Kaleidescape back in court in May 2011?

[nineball]

I don't agree with that, nineball. We are going to have other costs to deal with. There are bandwidth caps for one. Another thing is that everybody has access to buy a DVD. Not everybody has broadband and even then, one cannot simply stream your movie as it would often have to buffer first. We complain about having to watch forced ads and commercials before watching our DVDs (well, WE don't but other people do. ) so imagine how much it is going to suck to have to wait an hour to buffer the film before you can watch it if you don't have FIOS or the equivalent? Imagine having to deal with getting a video for the kids...

Seriously, music is WAY ahead of film on this, don't have anywhere near the bandwidth issues and who doesn't have an mp3 player given they are in almost every phone now? And yet they still sell music on CD. I have purchased them as recently as a few months ago - I don't buy many because there is so much crap and manufactured bands to sort through before I can find something real, like Adele or Norah Jones. Yet they keep on making them.

They still make DVDs even though Blu-Ray is certainly here to stay, so I don't see the physical discs disappearing.

You and I keep weaving back and forth on this issue. I'm beginning to feel paranoid.........just kidding.
There was a national news item recently declaring CD's on the endangered species list. They are clearly on their way out. The business model is in place for that to happen. This year purchases of music in non CD form has been eclipsed by the net. It is as inevitable as roof top TV antennas disappearing to be replaced by cable and satellite systems even though the quality of over the air product was clearly superior to cable and satellite.
DVD's/Blurays are about to disappear at light speed.

Its absolutely inevitable. I wouldn't worry too much if I were you. Material, especially mainstream material will be there tomorrow morning when you get up. So you don't have too much to worry about in the short run.

If however you were CEO of Kaleidescape preparing briefing notes for your Board of Directors on strategies for the near term I would expect you to deliver a tactical and cogent plan for the future that presumes a shrinking marketplace for DVD's/BD's. This market is NOT going to get any bigger nor will status QUO be likely. Fielding an adequate response to the changes and evolution has been a challenge for Kaleidescape to date and the calendar is going to loose its flexibility faster than anyone can imagine. Time is going to become a precious commodity all too fast. The kinds of technology and business model changes that will be necessary to cope and stay ahead of the tsunami will be significant and very expensive. It is worth it in my opinion but more imagineering needs to take place.
We also disagree about the relevance and impacts on current limitations of available bandwidth. As I have said before changes in this area are known to be exponential so if the market wants more bandwidth to deliver greater value to its consumers they will find it. Competition will take care of the rest. In the meantime the consequences to our domain will be to give in to the temptation to 'dumb' things down to fit the pipe. This is where you and I will suffer as streaming thinner movies at say 1080i or 720P will become mainstream along with iPads and heaven forbid iPhones.

I love my Kaleidescape system and I truly believe that it has continuing value in my future. Kaleidescape will know just how successful they will be by measuring my sense of continuing delight with the product.

 

[Mr.Poindexter]

You make it sound like it is happening soon. CD may have been eclipsed by online sales, but that was just this year and what company wants to give up 40-45% of their revenue? They will keep producing CDs as long as the marginal sale on a CD is positive.

When do you think we will be told "I am sorry, movie X being released next week won't be on DVD or BluRay. You must download it via iTunes/Netflix or similar service"? Next year? 2 years from now? Certainly Blu-ray will hold out longer than DVD, right, due to the much larger file size? As an industry, I would be hesitant to scuttle physical media to rely completely on digital download right at the same time ISPs all over are talking about putting on bandwidth and volume caps or having a "netflix tax" to their rates. They might jump into something that immediately changes. Ask TCU how they felt about that jump to the BigEast or Boise going to the MWC only to see what they got wasn't anything like what they expected to get.

They will do the digital thing, but discontinuing physical media sales is burning the bridge.

Next, you will tell me I won't be able to buy records...

 

[nineball]

You make it sound like it is happening soon. CD may have been eclipsed by online sales, but that was just this year and what company wants to give up 40-45% of their revenue? They will keep producing CDs as long as the marginal sale on a CD is positive.

