Posted by: hdemott | June 14, 2010

The Efficiency Premium

If you live in the traditional media world – one of your main attributes and advantages are a lack of efficiency.

HD video is beautiful – but takes a lot of bandwidth.

Radio broadcasts on the FM band sound fantastic  – but are uncompressed and take up multiples of the bandwidth used by Satellite Radio or Pandora.

Books are an exercise in a lack of efficiency – killing trees by the score to get the message out.

So how does this play in the new media world?

Not so well.

With A T & T having a virtual monopoly on all things Apple – and with the all you can eat data buffet coming to a close – it is going to get increasingly expensive to consume data on the go.

According to a recent Sanford Bernstein report, watching a Netflix movie on your iPad will use up your data allocation in about 41 minutes (assuming you use the iPad for no other data). Throw on a few hours of Pandora – a ton of web browsing – e-mails, etc… and you are looking at a very large data bill unless you spend a lot of time in wi-fi hotspots.

Given that, do you want AOL IM pushing you messages? Do you want facebook sending you e-mails? Who wants to download large attachments?

The obvious answer to me is that you want to look at companies that offer efficiency.

Who can do the best job of compressing audio and video files? Which systems to the best job of caching? Which applications are simply the least data intensive? Who offers some sort of variability in how I use a mobile device depending on just how much data I have left under my plan?

All of these factors will come to the fore in the not too distant future.

The relentless march of richer and richer websites will be met with higher and higher user bills – which will ultimately result in lower and lower usage for those applications that are spending your money the fastest.

Seems like there will be a real premium on efficiency coming up – or put another way – it seems like with the proliferation of distribution points – there will need to be a wide variety of different formats that are optimized for the platform itself. So for movies – if I am watching on a 60 inch plasma display – I want 1080p. If I watch the same movie on my iPhone, not only do I not want 1080p (it doesn’t have the resolution) but I may want a differing quality level depending on whether I  have the movie cached or it is streamed – and I may want a different level of quality depending on whether it is streamed over wi-fi or over a 3G or 4G network.

It’s a lot of variables.

Companies that figure out how to easily optimize for all of these variables should do okay.

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