Hollywood DVD - a buck a pop, beat that...maybe with ice cream?

My primary source of Hollywood entertainment is the Videocenter movie rental store located at a stones throw from my flat in Prenzlauerberg. Each movie is available for 1 Euro per day, the collection is as current as the DVD release schedule, and the place is run by courteous bunch of folks. There is a popcorn machine, soda fridge, snack isle, and even the Ben & Jerry's cooler. All yours, for 1 Euro. 1 movie per weekend * 1 euro per movie = 4 Euros per month.
Thats the monthly Hollywood bill for me and the wife. Now that is a hard-to-beat deal.

If I was wearing a cable/IPTV VoD service provider's hat I would be hard-pressed to beat this deal because breaking even at 1 Euro for another distribution medium is a tough cookie (see my related post on Netflix's VoD distribution cost). Plus cable/IPTV cannot deliver my Ben & Jerry's ice cream tub.

Wait, that gives me an idea. Maybe Cable/IPTV VoD service providers can team up with ice cream trucks to have them deliver ice-cream and get a cut from Ben & Jerrys. Pizza, snacks, popcorn, T-Shirts, I don't know, movie specific stuff. Perhaps this may allow service providers to compete with Videocenters. The thing is, they need to start looking outside technology and into ice cream trucks.

Renewable energy : Fossil fuels :: David : Goliath

Renewable energy annual growth scenarios (Click to enlarge)

US annual energy flow (Click to Enlarge)

I was reading the latest Economist (June 21st-27th) which talks about the next innovation boom for VCs to invest in: Energy. The scale of the Energy market ($6 trillion, about 10% of the global economy) is at least one magnitude higher than Internet and Computing (booms of the 80s and 90s) put together. No wonder that Energy is generating so much interest in the investor community and among researchers and entrepreneurs.

The driving force for innovation in alternative energy sources like wind energy, solar power, and bio-fuels is the steep increase in crude oil and natural gas futures (No I don't believe it is out of love for the environment). I wanted to understand how much time is needed make a significant hole in the fossil fuel demand by way of diverting the energy demand to alternative fuels. A beautiful figure from the 2006 Annual Energy Review released by the US Energy Information Administration is a nice starting point. The figure is US specific, and does not consider energy hungry China or India, but if the US energy juggernaut can be tamed with say, 50% alternative energy sources, then I am certain that China and India will happily adopt these viable alternative energy sources as well. (Plus I don't have the beautiful figures for the rest of the world so lets work with the US data!)

About 14% of the total US energy comes from renewable sources and nuclear power, in fact the figure also says that only 6% of the energy comes from renewable sources excluding nuclear energy. The rest comes from fossil fuels (including natural gas). So lets try to guesstimate, based on this data and varying rates of renewable energy growth in the coming years, the time until we derive as much energy from renewable energy as from do from fossil fuels today.

I have plotted 4 scenarios based on 5%, 10%, 15%, and 20% annual growth of renewable energy starting from their base 2006 value (from the Energy flow diagram). The plot indicates that it is going to take between a 10% to 15% annual growth of renewable energy in order to catch up with the present fossil fuel energy contribution by 2030. While there is no hard-written reason for the annual growth to not exceed 10-15%, I believe that there are significant inertial factors, like deployed fossil-fuel based equipment, lack of skilled engineers, innovation lag, legal issues, etc., which will keep renewable energy from growing at higher annual rates.

Conclusions:
Basically, this simple back-of-the-envelope calculation indicates that we need sustained double digit growth in renewable energy over the next 2 decades to challenge the fossil fuel Goliath. The figures also seems indicate that in the short term (5-10 years) fossil fuels are going to be the primary energy source. Therefore the world is going to need either a huge increase in supply or an appreciable decrease in demand of fossil fuels notwithstanding any alternative sources of energy in the short term.

Supply will grow as better technology is used for oil and gas exploration. It has already become worthwhile to use high-sulfur crude instead of sweet light crude oil. But the fact remains that demand will have to abate to meet the short supply through higher prices and unfortunately, slower economies.

Net neutrality: The value of a byte travelling on the Internet

In response to Richard Bannet's article.


Let us say, for simplicity, that most of us are connected to the best-effort, statistically multiplexed, Internet. What does this mean? This means that every byte on the Internet going from point A to point B will, on average, get the same service from the Internet (same probability of loss, same delay, same delay-jitter, etc.) Therefore the Internet has the tendency to treat each byte traversing it as equal because in our simple example of 2 bytes going from A to B, the fraction of service (or utility) that each byte receives from the Internet is equal.

However, most people agree that the importance, or utility, of every byte on the Internet is not equal. For example, it may be more important to quickly transfer a byte from a voip conversation than a byte from a file transfer. Or it may be more important to send bytes that update stock prices than to send bytes to play a You tube video.

