Remember the housing meltdown ? Tough to forget isn’t it. The formula for the housing boom and bust was simple. A lot of easy money being lent to buyers who couldn’t afford the money they were borrowing. That money was then spent on homes with the expectation that the price of the home would go up and it could easily be flipped or refinanced at a profit.  Who cares if you couldn’t afford the loan. As long as prices kept on going up, everyone was happy. And prices kept on going up. And as long as pricing kept on going up real estate agents kept on selling homes and finding money for buyers.

Until the easy money stopped.  When easy money stopped, buyers couldn’t sell. They couldn’t refinance.  First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences.

Can someone please explain to me how what is happening in higher education is any different ?

Its far too easy to borrow money for college.  Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans ? Thats right. The 37mm holders of student loans have more debt than the 175mm or so credit card owners in this country and more than the all of the debt on cars in this country. While the average student loan debt is about 23k. The median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.

We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?

The point of the numbers is that getting a student loan is easy. Too easy.

You know who knows that the money is easy better than anyone ? The schools that are taking that student loan money in tuition. Which is exactly why they have no problems raising costs for tuition each and every year.

Why wouldn’t they act in the same manner as real estate agents acted during the housing bubble? Raise prices and easy money will be there to pay your price. Good business, right ? Until its not.

The President has introduced programs that try to reward schools that don’t raise tuition and costs. They won’t work.  Right now there is a never ending supply of buyers. Students who can’t get jobs or who think that by going to college they enhance their chances to get a job. Its the collegiate equivalent of flipping houses. You borrow as much money as you can for the best school you can get into and afford and then you “flip” that education for the great job you are going to get when you graduate.

Except those great jobs aren’t always there. I don’t think any college kid took on tens of thousands of dollars in debt with the expectation they would get a job working for minimum wage against tips.

At some point potential students will realize that they can’t flip their student loans for a job in 4 years. In fact they will realize that college may be the option for fun and entertainment, but not for education. Prices for traditional higher education will skyrocket so high over the next several years that potential students will start to make their way to non accredited institutions.

While colleges and universities are building new buildings for the english , social sciences and business schools, new high end, un-accredited  , BRANDED schools are popping up that will offer better educations for far, far less and create better job opportunities.

As an employer I want the best prepared and qualified employees. I could care less if the source of their education was accredited by a bunch of old men and women who think they know what is best for the world. I want people who can do the job. I want the best and brightest. Not a piece of paper.

The competition from new forms of education is starting to appear. Particularly in the tech world. Online and physical classrooms are popping up everywhere. They respond to needs in the market. THey work with local businesses to tailor the education to corporate needs. In essence assuring those who excel that they will get a job. All for far far less money than traditional schools.

The number of people being prepared for the work world in these educational environments is exploding.

You would think traditional university educators would take notice. Beyond allowing some of their classes to be offered online, they haven’t. They won’t. Its the ultimate Innovators Dilemma. They don’t believe they should change and they won’t. Until its too late. Just as CEOs push for that one more penny per share in EPS, University Presidents care about nothing but getting their endowments and revenues up. If it means saddling an entire generation with obscene amounts of school debt, they could care less. This is how they get their long term contracts and raises.

It’s just a matter o time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. STudents will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.

And it can’t happen fast enough.

IMHO, the biggest problem the economy has is the enormous student debt new college grads and those leaving college find themselves with. In the past leaving college meant getting a job and getting a used car and/or an apartment with some friends. Yes there was student debt, but it wasn’t any where near your car payment. You could still afford the car and the apartment. Now its the exact opposite. Today, the minute you graduate college you face the challenge of debt against a college education whose value is immediately “underwater”

As a result spending habits have changed dramatically. Now when you leave school you move back home. You take public transportation or borrow your parents car. The only thing new you buy is the cheap work outfit you need. Savings ? Forgettaboutit. It’s not happening. Your entire focus is on hitting your monthly nut for school debt , credit card and maybe a car or apartment. The crush of college debt has taken an entire generation of graduates, current and future out of the economy. Which is exactly why the economy hasn’t grown and won’t grow beyond microscopic growth rates we have seen so far.

