LIVEdigitally

I recently had a lengthy discussion with my Rabbi talking digital media and more specifically on content piracy. One area we focused on was about people’s awareness of right and wrong, and their tendency to do wrong, whether intentionally or unintentionally. Many have conjectured that consumers would stop “stealing music” if there were “better systems” in place to buy it and use it legally. At this point, I think it’s fair to say the systems are there, and they aren’t really working.

First, to stop a counterpoint in its tracks - I know iTunes sells a bunch of music to a lot of people. Even Steve Jobs himself stated that Apple estimates about 3% of music (max) on iPods is purchased, leaving 97% ripped or copied/downloaded. When I did a music survey several months ago, over 60% of the people who completed it acknowledged a peer-to-peer download within the past 30 days. Let me repeat: 2 out of 3 people are actively illegally downloading content.

Over the past month I’ve randomly been asking friends and strangers the following questions:

• Do you download music that you don’t pay for?
• Is that wrong?
• Would you walk into a Best Buy and walk out with a CD without paying for it?

In almost every case, the answers are, predictably, YES, NO, and NO. Interestingly, there’s no reason to ask people if shoplifting a CD is “wrong” - they know the answer to that one. More importantly is the focus of the second question and the corresponding response. People today, in general, do not believe the act of downloading or copying music files is wrong.

Marc Cuban has some excellent thoughts on the future content, including this one (source):

Can the music industry be saved ? Yep. It would be so easy its scary. Make music available anywhere and everywhere.

In my eyes, this isn’t nearly enough.  If people don’t think of it as wrong, then the problem the music industry faces is deeper than availability, access, DRM, synching, devices, mobility, PCs, iPods, or anything of the sort.  The problem is morality can’t be spun.  Morality is exceptionally hard to market.

Consider the cases where the RIAA has prosecuted college students (and others) for peer-to-peer sharing.  Without fail, bloggers and even mainstream media tend to leap to the defense of the sharer, rarely to the side of the RIAA.  Deep in the hearts and minds of modern technology culture, there is a belief that sharing music files isn’t wrong.

My suggestion to the industry at-large is two-fold:

1. Publishers/Labels: Enjoy sales why they last, but intensely build out ad-supported models.  Figure it out, and do it soon.  There should be plenty of money to keep publishers and producers in business.  Also, while you are at it, stop throwing money at sensationalist acts that are only good for a track or two - it is a model that has led to the problems you face today.  Focus on spreading your promotional and development budgets much wider across many genres and acts.
2. Artists: Continue to focus on the live shows.  It’s fairly accepted that that’s how you make most of your money anyway, so work on deals that heavily emphasize your touring and live revenue.  Also, figure out how to do live streaming for micropayments, and enable a revenue source from a fan base you can’t otherwise touch.

I could probably come up with another dozen or so models that would work, from unlimited subscription plans to “donation” options.  At the end of the day, when they say “if you can’t beat em, join em” it’s time to realize that there is a massive groundswell of people who do not, cannot, and will not accept the concept that music sharing is wrong.  No number of lawsuits or failed DRM experiments is going to change that, nor cleverly phrased advertisements at bus stations.

I was reading my daily news over at the ol’ Tennessean, and saw that EMI is claiming their DRM-free tracks on iTunes are selling well.  Another (possibly untrustworthy) source claims:

Since EMI ditched the DRM on iTunes it has seen sales of Pink Floyd’s Dark Side of the Moon increase by between 272 and 350 percent

This is an excellent sign.  With the massive increase in power to conglomerates (in every industry, actually), the only real way consumers have to voice their preferences is with their checkbook PayPal account. Plus it’s a lot more “friendly” than waiting to deal with lawsuits from the RIAA.

If you believe, like many of us do, that DRM is eviler than Google, I can only recommend two paths:

1. Write your congressperson
2. Buy a DRM-free track for $0.99

Pick whichever one you find easier, and, as the swoosh says, just do it.

note: big props to Mr Underpants for finding the typo in my post today. 

Important Disclosure: I was born in Montreal, Canada, home of the greatest NHL team of all time as well as the baseball team “that got away” - and yes, I’m bitter.

Sling Media and the NHL just announced (although my friend Om seems to have gotten a bit of an earlier scoop than old JT) that they are working together to enable NHL content within the forthcoming Clip+Sling technology (more from SlingCommunity, refresher details here, beta signup here - don’t know if they are still taking, but it can’t hurt to sign up!).  Now if this were any decade prior to the 90s, I would probably insert nice gloating comments about how much I would use this to show my Habs trouncing their opponents, but, uhm, they, er, kinda, sorta missed the playoffs this year. 

