Media Dojo

Guilty as charged for light posting over the summer. We’re moving from Whidbey Island to Bellevue which has sucked 99% of processing cycles out of nearly every waking moment.

However, I did find time this morning to attend a webinar focusing on the new Certificate in Cloud Computing offered by the University of Washington’s School of Professional and Continuing Education. It’s a nine month course conducted in-class and online with a cap of around 40 students that terminates with a UW certificate. The curriculum was developed by the UW Dept. of Computer Science & Engineering under the guidance of the eScience Institute.

In a nutshell, there are three courses that start with a broad overview of cloud computing in the autumn, a winter quarter emphasis on the tools and services, and a spring quarter course that drills into Big Data. The instructors Rusty Chapin, Anthony Stevens and Bill Howe are drawn from industry and UW. Between the three courses, the goal is to go the next step beyond “this is the cloud” programs in many schools. Aside from UW, Cal State Fullerton is one of the very few offering a more hands-on certificate in cloud computing.

When you parse the curriculum to its essentials, there is a focusing on handling data more than handling applications. While some might feel that concentrating mainly on tools and Big Data limit the UW program, the trade-off (after all, the whole thing is nine months) seems reasonable to me. Data dominance is the new high ground for a lot of business competition. The cloud has largely removed access to data processing infrastructure as a barrier to entry. Virtually no start-up in their right mind uses their seed or series A capital to build a data center. Simultaneously, there’s no large organization that isn’t exploring its options for migrating some of its data processing operations to cloud-based infrastructure. Given that dynamic, one can expect the UW program to be heavily subscribed but also ripe for modification once it starts serving actual students.

Interested people can attend an information session next month September 8 in downtown Seattle.

DISCLOSURE: Currently, I’m teaching a course on transmedia design in the Master of Communications in Digital Media program at UW. There is no direct connection between these two programs.

I’m up from a deep dive in which I developed a course on transmedia production and distribution for the Master of Communications in Digital Media program at the University of Washington. I teach the first class tonight as an adjunct professor and then take a crack-o’-dawn flight Wednesday morning to San Francisco to attend GigaOm’s Structure 2011.

Structure is hands-down the most important pure cloud computing get-together of the year for my money. All the players who matter are there as are a bevy of new start-ups. By and large, the agenda focuses on computing iron and performance rather than specific industry applications, which I think is good even though I consider myself a media guy first and a cloud guy after that. I make it a point to go because it’s how I top up the tech tank given the pace of change going on.

However, I do see this as probably one of the last Structure events in which there isn’t a hard-core industry track. Maybe not next year but definitely the year after that, Om and crew will need to start including the voice of the user beyond the obligatory hat tips to Facebook or Werner’s rapid-fire listing of various start-ups and enterprises using AWS in his state of the cloud presentation.

In the media space, the news is mixed. Sure, there is no way in hell that a new media start-up gets funded without being heavily cloud-based. But notwithstanding some Black Swan pop from a start-up, most of the development $ for media properties come from traditional sources and they are just getting started. It comes back to the old saw of people overestimating what they can do in one year and underestimating what they can do in three years.

That’s one reason why I’m 90 degrees into transmedia right now from a media services point-of-view. Just as e-business evolved from buzzword into something more substantial once it let go of the e-commerce angle and focused on how to deliver a superior customer experience through a network interface, so too will transmedia grow into something beyond trying to bounce people all over platforms once media creators realize that they’re still in the business of delivering an experience to the user.

That experience will rely on the interplay of creative narrative, applications/networks and social connections which most likely will be riding on computing clouds. That’s why I’ll be in San Francisco.

That’s the cry of my daughter’s volleyball team when they rocket the ball into the other court unopposed.

What a difference a day makes.

Yesterday was weird, surreal. There was a lot of mental processing to do. But it wasn’t so much about the day of the attack but more so the year that followed it. When you’re faced with a direct threat, at least there is a distinct focus on what to do next. There’s also the luxury of being able to block out any notion of future given what’s in front of you.

Not so once the imminent danger passes. Then comes the anxiety of knowing you need to continue taking action but not knowing what will happen next. Given a good night’s sleep, I realized that yesterday consisted of me remembering the slow motion unease of late 2001-2002 living in NYC.

But this morning felt different. A massive piece of unfinished business from those days had finally been dealt with, right when I thought it never would. There’s a lot of challenge ahead. I don’t want to tempt karma by dancing over a man’s death.

