3D HDTV FUBAR

Tuesday December 28, 2010 - Stewart Wolpin

Stewart is Digital Tech Consulting's Senior Analyst.

It was one of dozens of otherwise innocuous and usually ignored CES appointment queries. Apparently Polaroid Eyewear, an unfamiliar company with a familiar name, has a booth at CES (South Hall 13616) at which they will exhibit passive Polarized glasses for 3D viewing.

Why, I asked myself, would anyone buy polarized 3D glasses? That's like opening a store to sell little ketchup packets. Passive 3D glasses only work in movie theaters, and they're free.

So, like a good little reporter, I asked why. The Polaroid Eyewear PR gal told me "many of the next generation 3D TVs from the major players set to launch at CES are expected to use circular [passive 3D] technology."

To which I coolly responded, "WHAT?!"

Passive 3D HDTV is coming

We are going to see a new breed of 3D HDTVs at CES, ones using a passive 3D technology called "circular," which doesn't require active shutter glasses. The polarizing left eye/right eye filters are built into the LCD HDTV itself rather than in the glasses, as is the case with active shutter. This means passive 3D HDTVs use the same polarized glasses used in movie theaters and are a fraction of the price (Polaroid Eyewear's run around $30).

Vizio is the first to start selling a passive 3D HDTV, the 65-inch Theater 3D Edge Lit Razor LED (model number XVT3D650SV), priced at $3,700. Vizio will be demonstrating it in the Le Fleur Ballroom in the Wynn at CES.

Earlier this week, LG introduced the second passive 3D HDTV, the as-yet unpriced LW6500, which will go on sale in selected markets soon after CES. LG's passive 3D HDTV launch isn't surprising. The company has been making passive panels in Korea, and earlier this year introduced two passive 3D consumer models into the U.K. market.

There are likely going to be others announcing passive 3D HDTVs at CES, but I admit this is all educated guesswork:

JVC has been selling a 46-inch passive 3D monitor and so is a top candidate to introduce a consumer model.

Sony also sells commercial passive 3D HDTVs for the broadcast market, so, maybe…

And I've heard Toshiba's name bandied about in connection with passive 3D HDTV.

Again, I have no official, on-the-record confirmation for any of this. But I smell a trend.

Passive 3D: A good idea

Once I got over my initial shock about the introduction of a second 3D HDTV format, and after some discussion with folks in the 3D know, passive 3D seems like a good idea for consumers, primarily because the expensive, heavy, constantly-in-need-of-recharging battery-powered active shutter glasses would be replaced by the kind of 3D glasses you get at the movies, only fancier and cheaper. (And thank goodness they'll be fancier. You could end up in a tussle with a minimum wage usher demanding you return your own glasses, but we'll cross that bridge when we see it in 3D.)

And of course retailers would love it – they can stop worrying about unpowered glasses when doing a demo.

Yup, passive 3D HDTV is a good idea – if this were the eve of CES 2010 instead of CES 2011.

Passive 3D: A bad idea

The pixels are barely dry on the active shutter 3D HDTVs the major HDTV makers have been hoopla-ing for the last year. Now we're getting ANOTHER 3D format?

What in the wide wide world of sports is a goin' on around here? Who's running this industry?

In a world of bad CE ideas, introducing two completely different 3D HDTV formats into an already skeptical 3D-at-home market ranks up there with the FUBARs (ask your local WWII vet what it means) of RCA CED, Philips DCC/Sony MiniDisc, DVD+/-/RAM, and HD-DVD/Blu-ray.

No, introducing both passive/active 3D is more FUBAR, actually. These earlier format wars made a semblance of business sense since the protagonists were fighting over lucrative standards royalties. Passive 3D is an open standard – anyone can do it, with no royalty payments due to competitors.

So why is passive 3D FUBAR?

Get it wrong the first time

I'm going to move from the usual subjective tense to a more chiding objective. Yes, I'm talking to you, 3D HDTV makers.

First and foremost, if you knew passive 3D was on the horizon, what was the rush to bring active shutter to market first? "Because we could" was essentially the answer I got – that manufacturers could produce active shutter sets faster and more cheaply than the more technically and manufacturing complicated passive and, therefore, active was the quickest way to get 3D to market.