When do you think we will be told "I am sorry, movie X being released next week won't be on DVD or BluRay. You must download it via iTunes/Netflix or similar service"? Next year? 2 years from now? Certainly Blu-ray will hold out longer than DVD, right, due to the much larger file size? As an industry, I would be hesitant to scuttle physical media to rely completely on digital download right at the same time ISPs all over are talking about putting on bandwidth and volume caps or having a "netflix tax" to their rates. They might jump into something that immediately changes. Ask TCU how they felt about that jump to the BigEast or Boise going to the MWC only to see what they got wasn't anything like what they expected to get.

They will do the digital thing, but discontinuing physical media sales is burning the bridge.

Next, you will tell me I won't be able to buy records...

I am saying its happening soon and much faster than you think. I am also NOT saying that Kaleidescape should abandon their current business model. I am saying that they should have 'on the shelf' a full roadmap to a business model that recognizes the ultimate death of physical media as a delivery mechanism. That plan needs to be reasonably public that reinforces the value proposition for their existing and future customer base. This will prevent any erosion to the notion that there are no real competitors to the Kaleidescape experience. Apple and netflix are catching up fast and will discover that the 'functional divide' is narrowing to their benefit. You are too young to remember what happened to Lotus 123, Banyon, Wordperfect, Novel, to name a few market dominant companies who were eclipsed before they themselves realized it was all over. Near the end of each of their respective lives they all without exception failed to accept that migrations to a competitive model were one way and unrelenting. This I believe is happening to this industry with respect to the production of physical media. Amazon sells more electronic books for the kindle than physical books...Hardcover or soft! Again I am not telling you that you won't be able to get your DVD/BD tomorrow or next week. I am telling you that as an investor I would be hard pressed to invest in a DVD/BD retail outlet because the future is not rosy as far as margins and market share are concerned. This does NOT bode well for the long or even medium term for that distribution model. Contrary to your view I believe consumer acceptance is on my side which is an important element in this algorithm for change.

All of this rhetoric is simply to encourage Kaleidescape to re-imagine the future before it is past.

Peter

 

[Mr.Poindexter]

Well Peter, I am not so young that I don't remember Lotus 123, which I took classes on, as well as Word Perfect and dBase and I remember being pushed towards a Novell network but I resisted. I also remember using SCO Xenix for our first server at work. I also remember having my Apple IIgs computer back then as well. Some companies adapt, some don't.

That said, I haven't stated how soon I think this changeover is going to take place, but I suspect it will take place later than you think. I would be willing to wager that DVD and/or Blu-ray will survive as a physical medium for at least 3 years after CDs are no longer produced. Old product lines do not disappear overnight. It takes a LONG time for them to die. The last laserdisc player rolled off the line just a few years ago - January 14th, 2009 to be exact and Laserdisc had nowhere near the penetration level of Blu-ray, let alone DVD.

Now, as an investor, I wouldn't want to buy into a DVD retail outlet, but then again that industry was is dead regardless. As they said in The Social Network "The record labels won the $35 million lawsuit, not Napster" to which Sean Parker replies "Want to buy a Tower Records Store?" I don't look at that as stating the physical media is dead - just don't plan on it being profitable enough to keep a Tower Records open. The future of physical media is online ordering from Amazon and impulse purchases as Wal-Mart/Target with front loaded pushes to get movies at retail as soon as they are released.

Downloads will happen and innovation is still critical, but don't count the physical disc dead yet. There is still a lot of life left in physical formats.

 

[Mars]

You make it sound like it is happening soon. CD may have been eclipsed by online sales, but that was just this year and what company wants to give up 40-45% of their revenue? They will keep producing CDs as long as the marginal sale on a CD is positive.

If memory serves me, (according to the RIAA) the US Music industry revenues are around $7 Billion. I know that in 2010 it was about 55%/45% in favor of physical media (including Vinyl!), so it sounds right that it would have flipped in favor of digital this year. Physical Media were around $6 billion in sales in 2008 when (legal) Digital and iTunes were in its infancy, so they have cut in half in the last 3 years BUT that means that it is still a $3 BILLION piece of the pie! So if CD's etc are still at that level and they are easy to pass through wireless and lower bandwidth, movies with their much higher file size take even longer to transition even if the technology is getting more advanced.

The other key component is the Studios want to make money by selling DVD's and that doesn't get abandoned until (well after) the people have spoken that they only want to get it digitally. The masses are certainly not saying that...the early adopters may be saying it, but not the masses

Don't forget, we need to have a massive cloud infrastructure because a DVD can get physically taken from room to room to car. Apple is getting there, but we are talking about the whole world....there's another point. DVD's are global and different countries are at different points in this process.