Instead, I want to focus on the fact that it’s 2011, not 2001 anymore in the deepest recess of my mind. There’s a lot of challenge and hard work ahead for me and for this country. But to quote Jon Stewart:

We’re back, baby!

Time to swing the focus to cloud computing and media.

The strangest days often come after the historic event.

I actually remember September 12, 2001 better than the day before. On 9/11, my only driving force was to evacuate Manhattan to see my family on Staten Island. It took many hours and harrowing times working through the chaos of lower Manhattan until I could get on a boat and get away. But on 9/12 when school was cancelled and a host of dads took their kids to parks where the children played warily as we listened to the radios blaring out of cars, gathering in pods that ebbed and flowed, exchanging stories of escape or news of people we knew who were still missing; it was then that some of the reality began to sink in—along with a feeling that we had all been dropped into the middle of a vast body of water, with no clear shore to swim to.

On the night of September 12, I was in the kitchen washing dishes in the sink. I heard my wife giving a bath to my five year old and two year old upstairs. Water and bubbles swirled about my wrists. Breathing became shallow and my heart fluttered. I was scared to my core. It sounds hackneyed like out of a bad movie but I also started humming the Star Spangled Banner because I couldn’t sing. But even though I can’t carry a tune, I didn’t care. Just humming made me feel a bit more grounded, not as weightless and helpless as before. As I hummed, the tears I needed to shed finally came, large, wet and steady. In that moment over the kitchen sink, I mourned but also let some resolve bring back a little light.

For the rest of that week, and into the next, I hummed in private moments to remind myself that I had survived and so had the country. I still had no idea what would happen. I was still scared. But that silly little song, that musically pedestrian piece of America’s catechism, was the lucky rabbit’s foot that helped me and many other Americans put one human foot in front of the other.

Guiliani opened up lower Manhattan with restrictions to civilians the following week, Monday September 17. My business partners were stranded on the west coast as the planes still weren’t flying. We had a software company on 32nd Street close to the Empire State Building. I had to get there and be with other employees who were Belgian, Chinese, Korean, German, and US. I took a flag with me because regardless of our passports, we were all civilized people who were scared but were also prepared to give a 100% genuine New York “GO FUCK YOURSELF!” response to Bin Laden and the animals who had attacked us. We were scared but we weren’t cowed. We met on our rooftop and planted that flag.

It’s been a decade and my daughter is in high school. Many jobs and projects have come and gone. I’m older—still in decent shape —and maybe a sliver wiser. The country has changed. There will be no going back. But maybe we can move to a different area.

With a profound sense of gratitude that a chapter has closed combined with gratitude to the professionals who pursued this existential threat to our lives, I stood on my deck this morning in a chill Northwest morning rain to behold Penn Cove. The boats rose and fell with the water’s calm vowels. Gulls huddled on the rooftop of the Wharf building before starting their day. I could hear the water pipes sing downstairs, knowing that my daughter and son were getting ready for school.

I hummed—again off key. And I felt clean, soft rain on my face mixed with some warm salt from my eyes.

Relief.

Bless our country.

It took 20+ hours of traveling but I’m here….a bit crispy but not too worse for wear.

Upon checking into the spectacular Yas Hotel, I discovered that the Abu Dhabi International Book Fair was happening the same week as the Media Summit. Tomorrow, I will spend the day with publishers across the Middle East North Africa (MENA) region learning about how digital is affecting their business.

The Yas Hotel is built over a Formula One track so I heard and saw practice runs this morning by some of the fastest cars in the world. Talk about a wake-up call!

The International Book Fair is now in its 21st year. The book fair is part of several initiatives underway to make Abu Dhabi a hub for cultural and media industries for the Arabic speaking world.

My main reason for coming was to attend the Abu Dhabi Media Summit, which is a 2 day confab featuring the top leaders from through emerging markets as well as big gun media names like James Cameron, who is going to give a salon style briefing on the next Avatar project of his. In the tech space, we’ve got Stephen Elop from Nokia to talk mobile as well as Akamai’s Paul Sagan and Hans Vestberg, the CEO of Ericsson.

This is only the second AD Media Summit. But it’s being organized by my friends at Publicis Live in partnership with the Abu Dhabi government so I’m expecting some big things.

