We have witnessed several changes over the last decade. First ascendecy of wireless cellular over land line phones. Then it was Pay-per-View over B&M rentals. –

The Dallas-based company has been warning for almost two years that it might need bankruptcy court protection to reorganize its nearly $1 billion in debt, as it struggles with dwindling cash and a shrinking business hurt by competition and its own store closings.

A “pre-planned” bankruptcy filing in mid-September is now considered the most likely scenario for Blockbuster, according to unnamed sources quoted by the Los Angeles Times. That would require agreement from the company’s biggest creditors and suppliers, among others.

Blockbuster CEO Jim Keyes recently visited all the major Hollywood movie studios with an entourage of senior secured-debt holders and restructuring consultants, the Times reported.

Source

So yes I am leading up to what I suspect is the ‘Next Middling Thing’. Its this –

vs this –

At first glance you might say ‘How’? The theater might have seem to have all the cards. Big screen experience with a professional sound system, night out plumage, food on demand, all the trappings of being part of a night out on the town. But hold on you also get to experience teenagers yacking through the whole movie. Several people not have the conviction to turn their cell phones off. Then to top it off be prepared to pay about $40 for a couple to see the viewing with ticket, drinks and popcorn. Its that cost vs say no more than $3 to do the same in the comfort of your home.

But here is the kicker, I don’t think any of the other tech blogs has caught on to the nature of this coming issue. LCD TVs have not been gaga tech for quite some time. Same with Pay-per-View. So this has been slipping by under the radar. But you can be assured that the Suits running the theaters certainly are considering it. Its not tech but a tipping point issue that is quietly giving the nod to In-Home viewing.

The tipping point is cost. You can walk into any Best Buy today an purchase a 50″ or larger LCD panel for around a $1000. Add a DVD player or Roku NetFlix box for another $100. That is a pricing level that is affordable to every middle income family in the nation. Home Theater is no longer the providence of well heeled households. Then just roll the numbers. If you figure that the average unit will last 5 years or more then consider many may go to the movies twice a month. It does not take long for the system to pay for itself in deferred expense. Its substitution. Another entertainment deflation.

The second tipping point is scale. Large screen LCD’s are now selling briskly even in this down economy. When a large segment of the population can do their viewing at home the theaters are toast. We are not even close yet, but give it 5 years as the conversion continues and theaters will be gone or greatly reduced in number.

Its no great shucks but it is something you can take to the bank from a business perspective.

HBO has been offering an online stream to some cable subscribers only through their cable operator. In a recent statement HBO’s chair made it clear that it intends to keep things that way.

Time Warner Inc.’s pay-television channel, home to shows including the “The Sopranos” and “True Blood,” holds cable and Internet rights to films from Warner Bros., Twentieth Century Fox and Universal Pictures and is unlikely to make a deal with Netflix, HBO Co-President Eric Kessler said.

“There is value in exclusivity,” Kessler said in an interview. Consumers “are willing to pay a premium for high quality, exclusive content,” he said.  (Bloomberg)

In other words, don’t look for HBO’s programming on Netflix or any other non-cable operator any time in the foreseeable future.

That’s very short sighted. There is no rule that states HBO has to be offered as part of a catch all package. In fact, it could easily be added as a service tier to Netflix, Hulu, Clicker, or even as a stand alone HBO offering. The fastest growing audience is cable cutters, not subscribers. Cable cutters are no longer willing to pay $30-$40 per month just to have access to HBO for another $10 or $20. Many may just be willing to pony up a ten spot or more for HBO via a stream they can access from any broadband connection. In fact, Mr Kessler, that is the future of content distribution. Not catering to cable cutters is already eroding your shareholders’ value. Even if you won’t listen to potential customers. sooner or later, you’ll have to listen to them.

Already streaming most of Starz content, Netflix has reached an agreement with content provider Epix to stream its content. Now both Starz and Epix distributed programming will stream to Netflix subscribers in the same release window as cable and satellite.  While it’s still a far cry from a complete replacement for cable’s pay offerings, for many it will be enough. Especially at $8.99 a month in a recession. (More at WSJ.com)

[Update, Dr Dog] Further background from NYT on the Epix deal –

Epix has the rights to films from Paramount, Lions Gate and MGM. But in a crowded marketplace, the service has gained very little distribution on cable and satellite systems, making it invisible to most consumers. Viacom, one of the owners of Epix, disclosed last week that the joint venture continues to lose money, though it said that the service is moving closer to the break-even point.

The Netflix deal is a way to partly circumvent the cable and satellite carriers — and stem the financial losses.

Only thing missing? A feed for newer Warner Bros works. Netflix gets that and the only reason you need a cable provider might be because its your only source of broadband. Channel based servicing is dead.

Here’s a surprise. Americans borrow more movies form libraries than from any other source. My local library is already offering downloadable books and audio, so could video be next?