So until we get the meltdown in college education, don’t expect much improvement in the economy. Who gets elected won’t make a dang bit of difference.

Update: Let me add some clarification here based on some of the comments. I include the Online For Profit Mills that live off of the government delivering student loans as part of traditional education. Phoenix, Strayer, etc, they are not the new generation of Branded Education I am referring to. They are a big part of creating the bubble. i should have gone into more depth here. I will save it for another post.

As far as the purpose of college, I am a huge believer that you go to college to learn how to learn. However, if that gaol is subverted because traditional universities, public and private, charge so much to make that happen, I believe that system will collapse and there will be better alternatives created.

Online video classrooms with lively discussions dont need a traditional campus to teach kids how to learn. Discussion groups built around Khan Academy like classes dont require a traditional campus to teach kids how to learn. I’ve seen better discussions and interactions on twitter than in some of the traditional classrooms I have visited. The opportunities for online interactive video classrooms is going to grow quickly and will be far more cost effective than traditional universities.

Leave the for profit online schools that create more employment for debt collectors than their students out of the equation and we still have an enormous bubble in Higher Education that is having a horrible impact not just on the economic life of their students, but on the economy as a whole as well

The Higher Education Industry is very analogous to the Newspaper industry. By the time they realize they need to change their business model it will be too late. Higher Education’s legacy infrastructure, employee costs /structures and debt costs will keep them from being able to re calibrate to a new generation of competitors.

The following is an article put together by Brett Morris that provides an additional perspective and some more details that to me, re-enforce my position.

### When the Miami Heat’s Dwayne Wade said he thought “guys should be compensated” for participating in this Summer’s Olympics, he received a great deal of public backlash for being “un-American,” and “selfish,” from all walks of life — military personnel, politicians and the average sports fan.

More interesting though was a group that kept quiet on the issue — other “Olympic sport” athletes.

I waited all week for a groundswell of support for Wade’s comments from the likes of swimmers, gymnasts, pole vaulters, etc. Not because they think Wade could use the money, but they themselves could.

Not a whimper.

Unlike Wade, maybe other Olympic sport athletes just don’t understand one fact: The Olympics are a business, plain and simple. A tax-free juggernaut called the International Olympic Committee that generates revenues, on average, of over $1.4 billion a year. In fact, the IOC’s 2010 tax return shows a $1.4 billion net balance — as in cash in the bank.

And if Wade, and other Olympians don’t ask for and get a share, then who does? Answer: A handful of unaccountable, Switzerland-based bureaucrats hiding behind the veil of so-called “Olympism.”

When Wade recanted his comments the next day, you could almost hear the sigh of relief halfway around the world from Jacques Rogge, the head of the IOC and his secret-ballot-elected, 15-member Executive Board. (Actually, it probably wasn’t a sigh of relief, but a toast to “fooling them again” with ridiculously expensive champagne in a five-star hotel suite overlooking a soon-to-be-bankrupt future host city).

Drawing attention to paying/supporting athletes is the last thing the IOC wants in an Olympic year.

Why? Because most Olympic sport athletes are severely underpaid — if at all. For every Usain Bolt who makes millions in endorsements and appearance fees (none from the IOC, however), there’s hundreds of elite athletes making ends meet just so they can train.

Yes, the United States Olympic Committee will pay $25 thousand for a gold medal and some sports national governing bodies will add more (US Swimming gives $75 thousand per gold medal). And select U.S. athletes receive training stipends (usually based on need) and Elite Athlete Health Insurance to cover medical costs.

But those amounts pale in comparison to the revenues earned from their talents — especially if you’re a U.S. athlete. For the 2005-08 Quadrennium, revenue from U.S. only broadcast rights netted the IOC over $625 million, annually. And U.S. based corporate sponsors contributed over $120 million, annually, to the IOC.