Given the latest results from the Watson’s performance on Jeopardy last night, it would seem that strong AI claims that computers can master natural language are being fulfilled at last.

Therefore, congratulations are due IBM for enabling a machine to rise above imbecility toward having a decent shot at becoming a moron.

Watson’s mastery of natural language problems arises from a very impressive mix of hardware and software. According to HPCwire, Watson is comprised of 90 Power 750 servers, 16 TB of memory and 4 TB of disk storage. The 360 Power7 chips that make up Watson’s brain represent IBM’s best microprocessor technology. Each Power7 is capable of over 500 GB/second of aggregate bandwidth and Watson has 2,880 cores at its disposal.

But the real fuel for this Ferrari comes in the form of a software system called DeepQA, which analyzes all the colloquialisms and relationships among phrases and facts that make up a Jeopardy game. It does so by dynamically correlating in real-time all of the “as-is” information sources out there (dictionaries, encyclopedias, books, thesaurus, newspaper clips etc.) that can be used to statistically analyze a Jeopardy problem.

I don’t want to cast aspersions on IBM for this very impressive technical feat. IBM wants to sell Power 750 servers into the enterprise analytics market. Jeopardy is probably the best natural language product placement opportunity out there. So kudos for shrewd marketing.

But just as we have no issue with a bulldozer or steam shovel besting our ability to dig ditches, we should avoid either paranoia or far worse, ecstatic mysticism over the fact that Watson is probably the best Jeopardy player that ever existed.

Therein lies why Watson is effectively a moron—albeit a very smart one. The Cretan Epimenides’ timeless statement that “all Cretans are liars and this statement is true” introduced us to the fact that you can have a correct statement in natural language that is also a logical paradox. Kurt Godel took it further in mathematics with his Incompleteness Theorem, which said “all consistent axiomatic formulations of number theory include undecidable propositions”. Translated, Godel means that you can make mathematic statements (what is stated and how it’s proved) that can be complete (covers all known phenomena) but will have inconsistencies (exceptions). Or you can make mathematic statements that are logically consistent (no exceptions) but are not complete (only a small slice of phenomena). But you cannot have BOTH completeness and consistency.

Watson wins at Jeopardy because according to the rules that define a legitimate English language Jeopardy proposition (logical consistency), the machine’s algorithms and processing power will now beat human opponents—probably time and again. I don’t see a John Henry of Jeopardy out there who will beat Watson, then lay down his buzzer and die.

But I also believe that civilization will somehow endure. I’m equally confident that Watson will become a very useful tool for the enterprise analytics market as well as other logically consistent, small universes.

That said, we currently have strong AI proponents like Ray Kurzweil out there doing movie tours and selling the idea of a digital Rapture for true believing Singularitarians. The drum being pounded talks of exponential growth of processing cycles somehow leading to a direct symbiosis between man and machine to the point of being able to upload one’s mind into a database. Watson’s Jeopardy performance will no doubt be cited as a quickening step toward the fabled Singularity. A news flash Ray: given the fact that Watson is about as socially aware as a mollusk, you’ll die of old age long before biology makes true communion with silicon. If Watson’s heirs have any sense, they’ll view a lot of those uploaded human minds as pathogenic and take appropriate action.

Because of the reality and imminency of death, human beings make Art. The late poet Cid Corman taught me that most misunderstandings of Shakespeare arise from trying to impose “truths” or “meaning” where none were intended. Shakespeare’s work does NOT offer solutions to our problems, It offers us realizations of the human predicament because at certain levels, we are ALL Hamlets and Lears and Macbeths and Othellos, Antonies and Cleopatras, Timons and Troiluses. We connect with these characters because we have shards of them within us. We go to the theatre, the cinema, the concert or we go online to feel ourselves made better by experiencing consistent though incomplete realizations (thanks Kurt) of stories which fire us to explore what it means to be alive and human.

Intelligence isn’t spitting out a solution to a fucking Jeopardy problem. It’s about how you make meaning out of the limited time you got.

In media markets dominated by physical formats, channels and devices, insurgents must pull off the perfect heist.

The incumbents have not only capital and distribution muscle at their disposal, they’ve got a more deadly weapon which is time to analyze and react to competitive thrusts. One flaw in the insurgent’s plan or execution and the full weight of the incumbent’s advantages comes crashing down on rebel’s head.

When you flip that equation to digital media, incumbents must craft the perfect defense.