According to the survey released by the Online Computer Library Center, public libraries in the U.S. lend an average 2.1 million videos/day, which edges out the 2 million discs shipped by Netflix and almost as much as the combined total of DVD rentals at Redbox (1.4 million) and Blockbuster (1.2 million).

Netflix shrugs off the idea of libraries as competition to their business. “I think of libraries as places for books,” explains a rep for the company. “It’s free, so it’s a whole different model.” (consumerist)

While Netflix is unfazed, this can’t be good news for the cable guys. A bad economy has made pay TV a luxury for most of us, and libraries are a great free resource.  I wonder how long it will be before duopoly and Hollywierd lawyers start looking for ways to shake down your local librarian.

If you’ve been with us for long, you already know we think services like Netflix are the future of pay TV. Two news items today are beginning to make it look like the future is here.  With growth of a million subscribers  at an increased profit and 61% of them streaming their selections the end of cable tv as we know it has begun.

There’s plenty of room for more players, and they’re already in the game to some extent.  The others are Hulu, Amazon, Apple, Youtube and more. The glaring absence remains in the cable channels themselves and programming distributors. The cable guys and Verizon still have some big bandwitdh potential in their dumb pipes. AT&T and the satellite guys are likely to suffer the most.

Tom Silverman is a guy who has been in the music biz longer than I have been in IT. So he knows the trade and its tricks. It is refreshing to hear an insider to state that the current music model is broken —

One of the biggest problems with the old model, which has been going for 50 years, is thinking, “We’re the labels, they’re the artists, and we make money even if they don’t make money. We reduce our risk, they put their blood, sweat and tears into it, and we only give them money when we sign them and when they deliver a new album.”

In between, the only place where they get money is from their booking agent, because they’re touring. They all love their booking agent, because their booking agent gives them a check every month, or every week, and we only give them a check every year and a half when they deliver a new record — and most of that money goes to their lawyer, manager, the taxman, and making the record. Not much of it ever goes in their pocket, and that’s been true for 20 years. Unless they have a five million seller, most of that money goes into that project. Of course they don’t like the labels, because they’re not getting that reinforcement of regular cash flow. They see the labels making money, and them not making money on records.

He also considers the use of the Internet and social networking much a waste of time. Even though in this same article he admits that Susan Boyle broke thorugh on the basis of internet presence. –

No, I think you have to be out there. You have to spread the word to get exposure, but I think the problem is context. When you’re in a glutted environment, you need to differentiate yourself more than ever, so you need a great story. Story is context; it’s not content. The songs on Susan Boyle’s record are forgettable, and her performance is just okay. There are a million singers who can sing that well at least. It’s just the story that sold it. If people could learn from her, regardless of what kind of music they did — “How can I make my story so that when people hear it, they have to spread the word?” That would activate the medium more effectively than trying to get another 50,000 followers on Twitter, which doesn’t seem to do much at all.

Silverman also suggests a different management model. Using LLC’s and Silicon Valley type investment techniques. Oddly we suggested that very thing on this blog well over a year ago. And it is right.

But there are some pieces that Silverman I think is missing –

• The first is good talent is extremely common, and extreme talent is in good supply. Go into any good size church in the USA and there are probably 2 singers in the choir equal to or better than what is screamed out of Hollywood. Is that the case?

  Empirical evidence. Neil Sedaka held a contest with several radio stations as part of a record tour/sale 5-6 years ago. Thousands were screened by the radio stations. Sedaka was floored that several hundred were good enough to be considered by his measure of talent. Anecdotal I know, but good talent recognizes that in others.

  Value in many ways is a perception, especially when the goods are of a nonphysical nature. So when the perceived supply of the goods rises dramatically because consumers perceptions are altered by the sheer volume of good choice the cost curve must drop. Its supply and demand. There is a huge talent supply and only a finite consumer supply.

• The other is this one. Silverman sees it, calls it the ‘clutter the marketplace’. He is of course, right. $3k and you can foam a garage, buy mikes and stands, a 2yo PC and a midi/mixer card and have the equivalent of what a decade ago cost $500k. So anybody can be in it if they want it enough, such is modern technology.

  But again that is not the biggest issue as I see it. Look the big labels are soon to be gone. They are right now where the major studios were back in the 60’s. Then as now, every release had to be a mega blockbuster as that what the audience expected but the costs were beyond belief. The end game will be the same too. Fundamentals now are also different.

  A band, even if it does not break thru to the levels that Silverman expects which is 100k distribution as the floor. Well run the numbers at $10 per disc. $1m gross. Deduct 5% for production costs. (Yes that cheap.) Zero out distribution costs as most bands at this level would sell either direct over the internet or more likely direct at the concerts wher they make most of their money anyway So out of say $900k split 10 ways with band, light, stage men that is still $80-100k. No you won’t get overnight rich at those numbers, but that is a descent upper middle class income with unlimited upside you you do break thru.

