Life Is Better; It Isn’t Better. Which Is It?(NYTimes, 9/20/06)

September 20, 2006
Economix
Life Is Better; It Isn’t Better. Which Is It?
By DAVID LEONHARDT
When the first snow falls on the North Shore of Chicago this winter, Robert Gordon will take his Toro snow blower out of the garage and think about how lucky he is not to be using a shovel. Mr. Gordon is 66 years old and evidently quite healthy, but his doctor has told him that he should never clear his driveway with his own hands. “People can die from shoveling snow,” Mr. Gordon said. “I bet a lot of lives have been saved by snow blowers.”
If so, most of them have been saved in the last few decades. A Canadian teenager named Arthur Sicard came up with the idea for the snow blower in the late 1800’s, while watching the blades on a piece of farm equipment, but he didn’t sell any until 1927. For the next 30 years or so, snow blowers were hulking machines typically bought by cities and schools. Only recently have they become a suburban staple.
Yet the benefits of the snow blower, namely more free time and less health risk, are largely missing from the government’s attempts to determine Americans’ economic well-being. The same goes for dozens of other inventions, be they air-conditioners, cellphones or medical devices. The reasons are a little technical — they involve the measurement of inflation — but they’re important to understand, because the implications are so large.
For the last few weeks, there has been a roiling debate, both within the Democratic Party and between Democrats and Republicans, about how to describe living standards in this country. Among Democrats, the debate is really about how to talk to voters about the economy as the party tries to reclaim control of Congress this year and the White House in 2008.
One group of Democrats says that it’s time to stop pulling punches and acknowledge that, at best, life is marginally better than it was a generation ago. The other group argues that the middle class’s current problems should not obscure enormous progress made over the last few decades. President Bush and his aides agree with the progress part and go on to say that the middle class continues to do quite nicely today. Each group has its preferred numbers, which can be dizzying, but you don’t need to dig into them to figure out what’s really going on. You just need to understand snow blowers.
They help to illuminate two big issues, the first being that progress is easy to take for granted. Clearing a driveway without a shovel, buying an affordable cross-country plane ticket and — on a totally different scale — watching a very premature baby survive are all accepted parts of life today. They’re also fairly recent developments.
Polls show that Americans, in fact, understand this. By wide margins, they say they live better than their parents. “Looking backward,” the Pew Research Center reported last week, “Americans were more inclined to say they had made progress than were the publics of any country surveyed in Europe or the Middle East and most of the countries surveyed in Asia, Latin America and Africa.”
But the experts keep fighting over living standards, largely because the single most commonly used measure of well-being — how much money people make — can be very misleading. This is where inflation, the second big issue, comes in.
In the early 1950’s, Toro began selling mass-market snow blowers, which weighed up to 500 pounds and cost at least $150. As far as the Bureau of the Labor Statistics was concerned, however, snow blowers did not exist until 1978. That was the year when the machines began to be counted in the Consumer Price Index, the source of the official inflation rate. By then, the cheapest model sold for about $100.
In practical terms, this was an enormous price decline compared with the 1950’s, because incomes had risen enormously over this period. Yet the price index completely missed it and, by doing so, overstated inflation. It counted the rising cost of cars and groceries but not the falling cost of snow blowers.
The cellphone and the air-conditioner also improved middle-class life, and also took years to get into the inflation numbers, by which point their prices had plummeted. Wal-Mart’s effect on prices is another blind spot in the index, which considers something sold at a discount to be lower quality (and, therefore, not truly a bargain) than something sold at full price — even when the items are identical, like a box of Tide or a can of Campbell’s Soup.
Mr. Gordon, besides being a fan of snow blowers, also happens to be one of the country’s leading macroeconomists. A decade ago he served on a government-appointed group known as the Boskin Commission. It argued, as Mr. Gordon still does, that the government exaggerated inflation by more than one percentage point every year.
Some other economists think the skew may be somewhat smaller, but there’s broad agreement, even at the Bureau of Labor Statistics, that the Consumer Price Index has its weaknesses. “Use of the C.P.I. over extended periods of time,” Patrick C. Jackman, a government economist, told me, “is much more problematic than using it over short periods of time.”
