Google News uses computer algorithms to identify top stories while Yahoo News favors old-fashioned human editors. But do Google’s automated search results display a conservative bias?

In newspaper newsrooms, editors often go to great lengths to achieve a semblance of balance in coverage of the two major candidates for president. Some count the story inches devoted to both men. Others make sure that photo size and placement don’t favor one over the other. Journalistic fairness demands equal treatment.

But what are the rules for online search engines, where millions of users are turning for their daily news fix? Does evenhanded coverage apply in the bottomless news hole of cyberspace? Does having an editorial team or an automated program get you a better sweep of important news about the political candidates?

These are tricky questions. To their credit, Google News and Yahoo News agreed to pull back the curtain and explain how they acquire and display political news.

Google News: Unintentionally skewing to the right?

Launched three years ago, Google News now attracts about 6 million users a month, double the audience of a year ago. In August it drew 5.8 million visitors, making it the 14th most popular site on the Web for current events and global news, according to Nielsen//NetRatings.

Google News scours not the entire Web but 7,000 information sources (4,500 of them English-speaking) and then groups and prioritizes the news into clusters of articles. An internal “sourcing team” decides which information providers to comb, but for competitive reasons Google would not disclose which sources it uses.

Google News’ most astonishing accomplishment is that it’s produced entirely by computer algorithms. The company seems to delight in the fact that it relies on engineers and product managers but no editors, much less reporters, for its news section. (Of course, like fellow aggregator Yahoo News, it relies on other news publications’ editors and writers.)

The automated system is far from perfect, as legions of bloggers and journalists have observed when Google News places the wrong photo next to an accompanying story, or when it misses major breaking news, such as the space shuttle Columbia disaster, which received no mention for more than an hour.

Despite those predictable flaws, it’s been puzzling to read Google News’ takes on John Kerry and George W. Bush over the past month. On Aug. 24, for example, users who clicked on the “John Kerry” link under Google News’ In the News heading were treated on the first page of 100 search results to these headlines, among others:

• Useless-Knowledge.com: John Kerry Said “Bring It On”, Now Whines To Bush To Stop The Ads
• Enter Stage Right: The imploding John Kerry
• BushCountry: Americans May Be Stupid, But Not THAT Stupid
• Intellectual Conservative: Why James Rassmann Is Honestly Mistaken About John Kerry Saving His Life
• RushLimbaugh.com: Who’s the Cowboy Now?
• Frontpagemag.com: John Kerry’s Puzzling Silver Star Citations
• Useless-Knowledge.com: John Kerry’s Resume (Part V) At Worst, Treasonous Behavior
• Michnews.com: Swift Boat Veterans for Truth Expose John Kerry’s Lies
• WorldNetDaily: Krazy John Kerry
• MensNewsDaily.com: John Kerry is Definitely “Unfit for Command”
• Michnews.com: I’m John Kerry And I Approve This Flip-Flop
• Useless-Knowledge.com: John Kerry Just Can’t Stand The Heat

In addition to mainstream news outlets from both sides of the political fence (say, NPR and The Washington Post on the left and The Washington Times and New York Post on the right), there were 34 anti-Kerry screeds from the second-tier websites. There was only one pro-Kerry item, from CommonDreams.org.

Far from an isolated example, the pattern has repeated itself throughout the past month. Small conservative Web sites such as Useless-Knowledge, Men’s News Daily, Michnews and ChronWatch turn up in disproportionate numbers when clicking on news about John Kerry. Useless-Knowledge, for instance, made up 12 of the first 100 results for John Kerry on Friday, and 11 of the first 100 results Saturday.

By contrast, a search on George Bush or George W. Bush typically results in a fairly neutral, evenly balanced set of results from both sides of the political spectrum, with many of the same small conservative sites showing up to sing the president’s praises.

What’s going on? Have Google’s search results been hijacked by Fox News?

Krishna Bharat, chief scientist for Google News, said he was puzzled by reports that the service has been skewing politically in one direction.

“Google News is a bit like a conversation that we’re hosting,” he said by phone from India. “We’re inviting thousands of news sources to take part, even those who are very small. The two big things we’re seeking are inclusion — we want everyone at the table — and diversity of opinions in the press.”

Bharat said Google News uses a mix of techniques to ensure that users are presented a diverse range of perspectives. The ranking and prominence of stories are based on several factors: How many publications are writing about a topic; how recent the articles are; the size of the story, with substantive pieces ranking higher than short items; and the frequency of the search term within the article. The computer algorithms, he said, “are trying to understand how hot and how big the story is.”

