GoogleTV: My First Take at a Review of the Revue

One of my earliest posts on this blog asked if “Google can Prosper Where Apple Failed?” in bringing the web to TV.  At the time, I laid out my case for why GoogleTV would be a success, long before the full specs of the product were known.  In advance, I will admit that I was/am biased in that I want to see a successfully launched product that seamlessly integrates the web into the TV watching experience.  So far according to the buzz Google has failed to deliver (pardon the bad pun for you Google followers out there).  I wanted to see for myself.

It’s now been two months since I purchased the Logitech Revue with GoogleTV following the big price cut and I have had ample time to mess around with the product and to develop some of my opinions on its utility.  Plus, today I finally received the long-awaited update to Honeycomb, therefor I have a better feel for the fuller suite of services.

Before I go farther, I want to make one point very clear.  I am fully aware that GoogleTV is largely a Beta product and will be refined over time.  I am familiar with, and a big proponent of the customer development method which Google implements.  For those who don’t like it, or don’t know what I’m talking about, I recommend reading an interview I conducted with Steve Blank a little while back.  In short, customer development calls for getting your “minimally viable product” in the hands of early adopters and constructively using their feedback in order to enhance and build out a more robust final product.

I have approached GoogleTV (hereinafter called GTV) with a very open mind, knowing that it’s Google’s attempt to “use” (or take advantage of, depending on your perspective) early adopters in an effort to build a better 2.0 product.  Some of my opinion below will be shaped by the “incompleteness” of the product, but by and large, GTV is a fairly robust and quality platform–the best I’ve seen so far for web-to-TV.  Thus my main goal in this review is to treat it as a fairly finished product and to explore some of the ways that it can and cannot create value for the living room entertainment experience.

The scoop:

The user interface of GTV itself is much improved with the Honeycomb update, as the menus are simpler, clearer and easier to navigate, and the Android Market is a welcome addition.  So far, I have installed one app that I already know I will use on a regular basis, and that is Google Music, but overall, the quantity of available offerings remains relatively limited.

I’m not concerned with the lack of apps for GTV just yet, as one of the uses I have been most excited about is a really easy way to play my mp3 and streaming music through my sound system in digital quality–and Google Music accomplishes that goal. The AppleTV is unfortunately so annoying in how you can only manage content through iTunes, plus its’ really tedious to selectively sync some songs and not others to the point where I just had to stop using it. With Google Music, I now have everything easily accessible and organized without even using any of my own harddrive storage capacity.  That being said, where’s my Spotify app?  I’m still waiting!

The Netflix app is far superior to the one on the Play Station 3 in terms of the UI, and also doesn’t suffer from the streaming problem that is common on the PS3 where the lip movements of a speaker don’t match up with the words they are speaking (this is a problem w/ DVDs on the PS3 as well). Some people would say this is too nitpicky to buy yet one more device for the living room, but watching a lot of content where the lips and words don’t match gets really damn annoying after a while.

I stumbled on a pleasantly surprising use while I was taking an online course on high-level financial modeling, and needed to have Excel open on a computer, with the video opened as well.  One can conceivably do this well using either 2 monitors or a 2nd computer, and I did that for a while, but the learning experience is hands down better watching the video content on TV, while performing the interactive component on a separate computer.  The GTV is the easiest way to do this, and it allowed for much clearer and direct focus, and my pickup time in learning what I wanted to learn was far quicker.   Following this initial success, I started seeking out far more web-based educational video content.

Since getting the GTV I also learned how awesome Vimeo is. All HD content on cable is broadcast at a maximum of 1080i, however on Vimeo there is a whole bunch of 1080p content that you can stream. It is amazingly high quality and I didn’t even know that I’d be able to perceive the difference–I can. There are all sorts of nature videos and other cool documentaries (just watched this one in Di Fara’s Pizzeria in Brooklyn yesterday).  HBOGO is another useful app, as it affords the opportunity to watch all of HBOs content without having to wait for something to appear in the OnDemand list.

As for the Chrome browser, there have been several times with people over that internet on the TV provided for convenient entertainment.  Such uses range from opening visually intensive websites to plastering fantasy football scoreboards on the big screen to salt a loser’s wound.  Most HTML 5 websites look cool and can be comfortably browsed from the couch.