Now granted, NHL’s TV licensing business isn’t quite the same as MLB’s.  Furthermore, this deal isn’t about to change the bottom line for the organization during the 2007-08 season.  But that’s not the point: it’s that they are working with Sling to see what the future holds, not working against them to see how lovely the fresh air was back in the 1970s.  MLB can’t act like the music industry when it comes to Internet distribution, they must make deals with tech companies, experiment, and look to increased revenue through innovation, not lawsuits (refresher on this one here).

While Bettman’s antics over the past 15 years haven’t done much to bring the NHL out of 4th place when it comes to professional sports in the US, he’s certainly enabled his organization to test the waters when it comes to new technology.  It’s not quite enough to excuse him for moving teams to North Carolina and Florida (two of em, in fact), but it’s certainly a step in the right direction.

Disclosure: I’m a former Sling Media employee, but I think the hockey/Canadian disclosure was more important.

Twice this week I’ve found gems over at the Hollywood Reporter!  Here’s a few excerpts from the latest:

Nielsen Media Research said Thursday that the impact of digital video recorders is a leading cause of why television viewing dropped precipitously this year.

Many of the top shows — from ABC’s “Grey’s Anatomy” to Fox’s “American Idol” to CBS’ “CSI” — saw their ratings drop in the spring.

I have a personal beef against industries that jump to point their woes on technology (newspapers, have you met MLB? you have a lot in common, I’m sure you’ll be good friends).   It’s just too easy a scapegoat, and there’s not an easy way to defend the tech side.  It’s actually nearly impossible.

For example, I’ll make the opposite claim of Nielsen - I’ll claim that the slip in viewership is due to quality (and maybe a bit of the ol buyshifting - hey, I can plug my own work, can’t I?).  Now I’m not exactly sure when it happened, but over the course of 06/07, the quality of TV went from what seemed like an awesome lineup into a big old snoozefest.  I think it’s just too many years of investigating crime scenes, grizzly murders, and serial killers; too many years of mediocre singers trying to get their 15 minutes; I suggest that audiences are getting tired of it.

But, just like Nielsen, I can’t prove it.  I don’t even have hard data like them, but I know enough about the “technology” in use to accept that they can’t prove it either.  The music industry is suffering as well, but frankly they’ve spent the better part of 10 years making as many wrong decisions as possible.  And they blamed the tech the whole way down the slide.  My advice to the TV folks: look inward for problems before being so quick to point fingers outwards.

Disclosure: I am a former employee of Sling Media.

I thought it made sense to get that out of the way up front.  Was just reading an article at Ars regarding MLB’s latest feelings about that Slingbox company (nothing reflects better on someone who can’t even deign to get a company name right when quoted):

“Of course, what they are doing is not legal,” MLB general counsel Michael Mellis told The Hollywood Reporter Esq. “We and other leagues have formed a group to study the issue and plan our response. A lot depends on ongoing discussions. Plus, there’s no guarantee that Slingbox will be around next year. It’s a startup.”

I must say I enjoy picking apart quotes when given the opportunity.  And that opportunity is now.

“Of course, what they are doing is not legal” - if it were “of course” why would they need to …

“We and other leagues have formed a group to study the issue and plan our response” - shouldn’t it be obvious?  Maybe it’s not so “not legal” as he said up front?  Maybe??  Probably.

Additional Disclosure: I am not a lawyer.

“A lot depends on ongoing discussions” - good, that’s always good.  I wonder who’s in those discussions?

“Plus, there’s no guarantee that Slingbox will be around next year” - actually, unless the boxes are going to spontaneously combust in 2008, there is every guarantee they will be around next year.  Unless he meant the company, I guess, in which case it’s just as fair to say there’s no guarantee that MLB will be around next year, they might just go on strike, again.  Okay, I must admit I’m particularly bitter because I am a Montrealer, and lost my Expos to the insane greed propagated by MLB and the owners, particularly G.S. of N.Y. Washington.

“It’s a startup” - well, if it’s just a startup, and not even guaranteed to be around next year, then why get all fussy about it anyway?

Still more disclosure: I get all bent out of shape when I read such inanity.  So much so that I use words like inanity without even verifying if they are real words.

Also from the article:

At last year’s Digital Media Summit, MLB VP George Kliavkoff said that a San Francisco Giants fan visiting Chicago and watching a Giants game via his Slingbox is “stealing” from whatever Chicago cable operator has the rights to carry the game in the Windy City.

