Unauthoritative Pronouncements

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Et Tu, Tim?

A few days ago, U.S. District Judge Lucy Koh dismissed a class action lawsuit against several animation, and visual effects companies. This is directly tied to the emails uncovered in a 2010 suit by the Justice Department for the companies agreeing not to poach employees from one another. Ed Catmull — one of the most important people in computer graphics, and film — was sending very casual emails about coercing people to participate in the no-poaching scheme. Ed also did away with contracts because they thought it would be better for employees not to be tied down, they’d all be “at will” and could, in theory, leave for better paying jobs. You know, jobs no one was offering them because of Ed’s no-poaching agreement.

From Joel Rosenblatt, writing for Bloomberg Business, emphasis mine:

“We have avoided wars up in Northern California because all of the companies up here — Pixar, ILM, DreamWorks, and a couple of small places — have conscientiously avoided raiding each other,” Catmull wrote to [Disney Executive Dick] Cook.

Asked about the e-mail during his January 2013 deposition, Catmull said he saw it as his duty to insulate Northern California film companies from salary bidding wars that drive costs up, move the animation jobs overseas, and destroy the U.S. industry.

“Like somehow we’re hurting some employees? We’re not,” Catmull said. “While I have responsibility for the payroll, I have responsibility for the long term also,” Catmull said. “I don’t apologize for this. This was bad stuff.”

Steve Jobs played a major role in this through Pixar and Apple.

When Koh ruled against the former employees, I was gobsmacked that the employees couldn’t sue the companies because the statue of limitations had expired. The clock started ticking when the employees were affected, not when proof of a scheme came to light. So tough cookies.

During my twitter indignation over this, Glenn Fleishman and Jason Snell pointed me towards the new Becoming Steve Jobs book. They informed me that the book doesn’t shy away from it (unlike Catmull’s autobiography) and specifically includes a quote from Tim Cook defending Steve Jobs’ position in this. The book is, frankly, a bit of a mess, particularly the chapter relevant to the no-poaching agreement.

From Chapter 16 of Brent Schlender’s & Rick Tetzeli’s Becoming Steve Jobs:

Tim Cook doesn’t see anything egregious in Steve’s thinking—even though he has since tried to settle the lawsuit by offering to pay hundreds of million of dollars to participants in the class-action suit. “I know where Steve’s head was,” he says. “He wasn’t doing anything to hold down salaries. It never came up. He had a simple objective. If we were working together on something—like with Intel, where we threw everything in the middle of the table and said let’s convert the Mac to the Intel processor—well, when we did that we didn’t want them poaching our employees that they were meeting, and they didn’t want us poaching theirs. Doesn’t it make sense that you wouldn’t, that it’s an okay thing? I don’t think for a minute he thought he was doing anything bad, and I don’t think he was thinking about saving any money. He was just very protective of his employees.” It’s a rational argument, insofar as it goes. All CEOs want to keep their best employees at their company. But it ignores the simple fact that making such an agreement with other companies, explicitly or otherwise, is illegal, according to the U.S government and most antitrust lawyers. Steve, apparently, couldn’t be bothered even with acknowledging those rules.

With all the positive, social speaking he’s done recently, it was very disappointing to read Tim excuse this.

It shouldn’t really be surprising, since Ed Catmull doesn’t regret his actions at all. He didn’t include them in the book he wrote, which specifically talks about managers needing to understand the mistakes they’ve made, so … great book, Ed.

If there’s anything Steve, Ed, and Tim are guilty of, it’s caring too much about employees. Don’t you get it?

2015-04-09 07:50:52

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California Film and TV Subsidies Chase Lost Jobs

The LA Times has a piece by Richard Verrier on the end of California’s film and TV incentive program that ran for seven years. A new program is starting with a different set of issues.

Last year, the Legislature signed a law to disband the lottery program and replace it with an expanded program that will triple funding to $330 million annually. The new program also allows more projects to qualify, such as big-budget features and TV pilots.

The new program cited from the California Film Commision’s site:

Eligible for 20% Tax Credit (Plus 5% Uplift*):

  • Feature Films: $1 million minimum budget; credit allocation applies only to the first $100 million in qualified expenditures
  • Movies-of-the-Week and Miniseries: $500,000 minimum budget
  • New Television Series for any distribution outlet: $1 million minimum budget per episode (at least 40 minutes per episode, scripted only)
  • TV Pilots: $1 million minimum budget

Eligible for 25% Tax Credit:

  • Independent Films: $1 million minimum budget; credits apply only to the first $10 million of qualified expenditures (only independent projects may sell their tax credits)
  • Relocating Television Series, without regard to episode length, that filmed their prior season outside California; $1 million minimum budget

5% Credit Uplift

  • Filming outside the Los Angeles zone + 5%
  • Music scoring/music tracking recording expenditures + 5%
  • Visual effects expenditures (minimum spend required) + 5%

*Note: The above uplifts cannot be combined. The maximum credit a production can earn is 25%.

This is messy. The reason pilots are mentioned so prominently is because networks commission a ton pilots every year. That’s how they preview things, they get together the cast, and make a show. The networks roll some dice, pick some flower petals, flip some coins, and then they give a small selection approval to go to series. Then the next time networks need a show, they make more pilots. This creates a lot of work for people.

In an effort to cut costs, pilots are happening outside of California. Then they go to series outside California. That’s why there’s a lot of emphasis on pilots, and on TV relocation, in the new incentives. It’s a lot of jobs.

The film side of the credits might make more sense to people unfamiliar with film production. It seems like films make a lot of money, right? Wrong.

The maximum tax rebate a film can get is 25% on everything. Compare this to Vancouver, British Columbia where they have a stacking system of credits.

  1. Basic (35% labor costs)
  2. Regional (12.5% labor costs)
  3. Distant Location Regional (6% labor costs - filming outside Vancouver prorated against the number of days filmed in Vancouver.)
  4. Film Training
  5. Digital Animation or Visual Effects (17.5% labor costs)

You will notice that is a bigger payout than the California program. The program also doesn’t have a cap of $330 million. If you ran a film studio, it would seem far better to set up a Canadian production company to collect tax credits and sit in your Hollywood office.

