JACOPO GIOLA

The technology industry is trying to address that question for the millions of customers ready to embrace the next generation of viewing options. In the process it could transform the clunky cable interface, with its thousands of channels and a bricklike remote control, into a series of apps that pop up on the television screen.

While still in its early stages, the idea has taken off among tech-loving consumers, and companies are trying to satisfy them. Already, apps for Hulu Plus, Netflix and Wal-Mart’s Vudu streaming service, among others, are built into Internet-enabled televisions. Devices like Microsoft’s Xbox 360 and the streaming video player Roku let viewers watch apps that mimic channels. New sets by Samsung and others come with built-in apps loaded with television shows, movies and sports.

Apple has a video player called Apple TV with apps to Netflix, Major League Baseball and other content. Many media executives predict Apple will ultimately enter the television market in a more aggressive way, with either a new set-top box or an Apple-made TV set. Both would rely on apps scattered across the screen as they are on the iPad. Apple declined to comment.

“I’ve told my bosses, ‘This is beachfront real estate. Buy in now,’ ” Lisa Hsia, executive vice president of digital media at NBCUniversal’s Bravo channel, said of developing TV apps.

A model built around TV apps, however, could let viewers use favorite apps on the screen on an á la carte basis, thus bypassing cable subscriptions and all the extraneous channels they don’t watch. And therein lies the tension that has the television industry delicately assessing how to balance the current system with an Internet-based future that some feel is inevitable.

“The question that hasn’t yet been answered is whether television viewing will consist of a single app that mimics the pay TV bundle or a series of different apps that together form a content experience,” said Jon Miller, the chief digital officer at News Corporation, which owns Fox Broadcasting and cable channels like Fox News and FX.

À la carte apps would upend the entrenched and lucrative economics of television, which have long relied on a system in which cable customers pay for channels even if they don’t watch them.

The so-called bundle setup helps little-watched channels bring in revenue from monthly cable fees and allows the most popular channels to get high fees from every subscriber, even the ones who don’t watch them.

The idea of undermining this model is so sensitive that media executives who think that apps are the future of television would not discuss the subject publicly, for fear of disturbing their cable and satellite partners.

But many analysts caution against predicting the near-term demise of cable and satellite delivery, pointing out that the spending and viewing habits of consumers are also firmly entrenched.

“The model we have is the model we have, and while it’s tempting to imagine an app for TNT and an app for ESPN, that’s not the likely outcome,” said Craig Moffett, an analyst at Sanford C. Bernstein & Company. À la carte apps might seem like a bright idea, Mr. Moffett said, but it is unlikely consumers would pay $20 a month for individual channels when the traditional cable bundle provides a bargain price.

Currently, most TV apps created by networks work on an authentication model that requires cable subscribers to log in before gaining access to a channel’s app. The handful of apps already available on television screens also largely require a cable subscription.

For the most part, the apps being offered today are intended as complements to traditional TV viewing and are available only on tablets and mobile devices. For instance, NBC Sports will soon introduce its NBC Olympics Live Extra app, which will allow subscribers to stream every Olympic event from London this summer. It is available only on iPads, tablets and other mobile devices, not on TV screens through Xbox or Roku.

“No one on the digital side wants to take away audience from the TV,” said Rick Cordella, vice president and general manager for NBC Sports Digital.

Time Warner’s HBO still relies heavily on the cable bundle because it does not have the customer service or sales force of a company like Comcast or Time Warner Cable. But HBO Go does allow subscribers to have access to the pay channel’s library of almost every series, movie, documentary and heavyweight fight directly on the TV screen, via the Xbox.

“The HBO Go app is seen as a doorway into the entire world of HBO programming,” said Eric Kessler, co-president at HBO. “That adds tremendous value to the subscription.”

As such, HBO Go could help the channel lay the groundwork to eventually break out on its own on an à la carte basis, even if that might not happen soon, said James McQuivey, an analyst at Forrester Research. “HBO has the largest subscriber base of any video service in the world, but they know none of their customers by name,” Mr. McQuivey, said. “That will be a huge liability in the future. HBO knows that; that’s why they need a direct relationship.”

The ability of any channel to strike out on its own, even strong ones like HBO or the Walt Disney Company’s ESPN, remains problematic. ESPN makes about $5 a month from each of the country’s more than 100 million cable subscribers. If ESPN ever sold its live sports and talk shows directly to the consumer, it would need to charge several times that rate. “We have no plans to bisect our partnerships with distributors,” said Sean Bratches, the ESPN executive vice president for sales and marketing.

But just as with previous transformations in television, the economics will have to catch up as technology evolves, said Jeremy Allaire, chief executive of Brightcove, a technology firm based in Boston that builds apps for media companies.

By 2014, an estimated 89.5 million people in the United States will use tablet computers, up from 54.8 million users in 2012, according to the research firm eMarketer. “You have to achieve scale before the economics will work,” Mr. Allaire said. “But at some point, we think direct-to-consumer will be very important.”

That model may prove attractive to smaller cable channels, many of whom dislike how they are buried within the traditional electronic guides that viewers use to navigate their cable boxes.

Bigger cable channels may find it appealing as well. The head of digital strategy at one major channel said he was excited about the idea of having an app that sat on the home screen of a television. It would provide a “safer passage” to eventually sell the channel directly to customers, rather than through a cable package, said the executive, who declined to be identified to avoid upsetting the company’s cable partners.