This is a very interesting point, one in which MLB has fairly, well, dead-wrong.  See, when I’m visiting Chicago, the local cable operator doesn’t really give much thought to me.  Hotel room TVs aren’t counted for local advertising.  So the provider there really ignores me.  On the other hand, my local SF affiliate loves counting my eyeballs every time they can (not mine specifically per se, although almost mine). 

I guess the part I most don’t understand is why they get quite so ridiculous about it.  It reminds me of Hollywood starting out all anti-VCR, which turned out to be one of the most profitable avenues the studios ever saw.  MLB’s response to placeshifting shouldn’t be to call in the lawyers and cry foul.  I’d like to see them, as they say, “man up” about this.  They should either:

• COMPETE with Sling - Provide an alternative solution that is more compelling than a Slingbox
• PARTNER with Sling - Find a way to leverage the Slingbox to generate additional revenue or business opportunities

MLB is a multi-billion dollar organization. Yup, that was with a “B”.  Sling’s raised a total of about $57 million.  Calling in lawyers to deal with this is like me calling Terminix to kill a spider in my house. 

Final disclosure: I do not work for Terminix.

Inanity!

History has shown that when it comes to technology, the fastest method to hamper consumer adoption is to have FUD (fear, uncertainty, and doubt).  In my limited lifespan, this dates back to the VHS-Betamax duel back in the 80s, and continues today in the BluRay-HD battles.  Nobody wants to buy the wrong thing, and consumers will often sit around and wait for a victor to emerge.

HP, a company I’ve liked over the years (and one where I have a lot of friends), decided that they wanted to get involved and, for lack of a more perfect phrase, screw with the HDTV industry by using the term “HDTV 2.0″. Shame on you, HP, for such an ill-timed, inappropriate, and unnecessary move.

Consumers today have enough trouble differentiating between 720p, 1080i, and 1080p when they try to buy a set (answer: the first two are effectively the same, 1080p is the ‘better one’ that you should be looking for if you are spending more than about $1500 on a set). 

They have enough issues trying to figure out if they should buy an upscaling DVD player or an actual high-definition player (answer: unless you have a very good set, you probably won’t really notice the difference, plus I wouldn’t buy until the format is settled). 

They have to figure out if they should buy DVI or HDMI or component cables (answer: it’s gotta be HDMI, no debate here), and once they’ve picked, have to then assess how much to spend on those cables (answer: now that I’ve learned a bit more about the cabling and the future of HD, if you are looking at a long-term investment in your HD setup, buy the expensive cables, there will be a difference).

Shame on you, HP. It’s not like a debate on what Web 2.0 (or 3.0) really is, where end-users can happily ignore the topic and just enjoy trying out cool new Web sites/services as they launch.  For a marketing organization to intentionally go out and cause additional FUD in an already confusing space is pure and simple a bad move.  Your job is to answer questions, not create them, and your job is to grow the overall pie, not try to cut out some small piece with such short-term thinking.  

Shame on you, HP!

I can’t think of any federal organization that has less fans than the FCC.  The FAA seems to do a pretty solid job.  The FTC could probably crack down on a few more tech monopolies out there.  The SEC should ease a few restrictions that so heavily discourage IPOs today. But those are minor annoyances compared to the FCC. The FCC has this weird dual-role, in which one half is trying to make sure lots of new technologies don’t make a mess out in the real world, and the other half is trying to figure out if its okay if I say “peepee” on television.

In it’s first role, I think it seems to do a bang-up job, but I’m not a spectrum engineer or anything like that, so I could be wrong.  But when I see stories such as “FCC Chairman Martin to Telcos: No Blocking Iowa Calls” (updated) ”FCC approves plan for major wireless spectrum auction: Spectrum in 700MHz band to have greater range for broadband” I have to say, it sounds good to me!  After all, my microwave works, my cell phones work, my wifi works - this whole spectrum thing seems like it’s being managed well.  And guess what, it’s exactly this purpose wherein the roots of the FCC lie:

Before the commission was established, radio was regulated by the Commerce Department under Commerce Secretary Herbert Hoover. Naturally, chaos reigned. The biggest problem was that hundreds of stations were trying to broadcast on only two frequencies, a situation that detracted from listening enjoyment.

