HBO: An Argument for Subscription Based Content

Posted on January 22, 2008
Filed Under Business, Media | 2 Comments

Reading time: 2 minutes 30 seconds

HBO probably has the best shows on TV right now. Sure, you could debate me on that but I have to say that the shows I hear the most about from people (right now The Wire is in that category) and the ones I tend to enjoy on DVD (I don’t have HBO) are mostly HBO productions. Why is that? Is HBO simply better at finding talent and backing good ideas? Does HBO have some kind of oracle hidden in the bowels of their corporate headquarters? I think the answer is actually much simpler.

HBO has the best TV on the air right now because they are a subscription based service.

Yup, that’s right, I said it. The dreaded word in the online universe. Subscription…. OK, are you composed and ready to hear me out? Good.

Here’s the theory: HBO can make better shows since they aren’t worried about the audience coming to view the shows and they aren’t worried about advertisers (since they are a subscription service). Not only that, they know a lot about their audience (they have solid info from the subscription process) so they can simply make shows their audience will like without any distractions (distractions being things like what advertisers will want, etc.).

Let’s look at the audience piece of the equation first. Of course HBO wants to please its audience but it knows its audience well and can therefore make content that the audience will enjoy. What I meant when I said they aren’t worried about the audience coming to watch the content is that HBO has subscribers who pay for their content and who will then show up to watch it. This allows HBO to judge revenues in a more accurate fashion and also to quickly get an idea of which shows make sense and which don’t. The subscription revenues also lower HBO’s production risk allowing HBO to produce higher quality content and to take more risks on new edgy ideas.

Now let’s take a look at the advertising piece of the equation. Since HBO has paying customers and does not rely on advertising they don’t have to create shows that advertisers will feel comfortable with. This allows HBO to create more edgy and “real” shows. HBO also sees another benefit from their advertiser-less status. HBO doesn’t need to have a huge broadcast like audience to make a show work (don’t get me wrong - they have a lot of subscribers but their revenue isn’t as tied to eyeballs as the advertiser driven businesses). All they need is for their audience to like it and like it enough to continue to subscribe.

HBO seems to have a great model for producing content even though they do go against everything the web pundits have been saying for the last handful of years (i.e. content should be free). I do agree that making content free and monetizing it with ads makes sense but there are also inherent drawbacks like:

So perhaps creating niche, edgy, high quality content is a model that should be monetized via subscription rather than via advertising. Of course when you do create niche content you do get the benefit of a highly targeted advertising situation which means higher ad rates but that really only helps you if you’ve got content that brings in big dollar advertisers (i.e. content on tree frogs may not get you the high ad rates you want).

There I go again. Always the contrarian… I’d love to hear some thoughts in the comments section of this post both positive and negative. It could be that I am just missing something but it does appear that delivering high quality content is better done through a subscription model and that people are willing to pay for it (HBO has 40 million paid subscribers by the way).

Side note: HBO is also experimenting with delivering content via the web to their subscribers. Their subscriber based set-up should help them innovate on the web more quickly than studios who are worried about the advertising potential of the web. Interesting.


TECH cocktail Chicago 7 Announcement

Posted on January 22, 2008
Filed Under TECH cocktail | Leave a Comment

It’s that time again!  I’m happy to announce that TECH cocktail Chicago 7 will take place on Thursday, February 21 at, you guessed it, John Barleycorn’s in Wrigleyville.  The event should be a lot of fun as always and I hope you all can make it.

If you are interested in demoing and/or sponsoring the event please let me know (eric [at] techcocktail.com).

Click here to RSVP


The Billion Dollar Corporation: Is it something all companies should strive for?

Posted on January 15, 2008
Filed Under Technology, Business | 4 Comments

Reading time: 3 minutes (I know it looks long but it only took me 3 minutes to run through it which is why I added this helpful “reading time” guide.)

I think that may be the longest headline I have ever written and it is an equally big question. Through my teenage years when I spent a lot of my free time researching companies, new technologies and stocks (Don’t get the wrong idea. I did get outside, had my own rock band (we had an EP - oh yes, we did) and even dated my share of girls, I swear!) and then subsequently through my college years studying business, finance and technology at Bentley College I came to believe that the corporation was where it’s at.

By “it” I mean wealth, prestige, challenges, fulfillment, big problems to solve, the ability to be creative, you know, everything one wants out of business. Now I don’t doubt that there are people that find a lot of these things, if not all of them, in large corporations. I am not saying that you can’t find fulfillment there but what I am wondering is whether every company should strive to attain “giant multi-national corporation” status.

I began to really think about this question more as I delved into the world of web start-ups. Web start-ups in particular are a place in which you can do very well with a small team of people and a good idea. There are a lot of examples of this. Business that throw off lots of cash for minimal work from a small team. Sure, they aren’t Google but they provide their founders and their employees a great life and, if the founders are smart, a great work environment.

