I’m far from a sophisticated investor, although I guess I am an accredited investor because of my networth. As I have written before, I’m a big believer that whenever you do a business deal with people you don’t know, particularly buying and selling stocks, you always look for the sucker. If you don’t see the sucker, then you are the sucker.

I have found myself on both sides of trades. I’ve been the sucker, buying stock in companies that turned out to be far from what they said they were, or even who the principles said they were. I’ve watched in amazement as the internet bubble went to the moon with the entire world ignoring the history of technology stocks. Anyone who tells you they have never made a mistake in the market is either lying to you or never traded in the market.

Today’s boom stocks are hedge funds that are going public. Fortress could be the netscape of the boom with Blackstone and many others to follow. Would I buy ? No. I personally would never buy stock in a public hedge/private equity fund. Ever. My position is based on basic common sense and a rudimentary understanding of the hedge fund business. Here is the logic:

When you are an investor directly into a hedge fund you have 1 single element of leverage on the hedge fund , and that is the ability, often with very stringent limitations, to pull your money from the hedge fund. That is it.

That leverage is mighty however, particularly for the bigger investors in the hedge fund. Why ? Because when an investor pulls a significant amount of money from the fund, it creates a cascading series of problems.

It may cause the fund to have to sell securities in order to pay back the investor while still retaining their required or chosen cash levels.

The more leverage the fund uses, the more the cash problem is leveraged as well.

A fund’s “scoreboard” is their return and their amount of assets. Its also their marketing pitch. If they perform, they can draw more money into the fund if its open, or to their next fund if its closed. If they don’t outperform, they can usually forget about growing or their next fund. Its unfortunate, but you rarely if ever hear about the hedge funds that closed unless they were absolutely huge.

Hedge funds obviously don’t want their big investors to withdraw, so they work incredibly hard to make sure they outperform their peers. As the number of funds has grown, so has the difficulty to outperform. There are so many funds chasing the same deals in every area of specialty that the funds keep on investing in riskier and riskier deals. All in hopes of keeping their “money happy”

Bottomline is that hedge funds scramble hard each and every day to make their big investors, some of which can leave on the drop of the hat, happy.

Appeasing hedge fund investors is a very, very different business than making shareholders happy.

If a shareholder sells their share of stock, the hedge fund wont really care. Sure, they want the stock price to go up. They own shares of stock in the fund, and as the stock price goes, so goes some percentage of their networth. That should be enough for them to do whatever it takes to increase the stock price, right ? Maybe

Increasing the price of a share of stock is as much marketing to create demand for the stock as it is earnings of the fund.We also call this increasing the P/E of a stock. There are dozens of ways to increase the PE of a stock that is showing a profit. Hedge fund investors care about 1 thing. Cash. Money that is returned to them. Shareholders care about the price of the stock. One is capital returns, the other is capital appreciation.

That difference is just common sense, but its significant.

Which makes me wonder why those who put money into these hedge funds are letting them take the fund public. It will certainly change how the fund invests and manages its assets, even if the fund says it wont.

They can’t be responsive to shareholders and investors with the same story

Hedge funds are known for laying it all out on the line and doing the big deals. Often ones considered to be crazy by outsiders, but smart by insiders. They are the ones buying the lousy or stagnant public companies and taking them private, remastering them, only to reissue them to the stock buying public investor a couple years later at multiples of their investment.

How many public companies do you know that are known for their risktaking ? That gladly take outsized risks that some consider crazy,and do they do it on an ongoing basis ? How many public companies do you know that aren’t focused on hitting “the number” to keep shareholders happy ?

The hedge funds that are staying private have to be licking their chops. Competing against public hedge funds that have to deal with reporting and disclosure requirements is a lot easier than competing with a company that is stealth in their actions. They also know that despite proclamations to the contrary, the public funds will certainly change how they approach investing to make the market happy. The earnings of public funds impact the brand of the fund. If earnings are good, its business as usual. If earnings are bad, and / or the stock underperforms, then the public fund’s brand , and their ability to raise money is diminished.

Finally, the IPO also seems to put public shareholders on the opposite side of the ledger of those that have invested in the fund directly. Shareholders participate with management in the earnings of the fund, while those who put cash into the fund participate in the returns of the investments of the fund. Of course, the higher the return on investments, the greater the income of the fund itself and the numbers allocated to public shareholders. But fund investors returns are also a function of how much or how little management takes off the top. This isnt a problem when things are going great, but its always a problem when things aren’t going great.

