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Cable Vet Calls on Industry From the Cloud

Willner says new Penthera technology helps operators execute mobile strategy 9/17/2012 12:01:00 AM Eastern

Cable veteran Michael Willner sold Insight Communications,
the MSO he founded, to Time Warner Cable for $3 billion last February. Now the
former NCTA chairman is back calling on his former colleagues after taking the
reins of Penthera Partners, a technology company he and Insight cofounder Sidney
Knafel invested in.

Penthera has developed software that moves HD video between
the cloud and mobile devices. One application allows video sharing; another
product downloads HD video for later playback.

In an interview with B&C business editor Jon
Lafayette, Willner talks about why these products will help the cable industry
at a time when it is under pressure from rising programming costs, slowing
household formation and growing competition from over-the-top video options. An
edited transcript follows.

Didn't you want to take some time off or hit the beach
before joining Penthera?

Oh my God. Don't give me those nightmares.

It must be good to get out of the cable business. I
keep reading about how rising programming costs make it tough for operators to
be able to make a buck.

Yeah, it's a very complicated set of circumstances that the
operators are living under right now. Frankly, one of the reasons we sold our company
was it was really getting very hard to be a smaller operator, so it was time to
move on. Time Warner [Cable] showed a real interest and it was a good fit for
them, so it just made a lot of sense.

So what put you on the scent of this company?

I have a long history of believing that the cable industry
could and should be in the forefront of new technologies with regard to its
core video product. I was introduced to [Penthera's] CTO through a mutual
friend and really was very impressed by the technology. They had already
thought that there was a natural place for the cable industry in the deployment
of this technology, with a business- to-business strategy, much more than a
business-toconsumer strategy. And when I heard them out, I guess I was able to
con! rm their view that there should be real interest on the part of cable
operators, cable programmers, satellite companies and telephone companies to
deploy this engine as they all move into un-tethering the consumer from the
set-top box and the living-room TV to mobile devices they can download and take
with them.

When did that happen?

It was after we sold [Insight], in about March. I made an
investment in [Penthera] and woke up one morning and found myself in an
operating role. I got together with [Knafel] more recently and said, you know,
we ought to put some more money in this company. We're making an investment
that is large enough to put us in the driver's seat and make sure that we get this
company launched, really.

Can you tell me how much money you've put into this
company?

No, it's a private company.

When people talk about video sharing, it starts to
smack of Napster and the things that messed up the music industry. That's not
the kind of uncontrolled video sharing we're talking about here?

No, we're actually trying to be law-abiding citizens here.
When we say video sharing, we mean user-generated. For instance, if you have
kids who are in Little League and your parents live down in Delray Beach, Fla.,
and if you shoot a 10-minute video of the kid playing in the third inning, that
10-minute video on an iPhone today is in high-definition and is a huge file.
You can't just send it off by email to the kid's grandparents, so you have to
have some way of giving them access to that video in an efficient way. And then
the cable play here is that not only can you send it from your iPhone to
somebody else's iPhone through our cloud, but you could also, in a
cable-company IP-enabled set-top box, deliver it to a living-room television
set. So this kind of bridges the gap from the mobile world to the living room
set-top box world as well. That's one product.

The other is basically a download engine that takes
authorized programming. If you're an HBO subscriber you can download HBO
episodes of True Blood rather than just stream it, which is today's
technology of HBO Go. You'll also be able to download it into your device so
that you can un-tether it either wired or wireless, not have a Wi-Fi
connection, take it with you and watch it on an airplane, in a park, wherever
you want to watch it. And those rights are now being developed and authorized by
a number of programmers.

It sounds like an invitation to piracy, if you can
take something that HBO is streaming, download it, put it in your device and share
it.

There are plenty of controls that are attached to these
downloads. They will self-destruct after a given period of time. They are
authorized just like with a DVR. You can copy once but you can't copy more, so
you can't move it around. But it turns your iPad into a mobile DVR is what it
does.

How does the cable company make money off of this?

Cable companies are developing cloud strategies for storage.
And remember, we're primarily business-to-business, although we do have an app
in the Apple store called Ribit, which is the video-sharing service. But cable
operators are thinking about cloud storage as part of their strategy. It's
value-enhancing to consumers who have premium services to be able to watch them
on mobile devices. There isn't a cable company that I can think of that doesn't
already have a mobile strategy. And the reason why they have one is because
it's important in customer retention and to get customers to upgrade to higher
levels of service, where some of these options are offered.