To an extent Mr. Silverman’s lament recognized for what it is runs head long into supply chain economics. The Internet has eliminated the middle man in most cases. Producer and retailer become one. No industry is immune from it even music. And for a lack of a better analogy, iTunes IS WalMart in the music industry.

Linky

The battle between traditional broadcast and cable and the Internet continues to intensify with news from Netflix. Soon, the online entertainment services customers will have access to new movies from Relativity at the same time the content is made available to premium channels like HBO.  Netflix already offers some current content from Starz concurrently with the networks cable play and subscribers have access to a live Starz feed. For $8.99 a month this could be trouble for premium channels like HBO and Showtime that cost more than $8.99 in addition to basic cable fees.

The deal announced Tuesday with film financier Relativity Media LLC adds to a batch of newer movies from The Walt Disney Co. and Sony Corp. that can be watched online through Netflix’ 2-year-old deal with Starz Entertainment LLC on a service called Starz Play.

Among the first films in the deal are “The Fighter,” starring Christian Bale, Mark Wahlberg and Amy Adams, and “Season of the Witch,” starring Nicolas Cage. The films are set to hit theaters later this year.

With new movies from Relativity available early next year, about one-fifth of the rental movie chain’s 100,000 movie and TV show titles can now be streamed online. (Yahoo)

The next questions is: Will HBO and Showtine see the light soon enough to jump on the TVoIP bandwagon or will the be displaced by upstarts. This brings us even closer to the time when subscribers will demand bigger pipes from a protected duopoly  that competes directly with web based services.

While Google and Yahoo’s maps are free, mostly accurate and even have API’s that extend their use, they still have limitations. Data collected by outsiders will never rival that from a person familiar with the area.That combined with hostile terms of service and “trust us” while we collect your data policies makes a very good case for  a crowdsourced, open source global map system. openstreetmap.org is just such a project. While it currently covers Europe, US users are beginning to add data.

A street-level map of the world might sound audacious, but OpenStreetMap has exploded in popularity—after starting with a few friends, more than 250,000 have now contributed mapping data to the project. Soon, the map achieved amazing accuracy, especially in Europe where it originated.

Take a look at Germany, for instance, where open mapping has become a craze. The Zoologischer Garten Berlin (the Berlin Zoo) exists in Google Maps, of course, but it has little detail (though it does have satellite maps, which OpenStreetMap lacks). Dedicated locals have used OpenStreetMap’s tools to do Google one better by mapping all of the zoo’s animals; if you want to plot your visit to the lair of the “Groβer Panda,” you can. Even restroom locations are helpfully plotted. (Ars Technica)

It could be the tipping point for the broadcast, cable and satellite businesses as we currently know them. While the cable industry worked hard to get everyone to buy into it’s TV Anywhere concept, the real growth has come in the form of streaming devices like Roku’s little internet stream box. With Google’s Google TV announcement earlier this week, followed by the Apple rumor mill ballyhooing a fruit cult stream box this could be there year net video will take control of the big screen.

With so much video m0ving across the net, consumers should start demanding bigger pipes to better carry HD streams. With the duopoly’s myopic focus almost entirely on wireless, it’s a great opening for new competition. Now, if we could just re-open the last mile……..

If you are a well known music artist, conventional wisdom as told by the labels is that you make tons of money from the sales of recordings. But, the reality is the majority of artists make very little from the sale of recordings. That’s because the labels “expense” most of the revenue before the artist is compensated. The big labels have been blaming piracy and music sharing as the reason why artists make so little for decades. Before file sharing, the “culprit” was tape.

It’s also true that the real money for musicians in is live shows. No matter is you can sing or not, a great many of the top acts lip sycn to studio sweetened recordings and connect with fans. While promoters can take a big share, savvy artists have almost always fared better with than with the labels.

A very current example is A list artists Lady Gaga. Love her or hate her, she understands the realities of the music market, and has used it to her advantage. Free downloads and engaging fans seems to have served her well. I don’t think all of the big label support in the world could have helped more.

in a wide-ranging (and really quite fascinating) interview that Lady Gaga did with the Times Online in the UK (check it out before they put up the paywall), Lady Gaga admits she’s fine with people downloading her music in unauthorized forms because she makes it up in touring revenue:

She explains she doesn’t mind about people downloading her music for free, “because you know how much you can earn off touring, right? Big artists can make anywhere from $40 million [£28 million] for one cycle of two years’ touring. Giant artists make upwards of $100 million. Make music — then tour. It’s just the way it is today.” (Techdirt)

While the big labels continue to focus on monetizing their archives, the real industry has moved on. Artists who get it will do just fine, with or without a label.