Even If The Supreme Court Ruled In Aereo’s Favor, It Still Had No Viable Business Model

Those who have read my blog before know that I have criticized Aereo’s business from day one. [See: Barry Diller’s OTT Service Aereo Is Dead On Arrival] Not from the standpoint of whether or not the service was operating legally, but rather with the perspective that when it comes right down to it, Aereo’s service simply isn’t compelling for the majority of consumers and never would be. Aereo offers very little in the way of content, with few choices, only average video quality, on only a few devices, with buggy DVR software. This is the exact opposite of what the vast majority of consumers are looking for in the market when it comes to how they want to consume premium content.

As a whole, the media’s coverage of Aereo has been poor in that it hasn’t fostered a conversation about what consumers want and whether or not Aereo was actually providing it. The story should not be about Aereo’s technology, or size of their antennas, but rather about the business models that their technology could or could not support. There is no value of any technology if it is packaged and brought to the market as a service that consumers are not willing to pay for in volume. Many in the media have been blinded by Aereo, thinking and predicting that their technology was going to replace or displace cable TV, that many simply can’t see the reality. Aereo failed not because it was found to infringe upon the rights of copyright holders, but because their offering wasn’t one that was compelling, reliable or in demand by consumers. Many want to talk about the technology, but few ever questioned Aereo’s business model. That has to change.

Netflix and other services have taught us that consumers want a lot of content choice, they want a deep catalog of content to pick from, they want it on all of their devices, they expect the quality of the video to be very good and the service to be easy to use. This isn’t what Aereo offered. For all the talk by Aereo and some members of the media on how Aereo allowed consumers “to pay only for the channels they want without being tied to cable companies”, the fact is that Aereo didn’t allow for that at all. A USA Today article writes that a “passionate base of a la carte TV fans is cringing”, because with Aereo “consumers can choose to pay only for the channels they want without being tied to cable companies. No, they can’t.

Aereo doesn’t have an a la carte offering of any kind. Aereo offers only one package, without the ability for users to only pick the channels they want. Of the 35 channels offered in the NYC area, Aereo doesn’t allow users to strip out the 10 channels that are broadcast in foreign languages and pay a lower price each month. No, like the cable TV market, Aereo forces users to pay for channels they may not have any ability to watch or have any interest in using. So for all the posturing by Aereo on how it was different from the cable TV industry, the fact is, their packaging was exactly the same. Aereo themselves used the term a la carte when they would talk about their service, when in reality, there is no a la carte at all.

The real discussion should be about what consumers are willing to pay for, what type of content they want to watch, how they want to consume it, what quality they want it in, and the business models that most resonate with them be it subscription, rental, PPV or download to own. Focusing on the size of Aereo’s antennas or how much consumers hate paying their cable bill isn’t the real story. Outside of the copyright issues, there is nothing to debate. The fact that Aereo’s service has been in the market for almost two and a half years, and they haven’t even penetrated 1% of the cable TV market, shows that it’s not the technology that was holding back their business, but rather consumer demand for such a service.

If Aereo came to the market and said it was a niche service and that a small percentage of consumers would want it that would have been accurate. But Aereo’s CEO and Barry Diller’s kept saying the opposite, stating that 25-30 million consumers in the U.S. would pay for such a service, with no data or previous use cases of any kind to back up such statements. Aereo set expectations they could not live up to and weren’t being realistic with themselves, or others in the industry. Just look at this video on Aereo’s website that gives an inside look at their technology where their Chief Commercial Officer says that consumers can access Aereo,”from any device that is Internet connected”. Any device? That’s simply not accurate.

Aereo didn’t understand what consumers are willing to pay for, how to package their service to truly stand apart from cable TV, or how important video quality really is. Aereo set themselves up for failure from day one. They have no one to blame but themselves. The Supreme Court ruling isn’t what stopped Aereo’s business from being successful, it was Aereo’s insistence that their technology would drive demand for their limited service that the majority of consumers never wanted to begin with.

Thursday Webinar – State Of The Second Screen: Behaviors, Trends & Media Consumption

Thursday at 2pm ET, I’ll be moderating another StreamingMedia.com webinar, this time on the topic of, “State Of The Second Screen: What’s Really Happening?” While the industry continues to experiment with, and be fascinated by second screen experiences, many are still on the fence as to its actual potential and place in the future of television. How are the personal viewing habits of audiences actually changing? How important is it for network or content owners to develop a stand-alone app? How much are consumers willing to pay to unlock exclusive content features? What second screen examples are working well? And will consumers ever shift to the point where second-screen becomes the primary screen for the majority of media consumption?

These questions and many more will be covered in this webinar as Alan Wolk, Global Lead Analyst, and Miles Weaver, Product Manager – Second Screen, dive into the second screen behaviors and trends of industry professionals and a younger target audience.

REGISTER NOW to join us for this FREE Web event.

Intelligent Software Is The Future Of Application Delivery, Not Networking Centric Approaches

I have written a few times about Instart Logic and its web application streaming technology. The company has attacked incumbent CDNs with a novel technology that it claims makes those same CDNs obsolete. The core of the technology is a way to build a connection between Instart Logic’s delivery network and the browser on the user’s device. This connection is enabled by a small JavaScript software layer Instart Logic calls the nanovisor on the smartphone, tablet or laptop. The technology allows Instart Logic to identify which parts of a web app are the highest priority and stream them down to the user. This is attracting media companies as well as ecommerce companies that are both investing in delivering very high quality images and dynamic, personalized content.

