Time are tough - maybe you’ve heard, it’s been in all the papers.  Oh wait, there aren’t any more papers - but we’re going to guess that one way or the other, you’ve had more than your share of macro-economic doom and gloom over the past few months anyway.  So we’re starting a new series of posts - think of them as occasional signs of (internet video-related) corporate hope amidst all the (over-leveraged under-regulated financial services) corporate rubble…

• The BBC, having seen a 152% increase in UK usage of their successful iPlayer streaming application over the past 12 months, has just increased their online budget for the next three years by almost 25%.
• The stock of mail-order DVD rental leader (and online pioneer) Netflix is up over 30% over the past 6 months.
• CBS has announced 2.8 million first-day unique users of its Silverlight-powered NCAA Men’s Tournament (March Madness) streams - at 56% increase over last year’s first day numbers.
• Pure Digital Technologies, the privately-funded startup responsible for the easy-to-use “Flip” personal internet video camcorder, is purchased by Cisco for $590 mil.

Hang in there - more good news to come…

I know I promised to keep politics off this blog. Do indulge me, though. 

Besides. It’s much more about the (digital) economy than politics.

The White House web site folks replaced YouTube with Akamai as the preferred video delivery platform for the President’s weekly online video address.

What sparked the decision was privacy concerns over how YouTube-embedded video dealt with cookies placed on the devices people used to access the popular White House Web domain.

OK. I get it! But what about the other, much less discussed issue in this context? Money!

Behind the decision to ditch YouTube for Akamai also were complaints that a tax-payer funded government site should not generate free advertising for YouTube and thus Google, the online video giant’s parent company. (The rational being that someone clicking from the White House domain back to YouTube becomes a potentially valuable set of eyeballs against which YouTube can charge advertisers). 

Well, how about this? (All completely hypothetical of course, and somewhat simplified):

YouTube - which for all intents and purposes has solved its cookies issue. Gone is the privacy concern - continues to deliver the President’s video address to the White House site. The nation’s most prominent government Web destination thus drives traffic back to YouTube as it has in the past. 

But this time, this time we go out and actually buy shares in Google stock. (Believe me, it’s cheap right now).

Yes, rather than complaining about taxpayer money being misappropriated by letting www.whitehouse.gov drive free traffic back to YouTube, how about sharing in the financial upside (and risk, I admit) in YouTube’s incremental revenue benefit from my tax-funded arrangement?

Net, net? The White House site would regain an exceedingly capable video partner; one with unparalleled online brand recognition and viral video marketing ability unlike any other video site today. 

And taxpayers? They would have opportunity to realize a potential return on their stock investment transferring right back into their own pockets. (Capital gains tax not withstanding, that is).

Wait! Does this sound too much like a mini version of the current US stimulus plan, bailing out an already lackluster Internet stock with public money?

Is this a (mini) step towards socializing the digital economy - akin to the previous administration’s proposal to let taxpayers (partially) invest their tax-funded social security, with all the inherent risk attached?

Listen, I am just a telco guy. What do I know?

But quite frankly, to me the bigger picture is that the digital economy has grown and prospered best every time we rewarded value (here YouTube’s unique video delivery expertise) and risk (my trust that buying Google stock) will pay off.

Artificially disconnecting any Web site from a quality vendor makes little sense to me.

Besides, wouldn’t we want to see our tax dollars placed where they are likely to generate the highest return?

What’s wrong with that? Especially in this economy.

PS: Yes, I own a handful of Google stock. And no, this post is not a vote against Akamai.

Consider Sony and Apple - in many ways, two similar companies: both span both the computing and CE spaces, both have intimate connections to a major studio (Sony Pictures and Disney, respectively), and both adhere to closed-end vertical silo business models.  Granted, Sony doesn’t write their own operating systems, and unlike Apple TV, the current Sony internet-video-to-the-television box (the Internet Video Link) is partnered with 3rd party services such as Amazon’s Video on Demand - but in other ways Sony represents more of a closed ecosystem than Apple: while the Apple TV will work with any HDMI-equipped TV, the Video Link will only work with Sony Bravia televisions - and while iTunes is platform-agnostic, Sony’s previous ill-fated internet TV device from a few years back (the Sony Room Link) demanded not only a PC, but a Sony Viao PC.