By overstating inflation, the official numbers understate the country’s wealth, since every meaningful calculation of income subtracts inflation. The Census Bureau, for instance, says that the median-earning man who works full time — the one in the dead middle of the earnings ladder — made slightly less last year than in 1977. It is one of the main numbers cited by those who say life isn’t much better now than 30 years ago.
But Mr. Gordon’s adjustments show that men actually got a 27 percent raise in this period and women 65 percent. The gains are not as big as those of the 1950’s and 60’s, but they do sound far more realistic than the official numbers. Think about it: we live longer than people did in the 1970’s, we’re healthier while alive, we graduate from college in much greater numbers, we’re surrounded by new gadgets and we live in bigger houses. Is it really plausible, as some Democrats claim, that the middle class has made only marginal progress?
In recent years, the government’s economists have gotten much better at measuring inflation, introducing some new products, like Viagra, into the index within months. Of course, this means that incomes lately have not been understated by much and that their growth really has been miserly. (The recent reports showing healthy gains all refer to averages, which have been driven by huge gains at the top.) For all the sunny numbers that Republicans have offered up, the reality is that not a single piece of government data shows that most workers have gotten a significant wage increase since 2002.
So these are the facts. Americans are far better off than they were a generation ago, but the last few years haven’t been very good. It’s time for both parties to move on to the harder question: What are the policies — in education, health care and other parts of the economy — that will ensure tomorrow’s middle class can afford the next invention as worthy as the snow blower?
E-mail: leonhardt@nytimes.com

Little Girl, 3 Million Years Old, Offers New Hints on Evolution(NYTimes, 9/21/06)

September 21, 2006
Little Girl, 3 Million Years Old, Offers New Hints on Evolution
By JOHN NOBLE WILFORD
If the fossil Lucy, the most famous woman from out of the deep human past, had a child, it might have looked a lot like the bundle of skull and bones uncovered by scientists digging in the badlands of Ethiopia.
The paleontologists who are announcing the discovery in the journal Nature today said the 3.3-million-year-old fossils were of the earliest well-preserved child ever found in the human lineage. It was estimated to be about 3 years old at death, probably female and a member of the Australopithecus afarensis species, the same as Lucy’s.
An analysis of the skeleton revealed evidence of a species in transition, the scientists said in interviews yesterday.
The lower limbs supported earlier findings that afarensis walked upright, like modern humans. But gorillalike arms and shoulders suggested that it possibly retained an ancestral ability to climb and swing through the trees.
“Her completeness, antiquity and age at death make this find unprecedented in the history of paleoanthropology,” said Zeresenay Alemseged, the Ethiopian leader of the discovery team and a researcher at the Max Planck Institute for Evolutionary Anthropology in Leipzig, Germany.
Two reports of the findings are being published in Nature. The National Geographic Society, a supporter of the research, will run a popular article on the fossil child in the November issue of its magazine.
At a news conference in Addis Ababa, Ethiopia, the scientists gave the fossil the name Selam, which means peace in Ethiopia’s official Amharic language.
Scientists not involved in the research said the fossils were a significant find that should provide new insights about the afarensis species and a little-known period of early human origins.
“The child really confirms that afarensis was walking upright,” said Tim D. White, a paleoanthropologist at the University of California, Berkeley. “It has the potential to answer old questions and raises some new ones” — including their behavior in trees. Dr. White, who has found even earlier human ancestors in Ethiopia, participated in the analysis of the 3.2-million-year-old Lucy fossils. They were uncovered not far away in Ethiopia in 1974 by Donald C. Johanson, who is now director of the Institute of Human Origins at Arizona State University.
Other discoveries show that the afarensis species, a major branch of the human family tree, lived in Africa from earlier than 3.7 million to 3 million years ago.
In an accompanying commentary in the journal, Bernard Wood of George Washington University, who had no part in the discovery, said the specimen was “a veritable mine of information about a crucial stage in human evolutionary history.”
Dr. Wood, a paleoanthropologist, also noted how rare it was for the fragile bones of infants to survive long enough to fossilize. “But if they do, they provide precious evidence about the growth and development of the individual and the species,” he wrote.
Until now, Dr. Wood said, the earliest comparably complete specimen of a human-related child was that of a Neanderthal who lived less than 300,000 years ago in Syria.