This post isn’t expert commentary. Its just a friendly heads up based on what I see.

If you are looking at investing in any hedge fund stock, take a long, hard look at the business,IN PARTICULAR, the tax consequences of the investment and your place as a shareholder before you buy. If you are looking at just getting in and hoping it goes up because its the hot company in a hot industry… Welcome to 1999

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I usually don’t talk about personal issues, but I thought this was important to share.

I’m getting to that age where it pays to be proactive and start getting tested for the myriad of things that can go wrong with my body. One of the things I wanted to get over with is a check for colon cancer. Although I’m officially younger than the “suggested age” for a colonoscopy, I wanted to get it out of the way. I had read and heard too many stories about people who found polyps and how if “they had only caught them a little sooner” it would be no big deal to remove them. So I set my appointment and went for it.

Like every guy, the thought of being violated by a long tube is at the very bottom of the list of things I want to do on a summer day. I could live with having to take all the laxatives that lead up to the procedure, That’s just more time to get my reading done. But the tube up the outdoor, that’s scary.

Well this morning was the morning. I had officially lost 4 pounds to the laxative over the past 24 hours and was surprisingly not hungry after going without food for the past 24 hours as I got to the hospital at the prime time of 7am.

I was definitely nervous. Despite doctors and nurses telling me it would be a breeze, I was naturally skeptical.

A breeze was an overstatement. I can honestly say that if it made medical sense to get one done every year, i would have no problem with it. It was easy and breezy .

Once I got into the Gastro Room where they did these, they told me that they were going to knock me out, and I would get a nap and wake up like nothing happened . They were right. One minute Im talking rugby, the next I’m waking up, picking up the conversation where I left off and being told to “dispell the air in my system”.

No where else can you rip off some huge farts and have 3 nurses and a doctor, while maintaining a very professional demeanor, tell you that you aren’t done yet and demand that you let loose a few more. Then it was up to get dressed and out the door so my wife could give me a ride home.

Now, about an hour latern I’m obviously back at it.

I’m writing this post because I hated the fact that I was afraid of getting a colonoscopy. It honestly scared me. I don’t like hospitals. I don’t like entries into exit lanes and its scary as shit that they could find something. In other words I was a pussy when I shouldn’t have been.

Bottomline is that your life just might depend on getting tested for colon cancer. There is absolutely nothing to be afraid of. Its truly easy and breezy. Do it.

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I love when a partner of mine takes a bold stand and gets it right. Dan Rather over the past few days has taken on the broadcast news business and as he is given to do, pulled no punches and told it “Just the way it is”.

HDNet hired Dan Rather to create Dan Rather Reports this past November . Its a program that I’m incredibly proud of. Our subscribers, the media and industry have responded to Dan Rather Reports with continuous praise.

If you havent seen it, here is a link to Dan’s interview on Fox News. Its well worth watching.

I’m a big believer in standing up for what you believe in. I’m proud to have Dan as a partner at HDNet.

For those who haven’t seen it, here is a sample :

Here is part 2

Here is part 3

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First of all, I have to commend Google for finally trying to get in the game and protect content. At least its nice to know that they have an interest in trying rather than just talking.

Unfortunately for them, their approach puts them in a catch 22 situatiojn and a position that hasn’t worked all that well for them in the book publishing business.

Based on what I have been able to read, it appears that the system is built upon content owners giving Google a copy of their content , which is then “registered” in their copy protection system. When a file is uploaded by a Youtube and hopefully a Google Video user (since Google Video is a far more egregious violator of long form copyrights), Google will then compare the file and its contents to a database of content previously made available to Google. If it finds a match, Im guessing that it will reject the upload, or at least, first attempt to get a confirmation from the copyright owner involved.

This all sounds wonderful in theory, but as Google found out from book publishers, not everyone likes the idea of Google having a digital copy of 100pct of their content, including me.

I recognize that it puts Google in a tough position. In fact, it could also be considered hypocritical on my part because I feel more comfortable with a user off the street buying and owning a DRM free copy of any or all of our movies or shows than I feel with Google holding DRM free copies of my content in order to protect it from pirated uploads. I dont have a good reason, but I don’t trust Google with a copy of the worlds content any more than I would trust MicroSoft , IBM of the 1980s or any corporate SuperPower.