This past week saw some news from both companies:

• Sony announced an expected $US 2.9b operating loss for 2008
• Apple recorded a year-over-year revenue increase of over 6% for the most recent quarter - and this despite the historically horrendous macroeconomic climate of the past few months



It’s an ongoing debate among those of us who think about consumer electronics and technology: closed proprietary platforms vs. open standards-based platforms.  Stability and elegance on one hand, lower costs and increased innovation on the other - two entirely different paradigms.

In addition to their numerous other circumstantial similarities, Sony and Apple both subscribe to the former - so maybe it’s not about the intrinsic advantages of a closed or open technology model (or other factors, for that matter) as much as it’s about the quality and desirability of the product.

If there’s one widely agreed upon fact of life in the still nascent long-form (short-tail) internet video space, it’s that consumers will not tolerate anything close to the advertising density they will for traditional broadcast television:

• A current NBC show on hulu carries roughly ¼ of the advertising that same show broadcast on a terrestrial NBC affiliate carries.

At the same time, online CPM rates are substantially higher than traditional broadcast rates, based on the internet-given ability to target online ads to individual users:

• NBC and hulu can charge over twice the CPM that NBC can charge for broadcast television.

It’s often taken for granted that these two characteristics are both inherent to internet video and even somehow compensatory - yet imagine if we could challenge the first assumption (the relative intolerance for online advertising ): in other words, imagine online video advertising density more in line with that of broadcast video, yet maintaining the higher CPM rates charged for target online advertising…

Now there’s a business model.

How to get internet video consumers to tolerate the amount of advertising tolerated on television, though? To me, the (somewhat obvious) answer is to solve the problem of making the internet video experience itself more comparable to the television experience.

In other words,

I would submit that there’s a direct correlation between the amount of advertising online premium video consumers will tolerate and the fact that (until now) they happen to have been sitting alone in front of a computer at the time– in other words, increase the comfort, ease, and sociability of the experience, and (for better or worse) you can increase the advertising.

Now that’s finally happening, as CE companies start rolling out TV hardware with embedded network interfaces this week in Las Vegas.

Today I read with interest a Will Richmond VideoNuze article questioning whether the current online advertising model will support this new generation of internet-enabled television hardware, and how it might have to change.  What I feel Will misses, though, is that as a result of all this new couch-centric hardware changes the fundamental viewing experience, there will be a commensurate increase in tolerance for advertising on the part of the average internet video viewer.

So as the density of long-form premium internet video advertising approaches that of traditional television yet the online CPM rates remain higher than the effective traditional broadcast rates (because of the internet-only value-add of ad targeting), I feel that the advertising-supported long form short-tail internet video sector has a bright future indeed.

When Andreas and I decided to start this blog project, we had a few rough guidelines on what we wanted to write about. Finance and economics were not high up on that list.

However, I want to write something of a fan letter for Barron’s, the business weekly published by Dow Jones. I’ve always been mildly curious about finance - in fact, the best learning experience I’ve ever had (in any subject) was the MBA economics course I took at the Stern School of Business as part of my NYU MSIS studies with Professor Navin Chopra (maybe not coincidentally, the best teacher I’ve ever had).

However, since then I haven’t followed economics very much, beyond maybe reading Gretchen Morgenson in the Sunday NY Times (she’s great too). So when I found an issue of Barron’s at the gym a few weeks ago, it was only out of boredom between sets that I picked it up and started skimming. I was immediately impressed with the writing: plenty smart, with just a whiff of irreverence, and incredibly readable - without watering things down to the extent the mass-market monthly financial magazines do.

Take this passage from the scathing article on the Fannie Mae/Freddie Mac crisis by Jonathan Laing that made the news recently:

“… the fair-value figures reported by the companies may overstate the values of their assets significantly. By some calculations each company is around $50 billion in the hole. But more on that later.”

…now if that isn’t a page turner, what is?

And this:

“Come May, Fannie kept its side of the bargain by raising $7.2 billion in mostly common equity. But Bush officials were shocked when Freddie failed to follow suit on an announced $5.5 billion equity raise.”

These two mis-managed firms have lost about 90% of their value over only the past year, and Mr. Laing clearly believes it’s only a matter of time before the government is forced to either manage their liquidation or nationalization.

As such, it’s a big story - the intersection of capitalism (and risk) vs. socialism (and responsibility) - and Mr. Laing just does an excellent job of telling it.

So check out Barron’s, either on the new stand or (much more economically) by website subscription.