The discovery team said the largely intact condition of the fossils indicated that the child was presumably buried in sand and rocks shortly after death during a flood in a desert region known today as Dikika, in northeastern Ethiopia.
Then, in December 2000, along came a team of fossil hunters led by Dr. Alemseged. On a steep hillside, one of the men, Tilahun Gebreselassie of the Ethiopia Ministry of Culture and Tourism, was the first to see the child’s tiny face looking up from a block of sandstone. It was a long and projecting face with a flat nose.
The face and skull were clearly that of a young afarensis, the scientists concluded almost immediately.
Dr. Alemseged’s team spent much of the last five years extracting the rest of the specimen from the surrounding stone with dentist’s drills and picks. The tedious work exposed the full cranium and jaws, the torso and spinal column, limbs and the left foot. The child’s one complete finger was curled in a tiny grasp, much like a young chimpanzee’s. The skeleton is much more complete than Lucy’s.
Although the fossils are still being studied, Dr. Alemseged and his colleagues noted several important findings and areas for further research. The Dikika girl’s brain size, for example, was about the same as that of a similarly aged chimpanzee, but a comparison with adult afarensis skulls indicates a relatively slow brain growth slightly closer to that of humans.
The presence of a hyoid bone was a surprise. It is a rarely preserved bone in the larynx, or voice box, that supports muscles of the throat and tongue. The bone in the infant appeared to be primitive and more similar to those found in apes than in humans, the scientists said, but is the first hyoid found in such an early human-related species and thus important in research about the origins of human speech.
The first relatively complete shoulder blades to be found in an australopithecine individual was one of the most puzzling aspects of the discovery, several scientists said. The lower body appeared to be adapted for upright walking by afarensis. But the shoulders and long arms were more apelike.
In the journal report, Dr. Alemseged and his team wrote that “the functional interpretation of these features is highly debated, with some arguing that the upper limb features are nonfunctional retentions from a common ancestor only, whereas others proposed that they were preserved because A. afarensis maintained, to some degree, an arboreal component in its locomotor repertoire.”

Officials Wary of Electronic Voting Machines (NYTimes, 9/24/06)

September 24, 2006
Officials Wary of Electronic Voting Machines
By IAN URBINA
WASHINGTON, Sept. 23 — A growing number of state and local officials are getting cold feet about electronic voting technology, and many are making last-minute efforts to limit or reverse the rollout of new machines in the November elections.
Less than two months before voters head to the polls, Gov. Robert L. Ehrlich Jr. of Maryland this week became the most recent official to raise concerns publicly. Mr. Ehrlich, a Republican, said he lacked confidence in the state’s new $106 million electronic voting system and suggested a return to paper ballots.
Dozens of states have adopted electronic voting technology to comply with federal legislation in 2002 intended to phase out old-fashioned lever and punch-card machines after the “hanging chads” confusion of the 2000 presidential election.
But some election officials and voting experts say they fear that the new technology may have only swapped old problems for newer, more complicated ones. Their concerns became more urgent after widespread problems with the new technology were reported this year in primaries in Ohio, Arkansas, Illinois, Maryland and elsewhere.
This year, about one-third of all precincts nationwide are using the electronic voting technology for the first time, raising the chance of problems at the polls as workers struggle to adjust to the new system.
“I think there is good reason for concern headed into the midterm elections,” said Richard F. Celeste, a Democrat and former Ohio governor who was co-chairman of a study of new machines for the National Research Council with Richard L. Thornburgh, a Republican and former governor of Pennsylvania.
“You have to train the poll workers,” Mr. Celeste said, “especially since many of them are of a generation for whom this technology is a particular challenge. You need to have plans in place to relocate voters to another precinct if machines don’t work, and I just don’t know whether these steps have been taken.”
Paperless touch-screen machines have been the biggest source of consternation, and with about 40 percent of registered voters nationally expected to cast their ballots on these machines in the midterm elections, many local officials fear that the lack of a paper trail will leave no way to verify votes in case of fraud or computer failure.
As a result, states are scrambling to make last-minute fixes before the technology has its biggest test in November, when voter turnout will be higher than in the primaries, many races will be close and the threat of litigation will be ever-present.