Production was in danger of leaving BC for Ontario, and Quebec, without increased tax breaks to compete with those provinces. The credits remained the same, and work stayed in BC. Justin Smallbridge writing for the Saskatoon Phoenix:

Shooting for “Deadpool,” the eighth instalment in the “X-Men” franchise starring Vancouver-born Ryan Reynolds, has begun and is expected to spend $37.5 million in B.C. and employ 1,100 people.

It’s one in a string of Hollywood features shooting in the province, including “Star Trek 3” and “The B.F.G.” (big friendly giant), Steven Spielberg’s adaptation of the Roald Dahl children’s book.

The productions, and many others, have prompted one industry insider to predict that 2015 will be one of B.C.’s most lucrative years ever.

Another factor is that facilities and infrastructure for many places that support each film moved, and are unlikely to move again as long as nothing is significantly better, or worse. They’ve achieved critical mass to sustain themselves as long as everything stays relatively the same. A former employer relocated and spoke to The Globe and Mail:

Randy Lake, executive vice-president and general manager of the animation and visual-effects leader Sony Pictures Imageworks, brings a hard, cold, cash-based reality back into play when he says, “I love Vancouver.” Having moved the Imageworks head office from Culver City, California, to Pacific Centre as of April 1, “I would not want to pick up and leave. But if the [tax] incentives were gone tomorrow—well, that’s my nightmare scenario.” The sweetest of those incentives, for Sony, is the DAVE—the Digital Animation or Visual Effects—tax credit, which lately means that a credit of “17.5% can be applied against any qualified B.C. labour expenditures that are incurred while performing eligible post-production activities in B.C.” Lake says this break, more than any other factor, drove the relocation from Culver City.

So again, when the LA Times used visual effects employment as an example, “Applicants can boost their ratio if they do visual effects work in California…” I had a morbid little guffaw. California will not woo those jobs back. Perhaps it will stabilize TV VFX, or houses that haven’t moved, but Imageworks is staying put.

CA Should Just Give Out More

Obviously, the work moved because places offer more money than California, but that hasn’t worked out well for everyone.

Take Lousiana for example. They have a $1.6 billion budget shortfall and yet they are still doling out money that leaves the state. Quoting from Chelsea Brasted’s report on a state mandated study: “Overall, the entertainment tax programs cost $4.48 for every $1 of state revenue they create.”

The study underscores the low return on investment on film projects with big name talent because these “higher-end paid individuals … are typically not Louisiana residents,” (emphasis the study’s own). Specifically, it said about 25 percent of the state’s total spend on all entertainment programs goes toward paying those big name actors, directors, writers and producers. “It is a heroic assumption that these monies will actually be spent in Louisiana,” it notes on page 15.

From another report by Julia O’Donoghue:

The governor is trying to abide by a “no tax” pledge he signed with the national anti-tax group, Americans for Tax Reform, in Washington D.C. Americans for Tax Reform would consider certain changes to the film tax credit program a “tax hike,” according Tim Barfield, Secretary of Louisiana’s Department of Revenue. It’s unlikely the governor would approve any changes that Americans for Tax Reform would label a tax increase.

Resist and die. Don’t resist, and die.

2015-04-06 07:20:00

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Rumored Apple TV Rumored to Not Have Rumored 4K

There was a piece by John Paczkowski, the managing editor of BuzzFeed San Francisco about the new Apple TV not supporting 4K. This shouldn’t be a surprise to anyone, really, because the current one doesn’t support it, and the only two streaming media companies that offer 4K (UHD) content are Netflix (some original programming) and YouTube (some user-generated videos). iTunes doesn’t sell UHD content to use on your Retina Macs, and Netflix won’t even stream UHD to them. Maybe save UHD for some point in the future when there’s more than 6 things to watch in UHD? When it can be a real, headline feature?

Naturally, John concludes his post with that acknowledgment. Actually he concludes with “Apple declined to comment ‘on rumor and speculation.’”

SD to HD to UHD

A few days ago, my boyfriend and I were watching a rerun of Friends on the TV Land channel. It was an episode that was remastered in HD, compressed by DirecTV, and displayed in his living room. I had seen the episode a long time ago, it was one where Phoebe’s identical twin sister, Ursula, was using Phoebe’s name. Phoebe confronts Ursula over it. Lisa Kudrow has no real life twin, so this was accomplished with split screen, and doubles. The shots showing the back of the double, and Lisa Kudrow’s face were as crisp as anything in HD on DirecTV. The split screen shots, where Lisa Kudrow was composited with herself, were a fuzzy mess. It kept cutting back and forth from crisp shots, to blurry shots, as the scene played out. To my trained eye, it looked like whoever was in charge of remastering Friends had to blow up the original standard definition output and crop it, instead of going back to the source and redoing the split screen. Remember it’s not just scaling, it’s also the aspect ratio change so you actually have to remove pixels on top and bottom.

Ultimately, it’s Friends, so very few people will care about a handful of blurry shots. This does illustrate a problem with “content” in that it isn’t future proof. Companies either can’t (original source is gone, or degraded) or won’t ($) remaster visual effects shots when they transition from one output medium to another. Naturally, most people assume that’s an issue for Star Trek and Babylon 5 (and it is), but it’s also a problem for Friends, and other sitcoms. Even dramatic shows that take place in the real world make extensive use of enhancement. Set extensions, painting out wires, adding explosions, combining different takes, image stabilization — all kinds of stuff that people don’t even perceive. Only they will perceive them because they’ll all be blurry when that moves up to a higher resolution.

Networks are still converting shows to HD, notably HBO’s The Wire and notoriously Fox’s Buffy: The Vampire Slayer.