Instart Logic’s intelligent connection is built entirely upon software smarts and is a shift away from the hardware centric approaches of traditional CDNs. Instart Logic claims that being software-based from the ground up allows for faster iteration and innovation along with lower capital costs. This is very different from the hardware centric approaches from Akamai and other similar vendors, who depend on lots of servers sitting in data centers around the world.

By moving to a “software-defined” model of application delivery, Instart Logic is designed to address the latest performance bottleneck – the wireless “last mile” from the cell tower or WiFi router to the device. The last mile is so painful for traditional CDNs because of four main variables including: network conditions and congestion, speed of Internet connection, application content and structure, and device type. One or any combination of the four can cause applications to load slowly or render a poor user experience. Instart Logic specifically designed its solution to take into account all four of these variables and use software-driven intelligence to address them for each specific user. This is their real secret sauce.

To back up their claim that software-based application delivery allows for faster builds of new features and greater technology innovation flexibility, Instart Logic has been releasing new features and technologies at an impressive clip. The two latest releases are both very interesting and something I have been spending some time to better understand. SmartVision is a new technology that works with the company’s image streaming capability. It uses computer vision technology to analyze the content of images. It can tell whether an image, for example, is a blue ocean or a face, a mountain or picture of a car.

SmartVision decides the minimum image data send required to make the image recognizable on first paint of the screen with a good quality of experience. A picture of a face might require more up front data transfer because of the sharp details whereas a picture of an ocean might not. This will reduce the data transfer to first-load images on the page and thereby reduce page load times. Instart Logic has a patent pending on this technology and is publishing scientific papers about the new approach, which came out of collaborations with image researchers at leading universities.

The second new technology is a feature Instart Logic calls InstantLoad. InstantLoad takes certain components of a web application that are most likely to be used early on in the page load process and use its client side nanovisor.js library to push those assets into the highest performing class of browser cache. In modern browsers with HTML5 technology, there are different classes of browser caches with varying performance. In a nutshell, InstantLoad puts the most highly demanded information into the highest performance cache depending on the devices capabilities and performance.

This is a clear way to leverage newer capabilities that only came online in HTML5 very recently. The technology works across all major browsers and is particularly useful for upping the performance of SaaS applications. Those types of web apps tend to be used throughout the day by users loading up the same pages over and over. So for those apps, any way to improve client side cache usage and performance can greatly improve the user experience and diminish wait times.

Both of these features plug directly into the existing software framework of Instart Logic. To be clear, some of the large incumbent CDNs use software to optimize content delivery and adapt delivery to changing circumstances, such as device type. Other CDNs capture very basic information such as the device type and the network condition and then make changes on the backend to code and images. To date and to my knowledge, only Instart Logic establishes a two-way communications channel between the device and the network and can make real-time decisions using a smart client in the browser, making them unique in the market.

By going deep into the device and using intelligent software to create an entirely new type of application delivery network, Instart Logic is clearly trying to differentiate itself from Akamai, EdgeCast and Amazon CloudFront. If the company can continue to roll out new features and pull in marquee customers like The Washington Post, then that product differentiation could force the incumbents to think about radical overhauls to their technologies, and makes Instart Logic a company to really keep an eye on. If I had to make a short-list of companies that I think are truly innovating in the content delivery market right now, Instart Logic would be number one on that list.

Thursday Webinar: Why Your CDN Needs To Be Paired With Managed DNS

Thursday at 2pm ET, I’ll be moderating another StreamingMedia.com webinar, this time on the topic of, “Four Reasons Why Your CDN Needs To Be Paired With Managed DNS.” Internet performance is more important to companies and brands than ever before with competition for page views, clicks, and conversions increasing every day. If your company is using a content delivery network (CDN) to deliver the videos, pictures, and content, you are putting your CDN investment at risk if you don’t have a managed DNS provider to help power that performance. Dyn Director of Performance Assurance Charlie Baker will go into why CDNs need to be paired with managed DNS, hitting up four specific areas:

  • The DNS impact on page load time
  • Why a CDN-agnostic plan with managed DNS is key
  • The big three of reliability, flexibility, and performance
  • Case studies on how to optimize your performance using multiple providers

REGISTER NOW to join us for this FREE Web event.

Updated: Private Equity Company Makes $645M Bid To Acquire CDN Provider Limelight Networks

The Phoenix Business Journal is reporting that on Friday, private equity company Tuition Build Inc. submitted a $645M bid to acquire CDN provider Limelight Networks in an effort to take the company private. With Limelight’s stock closing at $2.83 a share on Friday, Tuition Build’s offer values each share of Limelight at just over $6.50, which is a nice premium considering that Limelight has yet to turn a profit over the past thirteen years.

With Goldman Sachs still holding about 30M shares the last time I checked, they have a lot of veto power in accepting or rejecting such an offer and historically, have rejected many acquisition offers by other CDNs. Over the years Limelight had more than half a dozen legitimate offers to sell the company, including two offers from Level 3, at least two from Akamai and one from AT&T, for more than $12 a share, that I am aware of. Hopefully Goldman doesn’t make the same mistake this time around and gets a deal done so Limelight can get help in growing their business and making it profitable.

Updated June 16th: Limelight has issued a press release saying that their management,”has concluded that Tuition Build does not have the experience, credentials, financial resources, or capability to complete the proposed transaction, and that Tuition Build’s stated interest in acquiring Limelight Networks is not an actionable proposal. Accordingly, management believes current and prospective investors in Limelight Networks should disregard Tuition Build’s proposal.”

Disclaimer: I have never bought, sold or traded a single share of stock in any public company ever.