsic value within Blockbuster that can be realized with proper guidance and forward-thinking strategic insight. Love ‘em or hate ‘em, everyone knows that Blockbuster means movies, and having such widespread brand awareness is extremely valuable.

Davis: Having served on the front lines of the bond market, what insights does this give you into how the banks and hedge funds might be thinking about Blockbuster’s debt right now? Specifically, what sorts of things do you think that they’d like to see in order to be amenable to restructuring overtures?

Meyer: The perception in the market is that Blockbuster’s subordinated notes will be equitized at the expense of shareholders. I believe there are some intelligent steps that management can take to avoid this outcome, which would obviously be advantageous for shareholders- and I have recently apprised them of one such structure. The Company and its legal and financial advisors need to be thinking about creative solutions to bring the company back to health and not take the easy way out by converting sub debt
to equity unnecessarily. My impression is that the Company and its advisors are looking at this as a zero sum game instead of trying to figure out how to creatively increase the size of the pie for all constituents, which I think is doable. That’s why I think it’s so important to have at least one shareholder advocate on the board.

Davis: You also mentioned in your filing that you’d like to pursue a solution that results in the lowest possible dilution, if any, of shareholders. Given the burden of having to service almost a billion dollars worth of debt, can Blockbuster be competitive in an industry whose competition is cutthroat right now? Can you share any thoughts on your rescue plan for Blockbuster and what it might take to save the company?

Meyer: Blockbuster has some incredibly valuable assets and competitive advantages. In addition to huge brand awareness, the Company has very strong relationships with the Hollywood studios. These studio relationships have become more apparent in the last few months with the Warner, Fox, and Sony supply deals providing Blockbuster with day-and-date availability of new release titles vs. the 28-day delay for other channels. This is a huge advantage relative to Netflix and kiosks competitors, and it’s one that Blockbuster has never had in the past. I think the company has done a reasonable job of communicating this advantage to customers with the recent release of ‘The Blindside’ and ‘Sherlock Holmes’.

For now, having closed many of its underperforming stores already and amid a significant reduction in overall brick-and-mortar industry capacity, Blockbuster’s physical stores represent a true asset if managed properly that can generate significant cash flow for years to come and act as a bridge to its various future distribution channels rather than an impediment.

Davis: Blockbuster released a press release urging shareholders to reject your advances, saying that they were disappointed that you were pursuing a “costly and disruptive proxy contest” at a time when their efforts should be focused on executing their existing turnaround plan. Do you feel that it’s appropriate for Blockbuster management to publicly respond this way and do you have any concerns that your actions could have any negative consequences by trying to shake up the status quo?

Meyer: The reality is that Blockbuster’s management is making the decision to perpetuate a proxy contest. I find it unconscionable that management would be willing to waste shareholders money to fight a full blown proxy contest to keep a qualified, industry relevant and highly motivated individual off the Board. If James W. Crystal is as valuable as James W. Keyes suggests then I would be happy to serve constructively with him on the board. This does not have to be mutually exclusive. Keep in mind the size of the board has shrunk from 9 to 7 over the past few months due to several departures, so having both of us as directors would actually return the board to a more normal size. But this is a decision that Jim Keyes and the Board has to make as it is out of my hands.

Davis: Beyond the finance side of the equation, is there anything that you feel Blockbuster should be doing to make their product more relevant to consumers?

Meyer: Yes, I think the value proposition to customers can be significantly improved. Look at the smart things that smaller brick-and-mortar video competitors like Family Video (rental) and MovieStop (retail) are doing. These companies have been growing rapidly over the past several years as they’ve figured out how to remain relevant with consumers despite growing competition from Netflix and the kiosk operators. These companies offer a variety of real services to their customers. As one small example, both of these chains offer a ‘Notification Service’ by which they will call or email their customers when a movie or game becomes available for rental or sale, either new or used. This builds goodwill and drives customer traffic. Sometimes a lot of small improvements at the margin add up to a much better experience.

And of course there are many innovative steps the company can take to serve customers digitally, some of which they’ve started to take with Blockbuster On Demand. The combination of near ubiquitous brand awareness and strong studio relationships has the potential to make Blockbuster a dominant player in digital delivery going forward, but this path needs to be navigated intelligently to ensure success.

Davis: Finally, Carl Ichan previously spent a lot of time and money trying to win board seats and concessions from Blockbuster management. While he ultimately won, his actions haven’t seemed to help the company all that much. Even if you were to win a seat, do you think that you’d have enough influence to create the kind of change that Blockbuster needs in order to save their business?

Meyer: All I can ask for is the opportunity to have my informed opinions heard at the board level and hope that the other directors would act in a rational and objective manner in the best interests of the shareholders.

Since I’m not a Blockbuster shareholder, my vote won’t count in this contest, but I am interested in what other shareholders think, so feel free to share your thoughts in the comments. Will you be voting for Meyer? For Crystal or do you plan to kick all the bums out? While fighting a proxy war can be a distraction and could potentially interfere with Blockbuster’s efforts to restructure their debt, it can also bring hope to a weary shareholder base at a time when things seem hopeless. I don’t think that Meyer can turn the company around single handedly, but as Johann Wolfgang Von Goethe once wrote, “in all things it’s better to hope than to despair.”

Update – In an open letter to shareholders, Meyer calls out James Keyes for perpetuating the proxy contest and reveals that he encouraged Blockbuster to adopt DVD kiosk technology over five years ago. At that time he also pointed out that Blockbuster could have saved $140 million per year by cutting their store hours by three hours per day.

While most are good sports about these things, I’ve received my fair share of puzzled looks in my time, so imagine my delight when I came across a website called Ask500 where you can pose these questions to a global audience. The site is set up where anyone can ask a question and if it receives enough votes, then they’ll leave it at the top of their main page until 500 people have viewed it. Over the last year, I’ve been ducking in and out of the site and since I’ve enjoyed it so much I thought that I’d share some of what I’ve learned. While these results aren’t necessarily scientific, I did find a few of them surprising.

-Considering that it costs more to make a penny than the actual monetary value, I thought it was interesting that people were split 50/50 when asked if it would bother them if we retired the penny.

-41% have lived dangerously by hitchhiking at least once.

If you’d like to view all of the questions that I’ve asked, you can see them here. If you haven’t checked out the site yet, I’d encourage you sign up because it offers all kinds of wacky entertainment. If you’re a business and are interested in crowd sourcing some of your market research, Ask500 has a sponsorship program where you can get instant feedback on ideas.

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

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

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

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

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

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

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

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

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

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

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

If the memo is accurate, TiVo is about to receive a $20 million advertising windfall from Best Buy, in exchange for giving them a national retail exclusive on their secret product. To help put this into perspective, over the last 12 months TiVo spent a mere $4.7 million of their own money on advertising, so this could go a long way towards boosting subscriber acquisitions.

Here’s a complete copy of the memo,

“You Think You Know TiVo? You Haven’t Seen Anything Yet.

On March 2, TiVo’s game-changing plans will be revealed, so stay tuned. You’ll want your sales associates to know all about this exciting news, so make sure they check out TiVo’s new eLearning on Learning Lounge, starting on March 3.”