“We have the real chance of recounts in the coming elections, and if you have differences between the paper trail and the electronic record, which number prevails?” said Richard L. Hasen, a professor at Loyola Law School in Los Angeles and the author of the Election Law blog, www.electionlawblog.org.
Professor Hasen found that election challenges filed in court grew to 361 in 2004, up from 197 in 2000. “What you have coming up is the intersection of new technology and an unclear legal regime,” he said.
Like Mr. Ehrlich, other state officials have decided on a late-hour change of course. In January, Gov. Bill Richardson of New Mexico decided to reverse plans to use the touch-screen machines, opting instead to return to paper ballots with optical scanners. Last month, the Connecticut secretary of state, Susan Bysiewicz, decided to do the same.
“I didn’t want my state to continue being an embarrassment like Ohio and Florida every four years,” said Mr. Richardson, a Democrat, adding, “I also thought we needed to restore voter confidence, and that wasn’t going to happen with the touch-screen machines.”
In Pennsylvania, a state senator introduced a bill last week that would require every precinct to provide voters with the option to use paper ballots, which would involve printing extra absentee ballots and having them on site. A similar measure is being considered on the federal level.
In the last year or so, at least 27 states have adopted measures requiring a paper trail, which has often involved replacing paperless touch-screen machines with ones that have a printer attached.
But even the systems backed up by paper have problems. In a study released this month, the nonpartisan Election Science Institute found that about 10 percent of the paper ballots sampled from the May primary in Cuyahoga County, Ohio, were uncountable because printers had jammed and poll workers had loaded the paper in backward.
Lawsuits have been filed in Colorado, Arizona, California, Pennsylvania and Georgia seeking to prohibit the use of touch-screen machines.
Deborah L. Markowitz, the Vermont secretary of state and the president of the National Association of Secretaries of State, said that while there might be some problems in November, she expected them to be limited and isolated.
“The real story of the recent primary races was how few problems there were, considering how new this technology is,” said Ms. Markowitz, a Democrat. “The failures we did see, like in Maryland, Ohio and Missouri, were small and most often from poll workers not being prepared.”
Many states have installed the machines in the past year because of a federal deadline. If states wanted to take advantage of federal incentives offered by the Help America Vote Act, they had to upgrade their voting machines by 2006.
In the primary last week in Maryland, several counties reported machine-related problems, including computers that misidentified the party affiliations of voters, electronic voter registration lists that froze and voting-machine memory cards whose contents could not be electronically transmitted. In Montgomery County, election workers did not receive access cards to voting machines for the county’s 238 precincts on time, forcing as many as 12,000 voters to use provisional paper ballots until they ran out.
“We had a bad experience in the primary that led to very long lines, which means people get discouraged and leave the polls without voting,” said Governor Ehrlich, who is in a tight re-election race and has been accused by his critics of trying to use the voting issue to motivate his base. “We have hot races coming up in November and turnout will be high, so we can expect lines to be two or three times longer. If even a couple of these machines break down, we could be in serious trouble.”
Problems during primaries elsewhere have been equally severe.
In the Illinois primary in March, Cook County officials delayed the results of the county board elections for a week because of human and mechanical problems at hundreds of sites with new voting machines made by Sequoia Voting Systems.
In the April primary in Tarrant County, Tex., machines made by Hart InterCivic counted some ballots as many as six times, recording 100,000 more votes than were cast. The problem was attributed to programming errors, not hacking.
In the past year, the Government Accountability Office, the Brennan Center for Justice at New York University and the Congressional Research Service have released reports raising concerns about the security of electronic machines.
Advocates of the new technology dispute the conclusions.
“Many of these are exaggerated accusations by a handful of vocal activists,” said Mark Radke, director of marketing for Diebold Election Systems, one of the largest sellers of touch-screen machines. “But if you want to talk about fraud and tabulation error, the newer technology is far more accurate.”
Mr. Radke cited a study from the California Institute of Technology that found that between the 2000 election, when touch-screen machines were not used, and the 2004 election, when they were, there was a 40 percent reduction in voter error in Maryland, making the vote there the most accurate in the country.