Every 15 minutes a new edition of Google News is generated and the ranking changes. The formula rearranges the headline blurbs in each story cluster based on the freshness of each article and the importance of the source. “The algorithms do not understand which sources are right-leaning or left-leaning,” Bharat said. “They’re apolitical, which is good.”

Google News does not use the same formula as Google’s general search engine, which ranks results based on how many people are linking to a site or article. (While “John Kerry” results in 100,000 results on Google News, the same term draws 4.3 million results on Google.) Special interest groups use a linking technique known as Googlebombing to skew Google’s general search engine results to their liking. For example, searching on the terms “miserable failure,” “great president” and “unelectable” all bring up a White House page on President George W. Bush. Bharat points out, however, that link popularity plays no result in Google News’ rankings.

“Our mission is to be all-inclusive,” Bharat said. “We want breadth and variety. I would like Republicans and Democrats alike to read pro-Kerry and anti-Kerry articles, but it’s not our job to change the natural range of opinions that you see in the press. We’re showing you the world the way it is.”

But are they? Why does clicking on a “John Kerry” link in Google News turn up so many second-tier conservative sites but so few liberal sites?

Bharat said it might be an aberration, and that more people might type in “Kerry,” which gives you a more balanced set of results, drawing more articles from major media organizations. But that ignores the fact that Google News itself uses “John Kerry” as the preferred search term when it highlights news about the candidate in its In the News section.

Gaming the system — or site optimization?

Ethan Zuckerman has a theory about what’s happening. He observed the same phenomenon. A search for “Kerry” on Google News turns up mostly mainstream media sources, while a search for “John-Kerry” — the search conducted when you follow the In the News link — turns up a great deal more opinionated pieces culled from second-tier and fringe sites.

“I think what you’re seeing is an odd little linguistic artifact,” said Zuckerman, former vice president of Tripod.com and now a fellow at Harvard’s Berkman Center for Internet and Society who studies search engines. The chief culprit, he theorized, is that mainstream news publications refer to the senator on second reference as Kerry, while alternative news sites often use the phrase “John Kerry” multiple times, for effect or derision. To Google News’ eye, that’s a more exact search result.

A second possible factor, Zuckerman said, is that small, alternative news sites have no hesitancy about using “John Kerry” in a headline, while most mainstream news sites eschew first names in headlines. The inadvertent result is that the smaller sites score better results with the search engines.

“You have to wonder why some of these wacky sites make the cut,” he added. With an occasional exception, Weblogs are generally not found among the Google News results, so Zuckerman had some advice for aspiring political publishers who want to game the search engines: Don’t blog — start an alternative news network. Use terms like George Bush and John Kerry frequently, rather than their last names alone, in both your text and headlines. Publish new works frequently.

What Zuckerman calls gaming the system, others call optimizing your site.

Thomas Krafft, a Web site developer, said he began working with the conservative news site ChronWatch nearly three years ago when it was averaging 100 visits a day. “I completely rebuilt the site to better organize, categorize and display the content, to ease the process of adding articles to the site, and to especially be more search-engine friendly,” he said by e-mail.

“Today, ChronWatch averages nearly 10,000 visits per day and is regularly placed near the top of the Google News service,” Kraft said. “And it looks like we’re on track to see the same results and popularity for the site through MSN’s new search service as well.” Krafft said he also advises his clients to use keywords and phrases that match users’ precise searches and to write in informal, accessible language.

ChronWatch editor Jim Sparkman said the site attracts volunteer contributors who believe passionately in their cause. “There are many, many sites like ours on the Internet, and many, many e-mail exchange groups, that are forming a new communication method that is beginning to rival the big media in influence,” he said.

Yahoo takes a people-powered approach

Yahoo News, launched in August 1995, has been in a tug-of-war with CNN.com all year over the No. 1 online news ranking. In August, Yahoo News attracted 22 million unique visitors to CNN’s 22.9 million, according to Nielsen//NetRatings. In July, and during the Democratic and Republican conventions, Yahoo News topped CNN.com.

Jeff Birkeland, product manager for news, said Yahoo is out “to create the broadest, deepest, most comprehensive and useful news experience from start to finish.”

Toward that end, Yahoo News hosts breaking news, features and analysis from more than 100 news partners, mostly major news organizations. A small editorial staff programs the Yahoo News front page as well as plucking out hidden gems that appear on other sites. Special sections like Election 2004 include breaking news from partner news sources, pointers to political blogs and the candidates’ sites, and in-depth analysis and commentary. Readers who want to go deeper can plumb Yahoo’s news search, which indexes more than 8,000 sources.