One of the things that is most impressive with GTV so far is how Emily–the better half–claims it makes managing our home entertainment setup much easier.  I’m not kidding, this is the single first time I have heard that from her ever!  Each addition I have made over time to the living room has added an increasing level of complexity to where and how we consume different content, and now in the GTV, much of that process is centralized and simplicity has taken a step forward.  While people have complained about the user interface, and I do recognize some inadequacies, the OS is incredibly easy to navigate around, and the Logitech keyboard is just like using any other keyboard.  Web-on-TV inherently requires a more complex remote control interface than a numbered-channel system, but Logitech and Google combined to deliver a fairly straightforward package.  Compared to a computer, it’s barely more difficult, while compared to something like the PS3, AppleTV or even the original WebTV, it’s a major step forward

Content is king, and the future of GTV:

GoogleTV thus far is a solid platform for exploiting web content, but it is not the only platform.  Further, the content that is most valuable with the GTV is not content exclusive to Google.  At the end of the day, content is king, and while the device is great, and you can do all sorts of cool things with it, the main problem is that there just isn’t enough content for most people to buy the GTV over any other platform, yet.

With the GTV app market in its infancy though, it’s safe to assume there will be more unique content for the web-to-TV platform, but it remains to be seen whether the platform will ever reach a critical mass/tipping point.  Google’s acquisition of Motorola is a natural segue to sneak GTV into the set-top-box industry.  Where Google can make major inroads is in furthering its relationship with TV-makers like Samsung and Sony, who will drive adoption, solving the crucial chicken-or-egg question of whether content will come once a critical mass of users has been reached, or whether a critical mass of users will drive the creation of content.

As an early-adopter, I have some clear ideas for uses I would like to see further developed.  Education is one of the areas that seems to make the most sense intuitively.  It is a seamless and interactive way through which someone eager to learn can liberate the content from a platform that is less conducive to visual learning (the computer) to one that is built specifically for that purpose (the TV).

Where I see this going eventually is as a major enabler of the cord-cutting movement, and clearly the traditional media corporations agree, as evidenced by the old network TV stations blocking any web-based content from the device.  Were they not threatened, why would they do such a thing?

Somewhere down the road, TV will have a web-like interface much like the Honeycomb update to GoogleTV.  Top-watched “channels” will appear as apps with a logo on a clean taskbar.  Plus, content available to play by streaming, from storage, or live will all be easily searchable.  Eventually there will be a way to watch everything we want to watch, without having to over-subscribe by paying for hundreds of channels we never have watched, nor will we watch in the future.

Where it stands:

All in all, the GTV is both fun and a value-add to the living room entertainment system.  Google remains far from answering my question as to whether they can succeed where Apple failed (nor has Apple “failed” if the rumors are true that they will attempt to launch an actual TV), but even still, I am pleased with my GTV experience thus far. Many reviews critique the lack of unique content, and while I recognize this impediment, the device must be viewed for what it is–a first stab at creating a constructive platform to incorporate the web experience into the television.  There are several other decent competing platforms out there, but Google has already built not only the best of the bunch, but also the most scalable.

Disclosure: Long GOOG and VZ

My Reflections on Steve Jobs, by Walter Isaacson

As soon as I heard there was an authorized biography of Steve Jobs in the works, I knew I would be reading it ASAP.  As a semi-”fanboy” of Apple products, I had a special affinity for Jobs’ ability to create beautiful, yet simple products that so clearly surpassed the competition.

Steve Jobs is inspirational to me as an innovator and businessman, and I always looked forward to his next Apple event.  Not many people could successfully earn the respect bestowed upon him by both the hippiest of the hippies and capitalist of the capitalists out there today like Jobs has.  The first iPod I got (a gift from my Mom for my college graduation) was a semi-spiritual event and shortly thereafter Apple was my first really good Tech investment in the dot.com bubble’s wake.

I say a semi-fanboy, because while I prefer Apple products, and recognize their superiority, the closed ecosystem and lack of hardware scalability consistently pisses me off.  No product exemplifies my feelings more than the iPad.  I knew the concept was in the pipeline for a while, and I “knew” that I would be buying one rather quickly.  I even bought a large external hard-drive/hub and built my own internal home network in anticipation of the iPad as my computer replacement.  My vision was clear–with my newly created home network and hard-drive, a tablet (I was expecting the name iSlate, not iPad), and a tablet dock, I could theoretically build my own cloud-computer at home.  The tablet would be my CPU and monitor (the brains and eyes), while my network would be the memory (the central nervous system), enabling the liberation of my computing experience into my personal cloud.

Unfortunately, it wasn’t meant to be.  The iPad, required adding an additional device to one’s computing infrastructure, rather than liberating the user to do something new altogether.  Sure the iPad was new, and incorporated some amazing and groundbreaking features, but there was a major disconnect between my expectations and the level of enthusiasm that ultimately greeted the device.  Here’s what I said at the time.