“There is always the potential for human error,” Mr. Radke said, “but that is easily correctible.”
But critics say bugs and hackers could corrupt the machines.
A Princeton University study released this month on one of Diebold’s machines — a model that Diebold says it no longer uses — found that hackers could easily tamper with electronic voting machines by installing a virus to disable the machines and change the vote totals.
Mr. Radke dismissed the concerns about hackers and bugs as most often based on unrealistic scenarios.
“We don’t leave these machines sitting on a street corner,” he said. “But in one of these cases, they gave the hackers complete and unfettered access to the machines.”
Warren Stewart, legislative director for VoteTrustUSA, an advocacy group that has criticized electronic voting, said that after poll workers are trained to use the machines in the days before an election, many counties send the machines home with the workers. “That seems like pretty unfettered access to me,” Mr. Stewart said.

The Big Gamble on Electronic Voting (NYTimes, 9/24/06)

September 24, 2006
Digital Domain
The Big Gamble on Electronic Voting
By RANDALL STROSS
HANGING chads made it difficult to read voter intentions in 2000. Hotel minibar keys may do the same for the elections in November.
The mechanics of voting have undergone a major change since the imbroglio that engulfed presidential balloting in 2000. Embarrassed by an election that had to be settled by the Supreme Court, Congress passed the Help America Vote Act of 2002, which provided funds to improve voting equipment.
From 2003 to 2005, some $3 billion flew out of the federal purse for equipment purchases. Nothing said “state of the art” like a paperless voting machine that electronically records and tallies votes with the tap of a touch screen. Election Data Services, a political consulting firm that specializes in redistricting, estimates that about 40 percent of registered voters will use an electronic machine in the coming elections.
One brand of machine leads in market share by a sizable margin: the AccuVote, made by Diebold Election Systems. Two weeks ago, however, Diebold suffered one of the worst kinds of public embarrassment for a company that began in 1859 by making safes and vaults.
Edward W. Felten, a professor of computer science at Princeton, and his student collaborators conducted a demonstration with an AccuVote TS and noticed that the key to the machine’s memory card slot appeared to be similar to one that a staff member had at home.
When he brought the key into the office and tried it, the door protecting the AccuVote’s memory card slot swung open obligingly. Upon examination, the key turned out to be a standard industrial part used in simple locks for office furniture, computer cases, jukeboxes — and hotel minibars.
Once the memory card slot was accessible, how difficult would it be to introduce malicious software that could manipulate vote tallies? That is one of the questions that Professor Felten and two of his students, Ariel J. Feldman and J. Alex Haldeman, have been investigating. In the face of Diebold’s refusal to let scientists test the AccuVote, the Princeton team got its hands on a machine only with the help of a third party.
Even before the researchers had made the serendipitous discovery about the minibar key, they had released a devastating critique of the AccuVote’s security. For computer scientists, they supplied a technical paper; for the general public, they prepared an accompanying video. Their short answer to the question of the practicality of vote theft with the AccuVote: easily accomplished.
The researchers demonstrated the machine’s vulnerability to an attack by means of code that can be introduced with a memory card. The program they devised does not tamper with the voting process. The machine records each vote as it should, and makes a backup copy, too.
Every 15 seconds or so, however, the rogue program checks the internal vote tallies, then adds and subtracts votes, as needed, to reach programmed targets; it also makes identical changes in the backup file. The alterations cannot be detected later because the total number of votes perfectly matches the total number of voters. At the end of the election day, the rogue program erases itself, leaving no trace.
On Sept. 13, when Princeton’s Center for Information Technology Policy posted its findings, Diebold issued a press release that shrugged off the demonstration and analysis. It said Princeton’s AccuVote machine was “two generations old” and “not used anywhere in the country.”
I spoke last week with Professor Felten, who said he could not imagine how a newer version of the AccuVote’s software could protect itself against this kind of attack. But he also said he would welcome the opportunity to test it. I called Diebold to see if it would lend Princeton a machine.
Mark G. Radke, director for marketing at Diebold, said that the AccuVote machines were certified by state election officials and that no academic researcher would be permitted to test an AccuVote supplied by the company. “This is analogous to launching a nuclear missile,” he said enigmatically, adding that Diebold had to restrict “access to the buttons.”