A lot of these “lifestyle” businesses or what used to simply be called small businesses have another characteristic in common as well. If the founders wanted to try and make them huge corporations they may not work as well anymore.

I have to say that even I thought I was a little crazy for picking this up. I mean, this is anti-capitalist talk. Right? I don’t think it is. I am simply just not convinced that the modern corporation is the be all and end all pinnacle of business.

At the same time I was coming to these conclusions I happened to catch a piece by Saul Hansell on Bits (the New York Times’ tech blog). Hansell ws inspired by the talk about Twitter’s business model that was a hot topic a few weeks ago and the topic of Mozilla perhaps going public.

I think Hansell sums up my thoughts in the second paragraph of his piece which I will quote here:

Behind both of these [Twitter and Mozilla] is the presumption that the highest form of organization is a company valued at billions of dollars. The Internet now creates so much leverage for certain activities, that it is possible to create services that are incredibly useful, widespread and economically self-sustaining, yet involve very few people and not many dollars. This can sometimes be better for customers, business partners, and even founders, than trying to turn every good idea into a giant company.

The Internet does create a lot of opportunities for companies to form with small teams that, while running on small dollars (as Hansell says above), still take in big dollars. Look at the latest example that is the buzz of the blogosphere, PlentyOfFish.com. That site is by all accounts ugly and hard to use but it was built by one guy and it hit a niche. He works on it 10 hours a week and, wait for it….., takes in $10mm a year in revenues. Now that’s the power of the web. (Of course there are more examples - like 37signals - but if I listed them all this post would be way too long. Heck, it probably is too long as it is!)

I also feel like the web is a place where you can build a business that is geared toward a niche which is simultaneously a passion. This niche may have not supported in a business in one particular town or in a handful of towns but when exposed to the world on the web it can garner enough mass to make things work.

The web is to the virtual world like New York City is to the real world in that there are so many NYC businesses that couldn’t exist anywhere else but due to NYC dense and diverse population niche businesses can work (case in point: the shop near my office that sells only rice pudding - over 30 flavors of it - and always seems to have a line around the block). I hope that analogy makes sense.

Hmmmmm I don’t really have a good segue here and I am too tired to really think of one so I will just jump into it (Mind blowing moment: Is that non-segue I wrote in fact really a segue? You decide…). The other thing I love about building a smaller or niche business and not trying to make it a huge corporation (if it isn’t meant to be one) is that you can keep your culture in tact.

You can now truly build the environment that you, your founders, your employees and your future employees always wanted to work in and you can also make sure that it stays that way. You don’t answer to shareholders you only answer to your customers, partners and employees and that creates a good situation for all stakeholders.

This is the place where building a business really starts to meet zen for me. Ok, that was a little new age… My apologies. However, I think its true. I know the reason I always wanted to build a company was to create an entity that embodied me. My beliefs, my thoughts about work, etc. Create my perfect workplace and the perfect workplace for people like me (it’s scary I know but I believe there are actually others like me out there).

After all, a person spends most of their waking hours at work so trying to make work a better and more enriching experience should be something we all strive for. Sadly, I feel those ideals get lost in the shuffle of shareholder issues, quarterly analyst calls, profits and the like once big corporation status comes into play.

I’ll leave you with a link to an article Yvon Chouinard penned for Outside Magazine (thanks JZ) which outlines his thoughts on company building which he expands on further in his new book Let My People Go Surfing. For those that don’t know Chouinard is the founder of Patagonia. Patagonia did $241mm in sales last year, is still private, still allows their employees to check out early if the waves are good, donates 1% of gross sales to eco/conservation based charities (even if they are losing money that year) and a host of other good things. He has to be one of the poster children for doing good by doing good.

Here’s one of my favorite lines from the Chouinard’s piece that I had to put in this post:

This kind of independent thinking applies to our management philosophy as well. In fact, our employees are so independent, we’ve been told by psychologists, that they would be considered unemployable in a typical company [emphasis is mine]. We don’t want drones who will simply follow directions. We want the kind of employees who will question the wisdom of something they regard as a bad decision but, once they buy into something, will work like demons to produce something of the highest possible quality—whether a shirt, a catalog, a store display, or a computer program.

Who wouldn’t want to work hard for a guy like that? This guy really cares about and trusts his employees to do right by him and the company. How about that? There is clearly a reason why Patagonia does so well and I have to figure that the paragraph above is a big piece of it.

In my mind at least Chouinard proves you can build a company that is a platform for a rich life for not only you but also for your employees while also making lots of money. I am not sure if this is as possible if you are a publicly traded company or if you strive to be a big corporation when you are building a company that shouldn’t go that route.

Next time you have a chance to think about things you should ask yourself what kind of business you are building (or want to build), listen to the answer and then move forward with the new information in hand. Remember, we all don’t have to strive to build the next big corporation to do well in business especially with the advent of the Internet.