Users looking for the latest news about John Kerry will get about 2,700 results from Yahoo’s news partners. A wider search of all Yahoo’s news sources will turn up about 66,000 results from across the Web, including small online newspapers and foreign publications but none of the small, politically active independent news sites often featured on Google News. In addition, a search on Yahoo’s standard search engine turns up more than 7 million references to John Kerry on the open Web.

Like Google News, Yahoo won’t disclose how a term like John Kerry or George Bush makes it to the front page of its search results, but Birkeland said the factors include the source, the freshness of the story, and a method of determining relevance.

Yahoo achieves balance in political coverage by using a wide variety of news partners and an editorial staff that pulls together “a very wide cut at what the news is on a given day,” Birkeland said.

“We use actual humans,” he added. “News is far too human of an endeavor to rely 100 percent on automation.”

Birkeland pointed to several advantages that an editorial staff has over Google News’ algorithm approach.

First, he said, “we’ll always have breaking news faster. It’s very difficult to be timely on breaking news if your news service is relying on an algorithm that works off news being published elsewhere first.” Yahoo News’ partnerships with major news organizations allow it to publish news about major events within seconds or minutes of a story being filed. By contrast, a search engine that depends strictly on trolling the Web might publish news that’s 20 minutes old on a news site, but the story could be two days old.

Second, Birkeland pointed to “accuracy and trust issues.” “We’re working with news partners who are in the accuracy business,” he said. “We don’t have the kinds of situations where the reader scratches his head wondering why a story from a questionable source winds up at the top of the main news page. It’s extremely important to have editorial oversight rather than rely on an algorithm’s questionable judgment.”

Third, an editorial staff allows Yahoo News to better sort the news into opinion and analysis sections in addition to straight news.

A final advantage is that readers get a more comprehensive, friendlier user experience when they’re reading the news on a single site such as Yahoo News as opposed to hopping from site to site, Birkeland said. By hosting the material, Yahoo can display additional material and tools, such as related stories, video and photos, message boards, and the ability to rate the story or e-mail it to a friend.

Is the rise of the machines at Google News a threat to the carbon-based life forms at Yahoo News? “I’m not that concerned, frankly,” Birkeland said. “It would be extremely challenging to write a program that catches up to what we’re able to do on a daily basis.”

Last week we kicked off The Engadget Interview with outgoing MPAA president Jack Valenti, this week journalist J.D. Lasica tries out the Sidekick II and speaks with Hank Nothhaft, CEO of Danger, Inc., about the device’s upcoming release, the market for wireless handhelds, the cachet of having Derek Jeter and Paris Hilton as Sidekick fans, and whether, if forced to at gunpoint, he’d buy a Blackberry or a Treo.

Give me the 30-second lowdown on Danger. You started back in 2000?

That’s right. We’re a 3 ½-year-old private company in Palo Alto, Calif., backed by such big venture capital firms as Redpoint, Mobius and Softbank. Most of our 140 employees are in Palo Alto, California, though a handful are in Europe, Japan, and around the U.S.

Let’s talk about the market before we get to your new device. What’s the evidence that people want a converged device that combines email, web browsing, a cellphone and organizer all in one?

We came at it from a data perspective. The founders and subsequent management who came on board all worked in data processing and SMS. We were all involved in what I call the wire line or the traditional Internet, so we came at this from the perspective of creating a device that would enable the mobile Internet, not a converged device. We were smart or lucky enough to take on new ideas and vet them with actual customers and carriers. There was enough interaction that we learned that to get to market and have a compelling device, we had to add a voice capability to the device.

Isn’t the handheld wireless device market hurting? BSquare ended its line of Power Handheld devices. Handspring couldn’t go it alone, and now you’ve got Palm beating a retreat in some areas.

Well, it really depends on the timing and positioning. From the time we introduced our first product in October 2002 to this minute, one of biggest issues in the company was in obtaining a manufacturing capability and a set of financials that would support demand for the product. The demand is there. We’ve had three periods where we’ve unfortunately been out of product for months at a time in some cases. So we’re experiencing strong demand. The advance orders for the Sidekick II and the Hiptop II [the same product sold under a different brand name] represent hundreds of thousands of units. If you look at the Treo and the Blackberry range of products, I think you’d probably agree that both of those products are doing very well.

Why is T-Mobile the only wireless provider that carries the Sidekick?

Danger works with eight providers worldwide selling the Hiptop device. T-Mobile provides nationwide coverage in the US, and brands the device as the Sidekick. We also have agreements with some regional players. And we continue to go after the other large GSM carriers here in the U.S.