Great, you could get active shutter 3D to market faster – but should you have taken it to market at all when you had another potentially more consumer-friendly approach in the offing?

And, active 3D wasn't even ready for prime time – or any time – to begin with. Consumers groused almost immediately about the need for glasses, especially ones that needed batteries (glasses that need batteries? WTF…?). Sets were incompatible – one brand of $150 active shutter glasses didn't work with any other brand of active shutter 3D HDTV. You tried to sell 3D HDTV to a tech-weary consumer who had just gotten used to the idea of upgrading to HDTV to begin with. You had little Blu-ray and less broadcast 3D content lined up. Great market preparation, folks.

As a result, retailers and manufacturers have been reduced to scrambling, selling 3D HDTVs as really good 2D HDTVs that also can do 3D, if and when there's anything interesting to watch in 3D.

Hardly anyone – consumers, retailers, even many HDTV executives – understand active shutter 3D. They don't know how to explain it, market it, demo it, or sell it. Shocker: consumers don't give a rat's behind about 3D.

Before you throw another confusing 3D technology into the 3D mix, don't you think you ought to have gotten the first one straight?

It's a passive future

I understand what's going on. For LCD HDTV makers, passive 3D eliminates all the inferior refresh rate issues when compared to plasma 3D. Since LCD is the dominant HDTV technology, passive 3D HDTV may well become the dominant 3D HDTV format in a few years – in technology, convenience always trumps quality, and passive 3D is way more convenient than the higher-resolution active 3D. Plasma-based active shutter 3D HDTVs could become the elitist loyal opposition, sort of the D-SLR to passive 3D's point-and-shoot, the way 2D plasma is now to 2D LCD.

And introducing passive 3D is a way for the LCD HDTV makers to cut their active 3D losses early. We tried it, it didn't sell, let's move on quickly as if nothing had happened.

It's going to take a few years of 3D market FUBAR before this active/passive business works itself out, and could result in complete consumer petrification – they may not buy anything until you people get your 3D standards act together. In the meantime, you've left it to poor tech reporting schmucks like me and pimply retail sales staffers to deal with buyer bafflement.

But this 3D market FUBAR could have avoided with just a little less penny-wise/pound-foolish greed and a little more brain power applied first. Is the profit – if any – on selling just 3 million incompatible active 3D HDTVs worth the 3D FUBAR era you are about to lead us into?

More Content: Prescription for the DCA Blues

Tuesday December 21, 2010

The digital content appliance (DCA) category has largely been a non-starter in mainstream terms, marked by far more failures than successes. And the thud of GoogleTV officially entering the market place won’t likely change this fact anytime soon.

Most products designed to connect the Internet, PC and TV over the past several years have died on the vine, with only market leaders Roku and Apple having achieved what can at best be called moderate success. Indeed, shipments are barely over a million units annually—mere pocket change in consumer electronics terms.

Business, not technology, is the primary sticking point keeping this market in “start up” mode. Content owners, for the most part, are hanging on to current relationships with traditional pay TV suppliers for their high-value content. The relative success of Apple TV and Roku/Netflix are attributable to deals they could secure for mainstream content. Content providers certainly aren’t giving Google any special treatment as the platform has received poor technical marks (This week Google asked TV makers to delay launch of products) and several snubs from TV content owners.

The story is far from over. Despite the dramatic declarations that the internet is taking over the TV, the internet TV experiment is only starting. Stay tuned. Much, much more to come.

Checking in With Digital Television Receivers

Monday December 13, 2010 – Maya Jasmin

With analog shut-off plans solidified in most major countries, and some having completed their shutoffs already, digital television is definitely a matter of global interest. Digital TV receiver suppliers are all trying to find ways to remain relevant and profitable within the market. DTC’s latest data suggests that suppliers to the Digital Terrestrial TV (DTT), Direct-to-Home (DTH) Satellite, and Internet Protocol TV (IPTV) platforms should be poised to expect growth through at least 2015.

Digital Cable receivers are the only platform expected to see a decline in shipments dropping from roughly 54 million units in 2011 to right below 50 million units in 2015.