It will happen, but not for a while. IMHO. Of course as you state, nineball, you need to prepare for the decline in the industry of physical media, which is what they are doing at K...positioning themselves for the future, but not abandoning the bread and butter since it will still be relevant for a while.

In other news, according to RIAA stats, the Audio Cassette IS officially dead... Zero revenue in 2009...sorry!

 

[nineball]

If memory serves me, (according to the RIAA) the US Music industry revenues are around $7 Billion. I know that in 2010 it was about 55%/45% in favor of physical media (including Vinyl!), so it sounds right that it would have flipped in favor of digital this year. Physical Media were around $6 billion in sales in 2008 when (legal) Digital and iTunes were in its infancy, so they have cut in half in the last 3 years BUT that means that it is still a $3 BILLION piece of the pie! So if CD's etc are still at that level and they are easy to pass through wireless and lower bandwidth, movies with their much higher file size take even longer to transition even if the technology is getting more advanced.

The other key component is the Studios want to make money by selling DVD's and that doesn't get abandoned until (well after) the people have spoken that they only want to get it digitally. The masses are certainly not saying that...the early adopters may be saying it, but not the masses

Don't forget, we need to have a massive cloud infrastructure because a DVD can get physically taken from room to room to car. Apple is getting there, but we are talking about the whole world....there's another point. DVD's are global and different countries are at different points in this process.

It will happen, but not for a while. IMHO. Of course as you state, nineball, you need to prepare for the decline in the industry of physical media, which is what they are doing at K...positioning themselves for the future, but not abandoning the bread and butter since it will still be relevant for a while.

In other news, according to RIAA stats, the Audio Cassette IS officially dead... Zero revenue in 2009...sorry!

I don't want to appear as if I am pushing an agenda.....I'm not. I agree with absolutely everything you have advanced except the speed at which this model is evolving. Personally I want to own my movies, I want to get them as soon as they become available and my preference is to continue to store those movies on a centralized storage facility (like Kaleidescape). Oh yeah, and wherever possible I want the best, highest quality available. To date the only way to get that conveniently and legally (for the moment) is with Blu Ray DVD's. I'm there and I'm sold on the current delivery model. I live in Canada on the fringe of the largest city in the country. Product is getting harder to get and it is accelerating. Business realities are setting the agenda. We are 10 times smaller in population than the US. With all the business turbulence in the last five years there is really only one major distributor for the country as far as DVD's go. Some of the smaller producers are no longer part of the main menu of choices so its off to Amazon/Apple etc. The box stores are no longer reordering older movies because its not worth it. Netflix seems to look after that need better than anyone. So as has been suggested simply go to amazon when its not available at Best Buy or Wallmart. But this takes a huge bite out of on site impulse buys which make a small but significant percentage of the purchase population. The proof is the shrinking shelf space.

Here's where I creep out on a very, very, flimsy thin branch where, as far as a futurist is concerned, you should never go. I believe that the watershed event happens in the next year. Apple will bring to market a new device that will be plug and play, best quality and an integrated proprietary secure storage device optimized for the multimedia video market place. They have been hard at work building the industry relationships to make it possible. Here they crack a walnut with a touch of imagination with respect to current technological hurdles and challenges. When you buy your movie through your Apple TV it is stored in the cloud at no cost. Thats right, for free and the best part is that you have the right to play that movie on any iPhone/iTouch/IPad/Imac you own up to a max of 10 devices either at a resolution optimized for your display which goes a long way to diluting the bandwidth requirements or all the way up to downloading the movie for crazy people like us at full resolution. The reason Apple will be so driven to do this will be that the opportunity to up sell that same product to the next resolution lift is a business holy grail for downstream profits. The model is already in place for music and ITunes movies. Today there is no charge for storage in the icloud for products purchased from iTunes. All they need is a living room consumer friendly device to bring movies into the forefront. Its not Apple that I am stressing here, although they have a terrific head start it is the compelling business model and I believe it is already in motion. Yes it will take a few years but talented business folks will not wait on a market reality that is shrinking slowly at best. The accelerants for success in this domain are all around us.

I think I've probably outlived my welcome on this subject so to the author of this thread, I apologize for the hijack.

