Light Reading's Jeff Baumgartner ferreted out this scoop: despite the fact that its AWS spectrum partners Comcast and Time Warner will not bid in the upcoming 700 Mhz spectrum auctions, Cox Communications, the nation's third largest cable operator, will indeed participate. In an email to Baumgartner, Cox said:
We remain committed to furthering our plans for the convergence and mobility of our services and believe that bidding on this 700 MHz spectrum could provide us with another alternative that would support our goals.
This move makes a lot of sense. Cox was an early leader in delivering telephony-over-cable, pushing telephony out to virtually all of its markets through circuit-switched technology before gradually shifting over to VoIP-based service.
Moreover, Cox, which went private in early 2005, isn't under Wall Street's impatient scrutiny and can more easily afford to spend the money that the 700 Mhz licenses would dictate. Early rumors that Comcast and Time Warner Cable would bid for the spectrum, thereby potentially dampening short-term cash flow growth, sent both companies' stock prices skittering south earlier this fall.
Posted by Cynthia Brumfield at 6:21 PM | Print | Comments (0)Now that the last NBC TV program has been pulled from iTunes, NBC-Universal CEO Jeff Zucker has revealed that iTunes was responsible for around $15 million in profit to the company last year. Speaking at the UBS Global Media Week and Communications Conference, he said "we had about 40% of the market share at iTunes on the video side. We were by far the most popular content company there...All of that was worth approximately $15 million in profit to us last year."
So why ditch a good thing? Because Apple was just inflexible in terms of what it would pay for the content and how NBC-U could sell it. "We did not feel it was the game-changer for us as it was prescribed to be, as it was for Apple. There's no place that I can think of that the retailer gets to set the wholesale price," he said. "All we asked was the opportunity to set a variable price structure, even for one program," and Apple vetoed any such experimentation.
Still, Zucker hopes to one day again offer its content on the popular media portal. "Given the tremendous market share that Apple has with its iPods, it's clearly the leader in that respect."
NBC-U has instead pursued an alternative multi-pronged online and mobile video strategy, offering pay-for-play content on Amazon's Unbox, ad-supported downloads on its own NBC Direct and a one-stop shop for ad-supported content via its Hulu joint venture with News Corp. These efforts haven't made up for the lost iTunes revenue, but "ultimately we'll get there," Zucker said.
Content providers should be experimenting with technology, but so far nobody has figured out a way to make money with new forms of video distribution, Zucker said. "I think everybody should be trying things...but at the same time nobody has really figured out the economic model that makes that a significant part of their bottom-line today."
Just when and how NBC-U should jump deeper into the digital distribution pool is still unclear. "This is something I struggle with on a daily basis, to make sure we don't replace dollars with pennies."
The still-fuzzy business models of Internet and mobile video are at the heart of the Writer's Guild strike. The studios and the union will meet again tomorrow and Zucker thinks the two sides are actually talking to each for the first time. "We made a proposal last Thursday and the writers said they needed these five days to work through that and come back to the table tomorrow. To this point, there has really been no substantial give and take between the two sides."
Although "technology provides us a great opportunity to make sure our content is available in many different ways," it has also fostered piracy, Zucker said, picking up on Hollywood's most persistently annoying drumbeat. A new bill will be introduced in the House of Representatives this week that gives content suppliers greater control over their intellectual property, Zucker said. (Anybody know what this is? Is this the colleges-lose-federal-aid-if-they-don't-police bill?)
And, as if we all didn't already know that it was Hollywood that pulled the puppet strings to get the French government to crack down on file-sharing and spy on its citizens in the process, Zucker also added "I don't think there's be anybody more in the forefront of this than the French government."
Posted by Cynthia Brumfield at 1:28 PM | Print | Comments (0)Video storage and delivery infrastructure provider Acinion is coming out from under wraps with a new name, Blackwave, fresh from a $16 million cash infusion. The series B funding round was led by Sigma Partners and was joined by both of Blackwave's Series A financing investors -- Globespan Capital Partners and IDG Ventures Boston.
This new round of funding follows the start-up's $5 million first-round funding announced last December and will fuel a big push by the company when it starts shipping its product on a commercial basis in Q1 08. What, exactly, does Blackwave produce?
Blackwave does storage, streaming and all the intelligent software needed to power video publishing and it promises to cut costs over existing video distribution set-ups by a factor of ten. Although content providers used to face steep bandwidth costs and low hardware costs when putting their videos online, it's now the opposite.
Bandwidth costs are low but still not "low enough for everybody to go online" CEO Robert Rizika told me in a briefing last week. The big expense is now the hardware component of the equation and "Blackwave cuts the infrastructure cost by a factor of ten," Rizika contends.
Full-length video content requires a lot of servers and hardware, which in turn require a lot of rackspace, which in turn adds even more to the cost of delivering video. Blackwave's system produces 20 gigabit per second performance capable of serving an iTune video to 20,000 simultaneous users where existing configurations can only 2 gigabits per second capable of serving 2,000 simultaneous users. "We're fundamentally getting rid of 9/10s of your infrastructure cost," Rizika said.
Not only does Blackwave speed delivery and cut costs, it also improves video quality, the company contends. "We have software that as it sees new requests come in, it adds more performance to the hardware to manage the experience," Rizika claims.