Even CBS, which has been applauded for their work remastering the original Star Trek and Star Trek: The Next Generation, has no immediate desire to remaster Star Trek: Deep Space Nine or Star Trek: Voyager. (My personal theory is that this has to do with the decline of Blu-Ray sales, in general, reducing the profit.)

Babylon 5 a show that used computer graphics instead of miniature photography, is adrift. Warner Bros. lost everything they had. Jason Snell referred me to a fan that tried to redo all the effects himself (he gave up).

HD is still the law of the land in TV. It is newsworthy for a production to work in a resolution higher than HD. Netflix’s House of Cards is being mastered in 6K (and archived) and also mastered for UHD (4k), and HD, to be streamed today. Keep in mind, 6K isn’t even a standard, the next step up right now is 8K UHD, so … Let’s see where that goes?

Films are in the same boat. Most VFX have been produced at 2K. The exact resolution varies based on the project, and what the client requires for delivery, but it’s around 2048 wide with different regions of the frame being masked to produce different aspect ratios (or using anamorphic lenses that compress and stretch horizontally). Film resolutions and TV resolutions are not directly comparable so “4K” doesn’t mean the same thing.

Even films like the original Star Wars trilogy have 4K problems. A firm called NanoTech Entertainment hired Petr Harmy, the creator of the unauthorized Star Wars Despecialized Edition HD remasters to do the same thing in 4K for their UltraFlix 4K streaming service. Think of how many times Star Wars has been futzed with — whether George Lucas was involved or not.

Even knowing 4K will be eventually asked for, modern motion pictures aren’t entirely produced in 4K DCI (around 4096 wide). Those that are, might include VFX shots done at 2K, and blown-up to 4K.

This creates an uneven library of material to pull from and populate your “4K” TV with.

It’s OK, Netflix, your ISP, Vimeo, YouTube, DirecTV, Verizon, etc. can all step in and compress a video too, so it’s not like you’re literally getting pixel-per-pixel stuff anyway.

Colorspace, The Final Frontier

Beyond the issues of pixels, is colorspace. An overly simple way to think of that is the way the color data is stored, but it also has to do with how that stored data is transformed on to the screen where you see it. The internet is just awful when it comes to color accuracy. That has to do with the delightful interplay between how images and video are stored, the browser, plugins, operating systems, drivers, and monitors. Line up a bunch of computers and load the same sites on all of them and you will see slight differences. This is also why the colorspaces you’ll see used most often are sRGB, or Adobe RGB, because they’re from so long ago, and use such a narrow gamut, that maybe you’ll luck out and it’ll look uniformly bland.

As bad as that is, your home TV is weirder. HD TVs support a standard colorspace called Rec 709. As anyone who’s seen more than one TV at a time can attest, it’s not uniform color. It too is subject to the whims of the TV manufacturer. Sometimes they increase the saturation, and brightness, to make their TV seem more appealing on a showroom floor.

4K UHD is also plagued with this problem. Again, it supports a standard — Rec 2020— but it suffers the same fate, with each manufacturer doing different things to how they display that Rec 2020 material in your living room.

Here’s a very thorough piece from FX Guide about colorspace, and color pipelines.

Most consumers aren’t fazed by this at all because they simply don’t care. Much like they don’t care about resolution issues. They want their whole TV filled with an image. They want to know they bought the highest number of pixels, and they want it to be bright and colorful. Mark my words, in a few years, some manufacturer is going to make some Android stunt-phone that’ll claim to show 4K movies and TV shows, and they’ll get all the positive press in the world, because numbers are bigger than other numbers.

Everything’s a lie.

2015-04-05 15:40:00

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How to Save Star Trek: Make it the True Detective of Science Fiction ►

This ran at the beginning of the month on Vox, and I only just got around to reading it after hearing David Loehr mention the article that episode of Counter Clockwise about Star Trek.

I think there are other avenues that can be explored, but like everyone else, I’m just itching to have Star Trek back on the air.

Today, news circulated that Idris Elba was in talks to appear in the next Star Trek movie. I will be doubly sad to see the 50th anniversary of Star Trek celebrated with another Khan knock-off villain plot. Another Earth-in-peril film. Perhaps it will be more, but the last two installments were literally about vengeful men trying to blow up San Francisco. Two of them! San Francisco’s not that bad.

Villains have their place, and can be used to great effect, but not recently. Here’s a recap of film antagonists, and a projection:

  1. V’Ger — A machine seeking perfection.
  2. Khan — Vengeful megalomaniac.
  3. Kruge — Selfish megalomaniac.
  4. Probe — Accidental destruction.
  5. Sybok, Klaa, God — Selfish megalomaniacs.
  6. Chang — Homicidal war hawk.
  7. Soran, Lursa and B’Etor — Obsession, and power, respectively.
  8. Borg, Borg Queen — Complete assimilation, and domination.
  9. Ru’Afo, Dougherty — Vengeful megalomaniac. Ends justify the means.
  10. Shinzon — Vengeful megalomaniac.
  11. Nero — Vengeful megalomaniac.
  12. Khan, Admiral Marcus — Vengeful megalomaniac. Homicidal war hawk.
  13. Someone? — Vengeful megalomanic?

If this was a TV series, anthology or not, there wouldn’t be so many vengeful nuts. Indeed, Star Trek’s history is full of episodes that have very abstract notions of villains. Many times villains are inserted as a mirror for us, and our society. Some episodes are about broken components, and natural disasters. Antagonists are not the only source of conflict.

One of my favorite episodes of Star Trek: The Next Generation is “Cause and Effect” where there’s plenty of tension, and not a single villain, or hint of malice.

2015-03-25 23:55:00

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Counter Clockwise 2: Lost in Stars ►

Anti-time. Counter Clockwise. I’m hilarious!

My favorite nerd-culture (not grown on a petri dish) is provided by the The Incomparable podcast network. The main podcast spun off an orbiting array of other podcasts, including the The Incomparable Game Show. Which isn’t a show, but a feed of similarly themed game shows. Counter Clockwise, however, isn’t really a game, but just go with it. Each panelist presents a question to the group, and they take turns answering. It’s a mirror version of the popular tech podcast Dan Moren, and Jason Snell do for Relay FM’s podcast network.