Clearly, we would like to have broader distribution, but we also have a strong presence in Canada and pipeline of potential carriers in Europe.

Was any consideration given to giving customers the option to plug into free wi-fi instead of requiring a T-Mobile subscription?

Today, for a truly mobile device, given the state of development of wi-fi and battery life, it wouldn’t be practical. T-Mobile, I would point out, is the leader of creating hotspots in the wi-fi market. Down the road, there is going to be some accommodation by everybody to support not only mobile wide area networking functionality but through Bluetooth or wi-fi converged chip sets or some other means, people like ourselves will be figuring out how to provide both functionalities in the same form factor. It just makes sense.

I’ve heard the Treo described as geared toward businessmen, the Blackberry for Capitol Hill staffers, while the Sidekick 2 is targeting a younger generation and being touted as a fun toy.

It’s utilitarian and it’s fun. That’s certainly a marketing strategy. We went after what we perceived to be the largest market opportunity. If you look at the enterprise market, it’s clear that the consumer market is several order of magnitude larger.

Now that the Sidekick devices have been out for a while, who have you had the most success with? Urban 20something trendsetting gadget lovers?

We’re targeted to the 18- to 34-year-old on-the-move person who requires messaging and the ability to get information on the fly. The median age of our customers is 29 or 30.

What’s the coolest feature on the Sidekick II?

I think the compelling aspect of this product is the fact that we’ve been able to blend these applications together on a single device — messaging, email, web browsing, a phone service — with what I would call doing justice to each application. We make it available to the user through a very effortless, simple interface. I’d compare us to Apple’s iPod or to the TiVo. That’s our major achievement, we’ve simplified the complexities of all these phenomenal services so mere mortals can enjoy the fruits of this device.

If you’re already an AOL AIM user, you answer three quick questions and you’re operational — four questions if you weren’t an AIM user. You answer less than 10 questions to set up your email account and no questions to browse the Web.

Tell me about the ringtones — you’ve got some wild stuff on there.

Yeah, isn’t it fun? We have a lot of the standard stuff like dogs barking [he shows off a yelping canine] and dolphins chirping for my instant messaging, but we’ve gone a lot further through our agreements with Sony and others. T-Mobile got Kid Capri to do a ringtone rap about answering your Sidekick now.

You can download about 300 different ringtones for $1.99 or less. It’s painless, you don’t have to whip out your credit card. With a one-click buy it bills your T-Mobile account.

Can customers upload their own ringtones?

No. There’s an effort by the industry to make people pay for the content on these devices.

Too bad. What other little tricks are hidden away?

The application I like the most is the world clock. It’s got a regular clock, alarm clock, stopwatch. You can set up four other cities’ time zones. You can go to that icon and see the cities you’ve set up: London, Osaka, Chicago or whatever.

We also have a big following within the deaf and hard of hearing community for our instant messaging and its tie-ins with our other applications. Anyone can carry on 10 simultaneous IM conversations with 10 separate individuals at any one time. It’s like a mobile phone for a hard-of-hearing person.

Is there a killer app inside the Sidekick?

There are several popular applications on our platform across all eight of our carriers. For example,  eighty percent of the people do use the device as their primary phone, so that’s very popular. But the thing that’s really amazing is the messaging activity that takes place. I call them messaging engines. The people who are using IM on these devices are sending and receiving 110 instant messages a day. They’re also doing 25-30 emails a day, and they’re accessing 25 web pages a day. We also support SMS on this, and have a range of around 4 SMS messages a day.

Did you say 110 IMs a day on average?

Pretty amazing, isn’t it? When we launched in October 2002, we were at seven instant messages a day and we figured that number was sure to go down because we had all these crazy, compulsive early adopters. And just the opposite happened — across all the carriers we have worldwide, the number is now 110.

Even though we’re 1 percent of T-Mobile’s installed base right now, we generate 10 percent of their data revenue.

If you’re a developer, how can you develop software for the Sidekick?

We’re Java compatible, and we have a software developers kit. People with Java programs can tweak them and port them over to run on our platform, using Java or J2ME. We’re just getting started but trying to reach out to the independent developer community. A lot of the new games and applications being launched by us now are certainly all coming from third parties.

What about allowing developers to create user-installable applications for the Sidekick?

Not user-installable. We’re a gatekeeper in that sense. they use our developer kit, they reach an agreement with us, and then through us they can have access to our user base.

I just read that you don’t see yourself as a device company and that you want to concentrate on the technology but leave the design, manufacturing, sales and marketing to someone else.