Cable and satellite companies have sped up the development of their own TV apps in the hope that they will eventually mimic the set-top box. In an ideal cable industry model, customers will have one or two apps that offer hundreds of channels rather than dozens of apps for individual networks. “You download all these apps, and then you get app fatigue,” said Matt Strauss, Comcast Cable’s senior vice president for digital and emerging platforms.

“Apps create amazing experiences,” Mr. Strauss said. “But I believe most customers and households are still looking for an aggregated experience that’s intuitive and personalized.”

AP See Also THE APPLE INVESTOR: The iPad Is The New TV Here's What America's 10 Richest Companies Do With Their Extra Cash Chelsea Handler's Career Is Crashing And Burning

Intel has been talking to media companies about delivering pay-TV programming, and has even begun requesting rate cards to see how much it would cost to license shows.

That's according to the Wall Street Journal, which says the service would use Intel-made set-top boxes, an Intel interface, and might even carry the Intel brand. The service could come out late this year.

This sounds doomed from the get-go.

Every other effort by tech companies to replace TV has failed. Google TV, Apple TV, Boxee -- none of them have dented the growth of pay-TV services at all. Cable TV providers have seen some defections, but mostly to phone companies providing TV over fiber networks, like Verizon and AT&T.

It's really hard to see Intel succeeding where other tech companies have failed. It doesn't sell to consumers. It has no experience in the media business.

It doesn't even have a great track record providing hardware to the TV business, either. Intel had a partnership with Google for the first generation of Google TV, but Google reportedly switched to ARM-based technology and Intel shut down the group making the processors for the box.

See also: The History Of Interactive TV Failures Leading Up To Steve Jobs' Final "One More Thing"

 

 

One day I’m sure everyone will routinely collect all sorts of data about themselves. But because I’ve been interested in data for a very long time, I started doing this long ago. I actually assumed lots of other people were doing it too, but apparently they were not. And so now I have what is probably one of the world’s largest collections of personal data.

Every day—in an effort at “self awareness”—I have automated systems send me a few emails about the day before. But even though I’ve been accumulating data for years—and always meant to analyze it—I’ve never actually gotten around to doing it. But with Mathematica and the automated data analysis capabilities we just released in Wolfram|Alpha Pro, I thought now would be a good time to finally try taking a look—and to use myself as an experimental subject for studying what one might call “personal analytics”.

Let’s start off talking about email. I have a complete archive of all my email going back to 1989—a year after Mathematica was released, and two years after I founded Wolfram Research. Here’s a plot with a dot showing the time of each of the third of a million emails I’ve sent since 1989:

The first thing one sees from this plot is that, yes, I’ve been busy. And for more than 20 years, I’ve been sending emails throughout my waking day, albeit with a little dip around dinner time. The big gap each day comes from when I was asleep. And for the last decade, the plot shows I’ve been pretty consistent, going to sleep around 3am ET, and getting up around 11am (yes, I’m something of a night owl). (The stripe in summer 2009 is a trip to Europe.)

But what about the 1990s? Well, that was when I spent a decade as something of a hermit, working very hard on A New Kind of Science. And the plot makes it very clear why in the late 1990s when one of my children was asked for an example of “being nocturnal” they gave me. The rather dramatic discontinuity in 2002 is the moment when A New Kind of Science was finally finished, and I could start leading a different kind of life.

So what about other features of the plot? Some line up with identifiable events and trends in my life, sometimes reflected in my online scrapbook or timeline. Others at first I don’t understand at all—until a quick search of my email archive jogs my memory. It’s very convenient that I can always drill down and read a raw email. Because as with essentially any long-timescale data project, there are all kinds of glitches (here like misformatted email headers, unset computer clocks, and untagged automated mailings) that have to be found and systematically corrected for before one has consistent data to analyze. And before, in this case, I can trust that any dots in the middle of the night are actually times I woke up and sent email (which is nowadays very rare).

The plot above suggests that there’s been a progressive increase in my email volume over the years. One can see that more explicitly if one just plots the total number of emails I’ve sent as a function of time:

Again, there are some life trends visible. The gradual decrease in the early 1990s reflects me reducing my involvement in day-to-day management of our company to concentrate on basic science. The increase in the 2000s is me jumping back in, and driving more and more company projects. And the peak in early 2009 reflects with the final preparations for the launch of Wolfram|Alpha. (The individual spikes, including the all-time winner August 27, 2006, are mostly weekend or travel days specifically spent “grinding down” email backlogs.)

The plots above seem to support the idea that “life’s complicated”. But if one aggregates the data a bit, it’s easy to end up with plots that seem like they could just be the result of some simple physics experiment. Like here’s the distribution of the number of emails I’ve sent per day since 1989:

What is this distribution? Is there a simple model for it? I don’t know. Wolfram|Alpha Pro tells us that the best fit it finds is to a geometric distribution. But it officially rejects that fit. Still, at least the tail seems—as so often—to follow a power law. And perhaps that’s telling me something about myself, though I have to say I don’t know what.

The vast majority of these recipients are people or mailgroups within our company. And I suspect the overall growth is a reflection of both the increasing number of people at the company, and the increasing number of projects in which I and our company are involved. The peaks are often associated with intense early-stage projects, where I am directly interacting with lots of people, and there isn’t yet a well-organized management structure in place. I don’t quite understand the recent decrease, considering that the number of projects is at an all-time high. I’m just hoping it reflects better organization and management…

OK, so all of that is about email I’ve sent. What about email I’ve received? Here’s a plot comparing my incoming and outgoing email:

The peaks in 1996 and 2009 are both associated with the later phases of big projects (Mathematica 3 and the launch of Wolfram|Alpha) where I was watching all sorts of details, often using email-based automated systems.