The first one was a Star Wars one — which is fine, if you’re into that sort of thing. Their second episode is about Star Trek. Yay! (Throws shiny, space-confetti.)

Readers may recall a similar post about The Incomparable, and Star Trek from ages past, and then, only in legend.

Favorite Character

Dan Moren’s question is pretty straight-forward, but difficult to answer since it’s easy to be torn between several characters. Dan jokes, “Which one’s your favorite child?”

  • David Loehr: Jean-Luc Picard
  • Jason Snell: Leonard “Bones” McCoy
  • Scott McNulty: Worf
  • Dan Moren: Benjamin Sisko

While it’s hard to extricate the character from the actor, Jason Snell has complimentary things to say about both De Forest Kelly’s performance, and Karl Urban’s

I’m torn between Spock, and Data. The characters have many similarities, but some key differences in their personal struggles. There are two episodes of Star Trek: The Next Generation that stick out in my mind from when I was in my formative years: Hero Worship and The Measure of a Man.

Hero Worship is a flawed episode, and it’s hard to really get into it when you view it now, but it left an impression. Here was this kid that felt all alone, and isolated. He didn’t want to feel that way, and he looked up to Data as someone he could model himself after. This spoke to me.

As much as it pains me, I’d pick Data over Spock. If only Jason Snell had invoked The Phil Hartman Rule to save me from this choice.

What Scene, or Plot Element, Triggered a New Story Idea, or Head Canon?

David’s topic is, of course, very writery.

  • Jason Snell: Kirstie Alley’s Savvik, as originally written. Also considered:
    • Kelsey Grammar’s captain from the end of “Cause and Effect” exploring the universe as a fish-out-of-water.
    • The people thawed out at the end of “The Neutral Zone” for another fish-out-of-water story.
    • Dr. Bruce Maddox’s quest to make new androids.
    • Baseball. For … something.
  • Scott McNulty: “Conspiracy” ending with the homing beacon to other little parasites out in the far reaches of the galaxy.
  • Dan Moren: “Yesterday’s Enterprise” - to get to know more about that alternate reality version of Starfleet.
    • Get to know more about Boothby.
  • David Loehr: Explore any interaction between “Mirror Mirror” Spock mind-melding with McCoy, and Spock mind-melding with McCoy in Star Trek II.

Great choices. (Except baseball.) If I had to pick one, I’d go with exploring the unidentified Dyson Sphere from “Relics”. It’s a giant shell world, the size of a solar system, built by a civilization that abandoned it. Like so many things in Star Trek, we never, ever hear of it ever again.

What is the Star Trek Series You’d Want to See?

Jason longs for a series, and asks the panel what kind of series they want.

  • Scott McNulty: Firefly.
  • Dan Moren: A show about Section 31, particularly in the J.J. Abrams universe, where it needs to be rebuilt. Espionage — cloak, and dagger.
  • David Loehr: Star Trek: Continuum — an anthology series with a few episodes to tell specific stories spread throughout Star Trek’s chronology (chronologies). Particularly if it was with the Netflix model with 8-10 episodes set here, and there.
    • Jason riffs on David’s suggestion with the opportunities to bring in the J.J. movie cast for guest spots here, and there.
  • Jason Snell: He has two, but it’s really three.
    • A series set in the original series era, with the costumes, and designs, of the era.
    • A series set in the J.J. Abrams universe, with the costumes, and designs, of that rethought era.
    • Inspired by John Scalzi, and similar books about discovering something surprising on a planet, and uncovers a mystery.

I’ve been thinking about Star Trek series ideas since TNG. I’ll spare you all the iterations I’ve gone through and present only two:

  • Set post Voyager, but incorporating the “adjusted” timeline of the J.J. movies. It’s like TNG in overall format, a ship exploring the galaxy without a constant threat, but there are serialized arcs, like DS9. The real change is that it isn’t a rehashing of TNG scripts, it will return to creatively thinking of the morality issues that we face in the present day, viewed through the lens of science fiction. I want to go to subjects that were taboo for the previous producers to consider handling. There will also be a guy that kisses another guy, because that shit just needs to happen.
  • Like the first example, but the format would divide the season up into segments all telling the same story. This is similar to David’s Star Trek: Continuum pitch, but more like viewing overlapping events through the eyes of several alien cultures. This view at the same event through characters we can sympathize with will let us look at all angles, and not just the noble Federation scolding aliens every week. Layers of perception and drama. Every season is a new event to dissect.

What is Your Favorite Vehicle?

Scott McNulty steals Dan’s question from the previous Star Wars show.

  • Dan Moren: The USS Defiant.
    • Runabouts. “It’s like the compact car of the Star Trek universe. You don’t need, like, an SUV-Enterprise-thing. It’s like a Honda Fit.”
  • David Loehr: “Ditto” (He means The Defiant, not the runabouts, thank god.)
  • Jason Snell: The classic Klingon battlecruiser (the D7) “as best seen, probably, in The Motion Picture” (that’s the K’t’inga, but same deal as the D7).
    • Excelsior as a runner-up.
  • Scott McNulty: D’Deridex Class Romulan Warbird.

These were all very good choices, except for Dan’s runabouts. I mean, really? Any vehicle? Runabouts? They’re so unexciting, and wimpy, that the role they filled was mostly replaced by the ship he picked as his primary choice.