That should have said software, not technology. The strategy is and was that our expertise is in writing data applications, Java-based operating systems, and enabling things like online commerce. To prove that our concept was valid and exciting, we had to build a device and then hopefully attract consumer electronics companies to work with us.

So, we’ve sold several hundred thousand units, and now we’ve got the interest of several OEMs and signed up our first one, Sharp Electronics, which will be manufacturing the Sidekick II. Our role will be to launch several new additional products with Sharp, and we have an exciting new roadmap with them. And then we’ll sign up with other OEMs as well.

In the San Jose Mercury News, Mike Langberg complained about facial oils getting on the unit and wrote, “You’d think someone would figure out how to make a smart phone that didn’t end up slimed with human secretions.” Response?

I was a little surprised. That’s the first time I’ve heard that. You can use a headset if that’s bothersome.

A lot of young people today are using tiny keyboards on these kinds of devices to do thumb texting. Any reports of kids blowing their thumbs out?

Just the opposite with our device. In our original design, we had a relatively large qwerty keyboard, and as we got feedback, we had an overwhelming response not to reduce the size of our keyboard. People find the size to be very useable compared with the alternatives.

The Sidekick II will arrive in stores by late September?

It’s fairly imminent but I can’t speak for T-Mobile. Soon.

Retail price is $299 with a one-year contract?

That’s the list price, yes.

What’s the next realm for the Sidekick to assimilate? Video? An MP3 player?

We’re working with Sharp, and on the data-centric Sidekick II side, I think you’ll see the possibility of a larger screen, perhaps a higher-resolution screen. An easy prediction is that you’ll see a higher-resolution camera.

Certainly we’ll be looking at things like MP3 because this is a utilitarian but fun device. With an MP3, this would reduce the need for a separate device.

The other thing people like is this device is very good for playing video games, so if you’re riding the train or subway, it’s a nice way to pass the time. We’re selling six or seven times more content through our user base than the industry angle. So we’re looking at a lot of angles on how to improve the video game experience on the product.

So you’re not big on video?

MP3 would rate much higher than video on the range of what people would like to see on a mobile device. [Aside: A recent survey conducted by Jupiter Research found that although 78% of U.S. residents said they would listen to music on a portable device, only 55% said they would watch video that way.]

Video’s coming, but we’re looking at other things. Mp3 and wi-fi, with the right power consumption for broadband, would be much higher on the list right now.

You’re shooting for profitability by the end of 2005?

That’s right.

What comes after the Sidekick II?

Next year we are working hard to have more than one hardware device on the market, with different price points, features and functionality.

Where do you see the Sidekick and devices like it in 10 years? What will they be able to do, and how will they be used?

We’re talking about displacing camera, audio players, maybe video players. Certainly 10 years out the industry will have a different look to it. Mobile devices will become a PC displacement product. I don’t think you’ll see conventional laptops as we know them today — that functionality will be subsumed into some device.

Personally, I’m very much an online person, but I’ve gotten to the point where the only reason I’d take my laptop on a business trip is to do a Powerpoint presentation. Devices like ours and others are subsuming some of the functions of PCs.

Obligatory celebrity question: I’ve heard that Justin Timberlake, Jennifer Aniston and Paris Hilton use a Sidekick.

That’s true. I also know a guy who ran into Derek Jeter in a sports bar and he does email and baseball stats on the fly. I emailed Mark Cuban this week and he uses our device when he’s on the go. We gave away the Sidekick II to influencers. We had a product launch in Hollywood with T-Mobile and gave away the new devices to 30 to 35 celebrities. And since then we’ve given away hundreds more to celebrities and sports figures. No one’s been paid.

If you were forced to buy a cellphone that wasn’t the Sidekick II, which would it be?

Probably a Motorola for a voice phone, and a decent data-oriented device like a Blackberry, but that’s got limited Web browsing, or the Treo, but its keyboard is so small, so I might have to go upstream to an iPaq.

This week veteran journalist J.D. Lasica spent a few minutes with CEO Jordan Greenhall and President Shahi Ghanem (pictured at right) of DivXNetworks. The San Diego company has morphed from a codec-centered technology startup to a full-fledged CE business. The execs offered tantalizing hints about looming deals with Hollywood studios and Netflix, DivX movie kiosks, high-def camcorders and the coming grassroots video revolution.

I’m sure some readers have never heard of DivXNetworks. What do you folks do?

Ghanem:

First, let’s talk briefly about what DivX is. DivX is a compression-decompression technology, a codec. DivXNetworks is the company that invented that technology. We were founded in 2000 in San Diego and now have 110 employees.

What’s your business model?