OK. So email is one kind of data I’ve systematically archived. And there’s a huge amount that can be learned from that. Another kind of data that I’ve been collecting is keystrokes. For many years, I’ve captured every keystroke I’ve typed—now more than 100 million of them:

There are all kinds of detailed facts to extract: like that the average fraction of keys I type that are backspaces has consistently been about 7% (I had no idea it was so high!). Or how my habits in using different computers and applications have changed. And looking at the daily totals, I can see spikes of writing activity—typically associated with creating longer documents (including blog posts). But at least at an overall level things like the plots above look similar for keystrokes and email.

What about other measures of activity? My automated systems have been quietly archiving lots of them for years. And for example this shows the times of events that have appeared in my calendar:

The changes over the years reflect quite directly things going on in my life. Before 2002 I was doing a lot of solitary work, particularly on A New Kind of Science, and having only a few scheduled meetings. But then as I initiated more and more new projects at our company, and took a more and more structured approach to managing them, one can see more and more meetings getting filled in. Though my “family dinner stripe” remains clearly visible.

Here’s a plot of the daily average total number of meetings (and other calendar events) that I’ve done over the years:

The trend is pretty clear. And it reflects the fact that in the past decade or so I’ve gradually learned to work better “in public”, efficiently figuring things out while interacting with groups of people—which I’ve discovered makes me much more effective both at using other people’s expertise and at delegating things that have to be done.

It often surprises people when I tell them this, but since 1991 I’ve been a remote CEO, interacting with my company almost exclusively just by email and phone (usually with screensharing). (No, I don’t find videoconferencing with the company very useful, and the telepresence robot I got recently has mostly been standing idle.)

So phone calls are another source of data for me. And here’s a plot of the times of calls I’ve made (the gray regions are missing data):

Yes, I spend many hours on the phone each day:

And this shows how the probability to find me on the phone varies during the day:

This is averaged over all days for the last several years, and in fact I’m guessing that the “peak weekday probability” would actually be even higher than 70% if the average excluded days when I’m away for one reason or another.

Here’s another way to look at the data—this shows the probability for calls to start at a given time:

There’s a curious pattern of peaks—near hours and half-hours. And of course those occur because many phone calls are scheduled at those times. Which means that if one plots meeting start times and phone call start times one sees a strong correlation:

I was curious just how strong this correlation is: in effect just how scheduled all those calls are. And looking at the data I found that at least for my external phone meetings at least half of them do indeed start within 2 minutes of their appointed times. For internal meetings—which tend to involve more people, and which I normally have scheduled back-to-back—there’s a somewhat broader distribution, shown on the left.

When one looks at the distribution of call durations one sees a kind of “physics-like” background shape, but on top of that there’s the “obviously human” peak at the 1-hour mark, associated with meetings that are scheduled to be an hour long.

So far everything we’ve talked about has measured intellectual activity. But I’ve also got data on physical activity. Like for the past couple of years I’ve been wearing a little digital pedometer that measures every step I take:

And once again, this shows quite a bit of consistency. I take about the same number of steps every day. And many of them are taken in a block early in my day (typically coinciding with the first couple of meetings I do). There’s no mystery to this: years ago I decided I should take some exercise each day, so I set up a computer and phone to use while walking on a treadmill. (Yes, with the correct ergonomic arrangement one can type and use a mouse just fine while walking on a treadmill, at least up to—for me—a speed of about 2.5 mph.)

OK, so let’s put all this together. Here are my “average daily rhythms” for the past decade (or in some cases, slightly less):

The overall pattern is fairly clear. It’s meetings and collaborative work during the day, a dinner-time break, more meetings and collaborative work, and then in the later evening more work on my own. I have to say that looking at all this data I am struck by how shockingly regular many aspects of it are. But in general I am happy to see it. For my consistent experience has been that the more routine I can make the basic practical aspects of my life, the more I am able to be energetic—and spontaneous—about intellectual and other things.

And for me one of the objectives is to have ideas, and hopefully good ones. So can personal analytics help me measure the rate at which that happens?

It might seem very difficult. But as a simple approximation, one can imagine seeing at what rate one starts using new concepts, by looking at when one starts using new words or other linguistic constructs. Inevitably there are tricky issues in identifying genuine new “words” etc. (though for example I have managed to determine that when it comes to ordinary English words, I’ve typed about 33,000 distinct ones in the past decade). If one restricts to a particular domain, things become a bit easier, and here for example is a plot showing when names of what are now Mathematica functions first appeared in my outgoing email:

The spike at the beginning is an artifact, reflecting pre-existing functions showing up in my archived email. And the drop at the end reflects the fact that one doesn’t yet know future Mathematica names.  But it’s interesting to see elsewhere in the plot little “bursts of creativity”, mostly but not always correlated with important moments in Mathematica history—as well as a general increase in density in recent times.

As a quite different measure of creative progress, here’s a plot of when I modified the text of chapters in A New Kind of Science:

I don’t have data readily at hand from the beginning of the project. And in 1995 and 1996 I continued to do research, but stopped editing text, because I was pulled away to finish Mathematica 3 (and the book about it). But otherwise one sees inexorable progress, as I systematically worked out each chapter and each area of the science. One can see the time it took to write each chapter (Chapter 12 on the Principle of Computational Equivalence took longest, at almost 2 years), and which chapters led to changes in which others. And with enough effort, one could drill down to find out when each discovery was made (it’s easier with modern Mathematica automatic history recording). But in the end—over the course of a decade—from all those individual keystrokes and file modifications there gradually emerged the finished A New Kind of Science.