Or so I think. But what do you think? What does Skype think? What does Google think? What does Comcast think? What does the government of a country think? And if they think differently, then whose voice matters? Or should anyone's voice matter more than the others?

This is the key point of the Net Neutrality corundum. Everyone agrees that the present design of the best-effort Internet is suboptimal in that it treats every byte as equal and gives equal precedence to equal fractions of content. But the issue with doing away with this Net Neutrality model is that vested interests will decide which particular byte is more important than another byte. Can we trust one single company, or authority, to make the correct decision on this one? As a market believer, I would first say that let the market decide, i.e., let the price per byte, and hence the value attached to that particular byte, be the deciding factor. But the big issue is whether a flexible, effective, and dynamic market of this sort can be set up and quickly integrated with the existing and upcoming Internet protocols. Until this happens, I am more comfortable with time-tested simple statistical multiplexing, the fair but sub-optimal egalitarian algorithm, to do the job.

I am relieved that the question of Net Neutrality does have a technical solution - setup a market to do the job. I am just concerned of whether there is enough political patience to wait for the technology to develop this byte market we will need.

Scott McNealy's talk at TU Berlin

Scott McNealy at TU Berlin

Scott McNealy gave a talk on "Open Wins: Leadership and Innovation" at the Technical University of Berlin today. Scott McNealy is of the "The Network is the Computer" fame from the dotcom boom of the 90s and is presently the Chairman of Sun Microsystems. I was part of the audience and found a few things worth blogging.

The key message of his talk was that Sun is and has been an open source champion forever. I don't buy into that (Solaris wasn't open source till 2005). But Scott blamed a prior agreement with AT&T Unix for this. Whatever the truth is, I cannot seem to place Solaris in the same bandwagon as Linux when I think open source. I suspect that Sun is trying to leverage the open source developer community to shoulder the costs of keeping Solaris updated (he himself alluded to the bug-squelching power of open source software). Perhaps like the Fedora project of Redhat?

Scott also touted the Sun Ultrasparc T2 processor - with lots of multi threading and multi core support and the 1.5 Watt/thread low-power footprint. Off course there was the usual Microsoft/Oracle bashing (Microsoft and its patches... so un-open source, Oracle and its $40k per-core licensing... so un-Mysql), but the hidden message was that Sun hopes that these new T2s find their way into routers and energy conscious data-centers. Although in my opinion I doubt if Oracle's grip on enterprise database computing is going to loosen up anytime soon, so Mr. McNealy may find it a tad-bit difficult to wean enterprises from their established Oracle databases into to Sun-acquired Mysql.

I asked Mr. McNealy about why Sun-promoted Open Office does not enjoy the MS Office - .NET (think VB Macros) type of integration with Java. The answer I got seemed to suggest that I should ask the open source community about this. Why shouldn't Sun take the lead in this? Java is their baby and Sun says it is all for Open office, then why not cure the Achilles heel of Open office through Java integration? This makes me suspect what I said about Solaris earlier - that Sun is trying to leverage the open source developer community to shoulder the costs of integrating a credible scripting platform into Open office.

Undoubtedly Sun has done more for open source than most other companies (for example, as Scott rightly pointed out, Google has a rather poor record on this front). Lets hope Sun does a lot more in the future.

Entertainment technology and diminishing returns

I am trained in information theory, a science which emphasizes squeezing every last bit of efficiency out of communication channels to get a voice or video signal across in its best form. A noble endeavor no doubt, and one that has spawned a whole analog, and later digital, entertainment industry. But how much does it matter to the end-user?

My basic thesis is this: up to a certain quality people do care about how much error-free information gets across. But after that the human brain's smoothening kicks in - the apparatus in us that can skillfully ignore any small blemishes in the audio track or on the screen. While it is true that video technology already takes advantage of this "help" from the human brain (thats why finite frame rates and digitized pictures work), I have a feeling that sometimes technology needlessly pushes bits which are not useful, leading to "diminishing returns" on entertainment technology investment. After all, how many of us can make out the difference between a 192kbps-encoded MP3 file and its uncompressed counterpart that is 10 times bigger?

For another example, lets look at HDTV. Unless you are watching from close distance, the low pass filter in your eyes will substantially smooth out the sharp images on the HDTV screen. Undoubtedly HDTV looks better (but how better?) than SD TV, but is the delta enough to drive consumer pull in the mass market?

The rapid sales of HDTV s and blue-ray disks seems to suggest so. But I'd like to know what fraction of the content being seen on these HDTV s is really HD? And when the world does shift to HD, will the lowly SD TV be forgotten, going the B&W TV way? Probably not, because a vast library of content is stored in SD TV format. My kids will probably watch my old Friends and M*A*S*H DVDs or my father's music video collection (stored on VHS!). So their eyes and senses will probably accept fuzzy-ol' SD TV as well. Entertainment is about content quality first and then about technology quality.