I persisted. Suppose, I asked, that a test machine were placed in the custodial care of the United States Election Assistance Commission, a government agency. Mr. Radke demurred again, saying the company’s critics were so focused on software that they “have no appreciation of physical security” that protects the machines from intrusion.
This same point was featured prominently in the company’s press release that criticized the Princeton study, saying it “all but ignores physical security and election procedures.” It is a criticism that collides with the facts on Page 5 of the Princeton study, where the authors provide step-by-step details of how to install the malicious software in the AccuVote.
Even before the minibar lineage of the AccuVote key had been discovered, the researchers had learned that the lock was easily circumvented: one of them could consistently pick it in less than 10 seconds.
If skeptics cannot believe what they read about the ease of manipulating an election, they can watch the 10-minute online video: the AccuVote lock is picked, a memory card is inserted and the malicious software is loaded; the machine is rebooted, and within 60 seconds the machine is ready to throw the election in favor of any specified candidate.
Computer scientists with expertise in security issues have been sounding alarms for years. David L. Dill at Stanford and Douglas W. Jones at the University of Iowa were among the first to alert the public to potential problems. But the possibility of vote theft by electronic means remained nothing more than a hypothesis — until the summer of 2003, when the code for the AccuVote’s operating system was discovered on a Diebold server that was publicly accessible.
The code quickly made its way into researchers’ hands. Suspected vulnerabilities were confirmed, and never-contemplated sloppiness was added to the list of concerns. At a computer security conference, the AccuVote’s anatomy was analyzed closely by a team: Aviel D. Rubin, a computer science professor at Johns Hopkins; two junior associates, Tadayoshi Kohno and Adam Stubblefield; and Dan S. Wallach, an associate professor in computer science at Rice. They described how the AccuVote software design rendered the machine vulnerable to manipulation by smart cards. They found that the standard protections to prevent alteration of the internal code were missing; they characterized the system as “far below even the most minimal security standards.”
Professor Rubin has just published a nontechnical memoir, “Brave New Ballot: The Battle to Safeguard Democracy in the Age of Electronic Voting” (Morgan Road Books), that describes how his quiet life was upended after he and his colleagues published their paper. He recalls in his book that Diebold’s lawyers sent each of the paper’s authors a letter threatening the possibility of legal action, warning them to “exercise caution” in interviews with the press lest they make a statement that would “appear designed to improperly impair and impede Diebold’s existing and future business.” Johns Hopkins rallied to his side, however, and the university’s president, William R. Brody, commended him for being on the case.
Recently, there have been signs that states are having second thoughts about trusting their AccuVote equipment. Officials in California, Florida and Pennsylvania have been outspoken about their concerns. In Maryland earlier this year, the state House of Delegates voted 137 to 0 in favor of a bill to prohibit the use of its AccuVote machines because they were not equipped to generate a paper audit trail. (The state Senate did not take up the measure and it died.)
Professor Rubin favors the use of touch screens only for “ballot marking” — capturing a voter’s intended choice — then printing out a paper ballot with only the voter’s chosen candidates that the voter can visually check. Election officials can then use the slip to tally votes with an optical scanner made by a different manufacturer.
Manual audits of the tallies in at least 1 percent of all precincts, as is now required in California, would provide a transparent method of checking for integrity. Should a full recount be necessary, the paper ballots, containing only the selected names, provide unambiguous records of original intent.
“Let computers do what they do best,” Professor Rubin said, “and let paper do what it does best.”
Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: digitaldomain@nytimes.com.

A Video Business Model Ready to Move Beyond Beta (NYTimes, 9/17/06)

September 17, 2006
Media Frenzy
A Video Business Model Ready to Move Beyond Beta
By RICHARD SIKLOS
VIDEO mania is in full swing. Amazon is finally doing movie downloads. Apple is touting a new wireless gizmo to beam movies from laptops to TV screens. NBC is introducing a video syndication service that might pit it against Google and Yahoo, and it’s joining the other big networks in putting its shows online for free with advertising. MTV is working with Google to populate its video content all over the Web.