It’s amazing how much it’s possible to figure out by analyzing the various kinds of data I’ve kept. And in fact, there are many additional kinds of data I haven’t even touched on in this post. I’ve also got years of curated medical test data (as well as my not-yet-very-useful complete genome), GPS location tracks, room-by-room motion sensor data, endless corporate records—and much much more.

And as I think about it all, I suppose my greatest regret is that I did not start collecting more data earlier. I have some backups of my computer filesystems going back to 1980. And if I look at the 1.7 million files in my current filesystem, there’s a kind of archeology one can do, looking at files that haven’t been modified for a long time (the earliest is dated June 29, 1980).

Here’s a plot of the latest modification times of all my current files:

The colors represent different file types. In the early years, there’s a mixture of plain text files (blue dots) and C language files (green). But gradually there’s a transition to Mathematica files (red)—with a burst of page layout files (orange) from when I was finishing A New Kind of Science. And once again the whole plot is a kind of engram—now of more than 30 years of my computing activities.

So what about things that were never on a computer? It so happens that years ago I also started keeping paper documents, pretty much on the theory that it was easier just to keep everything than to worry about what specifically was worth keeping. And now I’ve got about 230,000 pages of my paper documents scanned, and when possible OCR’ed. And as just one example of the kind of analysis one can do, here’s a plot of the frequency with which different 4-digit “date-like sequences” occur in all these documents:

Of course, not all these 4-digit sequences refer to dates (especially for example “2000″)—but many of them do. And from the plot one can see the rather sudden turnaround in my use of paper in 1984—when I turned the corner to digital storage.

What is the future for personal analytics? There is so much that can be done. Some of it will focus on large-scale trends, some of it on identifying specific events or anomalies, and some of it on extracting “stories” from personal data.

And in time I’m looking forward to being able to ask Wolfram|Alpha all sorts of things about my life and times—and have it immediately generate reports about them. Not only being able to act as an adjunct to my personal memory, but also to be able to do automatic computational history—explaining how and why things happened—and then making projections and predictions.

As personal analytics develops, it’s going to give us a whole new dimension to experiencing our lives. At first it all may seem quite nerdy (and certainly as I glance back at this blog post there’s a risk of that). But it won’t be long before it’s clear how incredibly useful it all is—and everyone will be doing it, and wondering how they could have ever gotten by before. And wishing they had started sooner, and hadn’t “lost” their earlier years.

First we need Data, our own Data, collected in 1 place, than we can develop all sorts of Me Centred Services and Apps #EmotionalWeb

Well, that was quick. Two weeks ago, media mogul Barry Diller announced an ambitious cloud-based TV service that streams over-the-air channels to internet devices for $12 a month. This week, broadcasters offered their opinion in the form of a lawsuit that seeks to shut off the service which is set to go live on March 14.

Fox (NSDQ: NWS), Univision and PBS filed a complaint in Manhattan federal court that claims Aereo infringes their copyright and that the upstart’s technology fails to qualify for a legal loophole.

SEE ALSO: Why The Diller-Backed Aereo Will Need Some Fancy Lawyers

Aereo works by taking over the air signals that are free to everyone and retransmitting them to individual “dime-sized antennas” that let consumers watch the content on internet devices.

Aereo plans to launch its service in Brooklyn and then roll it out across the company to subscribers who will pay $12 a month.

The company’s pitch is: “Live Broadcast TV, meet the Internet. Finally. With Aereo you can now watch live, broadcast television online. On devices you already have. No cable required.”

As my colleague Daniel Frankel recently explained, the broadcasters were unlikely to let Aereo open shop in peace after they had spent years fighting to extract lucrative carriage fees from cable companies to reproduce their channels.

Aereo is another in a succession of internet companies that have sought to disrupt traditional TV-watching. Many of the others have been sued out of existence; and Aereo has said it is anticipating a legal challenge and has a theory to get around the copyright issue.

That theory is likely to turn on a distinction rooted in the analog era that distinguishes between transmitting to one or to many viewers. Cablevision (NYSE: CVC), for instance, successfully defended its remote digital video recorder technology, after an appeals court found that there was no transmission to the public. Under the plan, each individual subscriber was connected to their own dedicated DVR at Cablevision’s head end, in much the way each Aereo subscriber is linked to their own personal dime-sized digital antenna.

In their complaint against Aereo, the broadcasters argue, “It simply does not matter whether Aereo uses one big antenna to receive Plaintiffs’ broadcasts .. or ‘tons’ of ‘tiny’ antennas .. No amount of technological gimmickry by Aereo or claims of sophisticated ‘rabbit ears’ change the fundamental principle of copyright.”

The broadcasters are seeking damages and a permanent injunction.

Update: A second group of broadcasters, including ABC (NYSE: DIS), filed a related lawsuit. Aereo has since responded with a statement saying the suits have no merit. Here is the legal tack Aereo plans to take:

Consumers are legally entitled to access broadcast television via an antenna and they are entitled to record television content for their personal use.

Broadcasters v. Aereo

Related Stories

• Why The Diller-Backed Aereo Will Need Some Fancy Lawyers

Apple screenshot

One of the coolest features in Apple's new desktop operating system, Mountain Lion, is AirPlay.