But the greater issue is that there’s not much they can do about it. The IOC is a monopoly.

Athletes in “non-pro league sports,” swimming, figure skating, track and field, etc., have only one option to be truly considered the best in the world — win an Olympic medal.

And unfortunately, that option requires athletes to be the integral part in the most inefficient, dysfunctional, dated and corrupt system in sports — the IOC and their shady web of federations, committees and governing bodies.

In fact, in the United States, the Ted Stevens Amateur Sports Act grants legal monopoly status to the USOC. Any international sports event in the U.S. that has an Olympic affiliation must receive the blessing of the USOC and will also be required to pay a substantial sanctioning fee.

And with a monopoly always comes corruption. Since the most public Olympic scandal in Salt Lake City in 2002, other Olympic corruption cases have been well-documented and seem to have gotten worse. In March, the so-called “most powerful Olympic leader in the Western World,” Mario Vazquez Rana, resigned from the IOC’s executive board citing fellow IOC members as having “shady alliances,” “questionable procedures,” and a “lack of ethics and principles.”

Most national governing bodies have athletes sign a “code of conduct” where they commit to being an “ambassador … for the Olympic Movement.” So when someone like Wade, who could probably care less about a code of conduct and would never be disciplined for violating it, speaks out, you’d think others would jump to support him.

I don’t want to sound un-American as I have just as much fun and pride as most when we get the opportunity to chant U-S-A! U-S-A! But I also know that feel of nationalism wouldn’t change a bit if the athletes were getting paid a decent amount of money.

In fact, what could be more American than getting paid a fair share for hard work

Why wouldn’t they  ?

Put yourself in the position of a patent troll.  If the laws changed in your industry so that if you filed a lawsuit against any small business in the USA you were pretty much guaranteed to win or at worst get a settlement, could you overcome you internal greed and walk away from all that money ? You, maybe. You might do the right thing.  But these are lawyers we are talking about here. There is no chance the legal industry would pass up on a box full of money sitting right in front of them.  Its free money to them. They are grabbing for it.

While we often read about the big patent lawsuits with Yahoo, Google, Facebook etc, it is the untold number of mid size company settlements that are hidden by non disclosures that we never read about that should scare the hell out of you.  Thousands and thousands of companies are being sued or threatened with lawsuits over patents. It is by far the biggest risk that medium sized businesses and corporate America faces today. It is a fungus among us.

And Im not saying that every company is at risk of having 1 patent lawsuit come their way. Nope. EVERY company in America is at risk of having 2, 3, 5, 100 patent lawsuits coming your way.  If you have a janitorial service company, you are at risk that the USPTO will issue a patent to someone who says they have invented a new way to optimize the path you should take when mopping  a commercial kitchen. Then maybe they will issue a patent on the fastest way to wash kitchen utensils. If you wash spoons first while holding them upside down, you could be at risk. Ridiculous ? Not in the current patent environment. The economic problems we face will hurt your business.  Patent lawsuits can kill your business.

Oh, and before I move on, will someone please tell the NCAA and the Bowl Championship Series that there is a patent on most configurations of playoffs for a football championship. Our patent office at work.

So what should you do ? You should first contact your local Senator and tell him.her that without protection the only firms  that are going to be left in this country are law firms that specialize in patent law suits. Ok, maybe that’s an exaggeration, maybe.

This is a problem that obviously makes me incredibly mad. When it comes to this issue, Congress is a bunch of gutless , ignorant pansies on their knees to the IP terrorists of the business  world.  They won’t  realize what is at risk until the number of companies  in their districts going out of business after being sued for ridiculous patent infringement skyrockets.

Which of course leads to the question of why haven’t more companies gone out of business from patent lawsuits ?  Simple answer – because the small businesses that can’t afford to pay for protection or settle lawsuits  are further down the pecking order. The lawyers are grabbing the low hanging dollars first.  They are going where the money is, which is medium to super-sized businesses. The Googles/Facebook/MicroSofts, etc of the world.

