Shawn made some compelling points today that Major League Baseball is an excellent example of a new media entertainment company. Its TV product (like all sports) is Tivo-Proof (most people won’t DVR a game), so there’s no skipping of commercials. When and if cable dies at the hands of Internet TV, MLB’s has the market power to sell/stream it directly to consumers over the Internet. And of course its live events are piracy proof cash generators.

Of course MLB still has a long way to go before they become a truly digital-friendly company. But its interesting to think that one of the oldest media companies may have one of the most future-proof business model.

Right on the heels of pulling the plug on their TV.com syndication deal, Hulu apparently just requested that their content be removed from Boxee. From the Boxee blog:

two weeks ago Hulu called and told us their content partners were asking them to remove Hulu from boxee. we tried (many times) to plead the case for keeping Hulu on boxee, but on Friday of this week, in good faith, we will be removing it. you can see their blog post about the issues they are facing.

our goal has always been to drive users to legal sources of content that are publicly available on the Internet. we have many content partners who are generating revenue from boxee users and we will work with Hulu and their partners to resolve the situation as quickly as possible.

we will tell them how users love Hulu on boxee, why it represents a great opportunity for them to better engage with fans of their shows, how boxee can help in exposing their content to new people, and why they should be excited about future opportunities of working with us.

While it seemed like (we all hoped!) the studios were wising up to the inevitability of IP distribution, it isn’t entirely surprising that they cut Boxee off. Internet based TV on your computer can be rationalized as just another marketing channel. Internet based TV on the TV, on the other hand, means the end of the local affiliate stations and cable companies as we know them (both of which contribute significant earnings to, or directly own many of the studios producing TV content).

While this move isn’t likely to kill Boxee in the short term, the question is will other major networks now pull their content from Boxee as well (ABC, NBC…)?

As much as the existing TV distribution system would like to delay it, the day of free, IP based based TV on the TV, is coming. The irony of the situation is that innovators like Boxee are ones that will ultimately save the studios. Even if it means saving them from themselves.

In the technology world, deflation is a given. We get exponentially more computer power, bandwidth, and storage for less money every year. The same thing happens across the economy, and it’s an equally positive force for consumers and businesses alike. Yet the government’s actions lately are 100% directed at spending and printing money. I’ve wanted to write about this for a while, but Michael Shedlock at Mish’s Global Economic Trend Analysis beat me to it:

The idea of a deflationary trap is in and of itself complete nonsense. Deflation is actually a natural state of affairs. As productivity increases, standard of living rises and prices fall. Absent government intervention, productivity would actually increase the amount of goods produced, causing prices to drop. Falling prices are a good thing not a bad one.

Fed and government policies rob taxpayers by promoting policies of inflation. Look at what accompanies rising prices: rising property taxes, rising sales taxes, and rising income taxes. Is that a good thing. The answer is no, especially when wages fail to keep up, which is exactly what happened.

Who benefits from inflation? The answer is government, banks, and already wealthy because they are first in line to receive money. Everyone else is screwed. Inflation is theft from the middle and lower classes for the benefit of government and the wealthy.

Over time, the government and the Fed so distort the economic picture, that a mentality sets depicted in the often heard phrase for a few years’ back “Better get that house now, before it’s too late”.

The problem is not falling prices, the problem was the excess of debt that led to massive speculation and ever escalating prices. Krugman continues to put the cart before the horse in this regard. Indeed, Krugman Is Still Wrong After All These Years.

It is impossible for government to spend one’s way to prosperity. Proof can be found in the failed practices of Russian and Chinese central planners over the years, and more recently the failed policies of Japan.

This is not only a clear and demonstrable reason to avoid “stimulus spending,” but it also goes a long way towards explaining the rising inequalities between the upper class and everyone else. From food and clothes to medical care, the gap between what the rich and poor have access to has exponentially declined in recent years. The same forces should have created similar equality of income and net worth as well. Unfortunately, low-interest rate inflationary policy has ensured the opposite.