An insurgent has all the time in the world to find that one flaw to exploit. In the information security world, there’s an old saw that a software patch is the best advertisement for where an attacker will find their next meal. The gap between the release of a security patch and when the patch is universally implemented gives the attacker a precise road map for picking off weak or non-compliant users who don’t update their machines.

When I view how most of today’s incumbents are responding to the tidal shift of digital media from physical to virtual, from ownership to rental, from consumption to participation; I’m not seeing strategy.

I’m seeing patches.

Hollywood’s mass hysteria over streaming rentals as epitomized by Netflix isn’t as knee jerk as it sounds.

How would you like the prospect of reorganizing your business around $2 rentals as opposed to $20 physical DVD sales?

Effectively speaking, broadband and the rental model has started strangling the product sell-through business of video. Netflix is simply the current poster child of the fact that technology and some well timed licensing deals have created a more convenient model for consumers to access high-end paid video.

And as we know, convenience trumps EVERYTHING.

But let’s not get ahead of ourselves. During the 80s, the original video rental market started killing the sell-through market for VHS tapes. When the first VHS tapes for purchase came on the market, you were talking $39.95 or even $49.95 price points. So once Blockbuster started renting out tapes, people stopped buying because rental made so much more sense.

The studio response? Flatten the price curve. Drop the price for VHS to squeeze Blockbuster or force it to raise the rental fees. Tapes went from nearly $50 to more like $20. Then DVDs emerge to enable the studios to bundle in more content in a way to maintain prices for a while. And once DVD prices began their descent, physical rental became a secondary market and physical product sell-through became the big market.

Sure, Blockbuster and other physical rental firms like Hollywood Video made mistakes that hastened their demise. But it was home entertainment sell-through via cheap DVDs that killed them. People said , “screw it, I’ll buy the DVD at Walmart rather than troop down to the store”. Note, I’m not discounting Netflix’ DVD-by-mail launch model in the least. But let’s face it, if Netflix hadn’t gone the streaming route, we would start tuning up for its swan song rather than heaping praise on Reed Hastings.

Now Hollywood and the CATV industry are screaming bloody murder because studios like Starz and Epix cut deals with Netflix that offer literally digital pennies to cable dollars. Epix licenses content to the CATV industry at roughly $2 per sub per month according to some sources I know. The relative fee Netflix paid was on the order of $0.15 per sub per month. “Why the hell did you do that deal?!” bellow the studios while the cable guys are screaming just as loud “why the hell did you do that deal?!”.

“Stimulating the market” for paid streaming content may have been Epix’ motivation for cutting such a deal. However, the reality is that these deals have moved the price point down for paid video. Just like digital music prices must orbit around $0.99 plus or minus depending on features and bundling, so too are Netflix and its competitors ensuring that John & Jane Q Public believe that $7.99 per month is about right for paid streaming video.

Sure, there’s going to be a lot of words traded as the deal comes up for renewal. Netflix says it’s a friend of content providers. But they may not see things that way. In addition, the cable guys are re-evaluating what they’ll pay studios for content, especially reruns, which has a higher proportion of cream. Turner Broadcasting cited overexposure on digital platforms as one reason for not picking up “Modern Family”. True, it could have been a negotiating ploy but there’s also a grain of truth.

Thus, the battle lines are drawn. It’s a struggle by the studios to maintain physical/digital/some-kind of sell-through against streaming rental.

That’s probably why we’re going to see a lot of cloud-based digital lockers for storing purchased movie content in the coming months. The studios like the cloud because they’re betting that people won’t want to fill up their hard disk but will still want to own something. That’s Ultraviolet in a nutshell.

In the meantime, Netflix is habituating people to rental.

So what do you think? Will we look back at the original streaming deals cut by Netflix as the video equivalent of Bill Gates licensing QDOS (quick & dirty operating system) from IBM?

I bit the bullet and bought my airline ticket to Abu Dhabi for the Media Summit in March. I helped with some of the groundwork for the first Abu Dhabi Media Summit held last year but wasn’t able to make it in the flesh. My friends at Publicis told me it went over very well.

The focus is on media of all stripes in emerging markets. One look at how media (especially al Jazeera) has played a huge role in the Middle East revolutions (the proper technical term) makes it all the more important to travel to the region.