Ghanem: Our core competency is building intellectual property in the digital media space. That falls into three categories: compression; security and digital rights management to deliver video on demand over secure networks; and advanced multimedia technologies in the connected home to enable consumer devices talk to one another. Companies that you might compare us to include Dolby, DTS or Macrovision, though our potential market is much larger.

The reason DivX exists is to empower consumers with the highest quality digital media experience possible. We’re a consumer-driven company. Our community base is enormous: 130 million users strong, we add 3 million new users every month.

Did you have any key ah-ha moments early on that led to a new direction for the company?

Greenhall: I’d say the first insight was the digital media revolution was not going to be led by the major content providers. It wasn’t in music, and it hasn’t been in video, and really it never has been. The major content companies aren’t about innovation, they’re about market power. They want someone else to go in, innovate a new technology or marketplace, figure it out, make sure it looks viable, and then exert their economies of scale to go in and take it over.

The second ah-ha moment about a year and a half in was the consumer electronics marketplace and understanding how critical consumer electronics is to media, particularly video, from every level: from a consumer perspective, from an economic perspective, from a content provider perspective and from a performance perspective, and then understanding how that marketplace works and the dynamics of it. We came to realize that we needed to be as much a CE company as we are a technology company. And building technology for CE is very different than building technology for PCs or software.
How so?

Greenhall

(pictured at right): Consumer electronics is about getting technology into an integrated circuit. That means building your technology in a way that it is easy for a chip company to get it onto the chip, it works perfectly all the time, and it’s not going to be upgraded a whole lot. Unlike creating software for the PC, where literally anyone can write software, and put it out there on the Internet. You have to get the chip guys to agree to use your technology, which is not trivial. Because if you don’t have them, you’re not going to get into a CE device. To get into CE chip sets, you literally have to have a completely different culture than a software company. They work at a different pace, they have a much higher set of QA requirements, and when you’re in a chip, it’s got to be perfect. When you’re in software, it’s just kind of got to work. If you’re alpha for a year, it’s no big deal, you just upgrade for a year.

Ghanem: We organized our company along three business units: hardware, software and content. For the hardware makers, we provide all the intellectual property in the forms of source code and software development kits that go with the chips, reference designs and ultimately devices, chiefly DVD players and DVD recorders but also portable media players, PC peripherals, handheld devices, still cameras, video cameras, all compatible with each other. DivX has become to the consumer electronics industry kind of like what Java became to programming languages or what the Sony memory stick became to the Sony line of CD devices.

The PC is a nice device for watching content but the vast majority of people are not going to plug a PC into their TV or gather around a large PC screen. To really drive digital media, you need a CE device, and you need to grab and play content off the TV. So three years ago we began bridging the gap between the PC and the TV. This year, we’ll have about 20 million units of different devices coming out with DivX embedded. Last year we had 3 million units.

All of which contain the DivX codec. But that started out strictly for the PC platform.

Ghanem: Early on, we became the dominant technology used on PCs to decode and encode video. Then came a wave of PC software application developers who used DivX. Today, pretty much anyone who munches video in the PC software market uses DivX in some way — companies like Roxio, InterVideo, CyberLink, Holon, Canopus.

When you say DivX is the dominant technology to encode and decode video, others might point to Microsoft’s Windows Media codec.

Ghanem: Those are the two technologies you must consider. In the PC market, we have equal standing with Microsoft in that they get bundled with a lot of stuff. We have more application developers and game developers deploying DivX than does Microsoft. As you move into the CE market, you see a huge disparity open up.

There’s also a whole area of commercial users. Sony uses DivX for bundling with medical devices. NEC and AMD bundle with PCs. Boeing and GE use DivX for the enterprise. Nortel uses DivX for videoconferencing. We work with Electronic Arts, Activision, Lucas, all the major game developers use DivX.

Any interview about DivX has to circle back to the piracy question. A lot of people still associate DivX with the pirate video format. How do you respond to that?

Ghanem: I get asked that question probably on a daily basis. Let’s be frank about it. People on the Internet who pirate content use DivX, and they use DivX because it’s the best-quality technology available to them. As we’ve told the MPAA and the major studios, DivX is not a piracy technology. You can commit piracy with Quicktime or Real or any video compression technology, but people rip DVDs with other technologies and they encode DVDs with DivX because it provides them the best way to transfer those files. We tried to learn a lesson from Napster and MP3, which didn’t strike a good chord with the media industry. So we built in security because we want to bring users legitimate content. DRM is not a bad thing if it lets users get what they want. If it becomes so draconian that you can’t use your content, then you’ve gone too far.