Once they finish there, they will move down the food chain. It will be worse than a science fiction movie where the aliens try to consume all of our resources. In the not so distant future, trolls will go after companies knowing that while there isn’t cash available from small companies, there are assets that will be available to them once they bankrupt those companies. This is exactly what will happen if laws are not changed.

What can you do as a small business person to protect yourself ? Honestly, nothing beyond complaining to your Congressperson. The only option I have found is to buy into companies that aggressively sue over IP. It is a hedge against patent law. Put another way, if you can’t beat ‘em, join ‘em. Sucks, but there aren’t any other options that I can see.

What a bunch of BS.  ”Follow Your Passion” is easily the worst advice you could ever give or get.

Why ? Because everyone is passionate about something. Usually more than 1 thing.  We are born with it. There are always going to be things we love to do. That we dream about doing. That we really really want to do with our lives. Those passions aren’t worth a nickel.

Think about all the things you have been passionate about in your life. Think about all those passions that you considered making a career out of or building a company around.  How many were/are there ? Why did you bounce from one to another ?  Why were you not able to make a career or business out of any of those passions ? Or if you have been able to have some success, what was the key to the success.? Was it the passion or the effort you put in to your job or company ?

If you really want to know where you destiny lies, look at where you apply your time.

Time is the most valuable asset you don’t own. You may or may not realize it yet, but how you use or don’t use your time is going to be the best indication of where your future is going to take you .

Let me make this as clear as possible

1. When you work hard at something you become good at it.

2. When you become good at doing something, you will enjoy it more.

3. When you enjoy doing something, there is a very good chance you will become passionate or more passionate about it

4. When you are good at something, passionate and work even harder to excel and be the best at it, good things happen.

Don’t follow your passions, follow your effort. It will lead you to your passions and to success, however you define it.

When I read that Yahoo was suing Facebook my immediate reaction was disdain. As I thought more about it, I came to realize that this case could be the water shed moment that causes enough people to recognize just how horrific  our patent law is.

I am not saying that there is zero value to patents. There are plenty of examples out of the however many patents that have been issued where the patent was put to legitimate use to protect a company from a large predator.  It’s the law of big numbers. When there are enough of anything issued, some good will be done.  Look at the patent that some individual has for a BCS Playoff System. Im sure he was the first one to think of it and of course he should be protected from the BCS.  Does patent law get any better than this?

Seriously, there are  industries where patents are used fairly to protect intellectual property. The technology industry is not one of them.

Change is needed. However, its not going to come from our government. The lobbyists have taken over. One of the symptoms of the illness patents have caused the technology industry is the explosion of lobbyists pushing the agenda of big patent portfolio holders. They are not going to let our lawmakers give an inch.

Rather than originating in Congress, its going to take a consumer uprising to cause change. What better way to create a consumer uprising than to financially cripple and possibly put out of business the largest social network on the planet ?

If Yahoo were to be awarded 50 Billion Dollars from Facebook, I think consumers may take notice. And don’t think that 50B should be an impossibility.

If Yahoo’s patents truly are valid and recognize that they got Google to pay money for their Pay Per Click patent (acquired from Overture), then there is absolutely no reason why the same Patent shouldnt be valid against Facebook. The company looking at an IPO with a 100Billion dollar market cap !

The same with the patent for personalizing pages. My.Yahoo.Com was way ahead of its time when it was introduced. Facebook is built on personalized pages. If ever a patent in this patent environment should be valid, these two should be valid in today’s world.

Which is the exact reason why Yahoo should do everything possible to use the patents to tear apart facebook with as large an award as it possibly can get. 1 Billion. Peanuts. 10 Billion, Peanuts. Start at 50B.  After all there is no way Facebook gets as large as it is without use of Yahoo’s Patents. No personalized pages, no PPC, no Facebook IPO. No Facebook as we know it.