Peter

 

[cinelife]

I think both comments are correct, change will come, but it will be awhile. I'm continually reminded that infrastructure/bandwidth is still not close to being ready to handle mass HD downloads. I'm currently traveling and had an opportunity to visit a friend's home. We were discussing what K brings to the in-home entertainment experience versus his download/streaming service. We watched a movie and not wanting to be rude I did not critique the imaging as I normally would, but I was actually surprised at what some people will accept in their A/V experiences. Drop outs, both audio and video, some occasional stutter, video artifacts, and one freezing moment that lasted a few seconds. Other than the "freeze," he didn't mention any other issues.

I'm sure we will eventually get there, but there needs to be a significant improvement to get my attention.

Jim

 

[sipester]

I don't want to appear as if I am pushing an agenda.....I'm not. I agree with absolutely everything you have advanced except the speed at which this model is evolving. Personally I want to own my movies, I want to get them as soon as they become available and my preference is to continue to store those movies on a centralized storage facility (like Kaleidescape). Oh yeah, and wherever possible I want the best, highest quality available. To date the only way to get that conveniently and legally (for the moment) is with Blu Ray DVD's. I'm there and I'm sold on the current delivery model. I live in Canada on the fringe of the largest city in the country. Product is getting harder to get and it is accelerating. Business realities are setting the agenda. We are 10 times smaller in population than the US. With all the business turbulence in the last five years there is really only one major distributor for the country as far as DVD's go. Some of the smaller producers are no longer part of the main menu of choices so its off to Amazon/Apple etc. The box stores are no longer reordering older movies because its not worth it. Netflix seems to look after that need better than anyone. So as has been suggested simply go to amazon when its not available at Best Buy or Wallmart. But this takes a huge bite out of on site impulse buys which make a small but significant percentage of the purchase population. The proof is the shrinking shelf space.

Here's where I creep out on a very, very, flimsy thin branch where, as far as a futurist is concerned, you should never go. I believe that the watershed event happens in the next year. Apple will bring to market a new device that will be plug and play, best quality and an integrated proprietary secure storage device optimized for the multimedia video market place. They have been hard at work building the industry relationships to make it possible. Here they crack a walnut with a touch of imagination with respect to current technological hurdles and challenges. When you buy your movie through your Apple TV it is stored in the cloud at no cost. Thats right, for free and the best part is that you have the right to play that movie on any iPhone/iTouch/IPad/Imac you own up to a max of 10 devices either at a resolution optimized for your display which goes a long way to diluting the bandwidth requirements or all the way up to downloading the movie for crazy people like us at full resolution. The reason Apple will be so driven to do this will be that the opportunity to up sell that same product to the next resolution lift is a business holy grail for downstream profits. The model is already in place for music and ITunes movies. Today there is no charge for storage in the icloud for products purchased from iTunes. All they need is a living room consumer friendly device to bring movies into the forefront. Its not Apple that I am stressing here, although they have a terrific head start it is the compelling business model and I believe it is already in motion. Yes it will take a few years but talented business folks will not wait on a market reality that is shrinking slowly at best. The accelerants for success in this domain are all around us.

I think I've probably outlived my welcome on this subject so to the author of this thread, I apologize for the hijack.

Peter

I expect there to be a lot of movement is the mass market area for media options (and I agree Apple is likely to bring something).

However, I don't see how anything that Apple or anything anyone else would dream up could compare in quality to the K system. Just do the math, a K server can easily serve up 5 blu-ray streams at once to multiple TV's in a home. We are a long way away from any kind of internet infrastructure in the US that could handle that kind of bandwidth (it would likely need 100Mbs or more, and no download caps, to stream 5 blu-rays simulteanously over the internet).

 

[AnOutsider]

How many homes need 5 bluray streams at once though? Apple can easily win mass market if it provides the needs of what most people need. Heck, with kids in the house, is still cheaper to plunk down $200 on 2 Apple TV units and rentals than to get even a single zone kscape system, and it would be more functional for the average joe.

 

[cinelife]

Well of course, renting has always been less expensive, but that's not the point of a K system. It's about "ownership," and being able to watch anything in your collection without reaching out to a third party.

K was originally developed to help owner's of moderate to large DVD collections organize those collections to make all their movies more accessible and better categorized to improve their movie viewing experience. This really hasn't changed.

