And the Winner is...

...not Google.  Or is it?  The Spectrum auction has concluded with total bids in excess of $19.0B.  Verizon Wireless (VZW)and AT&T appear to have been the high bidders, with VZW bidding $4.7B for the entire C block of spectrum.  While Google did not "win" any spectrum bids, their efforts certainly helped to shape the bidding process and the open-access provisions of the auction.  VZW, just this week, held a conference where they discussed their vision of open-access on their network.  Time will tell if their vision and that of the FCC, and Google, align.  Goes back to that old saying, it depends on what your definition of open-access is.  Kind of like is, is?  Let's hope it turns out to be a true step forward in the development of an open platform that enables the creation of the next generation of mobile applications and services, unlike Apple's platform and SDK for the iPhone, accessed only via the walled garden known as the iStore.  Does Apple understand their is no "i" in open?  But their is in capitalism!  Two, in fact. 

Cable Cards

Its been a busy few weeks since my last post.  Paris Hilton was sprung from the big house, twice, the iPhone was finally launched, albeit to the displeasure of purchasers who had difficulty connecting to the AT&T service (is anyone surprised?) and the Cable and CE industries continue to face off over the issue of cable cards.  Ok, so the first two received more press than the last, but the latter could be more important.  Why? Cable Cards are the solution reached between the CE and Cable industries, at the behest of the FCC, to separate the security and program guide functions of the traditional set top box (STB).  The CE industry has clamored for the right to provide a set top box and the program guide, often referred to as the EPG, to consumers through their traditional CE distribution channels.  All the while the cable MSOs have countered that the impact of separating the program and channel control functions from the security, or conditional access, functions would increase the cost of STBs to consumers.  Many pundits believe this to be another attempt by the Cable companies to thwart the efforts of the FCC and the CE Industry and to blame the FCC for the increased cost of STBS, in what they are calling a "tax" on consumers.  So what's the real deal?   The first screen a consumer sees when they turn on the TV, and the billions of dollars of advertising and transaction fees that this real estate can produce via a service tied to this "home page", like VOD, PPV and other impulse purchases by consumers.

The cable industry has claimed this as their own even though the physical asset used to view programming is manufactured by the CE industry.  There has never been a debate as to who owns the customer as the Cable industry has provided the digital cable service into the home AND the STB.  The Digital STB is the key to incremental revenue generating services like VOD and SVOD programming.  It also controls access to pay cable services like HBO.  Separating the security function from the program guide function opens the door for CE and other STB, or Home Media Center, manufacturers to offer a CE Device for the home to compete with the Cable STB.  I have only read of one company planning to enter this market, Digeo, but I imagine the CE Manufacturers and companies like TiVo have plans to offer a retail device.  The Digeo service claims it will provide movie downloads via internet services as well as other revenue generating features.  You can be sure the first screen to appear when a consumer turns on their TV will not have a cable company's logo affixed.  And thus, the battle for the "little screen" will commence.

The dance with the FCC also continues.  Cable companies continue to ask for waivers to delay the implementation of the cable card in their markets and the phone companies, especially Verizon, are petitioning the FCC to be excluded as they claim their STB and service is "different" and a competing service to the encumbent cable operator.  All the while the CE industry sits on the sidelines waiting patiently for their opportunity to participate and offer product through the traditional CE retailers.  While the FCC has the best interest of the consumer in mind, or is supposed to, in the end its usually the little guy who gets hurt by the turf wars of the major corporations and government regulatory bodies.  Can't wait to see what my cable bill looks like when the dust settles.  I'm sure the Cable industry will use the FCC mandate as the rationale for their next round of price increases instead of the exhorbitant cost of cable programming for channels many consumers don't even know exist.  What happened to the a la carte pricing initiative anyway?

Is it the end of DRM as we know it?

Amazon.com's announcement of its intentions to sell music online free of DRM certainly made a splash in the press last week.  12,000 Labels (who KNEW there were 12,000 labels!) reportedly are offering their content for sale, excluding the Big 3 - Universal, Sony/BMG and Warner.  EMI is on board.  The deal is similar to the deal EMI cut with Apple - $0.99 for songs that include DRM, $1.29 for songs without DRM and in a larger file format that is reported to offer higher sound quality.  So this is good for consumers as it clears up the issue of interoperability of content on any media playback device, right? Perhaps.  If the Big 3 are not on board consumers still do not have access to most of the music of major artists.  The Labels have been struggling with the issue of music downloads for some time, trying to determine how best to offer downloads that preserve their business model.  One company I worked with developed what I thought was a novel idea to resolve the issue of interoperability.  The concept, in very layman's terms, was to attach the content license to the CONSUMER, not the device.  This would allow the consumer to play the music on any device they own but prohibit the illegal redistribution of the music.  Functionality was being developed that would enable the friends of the owner of a piece of content to "sample" a song and, if they liked it, buy it from the friend (using the interoperability service to facilitate the transaction) under the same rules as the original purchase.  Viral Marketing.  Legal Super Distribution.  What's not to like?  Any marketer will tell you how the opinions of peers have a big impact in the purchase decisions of others. 