This is what patents are for, right ? To protect companies with original IP from smarter, faster, aggressive companies who catch the imagination of consumers and advertisers. What else could patents be for ?

I hope Yahoo is awarded 50Billion dollars. It is the only way that consumers will realize what is at stake with patent law as is.

Then maybe we can get it right and further innovation and competition in this country.

m

I think at some level every single one of us is prejudiced.  There are things we all innately fear or are uncomfortable with.  I don’t know if its nature or nurture, but I don’t believe any of us on this earth is so pure that we absolutely accept everyone as they are.

I do however feel that all of us can learn to accept everyone.  I have come to realize, intellectually,  that I personally don’t give a shit about your sex life, your  spiritual life, your personal life, whatever. I have no problem with you being you.  I accept who you are.

I also don’t care who you tell about it or if you flaunt it.  I’m happy to take the responsibility to be your friend, your acquaintance or  if I don’t like you, what you do or how you do it for whatever reason, to completely  ignore you.

That doesn’t mean that I’m always completely sensitive to everyone  I engage with.   I have my own sense of humor. Things  make me laugh that may or may not make you laugh. I’m the first to admit that sometimes my humor runs to the sophomoric. Like my high school buddy Todd, who I still refer to by his high school nickname, Boafy (don’t even remember how he got that name) says, every guy laughs at a fart joke. Not every guy does. But I do. And I’m good with that. I hope I’m 95 and still laughing at dumbass jokes.

But sometimes what I laugh at isn’t appreciated by others. It may even offend them if it comes out at the wrong time.

So why bring this up ?

This past week I did an interview at a sports conference. It was a 1 on 1 sit down.  During the conversation the topic of the Kisscam at sporting events came up . The interviewer mentioned it and commented  ”I like the Kiss Cam,”  In response to the interviewer comment,  I said “That’s because you and your boyfriend are always on it,”

Totally sophomoric.  I quickly realized that the comment wasn’t appropriate, so I added “”Or his girlfriend, this is gender-independent commentary,”

I made a mistake in making the comment. I wasn’t trying to be hurtful. It wasn’t a comment on anyone’s sexuality. It was just me trying to be funny. It wasn’t. I quickly realized it and tried to fix it. I hoped at the time I didn’t offend anyone.

This blog post is not about trying  to defend what I said. I’m not trying to defend my sense of humor. I’m not trying to convince you I’m not a homophobe. I’m not trying to justify anything at all.

I guess what I am doing is admitting that at some level I am prejudiced and that I recognize that I am .  There are a lot of things in my life that I need to improve at. This is one of them. Sometimes I make stupid throw away comments that I quickly realize are wrong. It doesn’t happen often, but it happens. It was a mistake and I realized it. I learned from it.

I’m the last to be politically correct and the last thing I am trying to be here is politically correct. I honestly don’t give a shit what you think about me. But I think being the person I want to be includes not blurting out throw away jokes about sexuality, race, ethnicity, size,  disability or other things people  have no say in about themselves.  I’m the guy who still feels bad about punching Michael Cooper in the stomach in  6th grade purely because he was overweight, even though I made the point to apologize to him when I ran into him at a reunion years later.

But fear not. Not every job has to be a career. Money plays. You don’t need brilliant ideas. Sometimes you just need to  make some money for the summer. Or to pay for your braces. Or to pay for the phonebill your parents killed you on. Whatever you need cash for , its always a problem that needs solving.

To solve your big money problems, sometimes you only need to solve simple problems. Sometimes you just need to be creative. I’m going to give you 2 ideas any student going to any school can do to make more than minimum wage.

1. Shoelaces.

Say what ? Shoelaces. I said it.

I guarantee you that if you go to the parking lot of any high school or college football game with a bunch of shoelaces in team colors that you bought for 2 bucks a pop,and put up a sign and 2 chairs, you can make money. Not football season? . Go to where ever there are people in your community. Flea Market. Basketball Game.  Dance recital. Wherever people who go to your school show up , you show up. You set up your sign and your chairs.