Anyway, my pick is a little difficult, so I’m going to do the multiple-pick trick of saying a bunch of things I’ve considered:

  • The Enterprise NCC-1701-D. I have a fondness for this comfy, fabric-covered, kid-safe, holodeck-filled ship. It doesn’t look good from all angles, and some of it is a bit dated.
  • The Nebula Class is very similar to the Galaxy Class, but it’s much more compact. The first one we see, is the USS Phoenix, which has a funky AWAC pod. I much prefer the style represented by the USS Sutherland, and it’s arrowhead pod.
  • The New Orleans Class Kyushu is barely seen onscreen as a battle-damaged wreck, but if you were the kind of person that looked online at ships from the Battle of Wolf 359, and their reconstructions, then you probably liked the idea of it. It’s swept back nacelle pylons were great.
  • The Enterprise E is a slicker design than the above, but it’s not as “friendly”.
  • The Akira Class was a great ship, but then Enterprise came out and aped the design, and now every time I look at an Akira Class, I think of that incredibly disappointing show.
  • The Jem’Hadar Battleship - I’m a size queen.

In the end, I’ve got to go with the Enterprise D. It narrowly beats out the Sutherland, because it has a better bridge. They always say that kitchens and baths sell real estate, but in Star Trek, it’s about the bridge. Should have sprung for wood railings, Sutherland.

Bonus Question: Of The Many Starfleet Divisions, Which Starfleet Department Would You Work for?

  • David Loehr: Command.
  • Jason Snell: Command, but probably winds up in Engineering.
  • Scott McNulty: Wants to be in Command, thinks he would be in Ops.
  • Dan Moren: Engineering.

I’d want to wear a nice, soothing teal. Probably ship’s counsellor. I most likely wouldn’t pass any tests, and be one of those civilians with the onesies that never fit right in the crotch.

And Then Dan Died

The bonus on the bonus is the Bonus Track with excerpts from the recording session for the episode. It’s mostly about people that are having computer problems.

Also, the grocery store nearby has Quadrotriticale still. Snell, and Loehr, if you want to get it you’re going to have to come down here. You’re going to have to - come - down - here.

2015-03-20 07:45:00

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The Changing – and Unchanging – Structure of TV ►

Ben Thompson goes on a deep dive over how Apple’s OTT service will mostly move money around. This is very much in line with my own thinking. This is all about advertising money. See here, and here.

From Thompson’s conclusion:

Notice, though, who is not winning here, at least financially: consumers. The money is simply moving around. In fact, of the three major players in this proposed deal, Apple will likely earn the least:

  • Content owners have pricing power because they create must-see TV
  • Cable companies have pricing power because they own the pipe
  • Apple is simply proposing to be content’s customer service layer in place of the cable companies

The benefit for Apple is the strengthening of their ecosystem: owning the TV will make iPhone and Watches more valuable (see Apple’s New Market); this too is the main way in which consumers win, and why they will switch: a better UI, better integration with their devices, and a company that actually cares. Just be prepared to pay the same, if not more, than you pay today.

Thompson also breaks down the business of TV at the top of his post, although he glosses over the complex interaction between TV studios, film studios, and networks that make up divisions of media companies. The networks buy shows, and broadcast rights for films, from the TV studios and film studios respectively. Fox’s TV studio doesn’t always make content for Fox’s broadcast and cable networks, for example, and Fox’s networks don’t exclusively show 20th Century Fox films. The TV studios are even making shows for Netflix and Amazon, with Netflix and Amazon acting as the network in that relationship, and obviating the role the broadcast network division plays in collecting ad revenue.

2015-03-19 08:00:00

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Connected Cable

On episode 31 of Relay FM’s Connected podcast; Myke Hurley, Federico Viticci, and Stephen Hackett discussed many items of Apple news. This included the rumor from The Wall Street Journal concerning Apple’s supposed OTT service.

Whilst I listened to the recording live, it became clear that there are some fundamental concepts about televised entertainment in America that were unclear to people outside the U.S.– and, apparently, to people in Memphis. (Hi Stephen.)

What is Cable?

Federico professed that he didn’t understand the concept, and Myke said it was like satellite. That’s sort of true, when describing television programs, and channels. In the U.S. it’s often easier to group cable, fiber, and satellite together as “cable”, though that also glosses over differences. Skip this section if you feel reasonably confident in your understanding of cable.

Brief history lesson: In the 1920s, radio networks popped up all over. The stations had limited reach, and thus covered a small area. In order to produce high-quality, consistent programming, they started to create material that would be broadcast from multiple radio stations. Thus, the networks began. Many stations are locally owned and operated, but get the majority of their programming from the network. Local news is the best example of this, with the same hour being filled in by original news programming from each broadcast station.

NBC became the largest of them, with CBS the second largest. In the 30s, the FCC (The Federal Communications Commission) forced NBC to break up because it was too large, and competition wasn’t feasible. The new network was ABC. These radio networks would become TV broadcast networks in the 40s, but they still had their roots in that decentralized grouping of broadcast networks.

Additional broadcast networks have since been added. Independently owned stations offering syndicated programming are now either Fox or CW affiliates.

Cable was a great way to provide alternative, high-quality programming, with a huge array of channels that would appeal to someone. The cable companies pay the local broadcast stations for rebroadcast rights. This also leads to interesting situations like Los Angeles having two different CBS stations that are rebroadcast over cable, KCBS (owned by CBS) and KCAL (independent). This also makes it messy when dealing with advertising.

Because cable requires a physical infrastructure laid out of vast areas of land, there’s usually only one company operating in an area. Huge mergers of regional cable TV operations have resulted in the large cable companies today. Comcast is the largest, with 22.3 million subscribers, and it is trying to merge with the second largest, Time Warner Cable, which has 11 million. Almost all the other cable providers are in the neighborhood of a few hundred thousand to a few million.

In the 90s, the cable companies realized they could send data over their networks, and it was far better than telephone lines. This is also why Americans with high speed internet access almost all have cable. This creates a natural conflict between cable companies, and internet companies that want to provide competing programming that undermines the fees and rates the cable companies charge for programming.

The best way to think about present-day cable is to think of it as a wired service that provides digital programming guides, optional DVRs, “start over” service, live TV, and on demand entertainment, some of which is pay-per-view. These are features of IPTV services like Verizon’s FiOS. (Although Verizon owns the physical network they provide their IPTV service through, making it more like an American cable provider than anything else.)

