Turn on, tune in, turn-off

Last week DTC gave you some insight into why consumers who have heard the digital TV transition promises and purchased a digital converter box may be greatly disappointed once the hook up their new boxes. This week Stewart Wolpin delves into more problems being faced when the analog signals switch off.

Monday, August 25, 2008 – Stewart Wolpin

We are now six months from digital-TV-transition day. On February 17, 2009, when analog terrestrial television broadcasts cease, there will be millions of TVs that will go dark. There is an undercurrent of dread as industry and government players contemplate how big of an impact this will have on American households.

An analysis of the National Telecommunications and Information Administration (NTIA) coupon-redemption data and DTC’s estimates of ATSC digital-to-analog converter boxes shipped provides a glimpse of how many screens will go dark. And the news isn’t necessarily encouraging.

The NTIA recently announced that more than 23 million coupons had been requested as of mid August. Nice, but…

Nielsen, the TV ratings people, estimates there are 14 million over-the-air (OTA) households. This estimate doesn't take into account unconnected analog TVs in cable or satellite homes. Many unconnected homes have two or more analog TVs, and many connected homes have at least one unconnected analog TV. DTC estimates that there are about 38 million terrestrial analog TVs in use today.

Of those 23 million coupons, NTIA reports that 8.3 million have been redeemed to date. At that rate, the industry will be a long way from “converting” those 38 million analog TVs. Of course, there will be some analog TV sets replaced with integrated digital TVs, or analog sets used only with DVD players and videogame systems that won’t require a converter box. That will still likely leave millions of sets that aren’t ready for the transition.

Yes, NTIA is sure to turn up the effort to educate people on how to prepare for the February 17 cut-off day. But the job won’t be easy.

First, a large number of people don't even know there is a DTV transition to begin with, if they even understood what it meant. A couple of months ago, Best Buy ran a survey on the subject. Forty percent of those queried don't know the date of the turn-off and 54% don't know why it's happening. Count me in that latter group.

A few days later, CNN.com ran a similar admittedly unscientific poll. Of nearly 110,000 responses, 70% said they knew the date, but 22% said they didn’t, and 8% answered "what's digital transition?" That's 22% and 8% of people who own a computer and read a Web-based news site. How much of a chance do non-technical people have to know what's going on – or, more accurately, what's going off?

For instance, last weekend while in the checkout line in a big discount department store, I watched a shopper in front of me unloaded a no-name 13-inch analog TV from his shopping cart. It was bad enough that the poor guy didn’t know his new TV would go blank in six months, but it was even worse that the store still sold it to him.

Here’s the kicker. The more than 14 million unredeemed coupons are or soon will be, useless. They have to be used within 90 days, and you can't reorder.

Digital-to-Analog Converter Boxes: A Little Expectation Management May be in Order

Monday August 18, 2008 – Myra Moore

Some consumer ads regarding the DTV transition imply that digital-to-analog converter boxes will deliver a dramatically-improved TV viewing experience over that of receiving over-the-air analog signals. Fair enough if all reception conditions are near perfect, but like most things, perfection is seldom achieved.

Granted, my analog over-the-air reception with a pair of rabbit ears is pretty poor, but that’s no surprise. But if I had bought into the implied promises communicated through some of the DTV transition ads, I would have been pretty disappointed in the converter box I hooked up to my analog TV a couple of weeks ago.

The message prominently highlighted in some of the spots is that digital equates to a better picture, better sound, and more channels. And it does, if you get strong, uninterrupted reception of all digital signals available in the area. But my analog TV, which is a secondary set stashed in the spare bedroom, and new converter box are hooked up to rabbit ears. Out of all the digital terrestrial channels available in the Dallas/Fort Worth area, only one came in clear and without frequent pixelation. The rest displayed more pixelation than clear picture or no signal at all. Some consumers will hook their converter boxes to an outdoor antenna and will likely get much better results than I did. But I’m betting that there will be plenty of people who will take the “easy” rabbit ear route that I did. Maybe they’ll get better results than I did, but it’s a crap shoot.

It wasn’t a big disappointment. My expectations were pretty low going in, but then I’ve followed the digital terrestrial TV business as a market analyst since its inception and knew about potential reception problems before hooking up the rabbit ears. But most people have no frame of reference or experience with digital terrestrial TV and don’t have any reason to take the messages of ”improved quality and more channels” at anything but face value.

It’s a foregone conclusion that some consumers will be frustrated and confused with the converter-box program. The temptation to paint the transition as a wholesale improvement over the existing system is hard to resist – it helps sell converter boxes and to convince over-the-air only households to prepare early.

Maybe introducing some expectation-management messages into the transition process is a good idea. The inclusion of an asterisk to the message that the magic of digital will result in receiving more channels and great pictures* may be in order.

*Magical results may vary according to antenna type and reception conditions

Will DivX Help Sony Take on Apple?

Monday, August 11, 2008 - Antonette Goroch

That no one has succeeded in challenging Apple’s dominance of the Internet video download market is both fact, and, to some prognosticators, prophecy. But DTC believes that Apple may face a credible challenger in Sony with the help of DivX.

Sony announced that it would allow its movie and television content to be distributed in the DivX format in January. Since then a steady stream of announcements from Sony and others suggest a broad, DivX-based ecosystem strategy, which could ultimately challenge Apple’s dominance for paid videos.