DTT receivers, which represent the most growth of all platforms, are expected to reach roughly 158 million units by year end 2010 and 224 million shipments in 2015, for a Compounded Annual Growth Rate (CAGR) of 7% over the period. DTT receiver estimates include both set-top boxes (STBs) and integrated digital TVs (IDTVs); the explosive growth in the platform is mainly attributable to IDTVs as STB shipments remain relatively flat.

DTH Satellite receiver shipments account for the second largest majority of yearly shipments throughout the period. DTC forecasts that nearly 97 million DTH Satellite receivers will ship in 2011 growing to over 100 million in 2015. Although the shipment volume of IPTV receivers is not as robust as the other platforms they do account for the second largest CAGR of all platforms with 23 million units shipping in 2010 and 26 million in 2015, logging 3% growth over the period.

Source: DTC

The MPEG-2 Legacy Stays Strong

Monday December 6, 2010

While the MPEG-4 AVC market continues to advance the MPEG standard into new markets, its predecessor MPEG-2 is still a prominent player. Many consumer electronics products include both codecs to ensure backward compatibility.

DTC estimates that more than 800 million MPEG-2 products will ship in 2011 slightly growing to 850 million products in 2015. Set-top boxes (STBs), DVD and Blu-ray disc (BD) PCs, and non-PC DVD and BD devices make up most of the MPEG-2 devices shipping today.

MPEG-4 AVC/H.264 will soon take over the lead as far as products shipped. DTC estimates that 807 million products containing MPEG-4 AVC shipped into the market in 2009, and expects that number to reach over a billion by year end 2010, with shipments nearly doubling in 2015, yielding roughly 2.2 billion units. MPEG-4 AVC has firmly established itself as the codec of the future and DTC expects impressive growth across a majority of product categories for many years to come.

Even though MPEG-4 AVC/H.264 is taking the lead over MEPG-2 and is expected to experience continued growth, it is obvious that MPEG-2 remains a major player in the game as long as legacy content remains in the market.

Source: DTC

3D Mystery Shopper

Monday November 29, 2010 – Stewart Wolpin

It was an otherwise innocuous press release: Display Search noted "3D TV Not Growing as Fast as TV Makers Expected in 2010," the company slightly cutting shipments projections from 3.4 million units in the U.S. this year to 3.2 million units. Not a shock; initial forecasts of a new technology often are overly optimistic, backers hoping to project an image of success to spur consumer interest and demand. Once the realities of the marketplace and the current recessed economy took their toll, a quiet (shhhh!) adjustment of said numbers out of the public eye shouldn't appear too damning.

Except, as is often the case, there's more to these lower-than-expected uptake numbers than meets the eye. If 3D HDTV fails to catch on, the manufacturers – specifically the retail merchandising managers and trainers, along with the retailers themselves – will have a lot to answer for, at least if my recent 3D mystery shopper trip last week is typical.

Ostensibly, I went out to three Best Buy locations in midtown Manhattan – the store on Fifth Avenue and 44th Street, 23d Street and Sixth Avenue, and in Union Square where Panasonic made a big splash with the first-ever 3D intro last March – to test out the new universal 3D glasses from XpanD, which went on sale last week. XpanD's universal glasses would give me the excuse to devote this column to the quest to unify the nascent 3D equipment experience, including the efforts of CEA's own universal glasses committee. Attaining a one-standard-glasses-for-all, everyone agrees, would immeasurably ease consumer confusion. The Magnolia stores inside Best Buy, both myself and XpanD figured, would be the perfect place to test their glasses on a variety of 3D HDTV makes and models and, at the same time, take the temperature of the 3D market.

A raging fever doesn't begin to describe the problems in 3D HDTV.

Only one 3D HDTV in each store I visited actually was playing 3D content, all Panasonic sets, each matched four feet away with glasses mounted on height-adjustable stanchions. At the Fifth Avenue store, there was a 3D Samsung LED HDTV showing not a 3D demo, but ESPN's SportsCenter because, one employee working in a nearby department told me, they wanted to keep track of scores and news. I loitered around the Magnolia store-within-a-store for 15 minutes, fruitlessly waiting for someone to notice a customer interested in the high-priced item. During my wait, several customers wandered over and Pavlovianly (if that's a word) donned the 3D glasses tethered to the table opposite the Samsung. I advised each one that the set was not showing 3D (how they didn't notice this themselves I can't begin to understand), and to try the nearby Panasonic – which they attempted to do using the Samsung glasses. I let them know that wouldn't work either, that they'd have to use the glasses mounted on the stanchion in front of the Panasonic – and that's not the punch line. (One fellow thought I worked there; he was disappointed when I told him I didn't.)