After thinking about the memo, a couple of things really jump out at me. First off, I’m surprised at how excited Best Buy seems to be about the product announcement. While I expect that TiVo would want to generate as much hype as they could for their upcoming press conference, Best Buy wouldn’t need to do this for a memo that was never meant to go public. Yet, in their memo they use some pretty strong language to describe TiVo’s top secret product.

Terms like “something major”, “unsurpassed entertainment experience” and “transform the way people watch TV” would all suggest that TiVo’s announcement is going to be a bit more significant than the addition of a QWERTY remote or placeshifting abilities. While claiming that the DVR was just a “warmup” may be an impossible standard for TiVo to beat, this memo would suggest that something radical is in store for TiVo fans.

While it’s always possible that the memo could turn out to be an unsubstantiated TiVo rumor, some of Tom Roger’s comments from their last earnings call lend credibility to the leak. After being challenge by an analyst over TiVo’s subscriber defections, Rogers had bold words about the budding relationship between the two companies,

“We do think also that those trends can begin to be reversed. That is not something that will take effect in any meaningful way for this holiday season, because it’s dependent on some future development that we want to have for Best Buy before they really light up their promotion and marketing undertakings. Once that’s in full swing, that too should begin to well reverse those trends in 2010, at least that’s what we are working toward.”

Giving Best Buy an exclusive could potentially backfire on TiVo by making them less attractive to other retailers, but $20 million in advertising would certainly go a long way towards jump starting subscriber acquisitions once again. If internet retailers like Amazon are still allowed to sell the new hardware, the extra marketing would more than pay for any strained relationships with companies like Radio Shack. If you also include the advertising that DirecTV is expected to do, once their product launches as well as any potential advertising that TiVo could see from Comcast (if their product ever actually goes national), TiVo could see their most significant subscriber gains in years.

While we won’t know how much of this is hype vs. reality until TiVo holds their press conference on March 2nd, Best Buy’s leaked memo certainly makes this something to watch live, instead of TiVoing the event.

For those of you unfamiliar with how a DVR works, part of their magic is the ability to let you record shows in the future without having to worry about when it’s on. Back in the ole VCR days, you’d typically have to manually tell your gadget what time and channel you wanted it to record, but with TiVo (and other DVRs) they keep track of this information automagically and records your programs whenever it’s scheduled to be on. Because the TV studios tend to schedule all of their good programming at the same time (I’m looking at you Thursday night), there are sometimes conflicts between what you’d like to record and the number of TV tuners available to do it.

To resolve these issues, TiVo created a season pass manager that allows you to prioritize which shows get recorded and which ones don’t. This helps to make sure that I always get to watch Survivor and CSI, even if it means that I sometimes have to skip Community.

From patent 7,665,111,

“The invention correlates an input schedule that tracks the free and occupied time slots for each input source with a space schedule that tracks all currently recorded programs and the programs that have been scheduled to be recorded in the future, to schedule new programs to record and resolve recording conflicts. A program is recorded if at all times between when the recording would be initiated and when it expires, sufficient space is available to hold it. Programs scheduled for recording based on inferred preferences automatically lose all conflict decisions. All scheduling conflicts are resolved as early as possible. Schedule conflicts resulting from the recording of aggregate objects are resolved using the preference weighting of the programs involved. A background scheduler attempts to schedule each preferred program in turn until the list of preferred programs is exhausted or no further opportunity to record is available. A preferred program is scheduled if and only if there are no conflicts with other scheduled programs “

Without the ability to do this, the DVR would be as hard to program as the blinking clock on the front of your VCR. Recognizing how crucial this feature was to the DVR experience, TiVo moved aggressively to patent the feature, before they even rolled out their technology to the public.

In the ten years since then, TiVo’s season pass technology hasn’t really changed all that much. Most of their DVRs now come with two tuners instead of one, but the basic experience has remained the same.

Two improvements, that I’d like to see them make to their season pass manager would be faster processing times for when you want to rearrange your priorities or delete season passes and some kind of a menu that can identify future conflicts even after you’ve already scheduled your program list.

If TiVo introduces a DVR with faster microchips at their March 2nd press event, the long delay after reorganizing your season pass should take care of itself, but making their conflict resolution program a bit more robust would need some kind of a software upgrade.

While TiVo is good at pointing out conflict issues when you first schedule a program, they rely solely on your prioritization list when considering future conflicts. This may ensure that the programs you care about most get recorded, but it can make it difficult to know when you’ve missed an episode because of a scheduling change. In the past this hasn’t been much of an issue because the consumer’s only option would be to wait for a rerun, but with sites like Hulu and Netflix now streaming the repeats, it would be nice to be able to view some kind of a report of what you missed that week, so that you could watch any missed programs online.

While pretty much every single DVR currently uses this embodiment of the season pass manager, TiVo’s latest patent isn’t without a workaround. Because it was invented during a time when cloud computing was an expensive pipe dream, TiVo only patented the client side application of this technology. In other words, as long as the conflict resolution is done remotely on a server, competitors like Microsoft and cable companies could avoid infringement. Of course, this could potentially be a lot more expensive than licensing the patent from TiVo to begin with, but given the current trend towards remote DVR services, the USPTO’s long application process may have made TiVo’s invention obsolete, before they’ll have much of a chance to enforce it.

TiVo doesn’t know whether or not their injunction against Dish’s DVR will hold up yet, but that hasn’t stopped them from adding to their patent portfolio in the meantime. In a remarkable filing with the USPTO, TiVo appears to have now won an important patent for displaying closed caption information to DVR customers.

In addition to covering this important feature, TiVo’s latest addition to their portfolio, also appears to encompass enhanced TV services, including a “clip and sling” type technology, that could eventually allow TiVo users to automatically remove commercials from time shifted programs.

According to patent 7,661,121, TiVo now owns the right to use existing closed caption and Enhanced Television (ETV) signaling data to create an interactive experience for their customers. ETV data is metadata that content owners have started to embed into their programming. It’s been used by Cablelabs and is part of the fundamental architecture behind big cable’s sinking “Canoe” DVR advertising venture. While I would suspect that the cable companies also have patents related to how ETV data can be used, it will undoubtedly be another series of rapids that the long delayed project will have to maneuver through.

While the abstract for TiVo’s latest patent is a little vague, if you delve into the details, you start to understand why TiVo would try to seize this particular piece of intellectual property. Essentially, the patent allows TiVo to sync closed caption information (and metadata) from broadcast programs recorded on a DVR and then display that data in an interactive format. This data can be as simple as a menu or closed captioned text or can be as advanced as digital video and sound effects.