Indeed, over the past six months Sony has extended its original content agreement to include international releases, and made certification agreements across a range of product types, including the Playstation 3 and Blu-ray video optical disc. Add to this Sony’s new model of Blu-ray player, which also includes Internet access, and the picture becomes even more interesting.

Meanwhile, CinemaNow, one of the longest running Internet VOD sites with mainstream studio content, announced in late July that it will begin offering some (as yet unnamed) titles in the DivX format---undoubtedly Sony titles will follow by the end of the year. Certainly they will also be available through Sony’s own Sony Connect online propertiesto serve the Playstation platform.

Why might Sony succeed where others have failed? Because Apple’s digital entertainment ecosystem has seamlessly fostered growing mainstream commerce, but is still a closed network. Only Apple files will play in the Apple ecosystem. By aligning itself with DivX, Sony gains the benefit of a commercially secure platform (a la DivX’sOVS DRM) coupled with a thriving open platform that allows for a greater consumer base.

The potential of this sleeping giant is rather vast. DivX already boasts an installed base of over 100 million devices (predominately DVD players), which could easily double in short order if product suppliers other than those that make DVD players include DivX compatibility with mobile phones, and cameras. Indeed, DivX has spent the year announcing a swath of new DivX certified devices which include products for home networks (DivX Connected), mobile phones, Blu-ray players, as well as several promising chip level initiatives with Broadcom (set-top boxes) and AMD (mobile). Sony’s content will soon be available for purchase and playback by this entire “three-screen” installed base.

Additionally, there is already a great deal of DivX content on the Internet, meaning Sony won’t have to rely only on its own catalog to drive the platform overall. Stage6, DivX’s now defunct online clearinghouse, claimed some 17 million members before it was shutdown—and that was with no mainstream content. As a point of reference, DTC estimates Apple has about 16 million video customers.

If Sony can successfully tap the growing base of DivX devices, one thing is clear: the balance of power in the burgeoning Internet video market will have significantly shifted.

SAVE THE DIGITAL CAMERA!

Monday August 4, 2008 – Stewart Wolpin

Mobile phones are designed for communications. Digital cameras are designed for imaging. And yet, slowly but surely, the mobile phone seems to be replacing the digital camera as a primary, day to day picture-taking and video-recording device.

Camera phones outsell digital cameras around four-to-one. More than a billion camera/camcorder phones are likely to be sold worldwide in 2010. In comparison, DTC estimates that 119 million digital cameras will be sold this year. And folks holding up a mobile phone to snap a picture or capture candid video has become a common sight around the world.

DTC estimates that global digital camera sales will drop 5% in 2010 compared to 2009. By comparison, DTC expects global sales of mobile phones with digital imaging capabilities to rise significantly this year.

According to PMA, camera phones were present in 46% of U.S. households in 2007, up dramatically from 35% and 26% in the previous two years. In a recent survey, photo sharing site Flickr reported that nearly a quarter of shots uploaded to its site came from mobile phone cameras, and nearly 41 percent of users were uploading pictures taken by a mobile phone camera.

These trends are likely to continue. Mobile phone cameras have been vastly improving, moving from VGA to 1.3 megapixels (MP) to 2.0 MP. A growing number of phones now include 3.2 MP cameras, and a handful have 5 MP cameras. In the fall, Sony Ericsson will begin shipping the 8 MP Cyber-shot C905. Considering its imaging ergonomics, lens and advanced feature set, the C905 is more a digital camera with a built-in mobile phone than vice versa.

Mobile phones also add the convenience to send just-shot videos via messaging or email, or to upload them directly to video sharing sites such as YouTube, a feature only one or two digital cameras can match.

Is the standalone digital camera doomed?

Source: DTC

AVC/H.264 to the rescue?

One way digital camera makers can battle this erosion is to offer higher-resolution video recording. Yet, DTC estimates only about 19% of current digital camera models include MPEG-4 Visual video recording capabilities, and at this writing only Casio offers models with AVC/H.264 HD video recording.

What's even more surprising, prominent digital camera makers Canon, Polaroid, HP, Panasonic and Pentax sell NO digital cameras with MPEG-4 Visual video recording. Instead, all offer Motion JPEG, which allows users to extract still frames.

Canon and Panasonic make and sell AVCHD camcorders, so are quite capable of adding HD video capture to its digital cameras. But the two companies are likely fearful of camcorder cannibalization if they added AVC/H.264 video recording to their digital cameras.

These no-AVC decisions run counter to consumer desires. According to a 2008 J.D. Power Digital Camera Usage and Satisfaction Study, 40%of users used their digital camera to record video, but 52% wanted the capability. Sixteen percent cited high-definition video recording as one of the five most important features that would influence their digital camera selection.

With this increased competition from sub-$100 flash camcorder mobile phones with video capture, digital camera makers have gotten the message. In September, two top 10 digital camera makers will add models with AVC/H.264 video capture.

DTC expects more digital camera manufacturers will add AVC/H.264 video capture as well as some kind of uploading abilities.

If not, standalone digital cameras could soon become as much of a technical dinosaur as the vinyl record turntable, audio cassette player and the VCR.