Needless to say, I felt let down.

After spending much of this past Thanksgiving weekend messing around on some family and friends iPads, I still want one despite my disappointment, and despite the fact that Apple never fully came around to the features I want.  Perhaps that’s just my impatience about the fact that neither the iPad 2 nor any of its clones have come close to offering what I am looking for.  But really, I think it comes down to how amazingly awesome the iPad is to use, and in the context of what I was looking for in a tablet, if I settle, I better settle for the best (the Ipad).

I start my “review” of Steve Jobs, by Walter Isaacson with this little anecdote, because it is in some ways the perfect metaphor for my feelings towards the book, as well as my feelings towards Steve Jobs.  Reviews of the book are a dime-a-dozen, and therefore, I would like to focus my review not on the book itself, but on elaborating on my personal feelings towards the subject–Steve Jobs.

Immediately upon the book’s release, all the juicy tidbits about Jobs personality and personal life were plastered all over the Internet. Before the book came to light, I was generally aware that Jobs had a prickly personality, and before reading much of the book, I learned a good chunk of the most shocking details from his childhood post-adoption to his intimate relationships to his business rivalries.  Much of the “drama” was conveniently extracted by a media blitz as one website after another attempted to beat their rivals at revealing the most shocking plot lines first.  And let me be clear from the start, the “juicy” stuff is interesting because it is what we already did not know; however, as I kept reading the book I became more annoyed (albeit not surprised) with how much of the focus in the press was on Jobs’ personality and his private life rather than his ethos and achievements.  With that in mind, I purposely will forego reciting and commenting on many of these facts better left for the tabloids.

The media blitz forge an initial bias on my part: there was more to Steve Jobs than meets the eye, and he is not exactly the saint he was idolized as in the public eye.  My bias was further confirmed as I began reading the book.  The early parts moving from Jobs’ childhood in Silicon Valley, through his college days and the founding of Apple don’t really paint too attractive a picture of the man.  Jobs’ genius clearly stands out from early on, but all of the striking parts in the beginning pertain primarily to demystifying Jobs role in the creation of Apple (Isaacson confirms the oft-stated critique that Wozniak was the brains behind Apple’s technology) and highlighting the nature and depth of Jobs thorny personality.

As I kept reading, I said to myself, “sure he’s done some great things and all, but what an asshole!”   Then something happened along the way.  It started even before the revelation of Jobs’ cancer, at which time he became more of a sympathetic figure.  Where I really felt my inner transition in emotion towards Jobs was the sequence in which Isaacson takes us through the early days of Pixar and its rise.  I can’t put my finger on what exactly it was, but in this context I really started understanding Jobs as a guiding visionary, who can almost will innovation to happen, rather than just someone who got lucky being around the most brilliant computer geek of his time.

Visionary probably isn’t even the right word, but I said it there intentionally.  It wasn’t as if Jobs set out to create something new altogether with Pixar.  Actually, he was navigating down a different path altogether when the CGI movie idea came to him, but it was he who recognized the promise and allowed the ship to steer itself towards its manifestation.  Where most other CEOs would never let the project get legs in the first place, Jobs encouraged the creatively inclined workers among him to embrace and indulge in their creativity, nurtured the project, and saw to it that at each step of the way success would be maximized.  Opening doors was not enough.  Nothing short of perfection was.

Maybe it’s just that Pixar itself sounds more fun, but as that episode of Jobs’ life played out, my personal Steve Jobs impression reflated rather quickly.  This accelerated as the story evolved into Jobs’ return to Apple and eventually his battle with cancer.  The return to Apple contains much of the folklore we already know, but also in the context of Isaacson’s narration, it turns Jobs from someone whose bubble had popped and builds him back up into the man we know today.  There are some clearly delineated self-improvement stories in there, but also we finally get the clear articulation of Jobs’ brilliance–his ability to take something amazingly complex and make it beautiful and simple.  This holds true on the macro and micro levels, as Jobs built the company and each of its products around this principle.  Don’t get me wrong, these elements were there from the beginning in Apple, but they are much more well-rounded and central to the plot at this point, probably because they are clearer in Jobs’ own personal vision by then.

As for the battle with cancer, many have taken this as a real critique of a brilliant man.  The question “why would someone so smart do something so dumb” was asked throughout the blogosphere, and I very much see why people want to ask this question.  Yet, I think that view can only come when that fact is encountered in isolation from the rest of the book. While many have derided Jobs for failing to adequately treat his own cancer, and to a large extent, I agree, he wouldn’t be Steve Jobs were it not for his ability to ignore hindrances while focusing steadfastly on his personal priorities–EVEN TO A FAULT!