From the patent,

“A multimedia device may use closed-caption data patterns to recognize and synchronize to multimedia content streams. The types of data patterns available in closed-caption data are numerous. For instance, distinct data patterns may exist within the actual closed-caption text, the closed-caption control data, as well as well as any other event defined by the closed-caption data. By recognizing distinct patterns within the closed-caption data, a DVR may identify events within the multimedia content stream. One way of recognizing patterns within closed-caption data is by computing hash values representing closed-caption text and identifying patterns of hash value sequences. Thus, according to one embodiment, at a multimedia device, such as a DVR or server, the closed-caption data is parsed and hash values are generated corresponding to the closed-caption data. The hash values are then compiled into hash value sequences associated with particular video programs or segments, and further combined with metadata defining command and control information for processing at multimedia devices. These hash sequences and metadata are provided to multimedia devices such as DVRs in the form of hash value sequence data. The multimedia devices use the hash value sequence data for recognizing and synchronizing to closed-caption data. A matching algorithm is used by the multimedia device to sequentially compare generated hash values from the closed caption data with multiple hash sequences that the multimedia device has stored locally. According to one embodiment, the matching algorithm is implemented through a state machine that processes the generated hash values and reports whether or not a match has occurred with a hash sequence identified by the hash value sequence data. ”

While the patent was only awarded on February 9th, TiVo actually implemented part of this technology years ago. Not only do they already offer a number of different ways to view closed caption data, but if you’ve ever watched a commercial on TiVo from one of their corporate partners, you’ve probably noticed a thumbs up icon that lets you easily subscribe to a show or order more product information.

While TiVo’s current implementation of this technology is admittedly pretty limited, the patent hints that there may be more powerful features going forward.

“”A user can mark off sections of a multimedia program or place points of interest relating to content within the multimedia program. For example, a user may want to mark the best plays of a recording of a football game. Once the user marks the plays, he can send the resulting hash sequences to a friend’s DVR.” [Bold added by me]

One of the reasons why Dish was never able to launch their clip and sling technology was because the content owners threw a hissy fit and threatened to sue the bejesus out them, if they made it easy for consumers to share content. While I don’t know the technical details behind what Sling was trying to accomplish, my sense of the project was that they wanted to let users edit other people’s content and then redistribute digital copies of those clips. The genius behind TiVo’s method is that their method wouldn’t allow anyone to “share content” that wasn’t entirely owned by the customer or TiVo.

“DVR users can distribute their own sets of points of interest for programs to other users. Users can further attach metadata to each point of interest that may cause the DVR to display text to the viewer, e.g., “Isn’t this a great action scene?” The user may also attach metadata to a point of interest that tells the DVR to skip x seconds into the program from that point of interest or display x seconds of the program before skipping to the next point of interest. This allows users to create their own condensed versions of a program that they can distribute to their friends, family, classmates, students, interest group, etc.”

While TiVo uses the example of a clipping highlights from a football game in their patent filing, I’m much more interested in how TiVo customers could potentially use this technology to remove commercials from YOUR programs. If both you and I have already recorded a particular show, there is no copyright violation because we’re both recording content that we already own. By allowing their users to create hash tag data, TiVo would technically own that data and would have the right to distributed that hash tag data to other DVRs without having to worry about content owners accusing them of stealing.

This would make it easy for me (or more likely someone else since I time shift everything ) to easily tag all the commercials in a program and TiVo would then know to auto-skip past the content (commercials) when it saw the tags. TiVo could also use this as a way for live subscribers to tag the end of football and basketball games, so that they wouldn’t get cut off if the game went to overtime.

Another interesting embodiment of this patent would be the combination of live information with time shifted programming. Whenever I watch something a few months old, I always see commercials for upcoming TV shows or movies that are way past their expiration date. Instead of advertisers wasting their money on DVR subscribers, they could use sponsored hash tags to replace an old ad with something more current. Alternatively, if you were time shifting the news, TiVo could use your internet connection to create a live scrolling ticker that could update you on any new developments in the story.

Other potential uses that appear to be covered by the patent would include shows that have choose your own adventure type storylines. Upset about Chuck and Sarah not hooking up? the producers could give fans an alternate storyline to explore and allow viewers to vote on how they want to see the story move forward or TiVo could use this patent to create Blind Date type pop-ups around recorded television. While I tend to prefer my TV clutter free, for events like the state of the union, I can see why people would be interested in having fun facts pop up, addressing the issues that are being discussed.

While we haven’t seen any of these implementations take place today, the mere fact that TiVo was thinking about these options when they filed the patent would seem to suggest that they’ve been quietly innovating behind the scenes. This new patent award won’t necessarily help them in their case against Verizon or AT&T, but it could offer the telcos yet another reason to settle their dispute with TiVo, instead of being forced to place limits on the future of TV.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See larger view of chart here

While old school media types like to insist that content is king, when it comes to viewing said content, the format and media player can make a big difference in the quality of the user experience. With new options seeming to crop up everyday, I wanted to take a look at a few of the most popular media players (and video destinations) to determine which one is the best for consumers. While individual results may vary, here is the criteria I used to evaluate each one.

Format Support
With so many different formats out there, it’s important that your top media player has robust support. Since consumers shouldn’t have to scour the web to add additional functionality, I did not include any plugins that consumers could use to add greater support. Of all the players listed, the VLC clearly won this category. Whether you’re trying to watch Quicktime movies or play a VOB file, if VLC can’t handle the codec, you probably shouldn’t be trying to play it to begin with. The clear loser in this category was the Netflix Media player. While I have no complaints about the quality of their stream, the DRM restrictions and the requirement for downloading the Silverlight plugin, makes their web player pretty limited.

Ability to Stream Online
When digital movies first came out, you used to have to wait a couple hours for your file to download. With the introduction of streaming support, consumers no longer have to wait more than a few seconds in order to get access to that content. While most video players are able to support this functionality, I felt that Netflix was the clear winner for this category. Not only do their video streams take into account your bandwidth to reduce buffering issues, but they also seem to have the highest video quality when streaming content. The clear loser in this category was the VLC player. While technically, there are ways to use it to stream torrent files while downloading, for the most part the VLC player is designed strictly for offline media.

Ability to Play Offline
A lot of people don’t think that this feature is very important, but as someone who commutes an hour per day by train, being able to view my videos offline is just as important as being able to stream them. Once again, the VLC Player takes top honors due to their ability to handle high definition files and the robustness of their offline support. While Amazon, Netflix and YouTube don’t allow you to easily save files on your laptop, because they offer hardware support, they get a free pass on this one. Hulu on the other hand, ranks at the bottom of this list because they don’t allow consumers to watch a movie unless it’s on an internet connected computer screen.

Auto-Dimmer
In order to create a more cinematic experience, a few media companies have started to incorporate dimmer technology into their players. While Hulu does allow users to black out distractions manually, they don’t do it automatically. DivX on the other hand, will slowly darken the screen outside of your video, to help better focus on what your watching. This really is neat technology and something that I hope will catch on. Since none of the other media players include this functionality, it’s a tie for last place on this one.

Disable Screen Saver
Few things are more annoying than being totally immersed in a film and then BAM, all of a sudden your viewing experience is interrupted by your screensaver popping up. While users can always disable this themselves, it’s easy to forget to do this and cumbersome for media companies to expect them to. DivX, Windows Media Player, Amazon and VLC all take top honors for ensuring a seamless experience. Netflix finishes in a close second place, in part because I’ve noticed that their software will sometimes cause the media toolbar to pop-up when the screensaver tries to activate. At the bottom of this list is Hulu, who actually has the gall to request that their users disable their screensavers themselves, instead of helping to automate this experience.