There are clearly people who could care less about owning content and others, like me, that collect movies (not unlike someone collecting coins or stamps). Still others just like owning their movies. For me, and these others, Owning K makes sense. For the first group, perhaps Apple or Netflix or similar service makes more sense.

Back to the cost issue. Innovation, especially innovation that solves a problem in a capitalistic system like ours, is driven by a desire to make money. Sure there are some that innovate for other reasons, but I think it's fair to assume most do it for profit. K is a business, a business that developed a product that solves a problem. The value of that product to the consumer is directly related to the consumer's desire to solve the problem the product addresses. Some will look at K's entry cost and decide the problem isn't big enough to justify the expense. Other's, like most of us here, see it differently.

This reminds me of when I built my first home in Hawaii. It was on a ridge (as an aside, the old actor Tony Curtis was my neighbor). I had some ground settling issues, nothing major, but still a recognized problem. My other neighbor had the same issue. We both called the same engineering company out to assess the problem. I was in my yard speaking with their estimator, having already decided I would leave it like it was because of the cost. My neighbor approached and asked the engineer how quickly they could start the repair work. The engineer told him a week, and then offered to examine the property to provide a cost estimate but my neighbor declined, saying "just fix it.".

I think in K's early days, most owner's were my neighbor. Obviously, that's changing.


Jim

 

[AnOutsider]

Understood on renting vs owning, but many services (appletv included) you CAN own the movies. The only downsides remaining are that it's usually streaming (with amazon you CAN store locally, not sure on atv), and quality for the videophiles. I think the day is fast approaching where digital collections will be valued well above physical for most people.

K did solve a problem for me, the exact one you mentioned, but that problem is slowly going away.

 

[Mr.Poindexter]

How many homes need 5 bluray streams at once though? Apple can easily win mass market if it provides the needs of what most people need. Heck, with kids in the house, is still cheaper to plunk down $200 on 2 Apple TV units and rentals than to get even a single zone kscape system, and it would be more functional for the average joe.

I don't generally need 5 BluRay streams at once, having a wife and 2 kids pretty much limits us to 4. I have been streaming 3 BluRays on a couple occasions that I know of. To run 4, I would be in the theater and not really paying much attention to what the other 3 are doing anyway.

That said, I do have AT&T uVerse and have on multiple occasions reached my capacity limit for watching shows. Most people I know don't even have that kind of network capacity available to them, let alone already in place and running. A single person streaming video is tough enough. An entire family that cannot agree on what to watch is a lot more difficult to feed bandwidth-wise.

Also, wasn't there a study recently that said Netflix was completely responsible for something like 37% of all internet traffic already. I don't think we have the infrastructure to handle a massive explosion of growth there without large investments to handle the traffic and that will be passed on in higher internet access bills which changes the cost/benefit ratios greatly.

 

[JerryL]

Great discussion fellas. Enjoyed reading it.

 

[lgimene]

...don't want to beat a dead horse....but not all "old" technologies simply go away for ever....just look at polaroid film and cameras, mcIntosh amplifiers, vinyl discs to name just a few....

 

[AnOutsider]

Also, wasn't there a study recently that said Netflix was completely responsible for something like 37% of all internet traffic already. I don't think we have the infrastructure to handle a massive explosion of growth there without large investments to handle the traffic and that will be passed on in higher internet access bills which changes the cost/benefit ratios greatly.

If the services and devices become ubiquitous then yes, it will happen. Even if it means ISPs start increasing costs, people will do it. They won't associate it as a direct cost of their streaming like they'd associate a $5k kscape bill (at the very minimum). People aren't going to go "well, the infrastructure isn't there, so let me find a dealer/installer to hook this stuff up and go out and buy some DVDs". They're going to use what's there (streaming and downloads), and the ISPs will respond by raising prices to foot the bill for expansion. Those users will actually end up pushing the ISPs to upgrade, thus building the infrastructure out of pure need.

 

[nineball]

Well said AnOutsider. I really hadn't given much thought to the ISP's as stakeholders in the evolution of the information highway. As primary toll collectors they have a huge upside if they can improve services from the producers to the consumers of this multimedia tsunami.

Good point.....