Although the outcome sucks, it’s hard to blame the man for it.  In fact, it makes him into more of the tragic hero I think he has become, in that the source of his strength, his so-called essence itself, was also the source of his downfall.  Therein lies the real source of my once-again reflated opinion.  Steve Jobs is your prototypical tragic hero in the Aristotelian sense, and this is exactly what humanizes his brilliance in the end.

The real climax of the book, and what pulls it all together are Steve Jobs’ own words on what he thinks his legacy should be.  Whether one can truly ascribe each word to his life or not, the message in and of itself is one that all should take to heart.  To maximize one self, people need to be well rounded and have an understanding and connection to the humanities, but also knowledge of the technical.  People need to be hyper-honest, even to the point of being critical, while also being able to push aside their ego in order to accept criticism and use it constructively.  Lastly, people need to build things out of passion, aiming for the highest of quality, rather than for profits alone.

Be sure to read the book for yourself, it’s well worth it.   What is interesting in the book goes well beyond what’s juicy and leaves many lessons to learn for just about anyone.

Can the Market Rally Without the Financials?

Many analysts and pundits alike have proclaimed that this market cannot rally without the financial sector participating.  The story goes a bit like this: financial stocks led us down in 2007, they led us up in 2009 and their weakness of late will lead us lower for the duration of 2010.  The question has been asked during each move, both up and down, since the March ’09 bottom.  Many operate under the assumption that financial sector strength is not only necessary for the market to rally, but essential for the economy to continue.  Let’s take a look at the charts to test out this thesis.

The Financials vs. the S&P 500 and NASDAQ

In looking at a chart of the financials (as represented by XLF) against the S&P 500 and the NASDAQ (as represented by the QQQQs) since the October 2007 market highs, one can clearly see that the financials suffered the largest decline from peak to trough.  Since that time, the financials have recouped some of their losses, yet since July of 2009 they have remained stagnant while the broader markets continued higher.  Moreover, the NASDAQ in particular has exhibited significant strength and prices are now just 10% off of their 2007 highs.  While this is well below the all-time high set back in March of 2000, the index looks poised to regain a leadership roll.

This bodes particularly well for the longer term outlook of our economy and stock market.  Clearly the markets on the whole have been able to move higher without the help of the financial sector.  We are in a rolling credit crisis environment and pain in the financial sector does have implications for the broader economy, but from what we have seen since the 2009 bottom, there has been an impressive recovery, and even more impressive growth in some key sectors of our economy.  Pervasive weakness in the financials would not bode well for our economy, but stagnation (and under-performance) is a different story altogether.

The Financial Sector and its Roll in our Economy

Volatility tends to be cyclical by nature.  Slow and non-volatile moves tend to be followed by fast and dramatic volatility.  Just like anything else, volatility itself ebbs and flows over time.  From 2007 to July 2009, the financial sector went through a period of exceptional volatility and it would only be natural for the volatility to level off and the sector to stagnate.  As has often been the case, prices tend to overshoot to the upside, overshoot to the downside and level off at some sort of psychological equilibrium.

Following the popping of the Tech Bubble in the early 2000s, the financial sector went from being a relatively modest component of the S&P 500 to being a dominantly large sector.  Moreover, since 1960, the financial sector on the whole went from accounting for 4% of our GDP, to a high of 8% prior to the 2006 peak.  To an extent, this was the result of significant innovations in portfolio theory and money management; however, as we have subsequently learned, the explosion in financials from 2003 to 2007 was largely illusory in that it was built upon an explosion in leverage without the necessary economic growth to justify the rate of credit expansion.

In order for our economy to recover and reemerge on a growth trajectory, it is essential for new areas of innovation and growth to emerge.  That is certainly taking shape with the technology sector making an aggressive increase in its stature within the S&P 500 since 2008.  Whereas at the time, Tech accounted for 15.3% of the overall S&P, as of today it is now at 18.9% .  Technology remains well off its highs of 29.2% set back in 1999, but it is once again emerging as a leadership sector.

A Balanced Financial Sector Model of Growth

Not only is it possible for our economy to grow without the financial sector, many prominent economists think (or thought) it would be the preferable model.  Such thinkers include Hyman Minsky, Joseph Stiglitz and Paul Krugman, among others.  The line of thinking holds that in order to maximize investment and for the economy to grow, it is preferable to pursue policies of stabilization to constrain volatility in the financial sector.  A less volatile financial sector allows, and more importantly, encourages investment to flow into innovation and new technologies–the real sources of economic and job growth.

