3D: Do We Really Have to Have Another Serving?

Monday August 31, 2009 – Stewart Wolpin

Imagine you've just completed the Thanksgiving feast – turkey, dressing, mashed potatoes, pumpkin pie: The works. Your body sinks into the sofa as the tryptophan and alcohol sends you gently in-and-out of consciousness. Just as you enter REM sleep, you're blasted awake by a loud shriek: "Time for dinner!"

Dinner?! You just stuffed yourself!

Like the after-effects of a big holiday feast, America is sleeping off the long digital TV transition. Instead of turkey, we've consumed a bellyful of dire government entreaties to make sure we have a tasty new HDTV, a side dish of digital cable box and a digital converter desert. After this HD smorgasbord, we are now happily dazed in our digital torpor.

Wake up! Panasonic (and presumably the rest of the HDTV/Blu-ray equipment and content selling contingency) want us to do it all over again, this time to transition from 2D HDTV to 3D.

Last week Panasonic held a number of small demonstrations of its 3D HDTV and 3D Blu-ray products. Its stated plan is to start shipping 3D HDTV and 3D Blu-ray products in 2010.

What is Panasonic's 3D system? More on the technology here.

Why the rush?

Under a cloud of increasingly lower margins for flat-panel TVs and Blu-ray Disc devices, and the slower-than-hoped-for uptake of Blu-ray devices, TV suppliers understandably see 3D HDTV as a tasty high-margin morsel next to the $99.99 Blu-ray Disc player. Consumers have only been snacking on low-cost smaller-screen LCD TVs during this nasty recession and now suppliers are busy in the kitchen whipping up the next high-margin TV technology.

A 3D home theater will require not only new 3D HDTVs and 3D Blu-ray players but also AV receivers, all equipped with the just announced HDMI 1.4 standard. Oh, and for this flavor of 3D TV, you’ll have to wear those stylish glasses.

3D HDTV is the perfect antacid to the current HDTV/Blu-ray market heartburns. Unlike Blu-ray with its hard-to-see qualitative improvements and hard to suss BD Live connectivity frills, 3D creates an immediate and compelling gulf between what was and what will be. For Joe Sixpack, the arguments for spending extra dough to improve from 480p and 1080p might as well be a discussion between Albert Einstein and Neils Bohr about the merits of quantum mechanics.

The differences between flat TV/DVD and 3D HDTV/Blu-ray? (Insert your own humorous night-day metaphor here.)

The problem is America is still bloated from the digital transition meal. Now that millions have spent millions on new HD gear, how will they feel about being told they now have to spend again/more on new gear to get the real advantages of HDTV?

We suspect that most of us are going to push back from the table and say “We’re pretty full right now.”

Stay tuned.

Checking in with STB Shipments

Tuesday August 25, 2009 – Shelby Cunningham

Networked connected set-top boxes (STBs) reached record shipment numbers in 2009, coming in stronger than expected. Digital cable STBs, Direct-to-Home (DTH) STBS and Internet Protocol TV (IPTV) STBs all totaled over 133 million units shipped in 2008, and are expected to ship over 150 million units in 2013.

Digital cable STBs saw an increase in shipments in 2008 due mainly to new Chinese rollouts, as well as the introduction of Digital-to-Analog (DtA) adapters in the U.S. The Beijing Olympics provided the opportunity for digital cable upgrades to happen quickly in China.

In the DTH Satellite STB market, shipments were fueled by a demand for high definition and other advanced systems in Europe. Also in Europe, IPTV shipments are maturing and therefore slowing. IPTV shipments did come in higher in North America, and weaker in Asia Pacific, but overall were largely in line with previous forecast.

Source: DTC

Source: DTC

45 Million Boxes in 18 Months: Who Knew?

Monday August 17, 2009 – Myra Moore

Who knew so many consumers would buy U.S. DtA converter boxes? That 45 million (DTC’s latest estimate from its tracking service) shipped into retail from January, 2008 through June, 2009 comes as a surprise to just about everyone.

We’ll even go higher. DTC estimates that given the large volume of coupon requests in June and July (on the heels of the deadline for requesting coupons) that number could hit 50 million by the end of the year.

So now that the U.S. successfully shut off the analog spectrum without a major disaster, what are lessons learned and why should anyone care now that it’s all over? First of all, folks in the business of making equipment and delivering over-the-air TV programs should care because there are lots of other countries that have yet to shut off analog transmissions. Translation: There’s still more money to be made on turning off terrestrial analog transmissions.

Lessons learned?

• A product category ripe for the old-style price wars can actually keep its average retail price steady for a sustained period. Granted, there wasn’t a lot of margin for suppliers and retailers to begin with, but it seemed like a dive to the bottom could have started a lot earlier. We’ve only witnessed serious discounting off the average $50-$65 retail price since the shut off occurred. Frankly, we expected to see lots of $40 price tags for converter boxes quite early in the program.
• Don’t underestimate the popularity of a government subsidy. Most prognosticators seriously underestimated the take rate of coupons within pay TV households. Those old analog sets in the basement or the garage? Good chance they’ve got the box.
• Procrastinators rule. There will be an onslaught at the very end. No matter how early you warn folks about the big day and how many times you tell them (ad nauseam), most are gonna wait.

