Jim Louderback, Revision3's CEO spoke at ACG's January dinner event about The Future of Internet Television.  He spoke about internet television, traditional television, Hulu, Boxee, Netflix and a bunch of other interesting stuff, including a USB cigarette.

OK, let's start with the USB cigarette (so you can skip the rest of this post if you want): this is one of the wackiest products from CES 2010.  You can see it in action in this video that Jim did; skip the first 4:34 minutes to see it (or watch the other weird stuff that showed up this year at CES).

Jim demoed said e-cig at the start of his ACG presentation: he plugged it into a USB port (and the tip lit up, just like the real thing), took it out, inhaled and… he blew a puff of "smoke" from his mouth (actually, vapor).  We all had a good laugh. I wonder if you can Twitter with smoke signals?

Revision3

The company creates and produces its own shows.  They are targeted at 18-30 year-olds, a demographic that prefers to get their entertainment online (although a few 50-something year olds are known to watch the stuff, too).

This is the company founded by Kevin Rose, Jay Adelson, David Prager, Dan Huard and Ron Gorodetzky back in 2005.  One of its very early productions, Diggnation got a lot of press when it started and it's still Revision3's flagship show.

Hulu is the AOL of 2010

Jim reminded us how Time Warner came up with Pathfinder.  They spent a lot of money on it, promoted the heck out of it and… nobody came.  So they merged with AOL because they just didn't get the Internet "thing" and AOL did.  Then AOL sunk the combined company.  They AOL business model did not fit in with the Time Warner cost structure.  It was not sustainable and so they sunk.

In Jim's view, NBC, Fox and ABC, the owners of Hulu, are in the same position as Time Warner was in back then.  They know they have to do something with this Internet "thing" and Hulu is the result of that.  The problem is that the Hulu revenue model cannot sustain the old television cost structure.

It costs between $3M and $4M to make just one sitcom episode. Comedy shows like the Tonight Show are much cheaper, but still expensive productions.  For that the networks get to air 16 minutes of commercials or about 32 "messages" per hour.  One Hulu, the only get to show four messages per hour so Hulu would have to charge eight times as much per commercial to make as much money.  But they are not.  Every Hulu show is costing them significant revenue, compared to what that shows makes on traditional television.  The production costs are the same, but the revenue online is a fraction thereof.  It's not sustainable because they have not changed their cost structure and are still producing shows based on the old paradigm.

Where Is Steve?

Jim pointed out who's not on the Hulu bandwagon: ABC.  As it happens, Steve Jobs is on the Board of ABC… coincidence?

In Comes Revision3

By contrast, Revision3 starts with a different cost structure.  They produce original, broadcast quality shows very inexpensively using modern, inexpensive cameras, cheap locations, etc.  They have created many niche shows that take advantage of the long-tail effect: many, many, many small, niche, well characterized audiences that are at the same time rabidly loyal to their shows.

On the revenue side, ads and product placements in these shows command higher rates because they are laser-focused on a very well defined audience profile.

And that is a sustainable business model.

The Final Question

At the end of the talk there was time for a few question, but the best of the bunch was, "Why do you call it television? Television is Walter Cronkite and Mary Tyler More."  I think that Revision3 should adopt it as their new slogan because it really nails the difference and positions "television" as outdated (which it is).

I Wish I Had…

Jim made a big deal of the fact that ads in their shows are done by the show hosts intertwined with the show, in a way that a listener cannot "TiVO" past it.  For one thing, the advertised products get more credibility because they leverages the trust and familiarity of the host.  For another, "we make a boatload of money every time" they're mentioned.

That's all well and good and that is in fact the way that most commercials used to be in early radio and television (and it's still so in many Spanish-language show, most notably Sábado Gigante).  But, for some reason, they were replaced with ads that are clearly separated from the show's content.  Was it because the networks could make more money from one style of ad versus the other?  Could the same thing happen to Revision3 ads?  Or is it the case that the old dynamics don't apply in the new medium?  These are a few of the questions I wish I had a chance to ask.

Great Presenter

Jim's a Math major with a personality.  He obviously thrives in front of an audience, working the full breadth of the stage (such as it was), mixing it up with the audience.  He reminded me of Phil Donahue (a white-haired mythical character from pre-history, otherwise known as the 1980s).

He's a media guys who understands television and, more importantly, its weaknesses.  He also grokks the Internet's potential and how it is fundamentally changing what we mean by "television."  Revision3 seems like the perfect playground for him and I can't wait to see where he and his team take it.

The Making of this Post: the Pulse Pen

This was my first chance to use my Pulse pen (thank you, Santa) in a public event with a large audience and it worked great.  A couple of people at the table glanced at it but nobody actually asked why my pen had an OLED display in it.

I uploaded the result to the Livescribe site so you can see how it works.  The audio is very clear, even though I didn't use any external mic. (My handwriting is another story).  I just took notes while Jim spoke.  I held the pen normally and hoped for the best. (The clicking you hear in the background at the beginning of the talk is from the knives and forks of people finishing dinner).

The great thing about it is that later, while I was writing this post, I could quickly jump from one place to the other in the audio using the notes as pointers into the audio.  You can get some of the experience with the online presentation by clicking around the page and hearing how it jumps to the corresponding point in the audio.

As you can see in the image above, the "controls" for the pen (record, volume, etc) are printed at the bottom of each page.  That makes it super easy to control the device as opposed to trying to do with on-device controls (or, gasp, a brain-damaged menu on that tiny screen).

Before this, I've used to take notes while I listen to podcasts, TEDtalks, etc.