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Weekly Column

When is a TV not a TV?: When it is an Apple TV - the High Definition DVD-killer.

Status: [CLOSED] comments (42)
By Robert X. Cringely

As I predicted here last week ("The $7 TV Network," it's in this week's links), Neokast was the hit of the Video on the Net conference in San Jose. The prospect of high-quality streaming (not downloading) with almost no bandwidth cost whatsoever and no YouTube ads, either, was compelling to a broad spectrum of conference attendees. A well-known father-son team of investors flew in from Aspen to write the Neokast boys in their new dark suits a check for $1 million for a lot less of the company than you might expect. Others thronging to Neokast were the very download outfits it could potentially compete with, each looking for a way to save money on bandwidth. They all wanted to become Neokast customers. And some, smelling the money, wanted to become Neokast PARTNERS, including Akamai, the old bully on that block.

Of course there were plenty of doubters, but to their credit the Neokast boys were "broadcasting" some content from a notebook computer in their booth and even showed off their new live product that can throw your webcam signal on the net for not just anyone to watch but for EVERYONE to watch. This is exciting.

I ran the concept by an old friend who is also a quite well-known network architect, expecting him to puke, but he didn't.

"Actually, I'm not negative about it at all," wrote my buddy. "I think the bandwidth estimates are perhaps a little low, but that depends on a lot of different variables that could adjust that number up or down. What they're doing makes lots of sense. I was advocating that same principle to folks back in the mid-90's, but no one wanted to hear about it then."

"Far from hating Neokast. It's the right direction. I've always believed in multicast, (I) just think it needs some more 'push' (excuse the pun) to get it secure, adopted, etc. Unicast is BS. It can't scale and is only going to work for science projects and limited application. Remember the Victoria's Secret fiasco from a few years ago? Where they tried webcasting a runway show? Of course it was unicast and guess what? It crashed due to the load demands and took a lot of ancillary things with it.

"So, what do some of the network geniuses respond with from the Victoria's Secret disaster? Network caching, AKA Akamai, will cache the content closer to the users. It's just putting a Band-Aid on the underlying problem. I think part of the problem multicast hasn't taken off is: 1) media types are scared of losing control whereas unicast allows them a degree of comfort; 2) the pipe guys are not really interested in conserving bandwidth, they want more usage. I know, it's a little Oliver Stone'ish in terms of conspiracy theories, but who knows. I tried really, really, hard at (one big ISP) to turn on multicast but the content guys put a stop to it.

"And there's one other major reason why folks don't turn on multicast in WANs -- security. Imagine a multicast-enabled WAN; all of a sudden, a socially inept teen who launches DDOS attacks has yet another tool to use..."

So maybe Neokast is on to something, especially if they can control potential dastardly uses for the product, which I think they will.

But having said that, I also think they are heading the wrong way with their business planning. The problem with a product like this is how you make money from it, and the ideas the Neokast boys seem to have come up with are very similar to any number of other bad moves from earlier groups of boy geniuses. They seem intent to turn the major part of Neokast into a web service and thereby gain revenue from advertising.

When John Warnock and Chuck Geschke were starting Adobe Systems in 1982, they couldn't imagine any business being able to actually afford a PostScript printer, since it required more computing power than you could buy back then in any desktop computer. So they came up with the idea of a service bureau. They would build one big mother of a printer and people would send their jobs to it.

Thankfully Steve Jobs came along, convinced that Apple could do a PostScript laser printer that would sell for ONLY $6,000 or so.

At Neokast they are suddenly dancing with potential partners who want to be the portal to their portal -- companies like Akamai.

This makes no sense.

If your strength is this little network dodge you were the first to come up with that allows live P2P video from any notebook with a cellular modem card, then why force users to squirt that video through Akamai or some other service provider? And why force on your customers your particular advertising technology, which may be pretty good but odds are it isn't the best?

All this monetization nonsense just makes the product (it is a PRODUCT, not a SERVICE) less cool.

If the Neokast boys want to make a free version, then limit it in some other way -- most likely in terms of resolution. Want 320-by-240 video (typical YouTube resolution)? Knock yourself out -- it's free.