When I finally beckoned a sales associate and asked her to show me a 3D demo on the Samsung, she acted as if I'd asked her to do my laundry. She then took five minutes to find the remote and run through the TV's menus until successfully locating the right input settings. It was then we discovered one set of the tethered glasses was missing the power button and the other pair had no power at all. She shrugged her shoulders and wandered off, offering no solution, a potential 3D customer lost. I, of course, whipped out my XpanD universal glasses and fulfilled my original mission.

My experience at the other two Best Buys were actually worse. Along with single working Panasonic demos, both also had single Samsung and Sony 3D sets – neither displaying a 3D demo, neither with glasses anywhere in sight. Only the price tag indicated the set's status as 3D. And a second Panasonic set in the Union Square store was showing 3D – but there were no glasses mounted in the stanchion. And as in the Fifth Avenue store, I wandered around the 3D TVs in the other two stores for around 15 minutes each, with nary a sales representative in sight.

I'm shocked any 3D sets are actually bought except by those who know exactly what they want and who don't need a demo, or they are buying a high-end set for other reasons than its 3D credentials. Yes, other stores sell 3D HDTVs, both other big box retailers such as Sears as well as high-end boutiques. But Best Buy, as the biggest nationwide electronics big box retailers, is the 3D front line, and, if my three-store-tour is an actual trend (and I suspect it is), the center of that front line is buckling like the Atlantic Wall on D-Day – not from overwhelming force, but from complete neglect.*

Perhaps the (finally!) release of Avatar in 3D on Dec. 1 will improve matters, but if there are no glasses on sets other than Panasonics, hardly anyone will see it.

Oh, the XpanD glasses proved superior to Panasonic's RealD-made lenses, offering brighter colors, deeper contrast and blacks, and more 3D depth. But suddenly this seems way beside the point.

*Editor’s Note: We happened to do our own Best Buy 3DTV shopping in Dallas (only one store) two weeks ago with similar results. 3D content was being displayed on a new set and there were glasses present but they didn’t work, which probably means the batteries were drained.

I've Seen Cloud Storage from Both Sides Now

Monday November 22, 2010 – Stewart Wolpin

Joni Mitchell is going to have amend her lyrics for "Both Sides Now", adding a positive digital spin to her cynical description of clouds as mere sun blockers, indiscriminant precipitation sources and activity inhibitors.

Prior to Apple's announcement last week of The Beatles invading iTunes, most initial speculation focused on Apple unveiling a cloud iTunes service. There is likely a lot of crow being eaten by the varying prognosticating pundits, but analysts' red-faces may be only temporary.

Cloud storage is a inexorable inevitability, both for personal storage as well as for content streaming. Picasa, Flickr and their ilk already are popular repositories for our photos, while services such as Carbonite and SugarSync already are popular cloud-based U-Store-It warehouses for our data. And Cablevision got Supreme Court permission to begin network DVR service to store our recorded programs on their enormous cloud rather than our own finite home DVRs.

On the other side of the virtual sky are content cloud services. We pull TV and movie programming from the cloud via iTunes, Hulu, YouTube, Vudu, Netflix, et al. Music is streamed from cloud sources such as Pandora, Napster and Rhapsody. And as far as Apple's anticipated cloud-based iTunes service is concerned, the company is nearly ready to open a 500,000-square-foot data center in North Carolina. Even though the company hasn't discussed what the massive facility is for, speculation is rampant it will be used for cloud-based content delivery or an expansion its MobileMe cloud storage service.

The cloud won't only be used for pure storage. Earlier this week, AT&T demonstrated some startling cloud-based TV technology, including a one called iMiracle which would let you make contextual searches of cloud recorded material – searching for specific spoken phrases within a recorded program – and multi-variable voice searches of future TV programming (i.e. "comedy movies starring Woody Allen this Saturday and Sunday").

Since cloud-based storage for all our digital goods is not an if but a when, the only question is how soon local storage products such as DVRs and multi-terabyte external hard drives become both unnecessary and obsolete.