Movie Review: Once

Posted on January 10, 2008
Filed Under Movie Reviews | 3 Comments

Once has to be one of the most compelling films I have seen in a while. The story, while being so simple, was so intriguing and all consuming. The mood of the film was set (extremely well) with music so, in a sense, I suppose this film could be called a musical but it is truly unlike any other musical I have ever seen (i.e. it’s not cheesy).

The premise of the film is this: boy (singer/songwriter) meets girl (pianist/singer), girl opens boys eyes, girl helps boy find the strength to win back his ex while they also write and record a CD together (in one busy week), [SPOILER ALERT - Skip the next sentence if you don’t want to know what happens.] girl and boy have a strong connection but never consummate their relationship due to other life constraints.

I know what you’re thinking, it seems so simple and it can’t be that great, but I am telling you that you need to watch Once. I really believe you will fall in love with the film and, as I did, buy the soundtrack immediately after watching it. I think they should tour as a band. They really mesh well together.

I don’t really know what else to say other than this film was very well done and it sets a new standard for musicals. If you can, pick up Once for the weekend. You won’t regret it (but you may have a strong urge to grab a Guinness and then book a trip to Ireland - where the film takes place).


Another Olson in the Valley

Posted on January 10, 2008
Filed Under General Thoughts | Leave a Comment

I am not actually going to be in the Valley any time soon but my brother, Jeff, is. In fact, he’s already there. He’s working at eBay in San Jose on a trimester long project (about 10 weeks) as part of his senior capstone project.

Jeff is a senior at Worcester Polytech and will graduate this spring with a degree in Computer Software Engineering. He’s also right at the top of his class. He’s definitely the smarter Olson brother.

I figured I would post about Jeff being in the Valley to see if anyone was interested in meeting up with him. I am sure he’d love to meet some other coders, engineers and entrepreneurs if he can get some time away from eBay.

If you’re interested in getting in touch with my brother just ping me (eric [at] ericjohnolson [dot] com) or comment on this post and I’ll make the intro.


Bring CES to Chicago

Posted on January 10, 2008
Filed Under Chicago, Conferences | Leave a Comment

CES, perhaps the world’s largest consumer electronics trade show, may be looking to move on from Las Vegas according to an article on MSNBC.com. After Frank (my TECH cocktail co-founder) and I were made aware of that via one of our friends we thought why shouldn’t CES move the show to Chicago.

Chicago would be a great host for CES. The facilities in Chicago are more than adequate, the restaurants and night life are top notch, the culture (art museums and the like) is world class, the city is centrally located and easy to fly to and there are a lot of great tech companies in and around Chicago including consumer electronics giant Motorola and huge electronics seller CDW.

Bringing CES to Chicago would also help to bring the Chicago and midwest technology scene to the forefront which is something we have been working hard on at TECH cocktail (oh, and of course there would be general economic benefits for the city too).

If you’re interested in helping with the movement please check out the Facebook group Frank set up and join it. Also, you can comment on the TECH cocktail post or e-mail Frank and I at cofounders [at] techcocktail [DOT] com.

We think this will be something that will take a lot of cooperation from a lot of groups like the Mayor’s Office, the ITA, the CEC, World Business Chicago, etc. (in fact, we have heard there are groups already working on this). So let’s bring everyone together and make CES in Chicago a reality.

For more check out the post on TECHcocktail.com and a quick video Frank and I put together which is a tad rough but not bad considering Frank was in San Francisco and I was in NYC.


Car Powered By Compressed Air In Development

Posted on January 9, 2008
Filed Under Innovation, Environment | 1 Comment

Air CarYes, you read right. There is a car being developed that runs on compressed air (called the Mini-CAT or City Cat). I almost didn’t believe it when I first saw it but it’s true. The engine was developed by a former F1 engineer and Tata Motors, a large car company based in India, has decided to use the technology in a new vehicle.

I know what you’re thinking and the answer is that this car can go up to 200km (125 miles) on one tank of air and can reach speeds of up to 110kph (about 70mph) with a fill-up cost set at around $3 (i.e. $3 gets you 125 miles of travel). Not too bad eh? (Woah, just slipped into a Canadian feel there…). “Refuelings” only take a few minutes as well which is no more time than it takes to fill a car with gasoline.

While the car is a zero emissions vehicle it is of course not 100% zero emissions. The air compressors that fill the tank run on electricity which is generated via a number of methods including coal and nuclear and there is a carbon footprint associated with actually manufacturing the vehicle.

However, I figure that the footprint of this car will be far less than hybrids, plug-in hybrids and, of course, gasoline powered cars (ethanol is also a joke… while better than gas from am emissions stand point it has so many other draw backs like its inefficient use of farmland). I haven’t done the research there so if that is off base please let me know in the comments.

It’s great to see interesting innovation coming about by applying old principles to new problems. I am a big fan of the air car and I would probably buy one if they were available in the U.S. That said, the design isn’t too, how should I put this, sexy and the car is probably not the safest one to drive around in. It’s only about $7,000 though!

To learn more about the car and hear from the designer please check out this video over at the BBC.


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