High Definition Support
While a lot of people advertise high definition support, not all HD is created equally. As broadband pipes continue to get fatter, the ability to support larger and/or more advance compression algorithms is becoming a critical differentiator between various media players. The top honors in this category goes to VLC and DivX for supporting the MKV/H.264 format. The worst player is Real Media who may have pioneered video on the web during dial-up days, but hasn’t aged very well.

One Click Full Screen
While all of the media players reviewed allow for full screen support, some players make it easier for consumers to jump in and out of this experience. Making someone hunt around for a tiny button to maximize their video, just isn’t as friendly as letting them double click on their screen and instantly be able to see the full picture. Amazon, CinemaNow, DivX and Windows Media all make it easy for you to do this. Quicktime on the other hand, actually makes consumers pay money in order to get this functionality . . .

Hardware Support
Consumers used to have to burn their movies to DVD if they wanted to play it on the big screen, but over the last few years, we’ve seen a number of connected devices that will allow you to easily transfer content to your television. The winner in this category is clearly Netflix. Not only have their pioneered this particular field, but they’ve been able to strike agreements with a wide range of consumer electronic companies. Whether you own a DVR or a video game console, they’ve set the gold standard for watching internet video beyond the monitor. The worst offender is Hulu. Not only are they limited to the web, but they’ve actually fought attempts by innovators like Boxee, to bring their content to the TV set. While their studio owners may have good reasons for trying to keep consumers from cutting the cord, such an anti-consumer stance will only hurt them in the long run.

Subscription, Pay-Per-View or Free Content
With so many different services offering different forms of content, it’s made life pretty difficult for the modern digital consumer. If you want to view new releases, you have to visit Apple, CinemaNow or Amazon. If you want content that doesn’t charge you to experiment, then a subscription to Netflix is the best way to go. If you’re looking for free content, then you should consider Hulu or VLC. While no one seems to have figured out a perfect way to consolidate all three features at once, CinemaNow has done the best job of offering consumers flexibility when it comes to how you want to pay for content. While they don’t offer much in the way of free or ad supported content, they do allow you to rent, purchase or subscribe to various digital packages.

While it’s hard to say that any one media player is THE best, my recommendation for consumers would be a combination of Netflix and the VLC player. Both provide an excellent user experience, as well as high definition support and while your options may be limited on Netflix, they’ve done a good job of integrating their video streams beyond the computer and into a larger hardware eco-system.

I’m a big fan of internet video, but nothing can replace the big screen high definition experience and while I knew it would happen sooner or later, I still wasn’t fully prepared when my big screen Sony Wega gave a loud pop and ceased to display the magic flickering lights that I’ve fallen in love with.

My first response was one of panic. I knew that it was possible that I might have a burned out bulb, but given some of the issues that other Wega owners have had, I also knew that it might be more serious. After the panic subsided, I started making a few calls to see what it would cost me to bring in a pro. After getting a few quotes, I was shocked at how expensive it can be, just to have a repairman troubleshoot your big screen. While I’ll admit to being tempted to use this as an excuse to make the jump from a rear projector to a flat screen, I also wasn’t ready to give up on my TV just yet.

So with gritty determination, I started wading through the murky waters of the internet, in search of a potential diagnosis. The more research I did, the more apparent it was, that I had in fact exhausted the lovelight inside my television. Luckily, it turns out that this sort of repair is pretty easy for the home gamer to fix, so after finding a generic replacement lamp online, I eagerly waited the opportunity to try my hand at television repair.

Once my lamp arrived there were a few complications, but as long as you know how to use a screwdriver, most people should be able to fix their own Sony Wega, if your lamp goes dark. One complication that I did run into was the difference between replacing a lamp on a Sony Wega compared to other big screen TVs. Most rear projectors require you to replace the lamp from the back of the set, but Sony has flipped it around and requires you to go in from the front.

To help extend the life of your own big screen experience, I present this step by step guide to replacing a burned out lamp in a Sony Wega TV.

The first step is to unplug your TV to make sure that you don’t electrocute yourself. I’m not sure if the Wega retains an electrical charge after your unplug it, but since a lot of home electronics can still give you a shock, I waited 15 minutes before proceeding. The next step is to start taking apart your TV, so you can get into the guts. If you look at the front of the TV, you’ll notice that there is a grey plastic strip right below the screen.

The strip looks like it’s part of the screen, but it actually comes off and if you look at the back of your TV, you’ll see a black knob on both ends of the TV holding this strip attached. While the knobs are big enough that you can unscrew them with just your fingers, a large flat head screwdriver may come in handy when doing this step.

Click here for large photo

Once you’ve unscrewed these knobs, you can go ahead and pop off the front panel. When you try to pry it off, it may feel like it’s still screwed in, but it’s actually being held in place with two magnets. You don’t want to use so much force that you’ll break the bezel, but you will want to get it a good pull to get it to snap off.

Behind the bezel, right dab smack in middle of the TV, you’ll see two panels that protect the lamp and the guts that power the on/off switch. You’ll need to unscrew the panel protecting the on/off switch first, because the panel protecting the lamp is buried beneath. Once you take out all five screws, you’ll be able to swing both panels open and should see a black box that contains your lamp. This is located directly behind the flimsy plastic shell that is somehow designed to protect you from radiation.

When I opened mine, I needed a Torx 10 screwdriver to take the lamp out. Since my replacement lamp included regular screws, I decided to put those in to make future replacements easier. Once you’ve unscrewed the lamp, all you’ll need to do is slide it out and slide the replacement lamp back in.

After you’ve replaced the plastic covers, pop the front panel back into place, tighten the knobs on the back of the TV, and you should be ready to watch some high definition big screen TV again.

While the entire experience was a little intimidating at first, I was really surprise at how easy of a repair this really was. While there was some risk that the replacement lamp wouldn’t have solved my problem, I figured that it wouldn’t kill me to have a spare on hand anyway. Since the cheapest repair technician was asking three times the cost of the lamp, just to diagnose my problem, I felt that this was a cost effective way to deal with the problem.

If you tend to get frustrated by electronic gizmos and gadgets, it may worth calling in a pro, but if you can figure out how to hook up a DVD player to your TV, you should have the skill set to make this kind of repair.

As a small business owner, I’m not just concerned about protecting my own privacy, but I also care about the vendors and customers who do business with me. Because of this, I’m willing to pay a premium in order to have the best anti-virus protection on my computer, so two years ago I purchased several subscriptions to one of McAfee’s anti-virus solutions. Given their reputation, I felt that they were the best at what they do and had complete trust in their service. Unfortunately, after learning first hand how they treat their customers, their “total protection” turned out to be little more than a protection racket and I can promise you that I’ll never spend another dime on the company again.

My problem occurred late last year, ironically just 2 weeks before my anti-virus package was up for renewal. Since hackers tend to do a pretty good job of staying ahead of the curve, it’s always been important to me to update my software as promptly as possible. Whenever McAfee would release new virus definitions, it was a no brainer to install them. Because McAfee had earned my complete trust, I never thought twice about the possibility of them sneaking malware into one of these updates.