But if you want 640-by-480, or any of the HD resolutions, well that's a professional product with a professional price tag -- say two percent of revenue, or $9,995 if the usage is purely non-commercial. PBS stations can afford that, believe me.

And for those who can't afford it, well that's why ecosystems grow up around technologies like this. Let someone else pay the $9,995, create a non-commercial portal, and resell capacity. Same for smaller commercial users -- let them work with a commercial portal -- not necessarily NEOKAST'S commercial portal.

The problem with Neokast having a portal is not just that they may not be the best ad guys in the business, it also means that if they get Google as a customer they won't get Microsoft or Yahoo. It's better to have two percent of everything.

But of course nobody ever listens to me.

The other interesting news this week is the Apple TV started shipping and -- guess what? -- IT KINDA SUPPORTS HDTV! Other than movie trailers, of course, Apple has no HD content, but we can all bet that will shortly change. I found it very interesting, though, that the Apple TV goes up only through the H.264 equivalent of 720p (24 fps!), but I suppose that will allow them an upgrade path or possibly a Pro product with higher resolution at a higher price point.

Steve Jobs said that 2005 would be the "year of HD," but I think it is much more likely to be 2007 and the Apple TV will be the spoiler of many a Blu-ray or HD DVD sale because Apple TV is cheaper and easier, has no expensive consumable media, and HD movies will probably cost a little less to buy through iTunes than at Target.

The chance to grab market leadership happens when hardware standards are in transition, so in a sense Apple couldn't have introduced the Apple TV any earlier than now, when HD video players are finally reaching the market in real numbers.

But if you think Neokast will steal Apple's thunder, probably not. I can't imagine Neokast will remain independent for more than another six months. And if Apple has a lick of sense, they'll be the ones to buy it. And no, I STILL own no stock.

Comments from the Tribe

Status: [CLOSED] read all comments (42)

I am hoping that streaming rentals (rather than the poison-pilled download "rentals") would be the way to go with iTunes and appleTV. But since that is a different business model for Apple, it seems less than likely.

As for lack of capability in the appleTV, it is just an iPod for the living room with streaming capabilities. It isn't a DVR killer or a Netflix killer ... yet. It is an elegant, somewhat useful device for the 5% of the consumers with HDTV's (at least in my circle of underemployed folks) that Apple can use to tweak UI's and demonstrate content partnerships right next to your TiVo and stack of Blockbuster DVD's. THEN in 2 years, when everyone needs to upgrade their TV's and HDTV's quadruple in market size, the appleTV will move to version 3.0 and slowly knock the Tivo off the shelf.

The question then is "what about rentals?" Netflix still? On Demand from your cable company? iTunes Rental store? Netkasting direct from studios?

I think Apple has these two years to make iTunes OnDemand (buy Netkast) so elegant and content rich that even if the studios ever get their acts together, the appleTV market will have reached a critical mass 'a la iPod.

My questions for Mr. Cringley are:
1. Will Netkast be the right technology in 2 years when it will really matter?
2. Will Apple/Google contain enough indie and p2p content to move the balance far enough from the studios to still be successful irregardless of the what the studios do.
3. When is your next PBS miniseries air?

MacGregor | Mar 28, 2007 | 4:22PM to love the drug induced Ferret post...go Ferrets!

Ferret Lova | Mar 28, 2007 | 8:33PM

Meanwhile, people are finding the Apple contraption surprisingly easy to hack (Username and Password: frontrow; seems like an invitation!) and are busy hacking the hell out of it, making good progress on making the XBox mediacenter hack (XBMC) obsolete by making this the mediacenter modder's dream machine.

Just as how homebrew clubs grew around the Altair 8080, this stuff excites a lot of geek hackers who aren't necessarily Mac fans or ever had plans of getting one, and anecdotal evidence from various fora is that this alone is selling quite a few Apple TVs.
Makes you wonder how deliberate this is, or at least now it has come about, will Apple let it continue. Jobs most of all should appreciate this, considering his Homebrew background.

I wonder how long before a fusion Mini/AppleTV will be sold as its bigger brother? A modified Mini with WiFi, decoder chip, and HDTV plugs as people originally envisioned for it. And this baby will do FULL 1080p HD rez.

msandersen | Apr 01, 2007 | 10:02AM