Aside from the obvious networking opportunities at the Yas Hotel, I plan to soft-launch my next e-book on the technical and business back-end systems for transmedia. Right now, a lot of the production work and distribution is an extension of the previous paradigm.

I’m taking a stab at a broader question of what would a cloud-native transmedia infrastructure look like—not simply in terms of data storage, processing and networking, but also the business processes at work. Send suggestions or tips about transmedia or Abu Dhabi for that matter. Agent Smith and his brother thank you in advance.

Over the next 1-2 years, it’ll boil down to whether studios/ISPs on the supply side or Netflix/social nets on the demand side will define the paid digital video market.

The content owners and distributors have only a short window to establish firm control over the paid digital video market lest they suffer a similar fate as the music labels. Netflix and its imitators too have only a short window to grow large enough to where they can negotiate from strength once the current clutch of licensing deals expire.

My money is on the demand side.

Yesterday, Netflix reported blowout numbers for subscriber growth in Q4 2010. The top line figures showed over 20 million subscribers, with over 3 million net additions in the past 90 days. The fourth quarter capped an extraordinary year of growth with over 7 million new subscribers in all. This came after management had predicted 3.6 million net adds at the start of 2010.

Reed Hastings and the rest of Netflix’ management are shrewd enough to realize that a victory lap is premature. A spasmodic backlash is brewing among the content and distribution side (especially given the greenlighting of Comcast/NBCU) to throttle Netflix through punishing renewal terms or even surreptitious tinkering with network performance. Studios remember how the music industry allowed Apple to gain insurmountable scale before realizing that the new model wasn’t an addition to the legacy music business, but a substitution.

Not this time, they vow.

I think they’re already too late. In common with generals who focus on preparing for the last war, most of the supply-side responses (higher licensing fees, bandwidth caps, tiered services) miss the most important difference between today’s paid digital video market versus yesterday’s paid digital music market.

Competitive advantage is no longer exclusively a format, device or channel game. It’s a battle for registrations and account information as the fundamental currency, which is a service-oriented rather than property-oriented way of looking at the world.

Consider how fast Netflix has grown its streaming services since late 2010 launch. More than 1/3 of new subs are signing up for the pure streaming plan (including yours truly). Netflix management is betting that percentage will grow sharply over time. In its Q4 2010 SEC filing, Netflix cited three factors that form the flywheel for scaling its subscriber base:

1.) More subscribers means more money to license content, which drives more subscriber growth.

2.) More subscribers means more word-of-mouth from subscribers to those who are not yet subscribers, which drives more subscriber growth.

3.) More subscribers means Netflix can increase R&D spend to improve its user experience, which drives more subscriber growth.

Nice theory some may argue. What’s not arguable is that Netflix marketing spend decreased 10% in Q4 2010 compared to a year before, yet it grew its subscriber figure by 63% year-on-year.

So what does Netflix gain in addition to cash flow from this “get big fast” strategy of subscriber growth?

In a sentence, it gains pole position in the digital video demand chain. As video capable devices and *contexts* proliferate, understanding the demand patterns of the audience is the most valuable resource of all. Streaming not only gives Netflix the distribution path to end devices beyond PCs and TVs, it provides a real-time feedback loop into the demand cycles of its audiences.

The fact that the company is openly discussing deeper integration with Facebook only solidifies its fundamental bet that digital video taste making and distribution is poised to become more social than music ever thought about. That’s really hard to do when the main product is physical media like a DVD in the mail. However, once you’re dealing with cloud-based media, the ability to integrate content with ancillary applications, services and social links (‘Like”) is limited only by licensing terms.

Netflix and other cloud-based digital video players are slowly but surely eating away at the classic entertainment product sell-through (eg. windowing and various formats). The new sell-through will revolve around customized enhancements of the core product rather than different versions of the same product (a future post on this blog).

In my view, the basic reality escaping the incumbent digital video players is that they’re looking at Netflix as just another entertainment distributor (a different flavor of a CATV channel) when in reality, it’s an e-commerce play with digital video at its center.

There was another e-commerce player that started out with books in order to “get big fast”. This company concentrated ruthlessly on demand chains in order to sell more things—and more different things—to its registered users. It eventually began to sell computation itself. The fundamental resource wasn’t exclusive rights to books or territories but one of the best registration and account databases in human history.

Now Netflix has started turning the same trick with digital video using Amazon Web Services. Jeff Bezos would be foolish not to eventually write that multi-billion $ check.