Yet, after approving one such “recommended update”, I was dismayed to find an obnoxious button with the McAfee logo sitting at the top of my internet browser. Without every clearly explaining what they were doing, McAfee had installed a Siteadvisor toolbar directly on my internet explorer browser. Since I’m particular about how my browser is customized and since I was already aware of the Siteadvisor service, I wasn’t very happy about giving up valuable real estate on my screen to someone who I had paid money to. Worse yet, one of the proprietary programs that I use for my work had a conflict with their program making the situation completely unacceptable.

Being a little bit computer savvy, I figured it would be easy enough to disable or uninstall the update, but no matter what I tried, I simply could not get this button off of my browser. Over the years, I’ve had to deal with my fair share of malware and unwanted viruses and while there have been times where it took a bit of effort and research to get rid of these obnoxious predators, I’ve never had this much difficulty zapping an unwanted visitor before. If you search the web, you’ll find a ton of other people asking about how to remove it and a lot of answers telling them just to give up.

Here’s a good example of what other people’s experience with the program has been like.

” one good reason to remove it, is because the damn thing is a nightmare to remove and anything that evasive when it comes to uninstalling usually means it a bad thing. I’ve had less trouble getting rid of nasty virus’, therefor i consider it just as bad as a virus, because a user should have the right to remove their software, (and if its near impossible to remove, i’ve gotta wonder what else it upto that it shouldn’t be). I originally wanted to just remove stie adviser and keep the rest of my McAfee package, I’ve now uninstalled all of it in an atempt to get rid of it, and will never trush McAfee again, after relying on their antvirus for years. Its so bad i’m now resorting to formatting my shiny new laptop, which is less than ideal as I have to now try and hunt down all my drives. I’ve tried repeatedly to uninstall it in various ways I have Vista with IE7, I originally tried using the McAfee uninstaller, I have since removed it no less the 15 times using add or remove programs, even filled in their sodding questionair to why I removed it over and over again, but every time I open internet explorer it re-installs itself without my permission and leaves it it in a domant state, poping up a window saying it has been updated and wanting me to re-activate it every single time I open a new internet explorer window or tab, which as you can imagin is unbelievably annoyng. any surgestions about getting rid of it for good would be welcome?”

It would be one thing, if McAffee’s software was freeware and they choose to migrate to an ad supported model, but since I had paid for multiple copies of their software, having an ad forced on me was tacky at best. After conditioning me to always trust their updates, they took advantage of that trust by sneaking in a payload on an unsuspecting customer.

What really made this situation so infuriating though, wasn’t the mix-up with their unwanted malware or even the nefarious way that they choose to distribute this piece of software, it was what happened when I called the company for customer support.

After taking a look at the account, I was informed that since it had been more than 90 days after my purchase of a 2 year product, that McAfee wanted me to pay them a “service fee” before they’d be willing to help with my issue

Even when I asked to speak with a manager to discuss this policy, the rep flat out refused to transfer the call and told me that he wasn’t going to continue the conversation until I paid them the fee.

Over the years, many computer users have been tricked into a scam where they unwittingly download a piece of software that then tells them their machine is infected or at risk of a virus. While many viruses want to stay hidden, these programs want you to know about them because they then aggressively offer to sell you the antidote for getting rid of them. Not only is this behavior unethical, but it’s even considered illegal. In fact, just last month the FBI warned consumers about this very type of scareware and said that they think these scams have cost internet users over $150 million in bogus charges.

Now I can understand why McAfee is reluctant to help people troubleshoot their computers, especially when you may have installed a tricky virus or trojan file, but when their very own software uses sneaky and underhanded methods to place an ad on every web page you visit, I feel they owe it to their CUSTOMERS to help them get rid of this unwanted behavior. While they may have a good reputation within the anti-virus community, by requiring customers to pay an extra fee to get rid of THEIR unwanted software, they are essentially trying to extort money from the very people who are buttering their bread already.

McAfee may try to argue that they are only trying to protect their customers with a security enhancement, but I believe that their behavior is no different than what these scareware companies are trying to pull off.

Ultimately, the only way that I was able to get rid of this annoyance was to do a complete reinstall on my computer and to wipe out a lot of data in the process. Spending 3 – 4 hours to reformat my system and reinstalling my programs may sound like a lot of fun , but as a small business owner it cost me valuable time and money, that could have been spent more efficiently.

Since McAffee has built their business around a program where updating the software is a crucial part of the service, I don’t believe that it’s unreasonable for consumers to expect to have a hassle free experience when they are getting the most recent data files. Nor do I think that it’s unreasonable to expect a minimal level of technical support when it’s their own program that is causing the issue.

If you search the internet, it’s clear that these problems have been going on for a long time, but instead of dealing with them, McAfee continues to abuse customers who would prefer not to see an ad at the top of their browser. While this scheme may net their shareholders a little bit more in profits and a lot more in extra traffic to their Siteadvisor website, it’s also cost them at least one small, but irritated customer.

While there are some great public schools out there, my particular school district was infamous for being the worst of the worst in the Los Angeles school district. Last year, the graduation rate at the local high school was just a hair over 50%. While this kind of public education would have done a good job of helping me to succeed if I ever ended up in prison, it wasn’t going to provide me with the life skills necessary to succeed in the real world.

The other option that my parents had was to enrol their kids in a private school, but faced with the prospect of making 5 concurrent tuition payments each year (plus mandatory school taxes), it just wasn’t financially feasible for them to do it. Because my parents felt trapped between a rock and a hard place, they ultimately made a tough decision to forgo the traditional route and to homeschool their kids instead.

At the time, this was a controversial choice. In fact, I was one of the very first students in California to “officially” attend home school. In 2008, the co-op that was my Alma mater was actually declared illegal (and than legal again) by the California Supreme court. If my alma mater was ground zero for the California home school movement, it’s fair to say that I was part of the epicenter.

While my parent’s decision was driven in part by financial considerations, it was also driven by their desire to have more control over what their kids were exposed to. Our society tends to bombard kids at an early age with messages that aren’t always very healthy and they wanted to make sure that they had an opportunity to share their faith and ideals with their children. Some may view this as controversial, but I think that every parent should have a right to teach their kids right from wrong. Because my education was considered quasi-legal though, there was always a little bit of paranoia surrounding what we did. Personally, I never lost sleep over it, but my parents certainly worried that the neighbors might report us or that we could be accosted by truancy officers when out and about during school hours. At one point, they actually purchased legal insurance to help protect themselves, in case they were ever forced to defend their decision.

In addition to some of the legal questions, there was also a social stigma that I was forced to deal with. When I eventually re-entered the traditional school system, extensive testing was required before they would accept me. At the time, most colleges were shunning those who hadn’t received a formal education. When I did enroll in school, many of my peers viewed me as a bit of a social misfit. It’s fair to say that over the course of my life, I’ve heard my fair share of homeskooling jokes.

Fortunately, this trend has almost completely reversed itself and as more and more homeschoolers have worked their way through the system, it’s become increasing clear that those who’ve had this unique experience, aren’t necessarily the backwards country bumpkins that society would lead you to believe. Often times, they are gifted artists and creative thinkers who can bring a lot to an organization.

If you would have asked me at the time, I probably would have told you to never home school your kids, but when you fast forward 25 years, I have mixed emotions about whether or not I plan on making the same decision with my kids (assuming that I end up having kids of course.)