On the sign you put something like ” Get in the YourSchool spirit”.  I will re lace your shoes with “YOURSCHOOL” color laces for $10 (small schools), $20 bucks (big schools with more drunk alums or lots of rich people).  If you want to make it even more fun. You can add “I will lace them in 5 minutes or they are free”. If you are really enterprising, you can put up on the poster about 5 different ways to lace the shoes and charge a premium for anything but “Missionary” lacing.

Easy money. Guaranteed.

2. Become an expert in programming All in 1 tv remote controls. People are buying a single remote control to replace all the remotes they have. No one really wants to take the time to figure out all the options.  No one wants to take the time to learn how to program the stupid remote. In fact it pisses them off that it takes far more time than they have to do something they bought the stupid remote to do.

To help solve everyone’s problem, go to a local electronics store and find out what remotes they sell. Go to the local Walmart, Target, Best Buy, etc, etc. if the grocery store sells remotes go there too. Find out what the most popular sellers are . How do you find out which are the most popular ? You ask someone.

Then , you become an expert in programming those remote controls. The worlds best expert.  Once you know your shit. Go back to the store with business cards with your email/cell phone number on it and the following

Your Name

I will program any Remote Control for $20

I Have a Phd In Remote Control Programming

Cell #/Email/Website

Then you go to all the stores and tell them that their customers will be far happier if they send them to you to program the remote. You will program it exactly like they want it, connecting to any and all devices.  All the store has to do is let you put up a stack of cards next to the remote control maybe a little sign.  Then you give a sheepish grin to the manager of the electronics or remote control section of the store and tell them how this is really important to you and how you will do a great job. you promise.  Then every couple days you go back to the store and talk to the salespeople who work there and remind them about your PHD in Remote Control Programming and how if they send you enough business, you might be able to spiff them a commission.

Then you damn well do a great job or some other kid is going to steal your remote control programming business

There you go. Easy breezy money. nothing fancy. Nothing complicated. Just some hard work , some customer service and the ability to be nice to people and thank them when they pay you and tip you.

They dont Hulu it. They get together in front of the TV on Friday nights at 8pm EST , tune to ABC and watch and discuss the show.  Try that in front of an IPad or Iphone. And not only do they watch as a family, they even tweet about it as well.  #Sharktank continues to trend as all the Sharks tweet in real time. (And yes, we were the first tv show to do so when we started doing it last season )

As much fun as it is to brag about the show , that is not the point of this post. This post is to provide answers to the questions that I repetitively get about SharkTank. So here we go:

1.  Yes it is our own money that we invest in the deals.

2. We know absolutely nothing other than the name of the entrepreneur when they walk into the Shark Tank. Which is exactly why you see us all start taking notes the minute they start talking  and telling us what they are looking for.

3. We do not have access to computers. So we can not do a search or get any other information about the company or industry. Every thing we know or ask comes off the top of our heads.

4. We don’t get to see the tv packages that you see on the show until the show airs. I personally never watch any advance copies of the show. I see it for the first time when it airs on ABC. It makes the tweets more off the cuff.

5. The pitches that you see are just as we see them.  The entrepreneurs don’t get any do overs. If they screw up , they screw up and the show must go on. Some have freaked out, and we try to calm them and get them back on track.

6. The pitches and the Q&A can go on for anywhere from 20 minutes for a deal everyone hates to more than an hour for a deal everyone is competing for.  The producers then cut it down to what you see on air

7. The Sharks like each other away from Shark Tank, but when we are competing for deals, we are really competing. We get mad at each other. None of us like to lose deals to the others.