But then there’s the other FCC, the one that sounds a whole lot like an uninformed yokel, who arbitrarily fines DJ’s, declares that the word “Dick” better mean “Richard”, and generally acts like a bully only barely overshadowed by Homeland Security (but at least those guys are trying to take actions with the intent to save lives).  On almost a daily basis, I see through my variety of feeds and newsletters articles discussing how the FCC is playing in territory that should clearly be outside their “turf”.  Two recent examples:

Rep. John Dingell, D-Mich., who heads the House Commerce Committee, said at an occasionally rancorous subcommittee meeting Wednesday that “the FCC is not a legislative body - that role resides here in this room with the people’s elected representatives.” - source

Congress could regulate violence on cable, satellite and broadcast television without violating the First Amendment, according to the Federal Communications Commission. - source

Now whether or not I side with political correctness or moral majority or whatever term you prefer is wholely irrelevant.  Fundamentally, the FCC plays a game in which they redefine the rules as it suits their purpose.  But changes are afoot, changes that will render this part of the FCC near-useless in the coming years.  The good old Interweb is here to lay a bit of a smackdown on the FCC.  And the nice thing about Interwebbing is, it tends to do a lot more self-policing, with a lot better checks and balances.

The interesting part is the “checks” are literally checks - when it comes to IP video, of whatever nature, the dollar is almighty.  Put simply: streaming video costs money.  It costs money to create, produce, edit, and most importantly - stream.  If you cannot make enough money to cover your bandwidth costs, you will sooner or later be off the “air”.  Which is where our “balances” come in, and we call them advertisers (sponsors works too).  Mathew Ingram recently wrote (he wrote a second piece on a related topic that’s also a good read):

What kinds of advertisers will YouTube be able to attract? Critics such as Mark Cuban have argued that most advertisers won’t want to be associated with the kind of content that’s on the site, whereas Joost is much more like regular TV.

Cuban is dead-right on this topic.  But after “most” comes “some” and those some advertisers that are left will want to be associated with YouTube content.  That’s how they exercise their power - they write the checks for the content they like.  Don’t like it? No checks.  Fair and balanced at its finest.

Thanks to the FCC, television has its seven deadly words.  Thanks to YouTube, ustream, PodTech, PodShow, Apple, Fraunhoffer, MPEG-LA, and, as Time magazine so ______ put it, YOU, the Internet has no deadly words.  Go ahead, do a podcast, say “peepee” a lot.  If you get enough advertisers, someone might ask you to stop saying it one day, as that is their option.  And you are fully empowered to make your own decision.  As are the listeners or viewers.  As it should be, no unelected, unbounded, outdated, and out-of-touch government body needed.

I was reading Davis Freeberg’s article on DVR stats from Nielsen, and it jogged a memory I meant to blog about last month.  A few weeks back a guy knocked on my door, informed my wife and I we had the option to become Nielsen households.  Basically, we’d get another set-top box to install, and have to push a button (or two) every 45 minutes while watching TV.  Seems easy enough, but frankly I just didn’t want to deal with the hassle right now.

Maybe if Arrested Development were still on I’d care more, but my favorite shows (Heroes, The Office) are doing smashingly well.  Further, we’re about to get back on to the Netflix bandwagon, so my “real TV” hours are diminishing rapidly anyway.

The weird part is if accepted, I wasn’t supposed to tell anyone.  I wonder what my guests would’ve thought?

I really like the eMarketer.com newsletter, it’s one of the few that I receive that I read every day.  It’s well formatted, has bite-sized info, presents useful and relevant stats, and gets most of what I want to see above the fold. One of today’s articles was lauding the success of viral video, but unlike typical articles from them, I felt this contains some questionable statistics.  Let’s start with a few quotes:

Next to ‘cool microsites’ and games, viral video is hot.

Video clips got generally good reviews from marketers, with about three in 10 saying they yielded great results, and just 13% admitting their results were dismal.

If you see the fine print, n=2914 “experienced viral marketers”.  At 30% we have about 1000 viral videos of which their marketeers claim “great success.”

I’m either living in a hole or I have a different definition of the adjective great.  Why do I say this?  Well, how about you count the number of “viral videos” you’ve seen that you’d attribute to companies.  Remember, if it’s in this category it cannot include a commercial that aired on TV, nor can it be a clip like “Lazy Sunday”.  I am surprised if anyone’s list exceeds their count of fingers + toes.

My hunch, and I’m up to hear a counterargument on this, is that the surveyed marketeers are answering this way because it is trendy.  Survey bias exists fairly commonly in most segments, but even more so in a field dominated by follow-the-leader activities.  And marketing folks are especially predisposed to report on the success of their activities.  This is especially interesting in light of…

But what are the chances of a video actually going viral? According to an Online Publishers Association (OPA) survey, not that high.