While my relationship with my parents went through it’s fair share of ups and downs, undoubtedly I feel closer to them today, than I would have otherwise. My Mom was never a rocket scientist (or even college educated for that matter), but the one on one attention made a big difference compared to the massive classrooms that ended up being my high school experience. When I did test to enter school, they wanted to place me two grades higher than my age group.

When other kids were studying California history, I was seeing it first hand by visiting historic missions and seeing how the government worked in action. When I expressed an interest in one day becoming a fireman, my parents were able to arrange visits to the local fire station. When I expressed an interest in being a veterinarian, I was given backstage access to the LA Zoo. While you can question the educational value of some of these experiences, I feel that they gave me a perspective that most people miss out on and made learning an enjoyable process. Even at a very young age, it wasn’t unusual for me to read over 100 pages a day simply because I loved the topic.

From the negative side of the equation though, being home schooled was a very lonely experience. My parents made sure that we belonged to a lot of social groups, but you really can’t replace the day to day stimulation that kids get from interacting with each other. The parents that I know, who’ve chosen to homeschool their kids, almost never understand how pervasive this loneliness really is. Having spent a lot of time with other home schooled kids, I think it’s a fair generalization to say that socially we were all a bit behind. Even to this day, I still have social phobias that most people don’t have to wrestle with.

While these phobias have placed me at a disadvantage when it comes to office politics and competing in the rat race, my upbringing has also given me many advantages. Being forced to constantly seek out information has taught me how to think critically, instead of accepting everything as a truth. Instead of learning to memorize facts for tests, I was taught to think for myself. More than anything, spending my life living outside the box has helped develop crucial skills that one needs to be a successful entrepreneur. In this ever changing technologically driven world that we live in, these skills have already proved invaluable. While I still have many goals left for my career, I am very proud of where I am today and that I own my own business.

Even though, I still have mixed feelings about the entire experience, I’m thankful that I was given the opportunity to learn in this way. For parents who are thinking about homeschooling your own kids, I’d encourage you to think long and hard about the pros and cons and to take your time reaching a decision. If you don’t have the patience, time or resources to properly socialize your kids, I would discourage you from going this route. For those who do take the path less traveled though, it can be one of the most rewarding experiences for both you and your children.

Many investors tend to focus on large well established companies, but I’ve always had a penchant for small cap stocks. It could be my masochistic tendencies, but I prefer the risk/reward of a long shot, over companies who already dominate their market. Typically, my investment style has been to seek out strong brands that have fallen out of favor with the market and then wait for their fortunes to improve. Sometimes this involves waiting for years, sometimes it involves taking a complete loss and sometimes I get lucky and other firms step in and buy them out or bid up the price. Since a few of my readers have inquired about what sorts of things I look for in an investment, I thought I’d present a list of 25 small cap stocks that I currently have my eye on. Most of the data has been taken from Yahoo! finance as of 1/26/2010, so it’s probably a good idea to double check the numbers.

1-800-Flowers (Market Cap = $136.47 million Ticker: FLWS) – Every since United Online purchased FTD, 1-800-Flowers seems to have lost market share, but despite their wilting fortunes, they represent a strong brand in a market with limited competition. After cutting operating expenses by $50 million in the second half of 09 and with Valentine’s day just around the corner, I wouldn’t count this one down and out.

Audiovox (Market Cap = $151.26 million Ticker: VOXX) – Despite having booked over a half a billion in consumer electronic sales over the last year, Audiovox doesn’t seem to get a lot of respect outside of the consumer electronic’s industry. With $361 million in shareholder equity, the firm is trading at half of their book value. While the company has lost over $50 million in the last 12 months, these losses are largely attributed to one time charges. With the firm having hit profitability in the last 3 quarters, a turnaround may be in sight for patient investors.

Bank Of The Internet (Market Cap = $87.61 million Ticker: BOFI) – While many local California banks made some pretty terrible loans during the housing boom, BofI was considerably more conservative with their assets. The market may have discounted them along with the rest of the financial community, but a closer look at their balance sheet suggests that this may be a hidden gem in all the rubble. With a charter that allows them to operate in every US state, there is a lot of potential for this little known company. With some of the highest interest rates on cash deposits, they’ve been able to attract deposits during a period where most banks have seen their customer base contract. For fiscal year 2007, they had revenue of $45.7 million, in 08′ they booked $64.8 and in 09′ they had $81.1 million. While I’m no longer a customer of the bank, from past experience I can personally attest, that they have the best customer service of any financial institution that I’ve ever worked with.

Big Band Networks (Market Cap = $205.92 million Ticker: BBND) – Since it’s debut in 2007, this content delivery network has seen their stock price fluctuate between $3 a share to $20.44. The company did lose $11 million in the last quarter, but had they not been investing in research and development they would have generated a small profit. While they do owe approximately $70 million in debt, with $161 million in cash and short term investments, they should have the stamina to make it through the market’s bust. Sitting at the epicenter of online video movement, there’s a lot of potential for this Silicon Valley company.

Calamos (Market Cap = $237.42 Ticker: CLMS) – When it comes to convertible bond investing, Calamos has set the gold standard for fund managers. While revenue is down over 20% since the market collapsed in 2008, I don’t believe that this is proper justification for trading at less than 1 times their trailing 12 month sales. With a strong management team, a fantastic brand and their recent return to profitability, I think that the company is undervalued. With their latest dividend reflecting a 2.4% yield, I’m willing to wait for their turnaround.

ClickSoftware Technologies (Market Cap = $200.88 million Ticker: CKSW) – ClickSoftware helps companies better manage their workforce. Since the beginning of 2009, they’ve seen their stock rise almost 400%, so they’re not exactly a secret. Nonetheless, this Israeli company has demonstrated some pretty impressive metrics. In fiscal 06′ they had $32.4 million in revenue, in 07′ this rose to $40 million. In 08′ they recorded $52.3 million in sales and for 2009, they are expected to report approximately $61 million. With the company having made three small acquisitions in the past year and realizing 67% gross margins, it would appear that they have a bright future ahead of them. With $48.6 million in current assets and only $22.2 liabilities, they should be able to survive for a very long time, especially if the continue to remain profitable.

DivX Inc. (Market Cap = $180.25 Million Ticker: DivX) – After making a huge splash in 07′ and hitting a billion dollar market cap following their IPO, DivX has been a huge disappointment for many investors. While there are long term questions about their business model and management has given no indication that revenues won’t continue to drop, with $139 million in cash and short term investments and only $25.6 million in liabilities, the stock is certainly priced at a bargain. Given their unique position in the digital media space, I can think of a number of large competitors who wouldn’t mind taking advantage of the market’s short-sightedness.

Double-Take Software (Market Cap $216.34 million Ticker: DBTK) – Even before cloud computing was a buzz word, Double-Take was working towards building remote solutions for businesses. After seeing their revenues rise over 50% between 2006 – 2008, the company experience some turbulence in 09′. For the first 9 months of the year, they recorded revenue of $60.4 million, compared to $71.3 million for the similar time period in 08′. Nonetheless, when you consider that they are still booking a gross profit of 89%, there is a lot here to like. With financial and insurance companies representing some of their biggest customers, it may take time for them to return to their highs, but with nearly 4 times as many assets as they have liabilities, the company should have no problem surviving.