It is wholly unclear which, if any, of these or any of the dozens of other recent efforts that have been announced will break away from the pack, which is why many of them are couched as “tests” and “experiments.” (Whoever thought up this idea of Web sites forever being in “beta” deserves a prize as the spinmeister of their generation.)
Still, a few things are clear from the recent news flow. First of all: yes, the world has gone batty over video. Thirty-second clips, three-minute spoofs, half-hour sitcoms, TV dramas that haven’t been shown in decades, rap videos, Hollywood blockbusters and feeds from TV news outlets big and small are flooding online. The term video itself is already starting to sound old — the equivalent of songs before the advent of MP3’s and downloads.
The good news — and my second point — is that there’s gold in them there hills. Video delivered over the Internet is clearly shaping up to be an actual business that advertisers are interested in. The broadcasting (netcasting?) of television programs and clips on the Web moves the debate away from Internet-versus-TV because if TV executives put their best material online and get paid for it, the proposition becomes Internet-cum-TV.
The research firm eMarketer estimates that video-related advertising will top $2.3 billion within four years. And let’s not forget that Google is on track to exceed $7 billion in revenue this year — and that is predominantly from old-fashioned, Yellow Pages-style text ads. Heck, they don’t even have pictures, let alone moving images.
Much attention has been focused on the economics of selling digital versions of Hollywood movies (like in Amazon’s new Unbox service) as an alternative to DVD sales and rentals and to stem piracy. But what has yet to be exploited — what Google, Yahoo and many other aggregators are vying for — are pieces of the $60 billion or so that will be spent on television advertising in the United States this year.
NBC’s new syndication business, dubbed NBBC, for National Broadband Company, promises to match up content creators with Web sites that might be interested in showing the video. All three parties will get to take a cut of the embedded advertising revenue. There is much to quibble with about the way NBBC came out of the gate; its executives dissed most blogs as unworthy of their content and sneered at the homemade content that is proliferating on YouTube.
On the other hand, any video service using NBBC is nonexclusive, so there is really no reason not to use it (which explains why little corners of NBC competitors like Fox and CBS are participating in the NBBC rollout, through their IGN.com and CSTV businesses, respectively).
Some aspects of the NBBC concept can lead to head-scratching. If I have a great piece of video on my Web site, for instance, is it more valuable to syndicate it through NBBC or to just have it spread virally across the Web? A simple link will take people to the video and any ad accompanying it for free. But that’s why it’s an experiment.
The clever thing about NBBC, though, is that it’s an entirely new business — to the extent it will distribute other companies’ programs — that is designed to bring in new money. Even if free advertiser-supported video on the Web takes off, it’s far from clear whether those ad dollars will be greater than the dollars NBC may lose from viewers who will no longer watch its show on regular TV, or download or DVD and so on.
Which brings us to Apple’s potential convergence-buster, dubbed iTV (the name is — you guessed it — beta). Betting against Steven P. Jobs has not been a sound proposition in recent years, but there are plenty of reasons to be skeptical about whether iTV, which doesn’t actually exist yet, will have the technological wherewithal or enough compelling content to matter. But it does draw people closer to a world where inexpensive liquid crystal displays will moot the long-running debate about convergence because people will just plug in their cable or Internet or Wi-Fi and do what they please.
“The real win here is in high-value, high-quality, high-definition content on your TV set,” said Josh Bernoff, a vice president at Forrester Research. “To do that is going to require more than what Amazon and frankly more than what Apple is doing. We’re still waiting for that device.”
Or maybe it’s here and we just can’t afford it. TiVo last week brought to market its Series 3 digital recording box, which appears to have the ability to do everything from record in high-definition to take video files through a broadband Internet connection either directly or wirelessly. At $799, however, it’s the most expensive TiVo toy yet.
And if you want to really — really — get your hands on as much video as one could possibly enjoy, may I recommend the new DirecTV Titanium service? Introduced recently as the ultimate luxury for anyone who calls their home a “crib” with a straight face, it’s basically everything the satellite provider has to give for a flat fee of $7,500 a year.
That means every regular, pay and high-definition channel, every sports package, pay-per-view movies (at no cost), and a whole bunch of tuners and digital video recorders to do with as you please. There is also 24-hour a day “concierge” service for technical help and anything else.
Best of all, none of it is in beta.