This service requires the user to register their audio playback devices with the behind the scenes platform, which can easily be done since each portable device manufactured has a unique identification code.  When the consumer purchases music online or buys a CD the song or CD must first be registered with the service prior to being downloaded to a playback device.  The consumer is then issued a digital "license" to the content.  When the consumer wishes to download the music to one of their playback devices, the system checks the consumer's online license library to insure ownership and then downloads the song to the desired, authorized, portable device, applying the correct DRM, CODEC and security features to the content as prescribed by the Label.  This is similar to the concept of driving a car, somewhat.  You have to obtain a license to drive a car, but it does not limit you to the type of car you can drive (within car class, of course - you aren't licensed to drive a semi or a motorcycle).  One can drive their car to the airport and then rent a car at their destination without having to have a separate driver's license.  They can then return home, drive their car from the airport to their home and, perhaps, drive their spouses car to run errands.  No problem.  Same concept.  You have a license to the particular piece of content, and should be able to play it in any car you drive.  In this case, on any device you own.

The company who developed this technology platform is Ardtully Technologies, Inc (www.ardtully.com).  They have worked closely with the CORAL Consortium and it's members (including the Big 4 Music Labels, the MPAA, RIAA, and most of the major Movie Studios and CE manufacturers) on interoperability issues and have designed the platform with the CORAL standards in mind.  I doubt that it will ever see the light of day as the Labels, according to my sources, have abandoned discussion of platforms of this nature and are engaged in discussions of whether or not to go DRM naked for digital downloads. 

Fundamentally, its all about the business model.  How do the labels maintain a core revenue source and minimize the risk of illegal super distribution?  They have leverage over their artists if they own the copyright to the artist's work.  But what's to stop artists in the future, once their agreements with the Labels expire, from offering their music for free online and hiring their own PR agency to promote their work and to establish tour dates for concerts.  Some artists are already doing this.  The business model is changing for the artist as well, potentially in their favor.

So, is it the end of DRM as we know it?  Not in the near term.  But in time all indications are it will be.  And I feel fine.

The Digital Home

I read an interesting article by Erica Ogg of CNET yesterday about the digital home (The Digital Home: Still a Handyman's Special? Wednesday May 9, 2007)).  The premise of the article was although advances have been made in technology, devices and broadband adoption the digital home "puzzle" is still missing some pieces.   The article listed several the devices for delivering digital content to the "centerpiece of the connected-home", video, including the new Apple TV box and the SlingCatcher from Sling Media.  One company with whom I am working may have a solution.  The Company, Digital Media Research (www.dmrworld.com), has developed a device, called the Personal Digital Hub (PDH) that wirelessly controls the digital home, including moving digital content from the device to TVs connected to the network in other rooms.  The device uses the ZWave Alliance Protocol as the basis for wirelessly distributing digital media.  The device has massive storage capability for one's library of movies and music, is easy to set up and use - an important feature for consumer adoption - and also wirelessly controls home automation features, like lighting and blinds.  The GUI is being redesigned by the award winning team who developed the user interface for Digeo's Moxi Set Top Box/Media Center.  The timing of the introduction of the PDH could be right as the FCC continues its campaign for the set top box to be as ubiquitous in CE Stores as the TV. 

Perhaps the most interesting aspect of the device is the impulse purchase funtionality that is being developed.  Suppose you are watching your favorite movie and decide you'd like to own the soundtrack, or even purchase the title for your personal library.  DMR's platform is being designed to enable you to make such a purchase without leaving your chair.  This feature should be one the Movie Studios and Music Labels will love!   

DMR is currently in discussions with several major CE companies to license the device for manufacture and merchandising under existing consumer brands.  DMR's business model is to be the ASP providing the impulse purchases and other commerce, having learned a lesson from other companies who have developed and marketed a "new consumer device" when the real benefit of the device was the software platform that managed a consumer's content (e.g. ReplayTV).

There's much more information about the device than I can describe here, so I invite you to check out the PDH at www.dmrworld.com.  Its a clever idea that could be a key piece to the "puzzle" enabling a true digital home.