Issues & Answers

Update - I wrote the editorial below around January 2009, when it seemed that every customer we had was calling up and cancelling their encoding and hosting account. Now, BroadbandVideo, Inc. does MUCH MORE than encoding and hosting - and those who do business with us are aware of the range of our services. We started provisioning for the loss of simple encoding and hosting years ago when we saw the first free video sites poking their head up out of the digital sand. But as the article below indicates, we could never understand how these sites made money.

Well, there was a reason we couldn't figure it out. The simple fact is they DON'T MAKE MONEY. You cannot give something away for free and make it up in volume. Oh, I'm sure the guys who started YouTube are laughing all the way to the bank as they prepare to spend another day cruising the Bahamas in their respective luxury yachts - but the folks who bought that bandwidth pig are not laughing at all. In fact, they're openly weeping to the tune of $1.65 Million A DAY. That's right, they lose $1.65 million a day - and maybe you're one of the people who made the decision to put your business, promotional or creative video endeavors up "for free" on YouTube. Read this article - then start digging around for that "back up" copy you made. I personal hope you find it, because no matter how clever, how disruptive or how innovative, NOTHING can stay in business losing $1.65 MILLION a day.

We don't give away free video. Why? Because bandwidth costs money and if we gave it away to one guy, we'd have to charge another guy more. We don't want to play THAT game (Bernie Madoff figured out that that simply doesn't work) so we charge a very reasonable rate - but one that allows us to pay our rent, pay our utilities and yes - pay for our bandwidth. Here's a link to the article explaining how YouTube is losing their shorts. After you've read that, read the one I wrote several months ago as AOL shut down a whole bunch of money-losing video-based sites.

Beware of Free Video

As a life long video professional – I’ve seen fads and trends come and go by the hundreds. It seems that just when you think you’ve seen the last of the completely silly ideas fall by the wayside, somebody comes up with something even more outrageous and un-sustainable. I’ve watched fads on the web with keen interest, because what was yesterdays joke site just might be today’s 10 billion dollar winner – and vice versa! From greeting card sites that sold for millions to charging for admission to micro-payments of fractions of a penny, the web had been host to more of the most ridiculous scams and outright lies than any other media.

Now comes the clear winner of the week: Free Video. We all know there’s no such thing as a free lunch – somewhere, somehow, somebody has to pay the bill for any process, procedure or product that doesn’t fall like manna from the skies. Often it’s hard to see where the money is coming from or who is paying, but eventually the curtain is pulled back to reveal the small man working levers and pullies while screaming into the microphone “pay no attention to the man behind the curtain!” It’s just a matter of time and patience before we see what the real goal was or are able to make out the “real deal”. Often these carpetbaggers of the internet will spend months, even years on plans that (if everything just falls into place) they walk with the green and leave everybody else holding the bill – remember Dr.Koop.com?

So, back to the video business. Here’s the way it works WITHOUT EXCEPTION: you take video and encode it, you put it on a server (or servers) connected to the internet, somebody decides to watch it and it data is transmitted over the web utilizing bandwidth. And there lies the key to the “free video” equation – “utilizing bandwidth”. Bandwidth costs money, therefore somebody, somewhere, somehow is paying for this bandwidth. You cannot hook up a server to the web and say the magic words and get unlimited amounts of bandwidth – it’s like wishing gas into the tank of your car as you enter the freeway with the needle on “E” – we all know what’s going to happen sooner or later.

That being the known truth, how can certain sites exist on the internet when they clearly fly in the face of this logic? In 1999 all you had to do was have a great URL (www.puppy.com, www.incometax.com, www.tree.com …) and you could find somebody to invest in your new site because back then, all you needed was “eyeballs” – the money would follow. Ooops – that didn’t work, we got thousands of eyeballs to come to bloated, text-heavy sites that promised to be the next GREAT SITE on the web. And, if you were really artsy or esoteric, you could have a very few eyeballs who paid money to look at your cool content. None of these sites panned out – almost each and every one went belly up for a variety of reasons (I love furniture.com who posted on their closing note that they really hadn’t considered the cost of sending a giant oak armoire halfway around the globe), because even in “cyber-space” there was no such thing as a free cyber-lunch.

Until now. With the explosion of digital video just straining at the hard-drives of most of America to be released onto an unsuspecting public, YouTube was started on the credit cards of two entrepreneurs who had nothing to lose. And lose they didn’t – a six billion dollar purchase price from Google made sure that those early credit card bills would be paid in full, with interest. But there was still one flaw in the design, one fly in the ointment – one small issue that hadn’t quite been ironed out at the time of the sale, but it seemed so insignificant in light of the glory of this deal that almost nobody took notice – there simply wasn’t a sustainable business model anywhere to be found. They had millions and billions of eyeballs, but they were still giving away bandwidth for free. Not to worry, said other giant players in the space – if they can throw away money, so can we! So the big players all began the search for the most ridiculous way to burn through bandwidth they could think of. Wait, don’t just let them upload video, let them customize the interface and create channels! How about video with chat attached to it? What about free syndication tools so you can make money while we continue to lose it? And on it went – great, complex services sprang up all under the presumption that if YouTube could do it, well by-golly, so could we! Sites were launched by the dozens with names like Joost, Fugu, Hulu, Magnify, and on and on they came – at first most of them just allowed 5 minutes of video, then 10 minutes of video, then an hour if you became a member, the end was not in sight. As a company that encoded, hosted and streamed online video for its primary business – I began to feel the cold chill of impending bankruptcy, because we all know you can’t fight FREE.

