We are very excited today to announce our investment in Bamboom Labs (now Aereo). This opportunity brings together all things one could ask for in a venture investment – a great team, a big, disruptive idea, a large market, and a cool web site.
Bamboom was started by Chet Kanojia, an entrepreneur I had the great fortune to invest in and get to know for many years at Navic Networks. Navic was an outstanding company bought by Microsoft in 2008 in a very successful outcome. They were one of the few positive, large exits in the interactive television space, and Chet’s leadership was a big part of that. Chet’s last round of capital came just after the bubble burst in 2001, and he managed it brilliantly until our ultimate exit. Joining Chet at Bamboom as CTO is Joe Lipowski. Joe is a brilliant technologist and RF engineer we’ve known for a long time as well. We backed the spin out of Celiant from Lucent, and Joe was the CTO at Celiant (acquired by Andrew for $470MM). When Chet began to talk to us about his idea, it was a no-brainer to put the two together. The team around these guys is equally talented and truly best in class.
The idea is quite simple yet technically complex and brilliant. Bamboom wants to enable customers to experience broadcast TV, over the Internet, to any device, without all of the headaches associated with accessing it today. They have combined brilliant RF engineering with wonderful software design to create an incredible consumer experience. More details will emerge as we roll out of closed beta, but suffice to say it looks fantastic. This is what a next generation television experience should look like. Fully integrated, portable, native social integration, rich interactivity. As consumers shift television consumption online, we will see new content, commerce and advertising opportunities that we can only begin to imagine.
We are delighted to partner with Chet and our co-investors on the journey!Read Full Post | Make a Comment ( None so far )
TimeWarner Cable made a lot of news over the last few weeks when they introduced their tiered pricing strategy for high speed data services. The plans ranged from $15 to $150/month depending on the amount of bandwidth consumed. Their argument was that: 1) as a facilities based provider, the growth in network usage is forcing their costs to go up, which they need to recoup; and 2) this should reduce the bill for the many customers that don’t use even the lowest level of usage (so the poor user saves) and affect the super users who extract massive benefits for the network (and the rich user pays). From TWC’s COO, “When you go to lunch with a friend, do you split the bill in half if he gets steak and you have a salad?” I’m not opposed to the rationale in concept, but I do think there are several issues with it.
Plenty of people have talked about how the magic of photonics over fiber based plant has reduced the marginal cost of adding bandwidth fairly significantly. Bandwidth has an advantage over Moore’s law, in that it has two dimensions which can demonstrate improvement: concurrency of streams (number of waves sent over a medium) and rate of modulation/encoding of those streams (10Gb/s, 40 Gb/s, 100 Gb/s, etc). That multiplication creates huge drops in the cost of providing an incremental bit.
More telling to me is how vehemently the Cable industry fought a-la-carte pricing for television. This was the idea of forcing the MSOs to allow consumers to pick the channels they wanted to subscribe to and only pay for those a-la-carte, rather than the current model of buying a monolithic stack of hundreds of channels, where the vast majority are never consumed. In the interest of philosophical consistency, wouldn’t the a-la-carte argument be just as eligible for the “consumption based pricing” label as the data plan argument? I tend to think so, and can only reason that it’s simply not in their economic interest to offer that argument.
Clearly, the industry has no interest in shooting its cash cow in the foot. It is only natural to fight the mandated a-la-carte pricing. But the industry can also not be blind to outside threats. The availability of premium shows online in high quality over the Internet, the rise of on demand time and place shifted viewing, and the high broadband penetration rate has created a competitor to the proprietary, linear world of COAX. I tell many people that if ESPN360.com were not blocked by TimeWarner, I would have little reason to pay the $160/month I currently pay for cable television and high speed data. I’d be able to watch live streaming sports via ESPN360 or CBSSports for March Madness, and I’d watch the 5-7 shows I DVR online at HULU, Boxee, or some other destination. All of a sudden, my $160/month bill would be compressed to just over $40 for unlimited data access.
I’m sure the executives at the various cable companies have also done that math. And I believe they see customers doing it at a much more rapid pace. What better way to ensure one’s revenues are not cannibalized, and in fact be allowed to thrive, than to introduce consumption based pricing for data. In order to stream a few HD shows a few times a month would automatically push one into the $150-200/month category group of consumer. At that price point, the MSOs are absolutely indifferent to whether I watch my shows over their proprietary network or over the Internet on my data pipe. You can go a-la-carte but pay them just as much. In fact, they probably are incented to switch me over for revenue generation and cost efficiency gains – it’s way more profitable for them!
The path ahead will be tricky. TimeWarner has already rescinded plans for testing of tiered pricing, because of the consumer fury it has set off. If they move too quickly, they risk net neutrality legislation being thrust upon them. Better to let consumers think they won and come out with another plan, lest their hands get tied. But I think we are crazy to think tiers won’t be introduced somehow in the future. The MSOs are too smart to let their analog dollars get turned into digital quarters.
What do you think? Am I being too skeptical?Read Full Post | Make a Comment ( 3 so far )
Today, I attended the kick-off dinner to the NYC Economic Development Center’s efforts to shape and support NYC’s position as the media capital of the world for the next decade. The event was held at Gracie Mansion, and included 40-50 of the media industry’s most notable names. It was a great cross-section – from traditional media to the largest ad agencies to the newest digital media properties to deans of the leading NY universities to various NYC venture capitalists – all assembled to discuss the changes affecting the industry, and specifically how the city can create long term initiatives to ensure NYC remains the media capital in 2020.
The city seems to take this project quite seriously. It’s hired Oliver Wyman as lead consultants, it is setting up a website that will leverage the latest technologies to facilitate the dialogue, and has set up a rigorous program by which to have regular discourse and detailed action items.