Blackwave is currently in use by a couple of alpha and beta testers, including one "very large TV media company [my money says that's NBC], one very large social networking site and one very large UGC customer." Blackwave offers three different kinds of products aimed at three overlapping kinds of businesses.
Its most expensive product is aimed at big content delivery networks (CDN) such as Akamai (Jonathan Seelig, Akamai co-founder, is a board member). Blackwave also sells a system for large media companies that have decided to bring content delivery in-house, as well as a system for large media companies that need digital storage but use CDNs for delivery.
Although one upshot of Blackwave's system could be lower costs, Rizika thinks the real benefit might be to make it more economically feasible for content providers to bring more content libraries online. "If you think of Internet video today, just about one to two percent of video that could be online is online."
With a cost structure that is one-tenth of existing costs, top content providers can afford to bring online video content that otherwise might have lost money, such as old TV series, niche films and other material that is currently gathering dust. Small players that can't afford to invest in online video infrastructure might be able to do so for the first time using Blackwave's technology, Rizika thinks.
What isn't clear to me is whether a lot of video providers are ready to scrap their legacy set-ups, which include storage systems from companies such as NetApp (or increasingly "white box storage"), streaming servers from companies such as Dell and HP and caching and load balancers from companies such as Cisco. Even if Blackwave's system reduces the cost structure by 9/10s, most online video providers have made substantial investments in their existing infrastructure and might not be willing to junk the legacy gear in favor of Blackwave.
Rizika contends, however, that these legacy systems have very short life-cycles to begin with and are typically obsolete within six months. "What we've done with our system is build all those pieces in and optimized them for rich media delivery," making it a no-brainer for video providers to swap out the multiple pieces of hardware for Blackwave's system.
Posted by Cynthia Brumfield at 10:47 AM | Print | Comments (0)Time Warner, a key player in a coalition of cable operators that succeeded in buying broadband wireless spectrum during the last FCC auction process, won't participate in the 700 MHz auction, Time Warner Cable CEO Glenn Britt said this morning. Speaking at the UBS Global Media Week and Communications Conference in New York, Britt said "We are not going to be in this particular auction."
Given that Time Warner isn't bidding for the prized spectrum, it's likely that the other cable partners in the earlier coalition, which includes Comcast, Charter, Cox and Brighthouse Networks, will also stay out of the bidding. (Comcast has confirmed it won't bid. See update below.) What this means is that cable operators probably won't pursue mobile wireless services in competition with their chief rivals, the incumbent telcos AT&T and Verizon.
How that will play out in the future is unclear. AT&T and Verizon are already bundling wireless service with other services, culminating in what could be a killer combination of landline and wireless voice, along with video and broadband services, the veritable "quadruple-play" package of services.
But Britt says that consumers really don't want a quadruple-play bundle. "I don't think the quadruple play is a big deal," he said. "So far we've not seen a great demand for that."
Time Warner hasn't completely thrown in the towel when it comes to wireless. "What we're doing is trying to understand that space..we do own some spectrum. We haven't completely decided yet how to use it."
One area of potential wireless telephony growth for Time Warner is the cellular backhaul business, where wireless carriers use cable networks to transmit calls from towers to landline phones, he said. "It may be that cable is where wireless gets dumped off in the network," he said.
Surprisingly, Britt seemed to acknowledge the competitive importance of Verizon Wireless' announcement that it will open its wireless network. "The announcements last week about Verizon opening up could be quite significant," he said.
Britt also seemed to tip his hat toward another rival, DBS provider DirecTV, which has gained traction recently by promoting its greater-than-cable number of high-definition TV channels. "I think it's clever on the part of DirecTV," he said. But Time Warner Cable should catch up with DirecTV on the HD front when it finishes retrofitting its plant to switched-digital technology. "We are putting in video switches which will allow us to have unlimited HD."
Britt also conceded that the phone companies have taken a competitive bite out of Time Warner's video business. "We've actually seen the impact of both of them [AT&T and Verizon], mostly in Dallas and L.A." where the systems were in disrepair and not offering triple-play services. "They've made good headway there, especially Verizon. Now that we're up and running with our own triple-play, we'll see how we'll do," Britt said.
Update: Comcast confirmed this morning that it will not bid in the 700 MHz auction, saying that the "20 MHz of spectrum acquired in the wireless auction last year with our cable partners in SpectrumCo provides us with significant long-term flexibility and many strategic options."
Posted by Cynthia Brumfield at 10:10 AM | Print | Comments (1)Wireless start-up Frontline Wireless is going to bid in the upcoming 700 MHz auction. Frontline had been shut out of the auctions last summer when the rules barred the company from acting as a wholesaler of service.
But the politically savvy firm, which counts former FCC Chairman Reed Hundt as Vice Chairman and fomer NTIA head Janice Obuchowski as chairman, succeeded in pushing through a rule change a few weeks back that permits it to resell the airwaves if it succeeds in the auction. Otherwise, Frontline wouldn't be able to make a go of it -- only truly deep pocketed bidders can afford to promise retail sales of wireless service.
Not that Frontline doesn't have some impressive backers. Jim Barksdale, Kleiner Perkins' John Doerr and Google founding board member Ram Shriram are all investors.
Frontline will team with public safety-oriented wireless company Cyren Call to help it build a national network for emergency responders if it emerges as a spectrum winner. The left-over spectrum not being used for emergency purposes will be what Frontline offers to third parties.
Posted by Cynthia Brumfield at 8:14 AM | Print | Comments (0)
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