Geek.net (Market Cap = $77.41 million Ticker: LNUX) – As a self professed Geek I may be a bit biased on this one, but with the company trading at just $10 million above their book value, I think that this could be an extremely attractive acquisition for the right partner. Through sites like Slashdot, Sourceforge and ThinkGeek, they’ve been able to build an audience of over 40 million unique visitors each month. When you consider that their core audience tends to be primarily male developers with a lot of disposable income, I’m not surprised that their revenue has grown despite a collapse in the online ad markets. Recent insider selling and the lack of profitability may be cause for concern, but I believe that their core brands are too valuable to be trading at such a steep discount.

IncrediMail (Market Cap = $77 million Ticker: MAIL) – Since hitting their bottom in late 2008, IncrediMail’s stock before has been nothing short of incredible. With the stock up over 400%, there’s room for it to take a breather, but based on their most recent dividend, investors are earning an approximate 10% yield. While it’s always possible that they could quit paying back returns to their shareholders, with revenues up 25% for the first 9 months of 09, the trend is headed in the right direction.

Jackson Hewitt (Market Cap = $101.27 million Ticker: JTX) – They say nothing is certain in life except death and taxes and given Jackson Hewitt’s past sins, it’s fair to say that both may still be in store for this company’s future, but with the stock trading at 10% of past valuations, there’s also room for an impressive “dead cat bounce”. After getting busted for issuing problematic refund anticipation loans there’s an unknown liability that hangs over this firm, but with the company trading at 0.40 times their 12 months sales, the risk/reward is attractive for the troubled tax preparer.

Internap (Market Cap = $247.71 million Ticker: INAP) – Like many of the CDN players, Internap has seen their stock price hit with a buzzsaw as investors re-evaluated the long term potential of internet delivery. While Akamai may have a firm grasp on this market, I believe that there’s a lot of untapped value in this company. With over $250 million in revenue over the past year and over a billion dollars worth of tax losses, this small little video provider is ripe for consolidation.

Lasercard (Market Cap = $75.85 million Ticker: LCRD) – After a history of losses, this Silicon Valley security company appears to have turned the corner with their business model. During 2009, they blew through their net operating losses and have once again begun paying taxes on their profits. While their revenue tends to be concentrated with a few customers, recent contract wins with the governments of Hungary and Angola should provide some much needed diversification over the next year. Their leverage is a little bit higher than I’d like to see, but with a successful underwriting early last year and a bright future for the global security market, they should be OK over the near term.

Lojack (Market Cap $74.57 million Ticker: LOJN) – Caught between the wrong end of a patent lawsuit and the collapse of the auto market, Lojack has been absolutely hammered over the last few years. With the stock down more than 80% from their all-time high, it would be easy to write this one off as a tax loss. Despite the challenges that they’ve faced though, I believe that their unique technology and brand can easily be ported into other industries and that their recent losses will only prove to be temporary. With sticky contracts with law enforcement agencies and the potential to once again realize strong earnings, I think the company has been undervalued by investors.

Motorcar Parts of America (Market Cap = $68.22 million Ticker: MPAA) – Despite their ticker symbol, MPAA doesn’t have anything to do with the entertainment industry. They’re a small firm that sells plain old boring alternators and starters for small trucks. While the auto industry has seen new car sales eviscerated over the last few years, it should provide an opportunity for companies who build replacement parts. With their current liabilities exceeding their current assets, it may be wise to wait until they raise more money before proceeding, but with the company trading at approximately half of their trailing 12 month sales, the market seems to have priced in the doom and gloom already.

OpenTV (Market Cap = $162.92 million Ticker: OPTV) – With the Kudelski group having already agreed to pay $1.55 per share, you won’t get rich off of investing in this set top box manufacturer, but there could be an arbitrage opportunity for those looking for a short term investment. Assuming that it takes them another 1 – 3 months to close the transaction, investors could expect an annualized yield of 10.75% – 3.22% respectively. While these transactions always carry the risk that something could derail them, I’d be surprised if the deal doesn’t get completed in the first quarter.

Primedia (Market Cap = $126.26 million Ticker: PRM) – From a high of $175 per share during the .com heyday, to it’s current price under $3 a share, it’s fair to say that the last decade hasn’t been very kind to Primedia investors. Despite their past performance though (and huge question marks about the ad market), there’s still life in this old dog yet. Over the last 12 months, they’ve been able to pull in approximately $270 million in ad revenue and while this is less than what they earned in 2008, it does suggest that their revenues are starting to stabilize. With an impressive portfolio of .com properties, once the ad market returns, Primedia is an a better position to recover than most.

Rentrak (Market Cap = $167.97 million Ticker: Rent) – DVD sales may be in a freefall, but Rentrak has done a good job of managing this decline. The company not only helps to distribute packaged media, but also sells industry data to the major studios. While on one hand, the current business trends would appear to be working against the firm, the decline in disc based media also makes that intelligence even more valuable. With the company trading at less than 2 times sales, it wouldn’t surprise me to see a firm like Nielsen try to buy them in an attempt to bolster their own portfolio.

Rocky Mountain Chocolate Factory (Market Cap = $51.65 million Ticker: RMCF) – While this pick violates a rule I have about never investing in restaurants, I’m willing to make an exception when it comes to chocolate With $17.8 million in assets and only $3.7 million in debt, this small specialty retailer has a remarkably clean balance sheet. Sales may be down year over year, but thanks to a partnership with Cold Stone Creamery, there is potential for growth. Given the strength of their brand name, I could think of quite a few companies who would mind owning their brand.

Smith and Wesson (Market Cap = $235.94 million Ticker: SWHC) – Over the past two years Smith and Wesson investors probably feel like they’ve been shot in the gut. Despite revenue going through the roof, they’ve been sidelined by one blunder after another. With a messy balance sheet and company officials facing charges of bribery, this one may be dead on arrival, but with over $300 million in revenue and a terrific brand name I wouldn’t hesitate to take a second look once things get straightened out.

Sonic Solutions (Market Cap =$232.46 million Ticker: SNIC) – For a long time, Sonic seemed to be the little engine that just couldn’t. With a number of software products focused on digital media, success always seemed like it was just over the horizon, but delays from studio partners and the decline in demand for their DVD services put a crimp in their stock’s performance. After seeing a rebound of over 400% in 2009, investors may be setting themselves up for another disappointment, but recent agreements with Blockbuster Video and a successful stock underwriting late last year, have removed concerns about their near term future. While I still have doubts about their ability to execute, there’s no denying that the Roxio and CinemaNow brands have value.

SORL Auto Parts (Market Cap = $205.64 million Ticker: SORL) – Chinese companies always make me a bit nervous because it’s hard to trust their financials, but given China’s investment in infrastructure, there’s a lot of upside to the industry that SORL operates in. As a supplier of auto parts for Chinese trucks and buses, they’ve been immune to the issues facing the US auto sector. With assets representing more than 4 times their debt, they should be well positioned to capitalize on China’s own stimulus plan.