Thank goodness we now have an inflationary stimulus package to support the middle and lower classes though.

President Obama entered stage left yesterday on a message of hope and change, and by the end of the day, the market delivered on that change, closing down 4% or to its lowest level since December 1st. While one day moves in the market are rarely broad indactors, yesterday’s action was telling of a more fundamental economic psychology problem: The government’s economic policies are increasingly rooted in short term actions, not long term results. And that is a major problem when the present value of the market and the long term growth of the economy are both rooted in our expectations of the future.

Obama recently said that we should expect “Trillion Dollar Deficits For Years to Come”. While proponents claim that the US can handle increasing deficits and expanded national debt, few believe that there will be no future consequences from these actions. In the words of bond king Bill Gross, who openly supports stimulus spending:

More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to – that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less productive corner.

In fact while we are simultaneously increasing our future debt, we are also radically increasing the money supply. At some point we will have to either sharply reverse this course or allow the supply and demand of dollars to significant erode the value of the dollar. The best case scenario is that we quickly recover, and can afford to start contracting the money supply, which will immediately start putting the brakes on our recovery. The worst case scenario is far less rosy.

And if these policy decisions were not enough to dampen long term optimism, Obama’s clear support for economic redistribution, combined with a fully democratic-controlled government, ensure that when and should the economy start to recover, the government will be waiting with a fleet of new taxes and regulations.

So the question is this: If the only way to solve to our problems is economic growth, then why not focus on that long term objective? Imagine a world where instead of short-term stimulus, bailouts, and printing money, our government came out and acknowledged the inevitability of short term pain, but committed to a long term policy of lower taxes, smaller and more efficient government, and increased foreign trade. Its hard to believe that the market and the economy would not see a bright outlook in that future.

While the US may very well be resilient enough to simply grow out of the current situation, true economic recovery can not happen until people believe the future will be better than the present. If we want people as a whole to invest in future growth, the government should begin to promote that objective as well.

So the guys at TechCrunch have been making significant progress on their attempt to build a $200-300 touch screen web tablet. It’s still a prototype, but the specs are pretty impressive: 12″ touch screen, camera, 1GB Ram, 4GB flash drive. While it’s great to see this type of project moving forward, the bigger story is that a $300 web tablet is now economically feasible. And when Apple leverages its enormous user base, software, and manufacturing assets to build it, it could be a killer app.

While netbooks are all the rage these days, Michael Arrington hit the nail on head when he wrote:

When you ditch the operating system and all it’s weight and focus on a device that runs a browser only (a true netbook), you can make do with mobile phone level hardware. Give people a big screen to really experience the Internet. Make it a touch screen or add a normal keyboard. And keep it really inexpensive. That’s a device people will want.

I couldn’t agree more. I consistently see people forgoing their laptops and desktops for quick web access on their iPhones. The only limitation being that the screen is too small for common usage. At $200-$300, an iPod tablet would be affordable enough for people to buy in addition to their laptop and iPhone. It would be the perfect casual browsing platform. Combined with a camera and the full iPhone application platform, the device would also be a great game, communication, and entertainment platform.

In fact there are a variety of new uses for this type of device as well, including one that most people tend to overlook: reading. While the Kindle has gotten all the attention in the e-book space, just about everyone I know that has an iPhone and reads books, is starting to do so on their Stanza equipped iPhone. Shawn wrote some very interesting comments on this a while back. The reality, though, is that as great a platform as the iPhone/iPod is, adding a bigger screen to the mix would still radically improve the experience.

At the end of the day, given Apple’s ability to reap subsidies from wireless carriers and eek out every last cent of profit from manufacturing, it’s only a matter of time until they make $300-$500 iPod tablet. While the Kindle and netbooks are hot sellers at at this price point, neither will be able to compete with a similarly priced iPod tablet.