Your original idea was to use compression to pipe content over the Internet, wasn’t it?

Ghanem: We have an end-to-end video on demand platform that we built in 2001. That system has delivered over 10 million secure transactions to over 2.5 million subscribers. It’s bigger than Movielink and CinemaNow put together. Today we have 75 content providers who use it.

The vision is for DivX to become the glue or the lingua franca that holds this whole convergence space together.

What is the 10,000-foot view of some of the possibilities that codec technologies like DivX hold out for home entertainment? Will we see a grassroots video movement, for example?

Greenhall: It’s not a question of whether, it’s a question of how. There are a lot of pieces of the puzzle: broadband, home networking, devices throughout the home, and they’re all coming into place. And technologies like DivX come in to add the last piece to the puzzle. Being able to offer compression across all of those is the major piece. If I can take a movie I’ve rented or a TV show I’ve recorded, I’ll be able to watch it anywhere — on the TV in my living room, upstairs, or over at someone else’s house automatically on the network. I can put it onto a portable device and access it wirelessly. That starts to be a consumer behavior modification that starts to change how people interact with their media.

So what about those future armies of grassroots programmers?

Greenhall: That speaks to the economic layer. Compression makes the Internet economically viable. No matter how good your broadcast is, it only has the ability to deliver out a certain amount of content in temporal fashion. I turn on my satellite receiver, I’ve got 30 channels. But those 30 selections serve 10 million people, so they’re going to be very generic, and I don’t get a lot of control over the programming. If I start to use recording technology like PVR and TiVo, I can time shift that, but my selections are still based on the economics of mass media. But if you start layering in the Internet, you can do one-to-one communication. You don’t have to get out to an audience of a million in order to be viable, you can get out to an audience of six and be viable, depending on what you want to accomplish. So that signals the ability to deliver very narrowly tailored content out to individuals. People will be able to slice and dice what they consume – and somebody has to produce all that content. Now I have the ability to create and publish content at a very high level and deliver it to millions or to one person. So you’ve got hundreds of millions of potential publishers.

What’s going to kickstart this?

Greenhall: The propagation of high definition DV cams will be very significant in being able to provide high-quality source material. Because you’ll have source that looks very good, and that makes a big difference. With grainy VHS source, no matter what the quality of the content, a lot of people are not going to be willing to watch that. It’s hard on the eyes. But if you have high DV source, you have quality in your hands that’s superior to today’s broadcast television. You’re at the equivalent of theatrical film. So you combine that with a high-end PC editing suite, and the only barrier now is talent. (Leaves room for a call.)

How long before we see consumer-level high-definition camcorders at reasonable prices?

Ghanem: Right now they’re all priced above $2,000 to $3,000 and selling in Asia. You won’t see anything at a realistic price point in this country until Christmas 2005 or later.

Let’s get back to the present. What are some of the cooler devices hitting the market with DivX inside?

Ghanem: I’d say the coolest ones are the portable and handheld devices. Two companies doing really great stuff are NHJ and Apex. Apex started out as a DVD company and TV set manufacturer, and now they’re moving into portable devices. The Apex Digital E2Go portable media player (pictured at right) will be available with DivX certification in the next couple of weeks. In the same category is the NHJ MPM201. Both of these have a four- to five-inch LCD, they have a 20- to 60-gigabyte hard drive, and they have TV outs. You can store 50 to 70 DivX movies on them, or plug them into your TV and watch the content on any TV with a component-out jack.

The portable media player category is still fairly small, but I personally think this sector will drive convergence more than any other category for IP-driven music or video.  I’ve got rooms and rooms of gadgets in my house, and the ones I use the most are my portable media devices. I can download content from my PC to my device, watch it on a plane trip to Asia, I can plug it into my 65-inch Sony DLP and get a great experience with DVD quality, or I can show it off at a trade show. I’ve got my entire audio library on there, an entire photo library, lots of DivX video.

You mentioned DivX certification. What’s that?

Ghanem: The DivX certification program ensures that any device that carries the DivX logo meets our standards for quality, interoperability and security. When you walk into a store and buy a Toshiba, JVC, Philips or Thomson DVD player with a DivX logo on it, it means it always plays DivX, that the content created by that device can be played by any other device that bears the DivX logo, and that device can play both free and secure content.

Can you record off broadcast TV and transfer the shows to these portable media players?

Ghanem: Yes, but there’s an intermediate transcoding step on the PC. The NHJ device does have a handle with an analog-in that allows you to encode directly, but you won’t get a great picture until the chips get more powerful. Now, if you were so inclined, you could go out to BitTorrent, get an RSS feed, and grab all the episodes of ‘Sex and the City,’ download them to your PC in DivX format, dump them into your device and watch them.