8. The pressure in the SharkTank is off the charts. The Sharks feel it. The entrepreneurs feel it and sometimes get caught up in it. That sometimes leads  the entrepreneurs to “embellish”  details of their business. This is why we do due diligence after the show.  It can sometimes be  very, very difficult for the entrepreneurs to not get caught up in trying to get a deal. Its our job to catch any mis statements when we do our drill downs after the show.

9.  Yes Kevin is always exactly the way he is on the show.

10. We all absolutely love doing the show

That shouldn’t be a surprise. It’s just as rare for individuals with less than 10 figures in their networth to even consider actually buying shares as a path to ownership.

But what if this were not the case any longer  ? For those of you that own shares of stocks in companies,either directly or indirectly, would you be willing to take a lower earnings per share, or on the flip side, hold your stock at a higher P/E Ratio if in exchange the company moved their manufacturing to the USA  ?

Would Apple shareholders be wiling to accept Apple moving jobs back and not sell when the announcement was made ? Name a company that you as a shareholder would be willing to hold, knowing that earnings would be lower, but jobs would come back to the USA ?

I don’t directly own shares of any companies that do manufacturing overseas (at least that i know of), so I haven’t had to consider this. I know in my own personal businesses I try not to squeeze every penny out. I just want to be profitable and earn a decent return, but I recognize that a good or decent return is not the maximum return.

I feel the same way about tax free accounts overseas. I don’t have any personal bank accounts in Switzerland. I own a house in the Cayman Islands, but I don’t have a bank account there and I wont put a bank account there. I’m pretty sure that one of the hedge funds I invested in has accounts there, but I’m not involved in its operations. So i don’t have a say.

What do you think ? Would you cut a public company slack if they brought back jobs to the USA ?

We also knew that our core value proposition to consumers was that on broadcast.com they were able to get content that they couldn’t get on TV. We had Yoga channels, we had cricket live and on demand, we had sports , music, movies, tv, comedy and anything else you could think of available. We had a policy that we never tried to create hits. That we were always going to go wide and create a reason for people to start watching video online.  17 years later. Yep, its been 17 years since we started Broadcast.com (as audionet.com first), Youtube and others are still doing the exact same thing.

Good for them ! Except they are making one huge fundamental mistake, they are trying to create hits. They don’t like the idea that beyond a steady stream of 1 hit wonders they haven’t been able to create a sustainable roadmap to content success. In other words, they have no idea how to drive an audience to specific content. Their hits come out of nowhere. (Im excluding music since that has become the domain of VEVO).

TV doesn’t have that problem. TV has a fundamentally different problem. But before we go there, lets talk about the big lie that the internet video folks like to tell in order to pump their products.

The Big Lie = Online video views is the same as number of TV viewers.

1mm views of an online video is not  the same as 1mm viewers of a tv show. Nope. Not true. First, we all know that an online view is not a unique viewer. But lets get beyond that. When you look at USA Today and see number of viewers of a tv show, that is the AVERAGE NUMBER OF VIEWERS that watch the show. So when it says that SharkTank on ABC had 4mm viewers for a showing on Friday night (btw, SharkTank returns Jan 20th at 8pm EST !). That means on average 4mm people were watching. If you were to look at the total number of households for that showing, it would probably be 8mm or more. In addition, we all know that by definition a household has a minimum of 1 viewer, but it can be higher, so if you want to compare apples to apples with an online video , the starting point has to be Households that watched multiplied by the average number of viewers per household .

But wait , there is more ! The views of a video on Youtube includes all the showings over an extended period of time. The ratings for SharkTank or any tv show all happened during the 1 hour the show was on the air. Which is exactly why TV is still a much more valuable advertising medium. Would you rather have your ad seen by the audience all within one hour, or over some unknown extended period ? Who knows how long it will take for your online video to reach 8mm unique viewers ? It will certainly be more than 1 hour. That is an advantage that TV has and will not lose for the forseeable future. No matter what happens with wired TVs or mobile devices TV gives you an audience right now. (And yes we could take this further by including DVR usage as well)

So lets get back to traditional  TV. Big media is not as stupid as they used to be. Nor are they as stupid as the internet video proponents want them to be. At CES this past week it was popular to hear about the explosion of online content and how people were going to be watching it on TV now that the new TVs have internet connectivity to all the great providers from Boxee, Netflix, Amazon , etc.  These  content distribution companies are not competitors to TV as a lot of folks would like you to believe, they are CUSTOMERS of TV show producers.  They don’t hurt the TV business, they have made the TV business far, far more profitable.  In fact, the competition between all the companies that want to provide content over the internet to your wired tv is driving up the price for content produced for TV.