Like the rest of the tech world, I seem to be in Twitter mode this week. Apparently TweetDeck, the maker of an Adobe Air Twitter client, scored $500K in angel funding this week. TweetDeck is essentially designed to split Twitter streams into groups to make them more manageable, a feature I’ve described as critical to Twitter’s longterm success. Funny enough there is also talk that TweetDeck may be an analytics play as well.

In any case, it’s nice to see third parties developing needed functionality, though much of it would be far more useful if it were built into Twitter directly.

Tuesday it came out that Pierre Omidyar is working on a new Twitter-based startup that uses url analytics data to make recommendations and extend twitter conversations around the web. It seems like an interesting idea, but more importantly, it’s yet another example of why Twitter is missing a huge opportunity in analytics.

Much of Twitter’s success lies on the notion that anyone can build an audience on Twitter, and if desired, parlay that audience into traffic and attention elsewhere on the web.

The problem is, it’s hard to actually track these results. And until you can, businesses by and large won’t invest serious resources into the platform.

While there are services that are starting to address the analytics problem (brightkit’s url analytics feature is one of the best out there), because none are integrated with Twitter, significant value is being left on the table.

Imagine posting a link on Twitter and not only seeing how many people clicked on it, from where and when, but knowing in aggregate who else those users follow, and what other Twitter streams those readers most actively clicked links from. This would be invaluable information to individuals and companies alike.

And follower analytics are just the tip of the iceberg. Imagine being able to enter your site into a twitter dashboard, and tracking which users are most actively posting links to your content, and which are most actively referring users to your site (getting click throughs). Because users read Twitter from so many distinct sites and platforms, it’s impossible to track this type of stuff without building it into Twitter itself.

The point is there is enormous power in tracking analytics on urls on Twitter, and it’s something Twitter could instantly do by simply auto-wrapping urls (disable by preference) in a Twitter shortener (like they do with tinyurl right now).

Of course, since the service could provide significant marketing and ROI value to businesses and publishers, all of this could be available for a paid subscription fee. Whether Twitter decided to offer this at a low fixed monthly price, or decided to make it a high priced, ultra premium service for medium and large sized companies, there is no doubt revenue potential from these capabilities.

At the end of the day Twitter is an information and marketing platform. Without an analytics tool, the company is simply leaving money on the table for both themselves and their users.

Feedback? Write a comment, or e-mail the author at lee(AT)squawkingbaseball.com

Bruce Bueno De Mesquitas, Chairman of NYU’s Department of Politics, has an interesting take on why past peace plans have not worked, and how to structure new ones so that they do:

“Land for peace is an inherently flawed concept because it has a fundamental commitment problem. If I give you land on your promise of peace in the future, after you have the land, as the Israelis well know, it is very costly to take it back if you renege. You have an incentive to say, ‘You made a good step, it’s a gesture in the right direction, but I thought you were giving me more than this. I can’t give you peace just for this, it’s not enough.’ Conversely, if we have peace for land—you disarm, put down your weapons, and get rid of the threats to me and I will then give you the land—the reverse is true: I have no commitment to follow through. Once you’ve laid down your weapons, you have no threat.

“In a peaceful world, what do the Palestinians anticipate will be their main source of economic viability? Tourism. This is what their own documents say. And, of course, the Israelis make a lot of money from tourism, and that revenue is very easy to track. As a starting point requiring no trust, no mutual cooperation, I would suggest that all tourist revenue be [divided by] a fixed formula based on the current population of the region, which is roughly 40 percent Palestinian, 60 percent Israeli. The money would go automatically to each side. Now, when there is violence, tourists don’t come. So the tourist revenue is automatically responsive to the level of violence on either side for both sides.”

One issue I see is that money (including from tourism) handed to a Palestinian government is not necessarily money handed to the people. If peace broke out with Israel, Palestinians would likely start looking for a new government that specializes in governing, not war-making. That’s not good news for the current government, or its supporters that send it money and weapons.