Many fear that the structural shift in debt from the private sector to the public and growing government debt as a percentage of GDP bode poorly for our growth prospects.  Jeff Miller at A Dash of Insight takes a pragmatic and optimistic view on our deficit “problem”:

If you want to understand how governments  (or large private organizations) deal with problems, you need to quit thinking in terms of your family, your small business, or a chess game.  This is not a situation where you see a problem, analyze alternative, identify a solution, and make a choice.  It is decision making under extreme uncertainty.  Most observers get this wrong.

Here are the paths that I see as plausible, and even likely:

1.  The economic rebound will increase tax revenues, reducing the non-structural part of the budget deficit.  (The structural deficit (simplified) is what we would still face if we were operating at full employment).

2.  The consideration of the Bush tax cuts will lead to a number of compromises.  Taxes will be increased, but some of the cuts will be preserved — at least in part.  Like all compromises, everyone will hate the result.  The final tax rates will be lower than we had in the Clinton era.

3.  Entitlement benefits will be cut.  This will require success from the Deficit Commission.  Once again, most will hate the result, but these commissions are the only way to achieve change.

With a patient and forward-looking approach, there will be exceptional investment opportunities as we continue to rebound from the 2009 lows.  With interest rates and Treasury yields historically low, there is little choice for investors to chase yield outside of equities.  This does not mean that every sector has to rally, and it places an increasing premium on stock selection and identifying the right themes and trends, but this can be done.  The more the growth areas of our economy continue to outperform the tradition, the more optimistic our future looks.  Not only CAN the market rally without the financials, should we do so, the better things look for our recovery chances.  All this is not to say that the financials will not go up if/when the market does, but it does mean that the financials can become a laggard sector rather than a leader.

Revisiting Netflix and Media Consumption

One of the most read posts so far on this blog has been my take on Netflix and the New Media Model.  At the time, many had been asserting that the stock (then trading at just north of $70) was the most overvalued stock on the market (check out this from Crossing Wall Street or this from Felix Salmon).  With the broader indices now trading well below where they had been on April 1st, Netflix on the other hand, is trading at a nearly 50% premium.  The overvalued argument relied on an analysis of the stock based on traditional valuation metrics, such as P/E ratio, revenue growth, profit margins, etc.  Moreover, the naysayers argued that the DVD-by-mail model came with serious risks and that growth in the space was particular vulnerable to changes in Post Office rates or policies.

What these people missed is that the transition into streaming and the expansion of on-demand and its ability to meet the whims of today’s me-want-now mentality opened up opportunities previously unimaginable for entertainment consumers and investors alike.  The margins are exceptionally high when it comes to streaming and the growth is outstanding.  With their placement on all of today’s popular gaming consoles (just last night I streamed Bugsy through my playstation) and devices such as the Roku, streaming Netflix has become a popular way to watch movies across generational lines (my dad LOVES his Roqu and we just installed one in Emily’s family’s home).

Yesterday, through Silicon Alley Insider, I stumbled upon CEO Reed Hastings’ presentation on the Netflix business plan and the report fully confirmed what I expected to hear and expanded upon my initial investment theory with clear and concise information about Netflix present business, future endeavors and potential risks.  By 2013, Netflix expects to reach “peak DVD” in 2013, at which time, streaming will reign supreme as the venue of choice for subscribers to watch their TV and movies.  Additionally, Hastings outlines how Netflix aims to complement people’s existing sources of entertainment, rather than replace any altogether.  The company is using their growing cash position in order to access a wider variety of media content and to build out their ever-growing library of streaming media.  This niche, through which people can enhance their media experience with a cheap, flat-rate, vast library accessible with the push of a button from the living room couch is fundamentally changing the way that TV is watched and video entertainment consumed.

With the rapid uptake of mobile devices like the iPad, the mobile market creates another avenue through which Netflix subscribers can gain value from their flat-rate subscription.  This company is an incredible innovator and consistently stays on the cutting edge of every subtle change in our media consumption habits.  And look out investors (and shorts!), towards the end Hastings’ declares that Netflix will seek to expand internationally.  This growth story is not coming to an end just yet.  Without running through too many of Hastings’ points, I invite you all to check out his presentation attached below:

Netflix Business Opportunity

Disclosure: No position in NFLX at the time of this writing.