Comparison with Italy

Italy relies on terrestrial, over-the-air signals for programming. This limits the number of channels, and means that on demand services aren’t possible – with the exception of internet streaming services which are used to supplement service. Since there is little overlap, for the most part, with ISPs and broadcasting, this means no one is trying to screw anyone, like Comcast, or Verizon, messing with Netflix.

The most important thing to understand about cable is that the lines aren’t just used to carry TV shows, but also broadband internet, which makes it completely different from Italy or the U.K. Cable providers also have exclusive rights to regions of the U.S. and do not directly compete with one another – this means that costs are generally high. (Businesses gonna business.)

Federico speaks favorably of the system in Italy, because everyone can have the same experience of gathering around to watch sports events, and national political speeches. It’s more like TV in the U.S. used to be before the 1980s with a few broadcast networks that left few options.

There are, however, other problems Italy faces aside from limited selection, and limited utility. (Neither of which are major issues when you take supplemental streaming solutions into account.)

Did you know there is a “Television in Italy” page on Wikipedia? This is a fun excerpt:

According to BBC, the Italian television industry is widely considered both inside and outside the country to be overtly politicized. Unlike the BBC which is controlled by an independent trust, the public broadcaster RAI is under direct control of the parliament. According to a December 2008 poll, only 24% of Italians trusted television news programmes, compared unfavourably to the British rate of 38%, making Italy one of only three examined countries where online sources are considered more reliable than television ones for information.

HBO Won’t Sell Service Directly

In the Connected episode Myke brings up a post on The Verge that confused him and asked for clarification from Stephen. Myke’s not really at fault here because the structure of the post makes it sound like HBO NOW is just HBO Go.

From the post, with the subhead “Sorry cord cutters. You’ll have to buy it through a partner, like Apple or Cablevision”:

Cablevision doesn’t say whether it’ll be offering HBO Now on day one, but it seems like a possibility. Though Apple has touted its position as HBO’s exclusive launch partner, Apple is, in fact, only its exclusive “non-pay TV” launch partner. That means that while you won’t be able to subscribe over a Roku until Apple’s exclusivity period lifts three months from now, you should be able to subscribe though any cable company that makes a deal with HBO. HBO tells us that it hopes to announce more partners soon, but Optimum is the first.

This post is not structured very well at all and basically imparts no information other than HBO is not selling access directly, but through third parties, and he infers that cable companies will offer HBO NOW on day one. That would just HBO Go, as Myke points out on Connected.

The “sorry cord-cutters” is confusing and hyperbolic since the author acknowledges that there’s no information other than Apple and Cablevision (as an ISP) offering to sell HBO NOW. That does not mean that you will only have your regional cable provider to contend with for service. So this is still a “yay” for cord cutters.

The writer also mistakenly assumes that HBO should be the one you buy HBO NOW from, directly, like Netflix. There are large development costs to engineering a solution without partners like Apple. Netflix can manage this because they’ve been building their service in iterations for years.

From Variety, last December, about the resignation of HBO CTO Otto Berkes:

Under Berkes, HBO had been developing a streaming-video platform with the code-name “Maui” designed for the OTT service. But the Maui system was a “less-than-perfect solution” and the project was shut down, according to a memo sent to team members by Mark Thomas, senior VP of technology program management, and Drew Angeloff, senior VP of digital products. The memo was previously published by Fortune.

“This was not a judgment of the team’s work quality or deliverables but rather a bet that an existing streaming service could deliver the needed product faster and at lower risk than Maui,” Thomas and Angeloff wrote in the memo.

The execs added that “Maui’s timeframe caused us to make concessions both in scope and culture. We look forward to returning to teams defining scope, and consumer experiences, without forced top-down scheduling.” Meanwhile, a “large portion” of Maui can be repurposed for HBO Go, according to the memo.

The Verge should have referred to this reporting from Variety, especially when the author started to ruminate about how the service would be available. Technologically, HBO can do anything that Major League Baseball Advanced Media can do. That includes Roku, Android, and game console clients. HBO’s focus is obviously on iOS, and Apple TV, but The Verge would have been better off pointing out the MLBAM relationship than completely wild speculation that confuses their readers.

MLB does sell subscriptions to customers directly, so it would not seem to be a technological limitation. It is possible HBO doesn’t want to directly deal with viewers, or also fears going all-in on that immediately.

Cost

Myke asked Stephen if he felt the cost was reasonable, but Stephen no longer pays for cable, so he wasn’t sure.

I’ll refer you to my previous post covering the cost relative to basic cable packages which offer similar channels:

As I memtioned above, it’s not that much more expensive than basic cable. I am, of course, referring to true basic cable, and not the discounted plans they promote that go up 50-60% after one year. I couldn’t actually find Comcast’s basic cable package on their site. Fortunately, Consumer Reports did the footwork and found out that it’s $16 (receiver included, but no HD or DVR). Time Warner Cable’s package is $20 for a year, and then jumps up to an unspecified amount. Equipment is separate, $12 a month for a basic HD box, and $24 a month for an HD box with DVR. That’s $32 and $44, respectively, before adding in fees.

This was also under the section where I point out that it is likely to include advertising if the rates are so comparable, especially if the networks are primarily motivated by declining ad revenue, and advertisers demanding targeted ads, and analytics.

Stephen is also troubled by the cost of all the a la carte services. He says it’s why people resort to stealing content to save money. As someone that works in the entertainment industry, I am not a super-huge fan of people not paying for entertainment, but that’s my personal bias.

Bundling, and showing ads, are only natural outcomes to try to keep costs down, while still providing a comparable level of service. Apple’s approach, and interests, are different enough from cable TV providers that it should be a better experience even if it is still roughly analogous to what we have now, but will it be attractive to cord-cutters, and cord-nevers?

Despite Stephen’s old-man-ness, he’s actually in the demographic of people that are leaving cable, cord-cutters. His young kids are going to grow up not experiencing cable at all, which is increasingly common, and troubling for entertainment companies, networks, and providers.