What is worse, once they announce their “solution”, which is not really a solution, its going to give end users who steal content a sense of protection if the pirated content they upload is accepted. If it gets past their Content protection scheme, it must be legal, right ? Call it one of the many laws of unintended consequences. The amount of pirated content could actually increase. For small content owners who want to protect their content, this could increase their cost of policing sites for their content and filing takedown requests.

Plus, uploaders will quickly and easily beat the content owners to the punch by uploading files before it is entered into the copy protection system. Its going to be tough for some content owners to upload episodes of a show that hasnt been aired yet. Many shows, particularly news, gossip and obviously and others are in production right up till they are broadcast.

So despite a nice step in the right direction, Google is not absolved of its obligation to respect copyright.

What should Google do ?

They should take the easy way out.

They have announced that they more than a THOUSAND of content partnerships. Thats a big # and Im sure growing number. Which leads to the real solution for Gootubes content problems. Those owners who want their content posted on Google Video or Youtube can participate in their content protection programs. You want your cat fighting your dog tape, join the program. Which is exactly what all the music sites that offer content from independent artists do.

Of course none of those indie music sites has the user numbers that Youtube has and Google knows it. There is no way they want to be a fully protected site. So I dont expect this to happen any time soon. THere is too much value from illegal uploads. And as I mentioned above, GoogleVideo is more efficient an outlet than Pirate Bay, particularly for private groups. Why use torrents when Google has it all right there for you, delivered from some of the best datacenters in the world ?

Which leads us to the truth of the matter.If their copyright protection software works, they no longer need the DMCA to hide behind.

I dont think we see that happen until the Viacom Suit shuts either Google Video or Youtube down.

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First of all, I have to commend Google for finally trying to get in the game and protect content. At least its nice to know that they have an interest in trying rather than just talking.

Unfortunately for them, their approach puts them in a catch 22 situatiojn and a position that hasn’t worked all that well for them in the book publishing business.

Based on what I have been able to read, it appears that the system is built upon content owners giving Google a copy of their content , which is then “registered” in their copy protection system. When a file is uploaded by a Youtube and hopefully a Google Video user (since Google Video is a far more egregious violator of long form copyrights), Google will then compare the file and its contents to a database of content previously made available to Google. If it finds a match, Im guessing that it will reject the upload, or at least, first attempt to get a confirmation from the copyright owner involved.

This all sounds wonderful in theory, but as Google found out from book publishers, not everyone likes the idea of Google having a digital copy of 100pct of their content, including me.

I recognize that it puts Google in a tough position. In fact, it could also be considered hypocritical on my part because I feel more comfortable with a user off the street buying and owning a DRM free copy of any or all of our movies or shows than I feel with Google holding DRM free copies of my content in order to protect it from pirated uploads. I dont have a good reason, but I don’t trust Google with a copy of the worlds content any more than I would trust MicroSoft , IBM of the 1980s or any corporate SuperPower.

What is worse, once they announce their “solution”, which is not really a solution, its going to give end users who steal content a sense of protection if the pirated content they upload is accepted. If it gets past their Content protection scheme, it must be legal, right ? Call it one of the many laws of unintended consequences. The amount of pirated content could actually increase. For small content owners who want to protect their content, this could increase their cost of policing sites for their content and filing takedown requests.

Plus, uploaders will quickly and easily beat the content owners to the punch by uploading files before it is entered into the copy protection system. Its going to be tough for some content owners to upload episodes of a show that hasnt been aired yet. Many shows, particularly news, gossip and obviously and others are in production right up till they are broadcast.

So despite a nice step in the right direction, Google is not absolved of its obligation to respect copyright.

What should Google do ?

They should take the easy way out.

They have announced that they more than a THOUSAND of content partnerships. Thats a big # and Im sure growing number. Which leads to the real solution for Gootubes content problems. Those owners who want their content posted on Google Video or Youtube can participate in their content protection programs. You want your cat fighting your dog tape, join the program. Which is exactly what all the music sites that offer content from independent artists do.