 

[JerryL]

Thats right and it will happen. But you will also have the huge force of the consumer market of which the majority are taxpayers and out of that there is a good percentage of people who vote so if the toll collectors get too aggressive they will have negative blow back.

My own opinion is the rate of change is increasing. Our system is geared to that- for better or worse.

 

[nineball]

Thats right and it will happen. But you will also have the huge force of the consumer market of which the majority are taxpayers and out of that there is a good percentage of people who vote so if the toll collectors get too aggressive they will have negative blow back.

My own opinion is the rate of change is increasing. Our system is geared to that- for better or worse.

I agree that attempts to garner excessive profits will absolutely backfire. It clearly doesn't make sense to a majority of the movie consuming population who are happy watching a product that is regularly and routinely diluted by the satellite and cable companies. However I know that today my ISP (cable co) provides 100 Mb/sec download speed and works with a 250 gig monthly cap. I use about 50 gig a month for 'normal' activities which leaves me 200 gig for my Kaleidescape Blu Ray purchases. Thats about an average 8 movies a month without the extras. Since I live in Canada where gas is soooooo very cheap @ roughly $6.00 a gallon, the roughly four trips per month to my DVD store 10 miles away, I almost save the $100.00 a month internet cost. Now I know things are different in the US where you all are driving fuel efficient and electric vehicles where electricity is cheap, but I don't see anything but real value to access my DVD purchases over the net. Further, if I felt that I was going to require more volume because I will be buying Blu Ray version 2.0 (4K 3D movies) then an extra $100 per month gets me no download caps and the ability to run a VPN to Kaleidescape. The discussion about download restrictions to our demographic does not carry the same weight as the 99% with respect to tolerance levels.

Before I get accused of being egalitarian in my views, i'm not suggesting that my experience and perspective ought to dictate any kind of workable solution to the mainstream consumers. It clearly wouldn't be adopted at these price levels.

My point is aimed at those who have suggested that we would not be able to achieve a workable solution for K owners due to infrastructure limitations. We will end up paying a premium for the performance privilege but not waiting for a workable solution for the mainstream consumer as an answer. I would consider an up tic in my internet cost if the value proposition was compelling enough. Also getting access to a comprehensive catalog that clearly would be superior to a declining bricks and mortar experience would be very welcome if it resulted in a beneficial impact on my purchased, locally stored library. The only streaming I would consider is uncompressed movies on my own network at gigabit speeds. Oh and if Kaleidescape agrees to store my original purchase on their site my wife would be very pleased. Storing 2000 movie jackets is a real pain in the.......attic.

Peter

 

[JerryL]

Just a few random thoughts.

First, what if you could combine 4 trips to the store into 2 or even 1?

Second, about driving, its not just the fuel cost, theres also the excess wear and tear on the vehicle and the possibility that you might (GFB) be involved in an accident. On the flip side, you might enjoy driving so there could be some benefit there.

Third, can you get amazon or some other e-tailer to send you the movies? Thereby avoiding your transport costs- of course you now pay their transport costs.

Im with you that if Im going to do streaming, I want full quality. Sadly the market will probably be more than happy with something called 1080P but won't have the bandwidth of blu ray.

 

[nineball]

Just a few random thoughts.

First, what if you could combine 4 trips to the store into 2 or even 1?

Second, about driving, its not just the fuel cost, theres also the excess wear and tear on the vehicle and the possibility that you might (GFB) be involved in an accident. On the flip side, you might enjoy driving so there could be some benefit there.

Third, can you get amazon or some other e-tailer to send you the movies? Thereby avoiding your transport costs- of course you now pay their transport costs.

Im with you that if Im going to do streaming, I want full quality. Sadly the market will probably be more than happy with something called 1080P but won't have the bandwidth of blu ray.

Excellent points all.......

However, I go every week because I wouldn't want to wait a week for a movie that I knew was in the store just sitting on the shelf for two or more weeks. I guess that covers my ALOIC (Adult Lack Of Impulse Control). I have also discovered through much trial and error that copious amounts of Icewine or Scotch do not dampen the impulse part of the disease.

Bentleys do NOT have accidents!!!! Nor do they 'wear and tear'. They are however to your point very comfortable to drive. I have, on occasion wished my DVD store was a thousand miles further than it is.

Amazon, rears its head yet again.....since I usually get to watch 2 weeks before the official release date.....ALOIC again!!!!

Peter