Now I’d prefer if this data was less than a year old, as it was in February 2006 when YouTube’s activities began spiking (again, thanks to Lazy Sunday - I sure hope Chad sent a big bagfull of money to Andy Samberg).  My hunch is there’s a lot more forwarding going on than there used to be.  Of course, there’s a lot more Portland ice storms and people getting haircuts than there are commercially-driven “great success” viral videos.

Strange things are afoot at the Circle K

If the music industry is in a shakeup, then the video industry is in an earthquake (go ahead, make a better analogy, that’s not really my forte anyway).  Full-length TV shows available free on demand on company Web sites.  Episodes can be purchased individually to watch on your iPod.  Consumers can time and place shift any TV show they want, and legally.  You can even buy the boxed set of entire Golden Girls series!

Some networks get it very wrong (I’ll leave them Nameless By Choice).  Some, however, get it right. CBS announced today their intent to launch the “CBS Interactive Audience Network” which includes partnerships with the ‘traditionaly players’ as well as a whole bunch of small/medium technology startups:

• Joost (who has also issued a press release on the topic)
• Bebo
• Brightcove
• Netvibes
• Sling Media
• Veoh

Read the press release for all the nitty gritty details, but I am stunned and impressed at these moves.  Will they do it all perfect? Nope!  Will some things utterly bomb or backfire?  Most probably!  But what’s key is they are trying, and even more essential, they are being mindful of their customer base (as opposed to the music industry, for example, who chooses to treat their customers like criminals).

I chatted briefly with Dave Zatz from Sling Media, and from what I understand Sling’s participation is unique in that they will not only have a Web portal, but can also bring CBS content into the SlingPlayer on PCs and in the future, to the SlingCatcher device.  Sling was featured during CBS’s CES 2007 keynote.  Full disclosure here: I am a former employee there, have stock options, still love those guys, and think you should vote for the Slingbox Pro for Engadget’s Entertainment Device of the Year, and admit to being biased!

We have a long road ahead of us as the wave “future of television” has already begun to reach the shore.  It’s safe to say the broadcast industry is being heavily disrupted, and some big players are likely to fall over the long term.  Life for cable affiliates is already becoming challenging, and it wouldn’t surprise me to see some major networks suffer a casualty or two.  The content producers (MGM, Universal, etc) are all working hard as well, pushing their brands to the front.  Amazon Unbox, Netflix streaming, YouTube, etc. 

I can’t tell you who will rise and who will fall, but I believe in this: the companies that focus today on audience appreciation and customer retention are the ones who will be standing tomorrow.

More coverage on the topic: PaidContent, Ars Technica, WSJ (sub req’d), IP Democracy.  I predict this is top-of-techmeme by 1pm PST (as of 10:15 it’s 1/3 down the page).

I can’t confirm the stat (since I’m making it up), but I’ll go out on a limb and say TiVo’s product satisfaction rate probably hovers around 90%.  Echostar’s DVR is generally very well-liked by many of it’s customers.  Heck, even the tiny fraction of Windows Media Center Edition owners who use their PCs as DVRs claim it’s phenomenal.  And then there’s Comcast.

For HDTV DVR services, Comcast uses the Motorola DCT6412 set-top box, a unit that is simply plagued by defects nationwide.  Ask someone who owns this unit, odds are pretty good they’ll talk about their problems at length, and complan how much they hate it.  My friend Ryan was so frustrated by his unit (which is definitely defective) that he blogged about it.

I walked into my living room this morning to find my wife watching TV and when she pulled up the program guide, I noticed I’d lost about 1/8th of my overall screen space to a new “advertisement slot” (photos below).  Worse yet, I’ve lost 2 (of 6) lines of the visible grid area, meaning I have to spend roughly 1/3 longer than before just to scroll through channels.

What a terrible, terrible move.  Here are a few simple ways they could make this marginally better (assuming they won’t get rid of it):

• Reduce the height of the ad to the same height as a grid item, giving me one line back
• Only have it show up once every XX pages
• Use the “top area” where the Comcast logo is instead, since that’s pretty much wasted space already
• Make it slightly bigger, but then let me hide it once I’ve viewed it (it can reappear every XX minutes)

Or just give me the darn TiVo interface already - the one that was announced two years ago. Come on!

So AppleTV is officially shipping, and as I saw on Engadget, Walt Mossberg has already reviewed it.  Some excerpts:

… we can easily recommend it for people who are yearning for a simple way to show on their big TVs all that stuff trapped on their computers.