On November 28, 2011, a report by Credit Suisse media analyst Stefan Anninger said that young people who grew up accustomed to watching shows online would be less likely to subscribe to pay television services, terming these people as “cord-nevers”. Anninger predicted that by the end of 2012, the industry’s subscriber count would drop by 200,000 to 100.5 million, blaming the economy; Anninger’s report also stated that consumers were not likely to return to paying for television even after the economy recovered. In the case of land-line telephones, people had believed younger people would eventually get them, but now numerous subscribers only have mobile phones. Anninger predicted that the same would hold true for pay television, and that providers would need to offer lower-priced packages with fewer channels in order to reverse the trend.

The Great Barrier

Myke, and Federico are largely dismissive of the Apple TV because it will have very little impact for them where they live. Imaginary boundaries mess up everything. Region locking sucks. Movies are still released in bizarre, year-long international rollouts where the U.K. will have something premiere in theaters while we have something available on home media. Even satellite TV suffers from regions set up to enforce pricing models.

It’s still worth discussing Apple, and TV programming, even if it is just in the U.S. There are 318.9 million people living here, so it is a huge area for potential growth for Apple.

2015-03-18 08:45:00

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You Tell Him I Ain’t No Bandleader

My interest in Apple, and over-the-top services picked up after Apple’s March 9th event when they reduced the price of their Proterozoic set-top box, and announced 3 whole months of exclusive access to the new HBO NOW service.

This seemed insufficient for three years worth of work. Particularly because there have been rumors about new stuff in the works every year. New stuff that gets axed before it ever comes to fruition. Predominantly, the content providers have been blamed for dragging their feet, and withholding valuable programming from OTT services. (This doesn’t satisfactorily explain why nothing has been done with the hardware and software.)

After seeing what happened to sales in the music industry, thanks to iTunes, film and TV companies don’t want to see their content undervalued. Cable providers have also been afraid of being turned into dumb pipes that just move data. Clearly, this is not sustainable, especially when faced with Apple.

The Wall Street Journal, a place Apple typically leaks things to, ran a story that there will be a new OTT service from Apple this fall to coincide with new hardware and software (Here’s a link to Macworld’s post based on the WSJ - that headline). 25 channels, including ABC, and CBS (two of the three major networks (Sorry C-Dubs)). The price? Somewhere between $30 and $40 a month. That’s more expensive than an entry-level monthly plan from a cable provider, but there’s no installation fee, and you don’t rent your Apple TV box with a recurring fee. So it’s not that overpriced, depending on what you want to watch.

Notably absent is NBC, which is part of Comcast, the largest cable and internet service provider in the United States. Thanks for letting that merger go through, you stupid politicians.

The Watch isn’t the Only Thing With Perfect Timing

Apple has been in talks with networks, and content providers for years. The talks with HBO started last spring. Everything was so very slow, and nothing was happening. Apple was also building out their own CDN that could take advantage of any theoretical fast lane, or prioritization. The company had no official statement, in either direction, about Net Neutrality.

On February 26th, The FCC reclassified Internet service and adopted Open Internet rules. There are three main points:

Bright Line Rules:

  • No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.
  • No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
  • No Paid Prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no “fast lanes.” This rule also bans ISPs from prioritizing content and services of their affiliates.

No, I don’t have a conspiracy theory, so please, save the foil. It is, however, immediately apparent that these rules do help facilitate anyone looking to provide video entertainment over the internet from being obstructed by Comcast, the largest internet service provider in the US.

Indeed, the Wall Street Journal says that Apple was trying to work with Comcast until it realized that Comcast was stringing them along to develop their own X1 box. The fact that this is in the Journal, with the rest, makes me think that this is going to turn in to a tale of revenge from a spurned lover, or perhaps a cautionary tale about prized horses, and favors.

Bundle

One major problem with HBO NOW (other than the shouting!) is the price. Not because $14.99 isn’t a good price for on demand movies and original programming, with no subscription, but because it doesn’t scale if you try to apply the same pricing per “channel”. Ordering a la carte will always be more expensive than a package deal. That’s the nature of it.

This package of 25 channels will represent something like the entry-level cable package your cable provider offers. You can add premium content to it, like HBO NOW (and logically other premium services), but the basic package gives you lump of stuff that has value.

A major issue with the current “channels” offered by the Apple TV is a lack of any value. The majority that have content require a cable subscription in order to use them. This cable verification system has been a method the cable providers and networks devised in order to provide “cable anywhere” programming. It’s a flawed system because the agreements between networks and cable companies are not universal.

This also effectively negated any reason to open those Apple “channels” instead of using the cable set-top box. Pretty much missed the point.

Advertising?

I must assume that there will be ads.

As I memtioned above, it’s not that much more expensive than basic cable. I am, of course, referring to true basic cable, and not the discounted plans they promote that go up 50-60% after one year. I couldn’t actually find Comcast’s basic cable package on their site. Fortunately, Consumer Reports did the footwork and found out that it’s $16 (receiver included, but no HD or DVR). Time Warner Cable’s package is $20 for a year, and then jumps up to an unspecified amount. Equipment is separate, $12 a month for a basic HD box, and $24 a month for an HD box with DVR. That’s $32 and $44, respectively, before adding in fees.

So what does that have to do with advertising? Well, it basically proves that the cost of Apple’s package with HD, and on demand, is comparable. Apple would have to charge far more to get the networks to strip ads.

That doesn’t seem super exciting, but consider this: Advertising on cable is a two player system. As breaks feature ads sold by the network, and ads sold by the cable company.

Here’s a lovely page from Comcast all about their spot advertising platform. Here’s a page about analytics that they provide based on various audience measuring services.

Comcast Spotlight relies on sophisticated quantitative and qualitative applications to provide you with customized research to maximize ROI. The quantitative data from Nielsen, comScore, Kantar and others gives you precise analysis of television viewership, online activity, views into the competitive media landscape and more. MRI, Simmons, Scarborough, Nielsen Social and various other resources provide extensive qualitative data on consumers, geographies and social media habits to help you make a more informed decision during the media planning process.