Nonetheless, the De Mesquitas’ idea is quite interesting, and seems to have a lot of merit. Given enough time, I could see plans like this incentivizing Palestinians to start moving in the right direction.

It would be nice to see more of this type of thinking applied to US foreign policy as well, which apparently might be in the works.

This is going to be a really key issue for Twitter over the next year. Right now the service’s design incentivizes users to focus on increasing followers counts, even if it makes their own ‘following’ stream borderline unreadable. The net effect is that Twitter is growing rapidly, but its value as an information and communication tool isn’t keeping pace.

For most users, focusing on “followers” is an almost subconscious act (like following an extra person once in a while because they follow you, or posting or replying to something, just to get something out). And as long as the follower count is a key motivating force on the system, users will naturally over-post and over-follow.

What’s being left out here? Quality. Which, long term, is what will determine whether the system succeeds or fails.

The Facebook Platform, circa this time last year, is a pretty good comp. Users were adding big, annoying apps to their profile, at the expense of FB’s core features. And while it increased activity on the site, it muddled up the interface, and made Facebook look a lot more like one of its subpar competitors.

The key is changing the incentive structure, as Facebook eventually did with its redesign. People might not be downloading as many apps as they were before on FB, but those that they do add, tend to be more useful.

Twitter needs to take similar steps to promote quality over quantity, and the first step should be to deemphasize the follower count. The simplest way to do this is to relegate a user’s stats to a subsidiary page (instead of the user profile), or at least make them far less prominent.

The better solution, however, is to simply allow users to organize the people they follow into groups, much like the tagging system on Google Reader. You could then filter out the posts (or posters) you don’t actually want to read, even if you want to keep them as followers. This changes the entire reward structure of the system, emphasizing quality over crap. Being followed wouldn’t necessarily equate to being read; posters would have to offer real value, or be filtered into a ‘useless’ tag.

This could be a very important step for Twitter, since it directly impacts the system’s core value proposition. In the end, quality is what leads people to use services. This, above all, should be Twitter’s focus in the coming year.

Feedback? Write a comment, or e-mail the author at lee(AT)squawkingbaseball.com

While many people believe that downloading music is “stealing,” a broad swath of America clearly disagrees. The question is why? The answer is deflation.

While most of us believe inflation is a permanent and natural trend, in the absence of government controlled money supplies, there is actually a natural deflation. In fact, despite the fact the US government has vastly increased the money supply (causing inflation) over the last fifty years, we consistently get more for less with just about every manufactured product.

The effect is most obvious in technological realms, where today $100 gets you a billion times more computing power than thirty years ago, or a two hundred times faster internet connections then a decade ago. This exponential depreciation of processing power, storage, and bandwidth is commonly referred to as Moore’s law.

What’s really interesting, though, is that technology has similar deflationary effects on everything else as well. Ray Kurzweil has written about this frequently, but it’s visible in everything from food (we get more and more food for every one acre of planted land because of technologies like genetic engineering and modern agriculture equipment) and clothing (it’s exponentially cheaper to design, manufacture, and sell clothing than it has even been) to music (compare the cost of manufacturing, shipping and selling a CD vs. a downloadable album).

With the exception of land and human time, in all areas of society we have been conditioned to expect more for less over time. Yet until just a few years ago, the music industry was increasingly charging more, for the same product. And they were able to do this because copyright law gives them the ability to set prices like a legal monopoly.

While one can argue about the merits of copyright law, the reality is that people as a whole have a very reasonable sense of what things should cost. When people in aggregate are asked to pay far more than what they think something should cost, they start looking for alternatives. In this case, the alternative comes in the form of P2P technology.

A while back I wrote that the music industry will ultimately thrive and prosper because of all of this change. At the end of the day, that change comes because of our aggregate abilities to judge fairness. It’s no surprise, then, that for many people, finding ways around unfair pricing, is in itself, quite fair.