The session was kicked off by Mayor Bloomberg, who spent much of his time talking about the need for hope and the belief that the bad times would eventually yield a strong recovery. He made a number of interesting points, including highlighting an article by Fareed Zakariya that talked about how Canada has had zero bank failures, managed consistent government budget surpluses, has home ownership at the same rate as America without the tax deductibility of mortgage interest payments, and has been growing as a country largely on the backs of sound fiscal policy, common sense and an open immigration policy. He mentioned a number of interesting statistics about NYC, including that it had more fashion houses than Paris, and took the occasional shot at the folks in Albany. He also pointed out NYC’s fiscal discipline in cutting expenses in the budget by $3 billion. It felt like he was beginning his campaign.
After the Mayor spoke, members of the NYC EDC set the stage about the media industry in NYC. Some relevant facts:
· Media is the second largest industry in NYC, behind financial services;
· Media employs over 300,000 people, representing 10% of the total, and over $30 billion in revenues;
· The 305 large and very large media businesses accounted for only 50% of the media jobs in the city, the remaining 50% came from the 15,000 small and medium sized businesses in the city (driving the point home that supporting innovation and small businesses are high on the agenda).
We then transitioned to a plenary session discussing the positives and negatives of doing business in NYC, and the key issues we would need to deal with to ensure the “Media NYC 2020” vision. The highlights included:
· NYC is still “the place” young people want to be, for its energy, arts, culture, and unique mix of people, and that is an important characteristic to maintain and support;
· The lines between media and technology are blurring, and there is a strong need to improve the quality of the engineering and development talent to face this growing trend, lest Silicon Valley keep all the technology spoils to itself;
o Many examples of how media firms have simply put their technology development in different geographies because they could not find the needed talent in NYC;
o A universal sentiment that NYC needed to establish a “Media Center” that brought together academia, industry, and the bleeding media technology issues in a similar manner that MIT has done for Boston/Cambridge or Stanford for the Valley;
o Discussions about creating engineering scholarship programs to attract the best and smartest students from around the globe to the city;
o Discussions about tax incentives and credits for startups to combat both the higher cost of living and the more lucrative salaries that financial services firms had paid techies. One radical idea of creating tax free zones as some other foreign countries have done to foster community and innovation;
· In the debate about whether the city should support “traditional media” or “new media”, an acknowledgement by several that “big media” could not lead the charge, as it is facing a fundamental shift in market forces and will be permanently in a cost optimization mode for its legacy products. The key is not who should be protected, but that the industry of content creation, aggregation, distribution, and monetization be supported without regard to old or new so that NYC maintains its status as media capital.
It was an interesting night filled with plenty of good conversation. What other suggestions would you have for the folks at the NYC EDC? Please post them here, and I’ll be sure to pass them along!Read Full Post | Make a Comment ( 2 so far )
I moderated a panel this past week at the AlwaysOn OnMedia conference in NYC. It was an opportunity to get behind what the “big media” folks are thinking in this economy, and how they interact with startups. The panelists were Jessica Schell, SVP, NBC Universal; Walker Jacobs, SVP at Turner Digital; Vivek Shah, Group President Digital, Time; Jim Spanfeller, President, Forbes.com; and Sanjaya Krishna, Principal & US Digital Services Leader, KPMG. Below are the most interesting takeaways I got from the session. For the full panel, click here.
· On the overall economy, as expected most of the panelists indicated it was tough going out there, and they were focused on partnerships that drove revenue. In fact, given the pressures in the broader market, they were “more open than ever” to partner. Some of the panelists highlighted their willingness to do deals in areas like content as evidence of that openness.
· One of the key challenges they saw in unlocking more digital dollars was translating brand advertising into value online. One of the more interesting ideas was from Vivek Shah, who said that while growth in performance based advertising in a recession is to be expected (as demonstrated by the most recent Google and Yahoo quarterly results), it is akin to harvesting crops. It’s easy to pull in more food near term by harvesting more (search) but if you don’t plant any seeds (brand advertising), you may find yourself without crops in the future.
· All the panelists want to find ways to drive additional lift and yield – the “optimization” problem has still not been solved. Each were working with various contextual, behavioral, and other techniques to try and improve CPMs and deliver a more compelling story for this medium versus other areas of spend to advertisers. There were a few areas of strength highlighted, including in QSRs (quick service restaurants) and entertainment, to go along the usual weak spots of finance and autos.
· In defense of traditional media, the panelists pointed out that people turned first to CNN when news of the airplane landing in the Hudson River broke, not the blogosphere. The panel expressed a need for better curation tools.
· There was lots of discussion around the dearth or plethora of data online, and the need to make better sense of it all. Data standardization continues to be a recurring theme.
· Time Warner and NBCU both highlighted their investment arms (Time Warner Investments and Peacock Equity Fund) as one way to get introduced and a way for them to learn about startups, but quickly pointed out that the best way was to get a direct operational relationship. An investment did not guarantee a deal, and a deal did not guarantee an investment.
· In terms of mistakes startups make when engaging with big media, the panel offered the following advice: 1) don’t present a deal that assumes you’d capture the lion share of the economics out of the gate; 2) set expectations appropriately – start small and prove success rather than promising the moon; 3) focus on how to drive revenues in this environment; 4) know what items they are willing to outsource and what items they would never (such as the sales relationship).
· I concluded asking the panel what company they would start knowing the problems they currently faced in their environments. The answers: a next generation data exchange, improving the mobile experience, new back office systems designed for the digital era, improving operational efficiencies.
It was a fun panel to moderate. The panel cited numerous examples of startups they have successfully partnered with to drive mutual value, but it was clear there was a long way to go. Those of us part of the startup ecosystem should take heart!Read Full Post | Make a Comment ( None so far )