Yesterday wasn’t a happy day for global markets, but it’s already looking like sanity might prevail. Most on the Street realize that Japan isn’t a large enough chunk of the global economic pie to cause a major disruption even if we presumed that their economy was wrecked—which it’s not. There will be short-term dislocations as Japan’s production and consumption patterns try to restore themselves to normal, and in the longer term Japan will almost surely have a major increase in economic activity as the country rebuilds.
One factor that might have an impact on worldwide investment patterns is a possible selling of foreign assets as Japan funds its rebuilding. Even that’s not likely to have a major impact both because a significant selloff isn’t likely and because Japan isn’t the primary holder of critical foreign financial assets—China is.
In tech, an interesting set of developments comes in the online video space. Netflix is bidding to produce an original series—it’s first—and is rumored to be willing to pay big to get the deal done. At the same time, some networks have objected to Time Warner Cable’s plan to stream video to an in-home iPad. The complaint is that the application isn’t within the covered syndication rights negotiated between the parties.
The TWC application has proved so popular to consumers that the service stalled on excess traffic and has had to be phased back and restructured. This is proof positive, in my view, that the tablet really does change everything in video. It’s big enough to create a good video experience for an individual user, and it can be carried around. It’s clearly the expansion of the TWC program beyond the living room that the networks fear, but it may be that the big risk in video is illustrated not just by the TWC deal but by the combination of this and Netflix.
TV sucks these days, so say most users in my survey (of course, many have said that in the past). There is definitely a growing angst over the quality of primary-network TV, a growing flight of viewers to specialized cable networks. There’s also a flight out of the traditional channelized pattern to VoD and to streaming online video. All of this started off as a flight from perceived loss of quality, combined with increased irritation over the growing intrusion of commercials. However it started, though, the first result of this flight is a change in consumer viewing—a demand for that just-right piece instead of a willingness to watch the least of N evils, where N is the number of regularly viewed channels. Increasing consumer intolerance for all but the just-right exacerbates the flight risk from traditional viewing.
The problem with all of this is that there’s only a certain amount of content available in libraries that can satisfy the new demanding consumer. How many movies on Netflix can someone stream before they’ve used up all that interest them and exhausted their tolerance for re-viewing? The cable networks realize that they have a pretty large library of more timeless (and less viewed) material, and Netflix realizes that even this won’t be enough. What makes Netflix different is that they have subscription revenue right now, and they can use some of it to produce content and possibly pyramid themselves into being an online “network”. They need a hot show with some hot stars to start the process, but recent cable network drama and action series demonstrate that you can make an appealing show without well-known players as long as you have a bully pulpit to launch it from.
All the online video pressure created by the intersection of the more demanding user and the more tablet-mobilized user base is certain to create major network stress, particularly in mobile broadband. I think that the genius of Alcatel-Lucent’s lightRadio scheme is its direct application to the simple truth that broadband wireless will have a very different usage-density pattern than normal wireless. People will watch tablet video where they can stop and smell the roses (or the traffic, or whatever) rather than while roaming about. That focuses video consumption where sedentary behavior is likely, which is in turn focused on waiting areas, restaurants, hotel rooms, etc. Those areas will need much more capacity, and while you could cover them with femtocells or WiFi hotspots, those investments might not translate into as good an ROI as microcells on streets near a row of popular cafés.
All of this could have a major impact on the CDN world, too. If users demand more personalized video, then the notion that 10% of the videos get 90% of the traffic will cease to be valid. That means that traditional VoD models that rely on local servers alone will be stressed because there’s too much video to locally serve, and because tablet mobile behavior is making caching forward toward the user essential in preserving metro capacity and backhaul resources.
Video is getting complicated!