AirPlay already exists for the iPad and iPhone, but this version appears to be extend what AirPlay can do.

This new version is going to make life much better for users, and much less comfortable for big media companies.

If you're unfamiliar with AirPlay, here's how it works. You can wirelessly beam what's on the screen of your iPhone, iPad, or Mac to your TV, if you have an AppleTV, and have it running through your HDTV.

With Mountain Lion, this means you can send "webpages, YouTube videos, iTunes rentals, Keynote presentations, or anything else you can think of onto an HDTV without any added wires," says Jason Snell at MacWorld, who had some time to demo Mountain Lion.

If this is accurate, and you really can send webpages to your TV, it should scare the crap out of media companies who are doing everything they can to prevent themselves from being disrupted by TV on the internet.

If you can easily beam Safari to your TV, it makes pirated video streams that much more attractive. You can watch them on the big screen with ease.

It will also fluster Hulu. Hulu blocks Boxee and GoogleTV from broadcasting Hulu, even though both of them are web-based. There is code in GoogleTV and Boxee that tips off Hulu about what people are using.

Why does Hulu do this? We're not entirely sure, but it seems like Hulu's corporate parents don't like the idea of people watching free shows on big screen TVs. It's too similar to regular TV, without generating enough revenue. To solve the revenue problem, Hulu wants people to pay for Hulu Plus, which gives access to different devices.

Hulu isn't alone in blocking Google TV. ABC, CBS, NBC and all other media sites block it too.

With AirPlay, they won't know what's what. It will just be a Safari or Chrome or Firefox browser. And users will be able to get the big screen experience.

We'll be curious to see how Hulu and other media companies react.

Don't Miss: A Photo Tour Of All The Cool Stuff In Mountain Lion, Apple's New Operating System

Broadcasters have a history of squashing disruptive technologies in court—and the new cord-cutting service Aereo could well be their next target.

SEE ALSO: In Battle With MPAA, Zediva Is Down For The Count

New York-based Aereo, which has received the bulk of its $25 million in funding from Barry Diller’s IAC (NSDQ: IACI), believes it has found a legal way to channel broadcast-network signals to its users without having to pay the same costly re-transmission fees cable, satellite and telco TV service providers do.

Since each subscriber will use his or her own dedicated dime-sized antenna, located at Aereo’s Brooklyn, N.Y., head end, to receive their signal, the company says it is not subject to the same retransmission responsibilities as say, Comcast (NSDQ: CMCSA) or DirecTV (NYSE: DTV).

Officials for representative body the National Association of Broadcasters have yet to issue a statement about Aereo. But speaking to reporters at a Manhattan press conference Tuesday, Aereo founder and CEO Chet Kanojia said, “We understand there will be challenges.”

Just within the last few years, broadcast networks including ABC (NYSE: DIS), CBS (NYSE: CBS), Fox (NSDQ: NWS) and NBC have begun demanding fees from cable, satellite and telco service providers to re-transmit their signals. With cable networks commanding millions of dollars to have their feeds carried, broadcasters successfully argued that it’s only fair that the networks running TV’s most popular content should be compensated for carriage, too.

These retransmission fees have quickly become vital pieces of the networks’ bottom line, with CBS expected to take in more than $250 million in retrans compensation this year. According to SNL Kagan, so-called retransmission consent fees are expected to total around $3.6 billion by 2017. That’s not quite the $9.3 billion in advertising revenue that broadcasters secured at last spring’s record upfront market, but it’s an increasing portion of the total revenue pie nonetheless.

Even with retransmission fees at that level, CBS Corp. president and CEO Les Moonves told investors last year that his company is “vastly underpaid,” given the huge audiences and big programming events found on CBS relative to even the biggest cable networks.

What’s more, broadcasters have a history of fighting disruptive technologies like Aereo. Just last year, for example, they won a U.S. District Court injunction against Ivi TV, which was also streaming the signals of broadcast stations without gaining consent or paying re-transmission fees.

The legality of Aereo, which provides its subscribers with the ability to record local broadcast signals on a virtual dual-tuner DVR for $12 a month, is unclear. (Aereo was formerly named Bamboom.) For example, last year the studios were able to stop Zediva from operating a streaming service that let subscribers access their own virtual DVD player. But on the other hand, Cablevision (NYSE: CVC) was able to defend its remote-storage DVR when it was challenged in court by a host of cable networks.

In fact, that appeals-court ruling – which said it doesn’t matter where a DVR is located, as long as its for personal subscriber use—could have special relevance for Aereo’s claims to legitimacy.

“Each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber,” read a federal appeals court ruling. “We conclude that such transmissions are not performances ‘to the public,’ and therefore do not infringe any exclusive right of public performance.”

Related Stories

• In Battle With MPAA, Zediva Is Down For The Count
• MPAA To Court: Shut Down Zediva's Illegal DVD-Streaming Service

Evidence is slowly emerging that Apple could be working with operator partners for the introduction of its upcoming iTV product. Last week, Bloomberg reported that Apple may get access to programs through partnerships with carriers such as AT&T and Verizon. And Tuesday the Globe and Mail reported that Apple is pursuing partnerships with Canadian operators Rogers and BCE. But why would Apple feel the need to partner? Because doing so would give it a more complete lineup of content, enable it to offer a better user interface and give it wider distribution than if it went it alone.

Interestingly enough, I was discussing the possibility of Apple partnering with operators the other day at lunch, before the Bloomberg piece came out. That first piece might seem like a fluke, as it was written based on an analyst note. But with today’s Globe and Mail story, it seems more likely that the hardware giant is indeed considering some sort of a partnership approach to tackling the TV market.