Of course none of those indie music sites has the user numbers that Youtube has and Google knows it. There is no way they want to be a fully protected site. So I dont expect this to happen any time soon. THere is too much value from illegal uploads. And as I mentioned above, GoogleVideo is more efficient an outlet than Pirate Bay, particularly for private groups. Why use torrents when Google has it all right there for you, delivered from some of the best datacenters in the world ?

Which leads us to the truth of the matter.If their copyright protection software works, they no longer need the DMCA to hide behind.

I dont think we see that happen until the Viacom Suit shuts either Google Video or Youtube down.

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First of all, I have to commend Google for finally trying to get in the game and protect content. At least its nice to know that they have an interest in trying rather than just talking.

Unfortunately for them, their approach puts them in a catch 22 situatiojn and a position that hasn’t worked all that well for them in the book publishing business.

Based on what I have been able to read, it appears that the system is built upon content owners giving Google a copy of their content , which is then “registered” in their copy protection system. When a file is uploaded by a Youtube and hopefully a Google Video user (since Google Video is a far more egregious violator of long form copyrights), Google will then compare the file and its contents to a database of content previously made available to Google. If it finds a match, Im guessing that it will reject the upload, or at least, first attempt to get a confirmation from the copyright owner involved.

This all sounds wonderful in theory, but as Google found out from book publishers, not everyone likes the idea of Google having a digital copy of 100pct of their content, including me.

I recognize that it puts Google in a tough position. In fact, it could also be considered hypocritical on my part because I feel more comfortable with a user off the street buying and owning a DRM free copy of any or all of our movies or shows than I feel with Google holding DRM free copies of my content in order to protect it from pirated uploads. I dont have a good reason, but I don’t trust Google with a copy of the worlds content any more than I would trust MicroSoft , IBM of the 1980s or any corporate SuperPower.

What is worse, once they announce their “solution”, which is not really a solution, its going to give end users who steal content a sense of protection if the pirated content they upload is accepted. If it gets past their Content protection scheme, it must be legal, right ? Call it one of the many laws of unintended consequences. The amount of pirated content could actually increase. For small content owners who want to protect their content, this could increase their cost of policing sites for their content and filing takedown requests.

Plus, uploaders will quickly and easily beat the content owners to the punch by uploading files before it is entered into the copy protection system. Its going to be tough for some content owners to upload episodes of a show that hasnt been aired yet. Many shows, particularly news, gossip and obviously and others are in production right up till they are broadcast.

So despite a nice step in the right direction, Google is not absolved of its obligation to respect copyright.

What should Google do ?

They should take the easy way out.

They have announced that they more than a THOUSAND of content partnerships. Thats a big # and Im sure growing number. Which leads to the real solution for Gootubes content problems. Those owners who want their content posted on Google Video or Youtube can participate in their content protection programs. You want your cat fighting your dog tape, join the program. Which is exactly what all the music sites that offer content from independent artists do.

Of course none of those indie music sites has the user numbers that Youtube has and Google knows it. There is no way they want to be a fully protected site. So I dont expect this to happen any time soon. THere is too much value from illegal uploads. And as I mentioned above, GoogleVideo is more efficient an outlet than Pirate Bay, particularly for private groups. Why use torrents when Google has it all right there for you, delivered from some of the best datacenters in the world ?

Which leads us to the truth of the matter.If their copyright protection software works, they no longer need the DMCA to hide behind.

I dont think we see that happen until the Viacom Suit shuts either Google Video or Youtube down.

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its no surprise that those who own or sell advertising on internet video sites didnt respond favorably to my last post. Its far more profitable for them to sell 1k views an hour for 24 hours than to have to deliver 24k viewers in an hour or even worse, at the same time.

The number of simultaneous viewers should be the ONLY number that matters to advertisers when selecting where to place an internet video ad. Why ?

It shows the max number of users that a show can have at a point in time , which advertisers will evolve to in buying time critical ads (movie buys on Thursdays before opening on Friday). If an advertiser for Shrek 19 or Saw XX needs to reach 10mm people online before their movies open the next day, knowing the maximum and average number of simultaneous viewers for the content you are buying gives you the proper constraints required to do the math on the buy.

The number of simultaneous viewers a site can support also tells you what happens to your ad if something unique happens. Its hurricane season. Lets say there is amazing footage from a hurricane or some other event, maybe a Paris Hilton prison break and one site has the capacity to handle 1mm simultaneous viewers, the other 100k. If your ad is on one, you might be ok. If its on the other, you might be out of luck. Your ad is delivered at a snails pace if at all, with users seeing more buffering then ad.