Can Blockbuster Break Through the Bricks & Mortar?

Monday August 10, 2009 – Antonette Goroch

No doubt in response to Netflix’s popular video-on-demand set-top box (the Netflix player by Roku), Blockbuster debuted its Internet VOD service/STB to much fanfare late last year. But after almost a year of luke-warm reviews Blockbuster has been conspicuously silent about shipments of its branded set-top boxes or customer usage, leading many to question the long-term viability of the effort.

Blockbuster would seem to be well positioned to leverage its national presence into a successful VOD brand. It has a strong existing customer base, which it has extended fairly successfully into DVD by mail (a la Netflix) over the past couple of years. It also has existing deals with major studios that theoretically could be leveraged into shorter release windows and expanded catalogs of back titles. Never mind the failed VOD experiment with the infamous Enron back in 2001 – we’ll give Blockbuster a pass on that one seeing that its business partner couldn’t be relied upon to be honest with – well – anyone.

But despite this, unofficial estimates put STB shipment levels in the tens of thousands at best, far below what many had been expecting from the product. A couple of factors could suggest why reception hasn’t been what many were hoping for. While competitors such as Netflix, VUDU and Amazon have been extending their catalogs into HD throughout the year, Blockbuster remains SD only. Further, while Blockbuster has been able to secure some new releases ahead of competitors, its overall library is smaller---particularly in regards to popular TV content. Additionally, Blockbuster only allows a 24 hour viewing time from purchase—shorter than a bricks and mortar store rental. The bottom line is that Blockbuster has had little to differentiate its service in a recently crowded slate of VOD to the set-top competitors, and the market for such a single-use set-top box is inherently small.

Indeed, now that Netflix has essentially picked the low hanging fruit of early adopters with its Roku Netflix Player, differentiation will be increasingly difficult for most of these products. That’s no doubt why most players, both hardware and content alike, are seeking to expand their presence and capabilities through cross partnerships. Roku, for instance, just announced its newest player includes support for a variety of video codecs, access to the Amazon and Netflix VOD libraries. Similarly, Blockbuster is reported to be close to a deal with Sony to offer its content library via the PlayStation 3, as well as its own player. What seems clear is that with such a crowded market place for essentially the same content, Blockbuster (and other potential VOD service providers) can no longer rely on just a strong existing brand to make headway into the burgeoning market for Internet VOD. Indeed, Blockbuster’s experience indicates it will have to raise the bar considerably---both in terms of HD content, scope of delivery and the depth of their libraries—to gain any significant marketshare at this point.

LTE, Mobile DTV: A Change is Gonna Come

Monday August 3, 2009 – Stewart Wolpin

U.S. terrestrial broadcasters are buzzing about finally being able to monetize their forced investment in DTV with the advent of mobile DTV sometime later this year or early next year. Simultaneously, Verizon and, to a lesser extent, AT&T, are both buzzing about the future of their 4G LTE networks, due early next year and 2011, respectively.

These buzzes are not separate and distinct. Broadcasters and wireless carriers have been inexorably bound for nearly 50 years in their battles over precious spectrum – the recently concluded digital transition, the logical conclusion of these battles, has made both Mobile DTV and LTE possible.

This symbiosis between broadcasters and carriers will not change as both buzz about their new standards. Together and separately, in ways no one – including their prime promoters – can predict, mobile DTV and LTE will revolutionize how broadcasters and carriers deliver content and services, the how studios package content, the types of mobile equipment that will be manufactured to receive and view this content, and how consumers will consume all of these.

Verizon has been conducting LTE field tests in several markets and, according to published reports, have been achieving download speeds of up to 60 Mbps, faster even than its wired FiOS internet service. Real world speeds are likely to be less, but even if actual throughput is half of those reported, 30 Mbps is still nearly twice as fast as most wired broadband delivery methods. The mind reels with the possible positive effects on both mobile and home Web access and the negative effect on wired ISPs.

The official word from Verizon about LTE is a 20-30 city rollout in the second half of next year with full nationwide rollout planned for late 2013/early 2014. But parallel rumors have been flying about an Apple tablet due early next year and of Verizon rushing LTE rollout, prompting speculation of an LTE-powered Apple tablet and a future LTE iPhone later next year.

Exaggerations and speculations? Absolutely. But it's hard to deny the logic that such converged devices will flood the market.

At the last two CESs, for instance, both LG and Samsung demonstrated a variety of mobile DTV devices such as portable DVD players, portable TVs and mobile phones. Verizon and AT&T both have gotten into the carrier-subsidized netbook business, perhaps building a foundation for a range of LTE devices. Whether or not broadcasters and telecom carriers will take the symbiosis far enough to merge the two technologies into a single device is still not known. We think that it’s a possibility but not until all parties invlolved can figure out how to either make more money off the services, or to retain valuable high ARPU customers.