The Challenge that TV has is not in driving an audience that is bigger than an internet source. That is easy. The challenge is in creating hits that are big enough to maximize revenue and return for that show and to create a promotional platform for other shows.

Now some internet video proponents like to tell you that the audience for broadcast tv is declining significantly with the exception of sports and special live programming, in particular the NFL. They are right. Numbers are down. But what they don’t also tell you is that the financial model has changed. All broadcast networks are owned by  big conglomerates, or have same ownership as a big conglomerate. Because of this, single shows are no longer make or break. Shows are geared towards specific outlets. So you will see shows on USA Network that in the past might have been on NBC. The result is that viewing for cable networks has skyrocketed and the amount of traditional tv watched has continued to increase.

In addition those over the air broadcast networks are now also getting retransmission fees. That second source of revenue will change how they make programming decisions.

But wait there is more ! It used to be that only movie companies got output deals. An output deal is when a TV network pays a percentage of theatrical revenue for the license to show a movie. Today, TV shows are getting output deals and generating lots of revenue across all the different platforms that show TV shows. Its not just syndication,but those online distributors want to make sure they get the best shows and they are committing up front to buy those shows. An output deal. Found money.

The TV business isn’t dead. It really isn’t even morphing. Sure people will watch video online. They will watch it on phones. They will download it. But the videos that online distributors pay the most for will be those that have done the best on traditional TV. Which in turn means more money for the production of shows.

Think of it like an SAT question. Online video is to TV today like DVDs were to Movies in the past. A great revenue source that correlated to the movie’s boxoffice.

Bottom line is that the better the TV business does, the better Hulu and Netflix will do because their primary content will be in greater demand

That’s not to say the TV business is not going to have challenges. It will. It will become addicted to the money it gets from online sources and when some of these sources and the competition between them dry up, they will be caught not being able to reduce their costs. Expect it.

But the online TV content providers have it worse. Yes, there is a business in delivering content via TVs. It will seem very cool that when you hit a button on your remote a list of distributors like Amazon, Hulu , Netflix and others will pop up for you to watch. Some folks will make good money with it. But it still won’t be the competitor to TV that everyone predicts. Why ? Because just like no one took the time to change the blinking 12:00 on their VCRs back in the day, having to hit the internet button on the remote, or even worse, the input  button on the remote will not be the path of least resistance for watching tv. Believe it or not, it will be far too much hassle for most people when compared to just turning on and watching  TV the old fashioned way. And on top of that, distributors like Dish, Directv, Charter, Comcast, etc are working hard to improve their guide experiences which will be faster and easier than their online counterparts.

And last but not least, MOCA, DLNA and good old fashioned wi fi is always going to be a hassle. No one has perfect wi fi at their apartment or house. It always screws up. That may be acceptable to a price sensitive market. But when people want to see Tebow Tebow, buffering just wont cut it.

And let me be the first to describe how Twitter will negatively impact online delivered live TV . Compare the latency of twitter to your phone or Ipad or even TV to the latency of online video over the net to your house, through your house and to your TV. The latency of the video because of all the buffering that is done to reduce interruption of the video will mean that your video feed is behind what you are getting on twitter. Not a problem for ondemand,but not good for communal experiences. So if you all want to watch SharkTank and tweet and FB about it with your friends, its only going to work when you watch on a regular tv feed.

Thats the way I see. Let me know what you think