The move isn’t totally unprecedented: After all, Dish Network was one of Google TV’s launch partners, and Verizon has partnered with Microsoft to make its FiOS TV service accessible through the new Xbox Live user interface.

All the content, none of the fuss

By partnering with pay TV operators, Apple would immediately gain access to all of the TV content that viewers have come to expect, without having to strike up carriage deals of its own. It’s not alone in pursuing this strategy: Microsoft’s Xbox 360, for instance, can be used as a set-top box by AT&T U-Verse and Verizon FiOS subscribers.

In the FiOS case, the program data and channel lineup will be deeply integrated with the Xbox Live service and Bing search engine, which will let viewers discover live TV and video-on-demand content alongside streaming content from services like the Zune Marketplace, Netflix, Hulu Plus, Vudu and YouTube.

I could see Apple doing something similar by allowing operator partners to build integrated apps into the new device, which could be used to control channel lineups and program discovery. For Apple, such a move would give it the content it needs to be relevant, but allow it to control the overall user experience of search, discovery and navigation.

But what would the operators get out of it? Well, for one thing, an integration with the Apple iTV could potentially give them a competitive advantage over their peers. In the U.S., Apple already has relationships with AT&T and Verizon, both of whom could stand to benefit from having the best new iDevice available for customers as they pitch their IPTV services against the more traditional cable offerings. Those operators could be incentivized to push the iTV to their customers and could act as an additional distribution outlet, on top of Apple Stores and the company’s existing big box retail partnerships.

Could AT&T help you buy an iTV?

There’s even the possibility that Apple could bring the same subsidy model that exists in the mobile space to TV operators. To a certain extent, carriers already subsidize TV hardware, by making set-top boxes available to customers. Assuming an Apple TV product would enable those carriers to deliver cloud- and IP-based programming guides, it could act as a set-top box replacement. Whatever money was being put toward that hardware could be committed to reducing the cost of an Apple iTV purchased by subscribers.

A carrier subsidy could potentially boost adoption for an Apple device being launched in a market with traditionally long replacement cycles. Some believe that any introductory Apple TV product would be sold at a premium over existing Smart TVs, and a recent Best Buy survey lends some credence to this belief, polling users if they would spend $1,499 for a 42-inch Apple TV device. I personally doubt that Apple would introduce a new product priced so far above existing products, but if there’s any premium a subsidy could bring products within parity. And if there isn’t a premium, a subsidy could make the product all that more attractive.

iTV not just for partners

Note that I don’t believe that any operator partnerships Apple strikes would be exclusive. In the U.S., Apple would likely partner with multiple providers, since their services are only available in certain geographies. As noted above, AT&T and Verizon are the most likely partners in the U.S., but I don’t think it would shy away from the same type of deal with a company like Comcast.

Nor would the Apple TV be “broken” if purchased direct from a retailer or if a consumer doesn’t subscribe to an Apple partner. They will get all the same third-party apps and TV coming from the customer’s set-top box. There’s even the possibility that non-partners could build their own apps for device search and navigation — in the same way that Comcast, Time Warner Cable and others have built iPad apps that can be used as remote controls. But it won’t have the same tight program guide integration. And if there are subsidies involved, it wouldn’t be as cheap as it would be from Apple’s partners.

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NFLXJan 25 11:00 PM
95.04	Change 2.37	% Change 2.56%

Netflix earnings are out!

It's a beat on the top and bottom line with EPS $0.73 versus $0.55 expected and revenue of $876 million versus $857 million expected.

The stock was up 16% after hours in reaction to the news, but has fallen back and is now up 10%.

Netflix gave midpoint revenue guidance for the first quarter of $860 million with a midpoint guidance for EPS as a loss of $0.33. The revenue beats the street's guidance estimate which was $848 million. However, the EPS guidance is worse than expected, as the street had a midpoint loss of $0.29.

More to come, click here for latest.

We'll be live-blogging Netflix's earnings call starting at 6 p.m.

Below is Netflix's letter to shareholders, which we're reading through now.

Highlights:

• Netflix expects Amazon to offer a standalone streaming service at monthly rate below Netflix.

• Netflix thinks Hulu isn't a threat because it charges people and it throws in advertisements.

• The biggest threat says Netflix is "TV Everywhere" like HBO GO. If popular cable channels figure out a smart streaming plan it's bad news for Netflix.

• It predicts the future of TV, and it sounds cool! "Over the next few years, UIs will evolve in astounding ways, such as allowing viewers to watch eight simultaneous games on ESPN, color coding where the best action is in a given moment or allowing Olympics fans the ability to control their own slow-motion replays. A decade from now, choosing a linear feed from a broadcast grid of 200 channels will seem like using a rotary dial telephone."

• The DVD business is dying: "While DVD members declined sharply over the last two quarters, the weekly rate of DVD cancellations has subsided from peak levels in September. Looking out across 2012, we expect continued attrition among our DVD members. Specifically, in Q1, we expect net losses of DVD members of approximately 1.5 million, with the sequential decline moderating in future quarters."

• How Netflix will determine if its original programs are a success: "If “Lilyhammer” or “House of Cards” is popular enough on Netflix so that the fees we’ve paid for each are in-line with that of other equally-popular content on Netflix during the same time period, we’ll consider them a success."