Spark Networks (Market Cap = $62.77 million Ticker: LOV) – Every since I made a bundle when IAC bought out UDate, I’ve been looking for an internet dating site to court. While I may have missed the bottom when it comes to Spark Networks, I’m still attracted to their business model. Revenue, net income and their member base have both been heading the wrong direction, but if their new Spark.com domain can take off, there’s still a lot to love.

SRS Labs (Market Cap = $98.73 million Ticker: SRSL) – Compared to heavyweights like Dolby, SRS is a 98 pound weakling in the audio technology industry, but don’t let their size fool you about the quality of their technology. Recently the company announced that their partners have shipped over 30 million certified TruVolume devices. Perhaps even more impressive though is that the company operates at 99% gross margins. With their technology able to prevent the sound fluctuations between your programs and commercial breaks, I see a bright future ahead. When you also consider that the company has over $50 million in assets and less than $3.5 million in debt, I think it’s a steal at their current valuation.

Stamps.com (Market Cap = $140.77 million Ticker: STMP) – Over the last few years, Stamps.com’s revenue has been more or less stagnant, but with limited competitors they should be able to maintain a pretty good hold on their niche market. With the recent growth in home based businesses, the company is poised to capitalize on FedEx’s losses. With a balance sheet heavy on assets and light on liabilities all it would take is a dividend or a share buyback to make this stock attractive.

I’d argue that this is because of the monopolies that surround most major professional sports, but it may also have something to do with the temptation to release a new game every single year. After being burned too many times, I did finally cut my upgrade cycle from every year to once every 2 or 3 years, but even with less frequent purchases I still notice that there are pieces of each game that seems to be endlessly recycled year after year after year.

Specifically, I’m talking about the commentary in EA Sports games. Whether you’re playing NBA Live or John Madden football, having live commentators lends a certain amount of realism to the experience. Sure, their puns are cheesy and sometimes there are glitches where they’ll tell you how bad you did on a great play, but overall I enjoy having someone critique my every press of a button.

The problem is though, that after you’ve played a few games, you start to hit repeat commentary and what was once cute and funny quickly becomes annoying. If EA provided entirely new commentary with each new version of the game, this would be less obnoxious, but in recent years they’ve added almost zero new commentary and just continue to repeat the same tired expressions from past versions of their games.

While I understand that there are limitations to how much content can be put on a disc and financial considerations over how much time these famous celebs can spend in a sound studio, I do think that EA is missing out on an extremely lucrative market.

Just like people are willing to purchase ring tones to customize their cell phones, I bet that sport franchise customers would happily pay a dollar or two to get their favorite commentators “in the game”. As someone who grew up watching the Lakers play, I’d be thrilled to hear some of of Chickisms that legendary sport commentator Chick Hearn used to say. Even though Chick has passed away, it wouldn’t be hard for his estate to use some of his in-game footage to re-introduce expressions like the Dime Store score or Leapin’ Lena to an entirely new generation of sports fans.

Better yet, EA could set up some kind of an online locker, where fans of the game could share their own commentary and use people’s own social networks to give us a reason to upgrade. When I was in school, I had a friend of mine who’d say “that was slammin” everytime we played and while this expression would get old if John Madden used it, I’d pay real money to hear my friend sitting next to me while I played. This could also be a good avenue for the professional players to extend their own brand. Whether it’s Shaq talking smack about Kobe or Darth Vader calling plays for John Madden, the creativity would be endless.

From EA’s perspective, they could not only use these updates as a source of revenue, but it would also give their customers a reason to buy more games. By allowing customers to make free updates over the course of a season, it would provide a strong incentive to always have the latest copy. It would also make some of the personalization even more meaningful.

It’s great that I can create a superstar player that looks like me (even if I’m not 6’5″ with one percent body fat), but how much fun is it when the game calls out “great basket by number 35″, instead of pronouncing Freeberg as my last name? Given how small audio files actually are, there shouldn’t be any technical difficulties associated with implementing this type of system. While the repetition from in-game commentary might not be noticeable to the control groups who are testing EA’s games for an hour or two, for long time fans like myself it’s a great feature that becomes irritating the longer you play. Instead of creating a product that causes less satisfaction over time, EA should be using dynamic sports commentary to improve how their games age.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When e-commerce started to become a reality, some were nervous about trying new companies online, but I had no reservations about being one of the first ones in online. While I still miss my Webvan and Kozmo.com deliveries, no one can say that I didn’t do my part to support the shift from bricks to clicks. Given my preference for the online experience, it would be easy to conclude that for traditional retailers, I’m a lost cause. Yet, recently I’ve been thinking a lot about one of the biggest weaknesses of the online experience. For as fast as all those ones and zeros move, when it comes to instant gratification, you still need to wait a few days to receive most purchases.

While I do tend to plan ahead, there are times where I’m willing to pay a premium to have something right away and while it’s easy to transport media over broadband connections, when it comes to physical goods, you typically have to wait for UPS or the post office to stop by. This is a huge advantage for traditional retailers, but it’s one that I don’t believe that they are leveraging enough. Certainly, they do their best to draw traffic into their stores, but if they want to court the internet generation, they’ll need to use technology to better highlight this advantage.

Recently, I was in the mood for a little bit of world domination, so I set my sights on a lengthy game of Axis and Allies. For those who aren’t familiar with the game, it’s a complex simulation of world war two that is a ton of fun and can take all night to play. While there are digital versions of the game, it can’t fully replicate the real world experience of the board game.

It may have only taken me 10 seconds to find a copy of the game online, but when it came to finding out which local retailers carried the game, it was almost impossible to find. After a half a dozen phone calls to all of the usual suspects, I finally tracked down a copy that was over 40 miles away

In this case, I was so motivated to play the game that night, that I begrudgingly made the long journey to get it that day. While real time search has seen huge improvements over just the last year alone, when it comes to searching retail inventory, it’s almost unheard of to be able to check availability before driving to a store (let alone to be able to get that information in real time.) Yet, many companies employ expensive sophisticated inventory management software, that allows them to know exactly what’s sitting on their shelves, what’s being delivered via truck and what needs to be ordered pronto, just so that it can be restocked in time.

Despite this wealth of information though, unless you’re an employee inside of one of these companies, the data more or less doesn’t exist to the public. While there may be some competitive reasons to keep sensitive inventory data out of the hands of the public, I think that retailers are missing a golden opportunity to use that real time inventory data to draw online adopters like myself, back into their real world stores.

In the case of my situation, I would have gladly paid 50% more for the game, if I could have found it within 10 miles. Instead of being to forced to compete by heavy discounting, local stores could compete using their greatest advantage, the instant gratification that the internet simply can’t provide.

While i don’t expect that we’ll see this void filled in the near term, I do think that the firms who sell real time inventory solutions could easily become the next Google, by negotiating to list their client’s information online. Not only would retailers be able to charge different prices based upon distance or availability, but they could allow consumers to reserve and purchase the item before they even got in their car. If one of these real time inventory firms could get just a handful of major players to participate, it wouldn’t take long before real time inventory software went from being an efficient. but expensive luxury to a lucrative revenue source for their clients.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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