But that wouldn’t be legal.

Ghanem: Correct. And we don’t advocate it. Don’t do that.

A year or two ago Archos raised some eyebrows by allowing people to record directly off their TVs onto a portable device with DivX encoding.

Ghanem: Yeah. Not a strong working relationship between the two companies right now. Can’t really give you details about that.

I take it that licensing deals with DVD manufacturers make up the bulk of your business.

Ghanem: Apex started the trend toward multi-disc, multi-format DVD players. They were the first guys to introduce MP3 decode in a DVD player, and that started a revolution where suddenly MP3 suddenly became a must-have feature for DVD players. About three years ago the demand for including DivX on the players became great. Today every major manufacturer of DVD chipsets and DVD players in the world is a DivX customer. Over 103 different models of DivX-certified DVD players are available today.

What other markets are you entering?

Ghanem: Fixed media. Fixed media is not available today for DivX but we are in deep conversation at the terms level with two different companies to create kiosk-based systems. Imagine kiosks in a Blockbuster or similar store where you could download highly compressed but high-quality high def onto your device.

What would be in those kiosks? Indie films?

Ghanem: You’ll see major studio content. One of the issues is with the studios’ release windows system, so the holdup is in determining the appropriate release window for new releases on the Internet and on new media. There’s got to be a new industry standard created around that.

We’re also working with a major content provider so that if you want to see a major new release, you can have it delivered to your door in high def on red-laser DVD or on some other fixed media on the day it comes out in the theaters, maybe for about $20.

Are you in discussions with Netflix?

Ghanem: Netflix would be a great customer for DivX. Yes, we’re talking with them. The bottom line is, if you’re a Netflix, a Blockbuster, a major studio or independent content provider and you want to get to the TV, you look out into the marketplace. Here’s DivX on 25 million secure, addressable devices to which you can actually sell content.

What’s coming on the horizon?

Ghanem: The two cool categories we see are, first, network-enabled DVD players, turning your DVD player into a PVR-type device and network server and receiver. About 10-12 percent of the DivX-enabled DVD players hitting the market this year will be network enabled, running into the millions.

The second cool category are the high-def DVD players coming out in Q4. These are regular DVD players that are using a chip that has been optimized to decode DivX high-definition content.

What else?

Ghanem: Digital cameras. Today if you have a still camera, your video options are pretty crappy. You can get 15 to 45 seconds of really poor motion mpeg1. We’re working with our partners to roll out 30 minutes to an hour of VGA quality and in some cases DVD quality video on fixed media that is compatible anywhere in the house. Those guys are thinking, ‘If I can capture 15 to 30 minutes of VGA to DVD quality video on my still camera, I frankly negate most of the need to have a digital videocamera, and I can charge more.’ The cameras aren’t out yet, but I’d expect to see tens of thousands of units by Christmas, rolling into the low millions in 2005.

We’re also working with the DV camera guys to help them capture even more content with complete compatibility so if I take my Samsung camera and I capture some footage at a party, I can drop it into my portable media player, my DVD player, anywhere in the house and it just works.

And the last category would be PC encoder peripherals. These guys are popping up between the PC and the TV as a mediating step. The Plextor PX-M402U digital video converter would be a good example. These devices have an analog signal in, and they can transcode and encode content on the fly into DivX and dump it onto your hard drive. The user could capture any analog TV signal, compress it into DivX and store it on his hard drive and then watch it anywhere in a connected home.

This is neat stuff. From a business perspective, DVD players are where we make our money and drive our dominant position in the marketplace. The things we do that are true to our nature and exciting to the consumer audience are new device categories, the portable media players and PVRs, the PC encoder peripherals and the cameras.

Of all these different technologies we’ve discussed, which is most personally rewarding to you?

Ghanem: Two answers to that. As a DivX user, the most exciting stuff is in the advanced technologies that are enabling user creation and consumption of content. We’re doing some really cool things around high definition video right now — you can download some high-def trailers from our website and you can view it on your PC. We’re working to get high-def devices out into the market before Christmas. The first ones should be coming out in the next six to eight weeks. Can’t tell you the details yet.

Another exciting initiative is working with independent film producers and other folks that are not the major studios to help create their movies, edit them effectively, and reach a much broader audience with their message. We’re considering projects where we equip people around the world with cameras to go out and film content. We’re also hoping to do a DivX film festival. We have a large social consciousness and those are the sorts of things we enjoy doing.