Apple is hoping that, just as the iPod trumped earlier, but geekier, rivals, Apple TV can do the same by making a complex task really simple.

The review continues on, and Walt gushes about the device quite a bit.  The only competitor he points out is the Xbox 360, which he dismisses because it’s twice the price.  I think this is a dangerous dismissal, as the price points aren’t really the issue in this category yet.  We are in early early adopter-land, which means the people who really want it, are gonna buy it. $299, $399, $599, whatever.  The bigger question to ask is: is this really a market they can dominate?

In 2 years, over 20 million Xbox 360s have shipped, and as The Online Reporter observes, the biggest Apple TV competitor could already be on the market.  Xbox 360 owners who have the Live service tend to love it, my friend (and fellow blogger and now Sling Media employee) Dave Zatz told me he felt the 360 was the best device he bought last year. Also, the NETGEAR EVA8000, which I reviewed last week boasts a more robust feature set at a similar price point.  I read a lot of conjecture about how “Apple TV is just like iPod year 1″ but folks, I’m saying now it’s not anywhere close.

When Apple launched the iPod, the category already existed (even if you ignore other mp3 players, people already were comfortable with buying portable music devices).  The problem then was: there was no really convenient way to get existing and new music collections on to portable MP3 players.  I had a Rio Karma, it was great (like really great), but you had to be pretty savvy to get music onto it, and there was ZERO services on the Internet with new content.  In the living room, on the other hand, it’s not just a question of simplicity and furthermore, there’s tons of content out there.  It’s not hard to get “mainstream” video to a TV set, especially in comparison with the challenge of getting “mainstream” music to an MP3 player (circa 1999).

Now I’m not dismissing the product, nor am I dismissing Apple’s ability to move their marketing muscle into the living room.  But this certainly isn’t a slam dunk.  Take a time out to read Thomas Hawk’s list of why he isn’t interested in the “dongle”, then go check out Phil Swann’s reasons why he thinks Apple TV will “bomb”.  If you aren’t too saturated, I’d also stop by WIRED’s fair and balanced thoughts on why it “rules and sucks”.

Here are some of my specific problems with the product (note that I haven’t used it hands-on, so I have no comments about it’s user interface, which is probably great):

• No YouTube support.  This is a very questionable move at this stage of Internet/video/PC/TV convergence.  The EVA8000 does it, and after a few days using it, it’s a very fun application. 
• Widescreen-only.  I love the HDTV market, and about one third of all new TVs sold are flat (which implies widescreen), so that’s a lot of screens (I’ve read before the number of households is in the 20 million range, but cannot find that source to quote here).  But this is the kind of product decision that creates returns, something I have a feeling Apple doesn’t have to deal with in other categories.  Also, there’s a distinct lack of HD content offered at launch, which makes this even more… ironic?
• A computer must be on all the time.  One thing I like very much about my Sonos and EVA8000 setups are they work directly with my networked hard drive (aka a “NAS“).  With the Apple TV, I need a PC/Mac on all the time, and while this is clearly a growing trend, it’s a requirement I don’t like in a product this expensive (it’s one thing for a $99 media adapter, it’s another at $299). UPDATE: I was corrected (by Ben at EngadgetHD), I misread the usage with it’s internal hard drive.

Is it a good product?  Probably. After all, Walt is a pretty picky guy, and even though he clearly has an affinity for Apple products, he seemed impressed (although he didn’t really talk about video quality in the review, which is an interesting omission).  Also, Apple does tend to make the product experience great, and I’ve got to assume that heavy iTunes customers are going to think this thing was sent down from the stars above.  As Sonos’ worldwide PR manager Thomas Meyer said to me, “Mr. jobs is definitely going to do this right.” 

My hunch is they’ll do a very good job appealing to that core market, but have a tougher time getting beyond.  I don’t think they’ll be as strong in the HDTV segment as they want to be, as even enthusiasts such as Ben Drawbaugh (contributing editor at Engadget HD) who thinks “it’ll be awesome” (and has blogged about wanting one) doesn’t think it’ll be all that useful for HD content.   If I were Apple, I’d be doing everything I could to get associated to HDTV, as betting on the future is more important than the past.

I’d guess they can out-market a company like NETGEAR in this space (but will probably drive them unit sales for some of the reasons I stated above). I think they’ll probably be the #1 leader in “digital media adapters” by the end of this year, and can probably move over 100K units in 2007 alone.  That said, I don’t think they are positioned to utterly dominate the living room the way they do in the portable space.