Barf.

Analytics is actually an important issue facing networks because advertisers are increasingly demanding targeted ads. From Variety, Senior TV Editor Brian Steinberg writes about how prime time TV is being pressured to provide advertising solutions akin to online advertising.

Senior executives at both TV networks and some of the industry’s biggest ad-buying firms see a time looming when primetime TV is no longer viewed as TV’s most desirable real estate. Instead, these executives say, a new flow of consumer data and a dizzying array of video-viewing behaviors will prompt advertisers to carve out ad plans that put their pitches in front of very specific groups of people: first-time car buyers, for example, or longtime orange-soda drinkers, or expectant mothers. Chasing those targets, rather than viewers of big-ticket shows like “The Voice” and “Scandal,” could well transform primetime into a cultural artifact like Rubik’s Cube or Donkey Kong – something that was certainly fun while it lasted, but is no longer of the moment.

Advertisers and TV networks have long talked about Nielsen ratings guarantees and a pricing metric known as a CPM (a measure of the cost of reaching 1,000 viewers) as part of the upfront, where U.S. TV networks try to sell the bulk of their ad inventory for the coming season. Now, “technology is pushing that to the back burner,” says one media-buying executive. If advertisers are more interested in capturing very select kinds of audience, the buyer says, they will be less concerned about what time a show comes on the air, and more interested in how and when they viewers they desire more choose to watch it.

Read his full report for all the details, but it confirms what many would suspect: Viewership is down, and ad spending is down. The number of young viewers is really, really down.

Compare this with Hulu. Hulu tracks every ad viewed, and every program watched. Their ad targeting is absolute garbage, but if advertisers think it works then that’s just as good as thinking ad buys based on Nielsen numbers worked.

Apple is no stranger to advertising. They sell ads through their iAd platform for mobile apps on iOS, as well as for their Pandora-esque iTunes Radio service. It underperforms the competition with 2.5% of mobile app advertising.

Does that mean that Apple will serve ads like a cable company does? Will regional businesses be able to buy spots through Apple? Political campaigns? Apple might eschew that completely and only show ads that the network requires. Thus reducing the number of ads shown, and simplifying the experience. It would be money left on the table, but if Apple’s real interest is in device sales (boxes, phones, and tablets) then it could be a way to convince people that it was worth it over basic cable, where they would see more ads. It is an area that cable companies would be reluctant to compete in.

It’s very easy to argue the other direction too, that they would sell their own ads, like cable, in order to finance much of this endeavor.

Of course it all depends on how ads are sold.

Possible Ad Configurations

If we assume some amount of advertisement will occur, then there are a few different ways this could play out.

  • Networks broadcasting the same ads on Apple’s OTT service as they broadcast over their terrestrial and satellite agreements. Bundling those together would make sense because it’s increasing the volume of available viewers, but then it would be difficult to split out metrics, or split out ads, which is what advertisers desire.
  • Networks manage ad buys, but display them through a system Apple provides for tracking anonymous data. This is different from iAd.
  • Networks go completely targeted with the platform.
    • Structurally, if the new “channels” are set up like the current ones, then the content provider is hosting the material themselves, and they can track requests for certain media files from IP addresses and assume they’re all the same. Then, when an ad is requested, one can be served based on what the viewing habits tell them is likely to work for people at the IP address. Not great.
    • Apple could provide targeted advertising to users through their own means, through iAd, like they do for iTunes Radio. This is the Hulu model, which allows for targeted advertising, but it takes networks out of wheeling-and-dealing ad sales. (Seems unlikely.)
    • Apple provides networks with a targeted, anonymous platform, but allows the networks to serve ads they sell themselves to those targets based on the way Apple interprets the audience members.

It’s possible to combine any, and all of that. Especially if different content providers go different directions, and it’s not a uniform advertising approach across all the new “channels”. What Apple currently has on the TV platform is a mishmash of different things so it’s plausible that the bundle might be one cost to the user, but ads are still handled on a one-on-one basis.

2015-03-17 15:45:00

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Power Lawyer Ken Ziffren on Who Wins the Race to Go Over-the-Top ►

The Hollywood Reporter has a guest column posted by a “power lawyer” – They do not specify if he is “mighty” or “morphing” so I’m going to guess both.

He provides a succinct overview of all the OTT efforts being made by traditional studios, traditional networks, and stars from those traditional studios and networks. It doesn’t delve deeply inside how anything works, or acknowledge efforts made by non-traditional entrants, or services.

By “over the top” services, I mean Netflix and Amazon Prime, of course. But I also mean any outlet offering professionally produced content made available on-demand over the Internet (either in lieu of or in addition to linear viewing). Here, content is streamed to connected televisions and other devices. The business model could be subscription, VOD and/or ad-supported. In today’s pay TV industry, cable and over-the-air networks are paid affiliate fees ranging from a few cents to about $6 for ESPN, based on the number of subscribers reached, as opposed to the number of viewers actually watching the programs. The current OTT ecosystem is not following the linear TV model, so subscribers are being asked to pay for only the specific channels to which they subscribe; the appeal is made to millennials, mostly, who are willing to limit channels to escape the $80-plus-a-month tab when they subscribe to cable, a telco or satellite.

Ignore the conclusion where he tries to grade the OTT efforts for their potential to return on their investment. He just kind of hand-waves.

The worst is this line:

With incumbent companies, the criteria is more complicated. For them, I see the goals as improving the stock multiple, increasing the brand recognition and avoiding cannibalization

You can’t avoid cannibalization. Not unless you can make older customers immortal. Which is a power that I’m not sure Ken has.

2015-03-12 13:00:00

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Rocket 9: Channing Tatum Saves Feminism ►

Don’t let this sexy podcast title fool you, this episode mostly analyzes announcements from the Apple event and discusses HBO NOW. Christina Warren discusses the positive aspects of the NOW deal, though I still feel like the three month exclusivity window is fairly disappointing.

2015-03-12 12:10:00

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