Then there is the issue of cheating. its easy to cheat on views. Youtubers game their views all the time, as they do on all video sites. To advertisers, each site defines a view differently. is it when an ad is viewed for 1 second, 10 seconds, to its entirety, to its entirety without buffering ?

If you buy an average of 1k simultaneous viewers, thats a much more difficult number to cheat. The advertiser can get a link into the serving of their ads and monitor how many people are watching at any point in time which is something they can learn from. Which of course scares the hell out of web video hosts. If an advertiser were to see that at 9pm EST only 17 people were watching their ad on the site. Thats not so good compared to TV.

The number of simultaneous viewers also tells the “intensity” or heat of an ad or content. 1mm simultaneous viewers has a completely different impact than 100k per day for 10 days which is different from 1k per day for 1k days. Tracking the number of simultaneous viewers gives you the true feel of the viral nature of the content and it smooths out much of the cheating by video uploaders

Finally, the number of simuls give you a reference point to TV . what is the maximum number of simultaneous viewers that Youtube, or AOL , Yahoo, MSN or ??/ VIdeo have supported in aggregate across all their content ? What is the maximum number of simultaneous viewers that any given piece of content or advertising has achieved ? Thats a number thats easily comparable to a TV rating. The number of views isnt.

Back in 1999, when we broadcast the Cubs during the day, a 6k audio stream could get 25k plus simultaneous listeners and often peaked past 40k. Telling an advertiser that they could reach 40k people at once was powerful. Far more powerful than the number of views or listens content had.

its time we start to use average and maximum number of simultaneous viewers as the benchmark for video .

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Nielsens release of commercial data has led to quite a bit of discussion in the advertising industry about what counts as a commercial worth paying for.

Is a commercial only worth paying for when its viewed live, during its run in a broadcast ? Should a commercial only be worth paying for if its viewed within 3 days of its broadcast ? Are there viewings of commercials from a DVR that are not worth paying for, or should the price be different dependent on when its viewed ?

These may ultimately be only negotiations to get the best possible price for a commercial, but what I find interesting is the silence when it comes to the impact these discussions may have on internet video advertising.

Very, very little video viewing online is streaming video of live programming. Internet video viewing is almost exclusively from on demand sources.

So riddle me this. If the Internet is the ultimate DVR for video, will advertisers put comparable pricing parameters on internet video that they are trying to put on TV DVR commercial viewing ?

If they do, and only pay for videos viewed within 3 days of the video being posted, won’t that put a huge crimp in the internet video business ?

Of coures the argument is that they wont put a deadline on viewing for which they will pay, but how can they not create a pricing hierarchy ?

Currently online video advertising seems to be sold by the playback. An advertiser buys X number of views at a given CPM.or buy price , to be played in , in front of, around , next to or after specific or a range of content..

What is not known for larger buys is just how long it will take to fulfill the buy. Minutes. Days. Weeks ? It depends .
What we do know is that the amount of video inventory is literally exploding and pricing is coming down. I think its going to be impacted by the outcome of DVR valuations. That there will be and should be timing constraints put on delivery. If an ad is delivered within the first 3 days, its full price. From there, it comes down because the value comes down.

It will be interesting to see what happens.

One more topic I want to cover briefly. That is measuring audience of online video. This is actually very simple, and video content hosts are hiding the important data that advertisers need and should be using.

The only real numbers that matters to define the audience of a video hosting site are the maximum number of
simultaneous viewers in any given hour and the average number of simultaneous viewers. Every other number, whether its views, “streams started”, whatever is meaningless and misleading. Just ask their bankers which number is more important, the maximum number of streams they wlil serve and the resulting bandwidth peaks, or the number of views they get.

If you want to compare the popularity of Youtube vs AOL Video, get them to publish these numbers, or give 3rd parties the ability to monitor these stats. They certainly monitor them to manage their bandwidth, so its easy for them to do..

This is the only true way to gauge relative popularity. Every other number is BS.

The same concept could be applied to regular websites as well. The number of simultaneous connections will tell you just how popular the site is.

Advertisers have growing leverage. It will be interesting to see how they use it.

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