5 Questions with Michael Cai

In the Dallas headquarters of Parks Associates, a market research firm, sits Michael Cai, who covers developments in broadband services and closely follows emerging digital home technologies, such as networked storage and home entertainment solutions. Cai, whose bio boasts that he earned a 4.0 GPA from Baylor University when he graduated in May 2002, has also written reports on the Chinese telecom market. PE Week Senior Writer Alexander Haislip recently caught up with Cai to talk about the digital video sector and plumb the opportunities for startups.

Q: Is there life after YouTube in the digital video space for innovators?


There’s more opportunity in the advertiser-supported space than in the paid content space. The studios had high hopes for digital distribution, but the problem of transferring from the PC to the home TV has made adoption difficult. Paid content distribution via the Internet hasn’t really happened yet.

Q: Sounds like you’re saying it will move from what’s often called ‘loser generated content’ to premium shows and movies. So why can’t we get that online yet?


How soon that’s going to change depends on the studios. The service providers will need premium content and for the window of distribution to be shortened so it can compete with video-on-demand and pay-per-view. If, for the same amount of money, you can get high-definition delivered for the same price you can buy it from the store, consumers would be interested in doing it. The technology just might not be mature enough yet.

Q: Is there enough demand for premium content downloads to sustain a tech build out?

A: Consumers might be willing to pay for quality, but the question is if you can already get the content in high-def through your TV, why should you go through all the trouble of downloading it? A lot of the demand for iTunes video comes from frequent travelers who download a show before they travel.

Q: What about new business models. Is there anything interesting there?


There’s also a lot of interest in the download-to-burn model, where you go to BestBuy, or someplace, and download a video and burn it there in the store. There will be even bigger opportunities to bundle it with a subscription service, so if you are desperate to watch something you may be able to download it there.

Q: So where are the opportunities for entrepreneurs?


A better distribution platform might still be needed, but that space hasn’t been hot for several months. If you had a great way to cut down the cost of delivering those networks, there might be interest there. Video advertising solutions may be interesting too, especially targeting.

The video search space has a few mature players. Unless you have a really innovative approach, the sector may be too crowded. The YouTube space has become fairly mature.