Investor Letter Q4 2011

 

LIVE BLOG OF NETFLIX'S EARNINGS CALL

Hey, this is Kevin Lincoln — I'll be live blogging the call, which is underway with CFO David Wells and CEO Reed Hastings.

6:02: Can you help us understand the fixed vs variable components in content deals, and how industry is moving?

Bidding in an industry set by cable, so all deals are fixed. Reflects nature of market, been like that for 10+ years.

6:03: What is your appetite for bidding against HBO when studio deals come up for renewal?

I don't think it's likely that rights will be decoupled. HBO would want both. To win bidding, have to bid for both as we did with Dreamworks. Will continue to be an active bidder.

6:04 Are you comfortable with current levels of content? Anticipate that a slowdown in acquisitions would slow subscribers?

We are rapidly increasing amount spent on content. This quarter increasing spend y/y over 100%. That y/y increase is declining but is substantial increase all through this year. Always want to get more content, and as we get more content will get more subscribers and then more content. Will continue to add more content for very long time.

6:05 How should we think about subscription costs as a % of revenue?

Will vary by market and maturity. Think about it as contribution margin and contribution profit. Did better in Q4 than expected, so taking up target as 11% for Q1 contribution margin. In international markets, still negative, losses will abate as we grow breaking into positive.

6:06 What's driving change in tone and practice in terms of exclusivity of content.

More that we bid against other cable networks, i.e. Mad Men, movies, those other bidders are cable networks that demand full exclusivity against us. So we're essentially pushed into bidding exclusive to succeed. What's driving it is that we're in the first league of cable network buying.

6:07 Even with streaming growing, TV seems to drive subscriptions considerably. How does Netflix do this?

Our view is to be complimentary with complete previous seasons, catch-up TV, and authentication TV-everywhere is way to go for networks. We're comfortable with that because we feel like our segment is broad and big at a low price point. So that's why we're bidding on prior seasons, not current seasons.

6:08 How do you measure success of original programming?

HBO spends 1/3 of budget on original. That would be high-water mark. We're starting much more modestly with originals. Some will be judged by how much it gets viewed, how much it costs, does it attract new subscribers and build Netflix's rep. Will continue to be modest part of our budget until we learn more y by y.

6:09 Can you talk through rationale of making all episodes of Lilyhammer available at once?

Binge viewing, watching episode after episode. Our origianl content strategy emphasizes that brand strength. Not particularly focused on single show for driving retention — all shows.

6:11 Do contracts differentiate you from only web-only or also pay-TV?

It varies, different types of exclusivity in different contracts. Strongest form, Dreamworks, Relativity. Some it's just exclusive in internet SVOD. There's quite a mix there.

6:11 Do you feel like you're in an overbought position re: content?

Feel great about content we've got, not about profit stream this quarter. impact of lower # of subscribers not showing up in quality of content, just in profit stream. Hope to mitigate that as we grow subscriber base and international expansion.

6:13 What % of steraming is on TV vs. mobile/smartphones vs. laptops

Don't discuss publicly

6:13 Why don't add a la carte for new releases?

I don't think there's a lot of brand strength in being everything for everyone. Gain brand strength from being something important and precise. If we were to add pay-per-view it would confuse brand. # of providers who already offer pay-per-view and we have no way to do it better that we know of. Focus on working with partners and keeping clarity of brand. We believe there's a large enough market at $8 unlimited subscription to help us grow very large. Very large niche that we think we can lead.

6:15 What does content underspending mean in 4Q?

Related to contract dates shifting out a month or so, small number.

6:15 Is there a case to be made for relative profitability long term of US vs. international subscriber.

Relative. In any market in which we have strong scale advantage will have higher profitability and vice versa. Part of why we're investing early in as many markets as possible.

6:17 How do you determine you have right ingredients at launch?

Research on consumer preferences, in-market research, all informs our intuition. Learn after launch, what people are viewing, what they like, how much is hi-def, what platforms. Considerable variation between markets.

6:18 Latin America, different income levels and broadband penetration. Might it achieve profitability faster or lower than say Canada?

Latin America, you can infer from earnings letter, is growing slower than Canada did in first quarter launch. Building a new brand in Latin America, more of a U.S. halo in Canada and device penetration. Two things are turning out to be important. Good and possibly great market going forward, but slower profitability than Canada. Will take longer than two years, odds are, to reach profitability in Latin America, aspirational benchmark. Two-year goal internally.

6:21 What is Latin American content like? How is it priced?

Pricing's not an issue, aggressively priced, 99 pesos in Mexico. Most content viewing is Hollywood content, complimented by telenovelas.

6:21 How does piracy in Latin America affect pricing?

If piracy affects, lowers pricing because potential to monetize is lower.

6:22 Why do you dismiss LOVEFiLMS so quickly?

Netflix is easier to use in streaming, LOVEFiLMs is mainly DVD. We have a leg up in streaming experience.

6:22 Four distinct regions. Is there a need to favor one over another?

No, no such need.

6:22 Why did international subs decline quarter-over-quarter?

International freeze — we launched Latin America mid-September, big burst of trials up, no market that we launched in December.

6:23 Do you expect international quarterly losses to begin to decline in Q2?

Yes, will moderate, go down in moderation from Q1 to Q2, dependent on subscriber growth and revenue.

6:23 If DVD business continues to decline, will you consolidate warehouses? How will Post Office closings affect?

Post Office closings have been put off, so no effect. No practical savings to closing centers. Not material, low cost.

6:24 How will consumers react to 56-day release window?

