Silicon Valley veteran Mike Homer wants to move TV shows from the airwaves to the grid. If he succeeds, we'll never look at video the same way again.
(Business 2.0) – At every important turn in Silicon Valley's recent history, Mike Homer has been there. He got his start as an engineer and later a marketer at Apple, then joined Go, a handheld device startup that, despite $100 million in funding, failed to find its market. From there Homer landed at Netscape, just in time to see the company's spectacular success and equally spectacular slaughter at the hands of Microsoft. After Netscape was sold to AOL, Homer jumped ship to launch Kontiki, a Net-based video-serving business, where he is still chairman, and invested in a slew of technology startups, including TiVo and Google.
For years Kontiki has labored in obscurity, perfecting a video-delivery service for corporate clients. But all along, Homer had his eye on the consumer market. He now believes that the time has finally come to put video on the Net--and he's betting his money and his reputation on it. In April he and former Netscape cohort Marc Andreessen launched the Open Media Network, an audacious nonprofit that intends to host video files and create an Internet TV guide. Business 2.0 caught up with Homer on the day the network launched.
Why are you calling the Open Media Network "the future of public broadcasting"? OMN is a free public service that enables consumers to view and publish legal content on the Internet. Digital distribution technology is now capable of doing a good job with video on the Internet, but there are still a lot of factors within the industry that keep producers from putting a wide variety of content online. We wanted to find a segment of the broadcasting industry that was willing to move first--and that's the Public Broadcasting System.
So what's holding back the rest? First is concern over cannibalizing their current channels of distribution. Second is concern over piracy. And the third is the lack of a demonstrated business model.
How does OMN differ from other recent offerings, such as Google's planned video service? Well, the big difference is that we have already created a user interface and a TV guide--you just click to get OMN, and then there's no instruction required. The other thing is its ability to handle very large files. Anything longer than 10 minutes or of high quality will have a substantial file size. That requires a grid delivery technology like Kontiki's, which fundamentally enables the business model.
How does the technology enable the business? Say you have a TV show that's 500 megabytes, which is typical. It costs anywhere from 20 to 50 cents to deliver that from a traditional website. Well, if you want to charge $1.99 for that show, the delivery cost represents a significant part of what's left after the producer's royalty. OMN can deliver that 500MB package for around 2 cents. The cost of delivery is just radically lower.
And how does a "grid network" function? I call it peer-to-peer plus. In a peer-to-peer system, one PC delivers content to another PC. In newer systems like BitTorrent, multiple PCs deliver the content--but it's still only PCs. The main "plus" of grid delivery is dedicated servers. That collection of PCs and servers gives you a network--a grid--that ensures reliability.
Is the idea behind OMN to show off what Kontiki can do? The Open Media Network is a completely separate nonprofit foundation. It started off with funding by me, but that will expand to other individuals and some advisory corporations. Think of Kontiki as building high-performance engines. We sell them to people who want to build race cars, but at the same time, having invented the engine, we have a dream for what the ultimate race car would look like. OMN is just me saying, "I want to build that."
You hired a former SAP executive as Kontiki's CEO to help enterprise sales. Now he's gone, and you're looking for a new CEO. Why? We had explosive growth in consumer broadband in '03 and '04--from 50 million to 130 million consumer broadband users during that two-year period. It'll go to 200 million by the end of this year. Demand for consumer video services started to poke its head up in 2004. We did a deal with CNET, then with AOL, then with Cinequest, and finally with the BBC this past summer. I think video will be extremely strong in 2006. We want to take advantage of that. We're still primarily selling enterprise video systems, but some of our newest and most exciting applications are in the consumer realm.
What might hinder that new market? The thing that gates it is the availability of popular content. It's exactly what happened in the music industry: No one really wants to be first out on the Internet. It's time either for Steve Jobs to show up with an iTunes for video or for somebody else who has major popular content to make it available. I think once that happens, the floodgates are open. When iTunes came out, after that there were 20 music stores in 20 months.
What's your view of the landscape now? You fought--and lost--in the browser wars at Netscape. Now the battle has moved to search, with Google in the hot seat. Well, I'm a little biased. I was an early investor in Google. And the guy who they call the business founder of Google, Omid Kordestani, headed up ad sales for Netscape's portal.
Google just has an incredible innovation engine. Look at Google Maps. Every major portal has a map service, but what Google did is better than anything that has ever been done. The primary thing that Google needs to do is keep its product lead.
Many have speculated that Google will build a better browser. It has hired a lot of the same Microsoft people who worked to beat Netscape in 1998. The browser is yesterday's battleground, not tomorrow's. I'm not sure it makes a lot of sense for Google to collect pieces of software into one big piece called a browser. What Google can do is to ensure the health of Firefox. It has three developers working at Google who basically contribute to Firefox for free.
They're helping to create a competitor to Microsoft without making Google itself the competitor. Right. If people thought Google was entering a browser war with Microsoft, they'd predict Google's demise. That's one thing Google has done far better than we did at Netscape. When we were in the heat of battle with Microsoft, a venture capitalist forwarded us an e-mail written by a Microsoft executive. All it said was "Boy waves red cape in front of bull, boy gets gored."
That Microsoft executive knew the VC would forward that e-mail to us. The point was, "You dumb shits, keep waving the flag in front of us and we'll fight back." Promoting the fact that you're in a battle with Microsoft is a bad idea. Most people who go into battle with Microsoft lose, so that'll be the expectation everybody lays on you.
Instead, you should downplay it. Do the "aw shucks" thing: "Microsoft's a great company, and we would hope that we don't have to compete with them." Or you even go further and say, "We're their best partner and developer."
What have you learned from 15 years of starting companies? I love the idea that you can create something that exists pretty much in your mind. It's still the most exciting thing in business to do. But it really is hard work. When I went from Apple to Go, we worked our butts off for three years and essentially failed. We raised about $100 million and tried to build a product, a tablet computer, that was well before its time.
That's what I call the ground game, you know, 2 yards at a time. There's the good version of the ground game where it's 4 yards at a time and you're making first downs and then ultimately touchdowns. Then there's the bad version of the ground game where you're making 2 yards at a time. They don't look all that different when you're in the heat of them.