Would the consumer buy this or would it be bundled
into the subscription price?

Right now the thinking is to bundle it into the mobile
applications that the operators are already deploying. Comcast has a mobile
app, Time Warner has a mobile app, Cox has one. They all have one. The idea is
to build this engine into their mobile apps and give the consumer additional
technology so they'll utilize the service more extensively.

You would sell licenses to the technology?

That's right.

You said you needed to be in an operating role. Are
there some problems with the folks who were running the company?

No. The two founders were computer experts. I think I had a
little more business-to-business customer-facing experience that they were
eager to tap, so we carved a role out for me. Since then, and really on his own
volition, for personal reasons, [cofounder] Sam Leinhardt stepped back a little
bit. He'll remain on the board and act as special advisor. But I've recently
taken over as CEO of the company to run it day-to-day.

How far along are you in terms of talking to any of
the operators?

We're talking to all of the usual people. There aren't that
many.

Is it odd being on the other side of one of these
negotiations?

I knew exactly what to expect.

How would you characterize that?

No comment.

The trick in negotiating with a cable company is to be someone's idea
of a priority. How do you make this into a priority of someone at one of the
cable companies?

I think that the service that I've just described, of being
able to move large quantities of data, and in the cable companies' world that
would be video primarily from one device to another, is already a priority in
most cable operators' minds. I think they view the consumers' desire for that
capability to be very high and expanding rapidly. There are a lot of challenges
involved in being able to deliver that kind of service as a network operator in
terms of bandwidth, how much congestion it brings up on the network, especially
when you're dealing with high-definition video, so a lot of the specific
software that we have created helps network managers manage the network better,
helps consumers manage their battery life and their costs better instead of
using 4G cellular or if they have a limited service through their cable company
or phone company, so a lot of the software whistles and bells that we have
built in allow a lot of user controls to be set so they can be most efficiently
utilized by the consumers.

Do you have other products in the pipeline?

We do. Not really able to talk specifically about them right
now. But the fundamental engine is kind of common across the product line right
now-if you think of Ribit, the app that's in the Apple app store right now, and
this Virtuoso product, which is a download service for network operators to be
able to download programming. Those are two very different products using the
same engine and there are other applications that are in development right now
that would exploit the capabilities of this engine for very different users,
very different applications, some of them having absolutely nothing to do with
video.

But speaking of video, the operators are still trying to figure out how
to implement their TV Everywhere strategies. Will this help them in moving TV
Everywhere along?

I think this is an enhancement to the deployment of TV
Everywhere, and I say that in the generic sense, not in the branding sense.

How does this help with TV Everywhere?

It's a new capability, first of all. Don't forget, nobody
can download to go now. It allows people to provide transferability in both
directions, upstream and downstream, which expands the concept of TV Everywhere
from just network programming to both network- and user-generated programming.
And it also manages the transferring of large data files very efficiently,
determining when and how these files should be transferred and at what speed
and what the cost structure is. I think it helps the industry advance its
agenda of moving to next-generation video.

Are you also targeting the various over-the-top companies who could use
the same capabilities to advance their businesses?

We're not limiting ourselves to any set of relationships and
we thing that there's a natural play here for cable. There's also a play here
for satellite companies, for phone companies, for technology companies who are
creating business models around clout services and other things that people are
doing.

I think there's a whole list of potential
business-to-business partners that the company can be dealing with. But again,
it's not all about video. It's about moving large files very efficiently. And
not everything out there is video, although most consumers think that way.
There's lot of stuff that goes from place to place that's big and clunky but
not video.

But this isn't the kind of product that will unhinge the whole industry
and create unbundling and change the nature of who subscribes to what by making
different forms of video available?

This is a technology that is inevitable. We think we have
the best mousetrap already developed in order. But this is not the Napster that
took down the music industry, even from a legal standpoint. We're just trying
to enable people to do things that consumers want to do.

E-mail comments to jlafayette@nbmedia.com
and follow him on Twitter: @jlafayette

 

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