At last, in the midst of the latest implosion of the stock market, right after 700 billion gets thrown to the banking wolves in the form of fresh, raw meat – sanity begins to emerge in the form of a small article in a media trade “AOL's Hit List: 50+ Projects Gone Or Going”. What’s this? The mighty AOL of free hours and hours of endless video watching and uploading and downloading and managing and channeling and syndicating and advertising (not really)…the Queen of Free Bandwidth (YouTube remains the King) all of a sudden says STOP, I can’t take it anymore, I’m not giving away bandwidth for free anymore!

In an unprecedented move, the internet rumor mill (which is usually correct) announced today that AOL would be “dropping” a large number of media / video projects. What “dropping” means is anybodies guess – but if my whole business and meaning of my existence was hosted on a free AOL video site – I’d be out buying back-up hard drives by the dozen because it sounds like the party is over, the gate is closing – we’re NOT giving away endless megs, and gigs and terabytes of transfer and storage for something called “Dudes Lets Puke Two”. In fact, because these sites have been FREE, I would guess that there’s no obligation on AOLs part to preserve any of this for posterity – “dropping” could mean that they’re letting go 30 guys down the hallway with the most extreme tattoos and body piercing (the video guys), hitting “Format C drive” on the master server and all going out for a beer. Hey, it could happen – and what if it does?

Imagine a scenario where all the video / media sites mentioned in an article on “Silicon Alley Insider” actually DO what I’ve suggested above – well, that leaves billions of terra bytes of important, socially relevant documentaries of our time on planet earth (“Co-ed Tease Shows All While VERRY Drunk”) with no place to live. So they turn to the godfather of free media – YouTube and begin to slowly at first and then faster and faster upload endless streams of music, dancing, drinking, advertising, and all the other essential elements of the streaming video world. Like a giant digital mosquito in the background the buzz begins that you’ve got to get your video on YouTube because UnCut brand, HiQ, Fugu, Windows Media Streaming, AOL Video 10ft are all shutting down. The buzz gathers steam and begins to get louder with the demise of AMoD on MCE, AMoD on TWC, Video Commerce, Predixis on Winamp, 3rd party videos, AOL Video DRM. By now billions of streams of video are being transferred to YouTube in an uploading frenzy the likes of which the world has never seem. System after system pounding gig after gig of streaming video, downloadable flash, quicktime and bunches of other lesser known formats as the YouTube encoders desperately try to keep up with the encoding job of the century. Hard drives spin at unprecedented rates as server farms begin to grow hotter and hotter. Technicians in front of walls of glowing screens eye each other nervously as their carefully crafted custom bandwidth charting programs all beginning to say the same thing – up, up, UP. Without hesitation AOL slams the doors on Onstream, 2CMedia Productions, UnCut on Mobile, UnCut Payloaders, HP IP enabled TVs as it can no longer bear the daily expenses of thousands of bytes of streaming editorial on the latest video games out of Japan ("Is Terra 5 - The Buchering Too Easy?"). The whirr now becomes a scream of high pitched terror as the servers begin to melt down, the foam guns in the farms begin to hose down the overheated machines destroying terabytes of data with a single guided burst of chemical flame retardant. At the corporate level a final axe falls on  Direct File Downloader, H.264, Userplane enabled-syndicated video player and a new content management and ingestion system that shall never see the glow of monitor LED.

It’s over and the damage has been done. The data has been lost. YouTube is a shell of smoldering cases. The AOL sites have been formatted and the drives sold on eBay. The techs wander through the wreckage searching for a Smart card or any small bit of data that might have been spared in the carnage. But there is no such luck, nothing has survived.

Meanwhile, back at home in a basement in Toledo, Ohio – a young boy keeps clicking on a link without result. There is no free video, and there also is nothing left of “Billys 5^th Birthday Party”.

Epilogue:
Bandwidth costs money. If you put your video on a service or carrier that doesn’t charge anything – you’re getting exactly what you paid for. If your video is important – you need to pay to keep it on the web. Companies that do not charge for their services cannot stay in business, because the simple law of commerce that states “free is not a sustainable business model”. If your video disappears in the middle of the night – you have no one to blame by yourself. If you’re handling the video of others – you need to warn them that their materials could disappear at any time.

Note: The names of the video services that are being “dropped” by AOL are sourced from this article: “AOL's Hit List: 50+ Projects Gone Or Going” which appeared in Silicon Alley Insider on Oct. 6^th.