Our DVD subscribers continue to be weighted toward catalog, not new release.

6:25 Adding video games or 3d movies? Premium for those?

Already have 3d movies, Blu-Ray 3d. No plans for video games.

6:25 Seems guidance is suggesting that DVD subscriber contributes 6x more to profits than streaming. Do you still feel it is wise to push toward streaming?

The analysis is well-intentioned but not looking at marginal cost and marginal increment. Marginal streaming subscriber is almost all contribution margins. Marginal DVD has number of variable costs and DVDs fees. Actually profitability of new streaming subscriber, contribution margin is almost twice DVD subscriber. Would like to have someone use both services but if only going to use one, would prefer streaming.

6:26 Why reduced expectations to Q1 margins?

Related to reduce revenue that we discussed in letter, not going down too much. Q4 to Q1 we usually see seasonal reduction in DVD business.

6:27 will Netflix market DVD subscriptions?

No, will keep it stable but not market DVD subscriptions. Keep it running very well. Have looked at it, but not a great take-rate.

6:28 Matching roll-outs of new markets to profitability. Cycle repeating until near global offering?

Yes.

6:28 Looking at competition for streaming rights, Hulu and Amazon doesn't match content of Netflix yet, but do you see their bidding activity picking up?

Very little market just for streaming rights, mostly generalized exploitation rights, and so Hulu Plus and Amazon are very small compared to cable networks that we bid against.

6:29 What are implications of future Apple TV?

No insight on Apple TV, but there is a small 3x3 inch box that Apple invited us on, has been very successful for us, just updated it and added Netflix for Kids, now throughout Latin America, expanded into UK and Ireland, working very well with current Apple TV.

6:30 Why is hours stream a relevant metric?

It's a measure of engagement and scale in terms of widespread use of our service, will not update on quarterly but on milestone basis.

6:31 Could you update on % of subs that are DVD and streaming?

40% of our total streaming subscribers domestically. Continuing to fall.

6:33 How is Facebook integration impacting sub growth in Latin America and Canada?

No direct measurement on what's due to social integration. Look at engagement as driving focus, going very well, excited about possibilites of social TV.

6:34 Update on when app will be available?

In investment letter.

6:34 Apple sold 15 million iPads last quarter, but you don't believe tablets are subscriber acquisition channel. Could they grow?

Not particularly, tablets are very successful and people are watching Netflix on tablets, but not acquistion vehicle, consumption vehicle. Bullish on tablets, investing heavily in it, updated iPad interface, key part of our strategy. We don't comment on useage across devices but investing in tablets because we see increased viewing relative to TV.

6:35 Smart TV?

Smart TV is one of our fastest-growing device categories. Longterm trend is very exciting and positive.

6:36 In hindsight, do you wish you waited on secondary?

Always fun to pick stock prices in hindsight. Relative dilution is unfortunate, but otherwise in much stronger position.

6:37 call-in questions

6:37 Reed, talked about investing in DVD business with Qwikster but now it seems like you're not going to put much more emphasis on DVD from investment standpoint. Do you expect standalone DVD subs to be down each quarter through 2012?

Yes, we expect steady decline every quarter forever in DVD. DVD subscriptions regardless of standalone or not will decline steadily essentially forever.

6:39 Last filing expecting EPS loss for year around offering, how have near-term results on outlook for first quarter affected? Share count?

Referred to investor letter. Share count: 55.4 million diluted share count at end of quarter.

6:40 On Warner home entertainment 56-day window, mentioned in letter improves relationship with Warner. Some investors wondering possibility license more Warner TV content going forward. Is relationship with Warner improved such that it's more likely you could secure Warner content?

Don't believe that we said it improved relationship. Perfectly healthy, respectful relationship. When we're top bidder and make most money, we get content. We don't do them favors, they don't do us favors. Trust and respect.

6:42 Color on Q4 underspending?

It was related to the fact that we had to make some estimates on Netflix button payments and estimates were too high.

6:42 Said won't add new geographies until you return to profitability. Is that quarterly?

Quarterly.

6:43 DVD business has possibility of making more per sub w/ with more disks, etc. Any opportunity for that with streaming?

We think $7.99 is right price for streaming. Feel great about that price, no plans to change that. We will be add various kinds of multi-account options over the year. Those are aimed at providing better experience, so that not all of your kids content shows up for you and not all yours shows up on your kids' account.

6:44 Should be able in the longterm to have a better margin position than HBO, but it depends on our relative scale. Need to be larger in terms of subscriber size. And needs substituion more than compliment.

6:47 Longterm churn?

Not something that we focus on, make it easy for subs to get in and get out, one aspect of membership change is that if we go to your credit card and charge doesn't go through, you're instantly canceled for membership purposes. When card clears you become a member again. That makes churn numbers not sensible which is why we've been focusing on net additions and subscriber growth, not churn. And retention gets better longer sub stays with us.

6:48 is that similar DVD to streaming on same cohort basis?

Roughly in line.

6:49 On Q1 streaming guidance, mentioned that 200k fewer domestic streaming subs in Q1 potentially on subscriber hold: guidance would be 200k higher if it wasn't for that change?

Correct.

6:50 Sense for how you think about mix of marketing and content spend as you're entering new markets?

Can't help on that for competitive reasons. Enter big on both. Each market learning more and more, adjusting.

6:52 Q4 11 subs better than guidance. Why, was December better?

We said in letter that Oct. and Nov. matched and Dec. was stronger, combination of holiday growth adds and fewer cancels than expected.