Examining how fast we moved from one form of storage to the next over the last 30 years to guestimate how quickly we move from local to sky storage won't be instructive, however.

Until now, the shift has always been simply physical media, and always to increase capacity – from the 8-inch floppy to the 3.5-inch micro floppy to the Zip drive to CD-R +/- to DVD-R +/- to solid state flash memory cards and thumb drives to portable hard drives, and the varying Moore's Law growth in hard drive memory capacity from kilobytes to megabytes to terabytes and, soon, to petabytes.

But Joni isn't the only one who really doesn't know much about clouds at all.

There's a psychological aspect to cloud storage mainstream consumers have to overcome. Not to get all metaphysical, but physical forms of media are like human consciousness – whatever we know or are is essentially trapped inside ourselves. Transferring that knowledge or experience to other folks – to transfer data from one device to another (i.e. a recorded program on a DVR or an Excel spreadsheet on your PC to a smartphone for mobile viewing/manipulation) – is an imperfect process. Just as humans deal with imperfect language, gestures and facial expressions to messily transfer knowledge or experience, in the data universe we have to deal with copy protection and formats and various wired or wireless connections, etc.

Cloud storage, however, is more akin to Star Trek's Borg, a collected consciousness. In this metaphysical context, all your devices – and anyone you designate – can easily share the same data/content because the data doesn't exist in a physical form in the cloud, at least not a physical form we can see or touch. As far as we're concerned, the photos from your last vacation are floating magically in the ether someplace, free to be viewed by us or anyone we designate on any device with access to the Internet.

And more and faster Internet access – Super WiFi or 4G cellphone networks offering data download speeds of up to 60 Mbps – will contribute to the lure of the cloud.

Therein lies the reason cloud storage will only slowly become widely adopted as a local storage replacement. Local media may be limited in capacity and not as portable as we'd like, but cloud storage seems a bit too much like alchemy – it's there, but isn't. I save my vacation photos and they go – where? Are they safe? Can someone else get at them and steal them? With a nod to Laurence Olivier's demented dentist in Marathon Man, is it safe?

So while the move to cloud storage is happening, it's happening slowly, almost too slowly to notice without time-lapse reporting. Cloud storage is a concept the mainstream consumer has yet to fully grok, which likely will keep sales of DVRs and external hard drives relatively safe – for a while.

Oh, I pulled Joni Mitchell's performance of "Both Sides Now" from – you got it – the cloud.

MPEG-4 AVC Readies Old-School Products for a Second Close up

Monday November 15, 2010 – Myra Moore

Mobile video phones are the star players in DTC’s forecast of more than 1 billion MPEG-4 AVC products estimated to ship into the marketplace in 2010. But the standard is also doing its fair share to brush up the sales of more traditional consumer electronics products as consumer appetite for HD increases.

Advanced video compression merely makes the fact of video playback possible on mobile phones because of the ability to squeeze more bits into a small and error-prone pipe. But for Blu ray Disc (BD) devices, camcorders, and digital still cameras (DSCs) it allows for a relatively efficient and low-cost way to deliver high-definition content to devices other than HD set-top boxes and TVs.

An analysis of forecasts for traditional consumer electronics products using the MPEG-4 AVC standard reveals a high level of growth not seen in some years for more established digital consumer electronics products such as camcorders, DSCs and IDTVs that only previously operated with MPEG-2 or other video compression technologies such as Motion JPEG and MPEG-4 Visual.

In the case of camcorders and DSCs and other common digital products, consumers have come to expect HD. In the case of IDTVs, the betting is that many consumers will grow to expect the ability to source some programming from websites and much of that programming requires MPEG-4 AVC decoding. TVs, camcorders and cameras may not be the glamorous stars that are the video-rich smart phones, but they’re getting a second close up thanks to the MPEG-4 HD face lift.

For a more in-depth data on the use of the MPEG-4 AVC codec, DTC’s latest MPEG-4 AVC reports are now available. Follow the link for more information and detailed tables of content.

I Want My Internet on My TV

Monday November 8, 2010 – Shelby Cunningham

There is a boom in digital content appliances (DCAs) – set-top boxes that deliver Web-based video to the TV -- sales, but it’s unlikely that the new devices have as much life as discreet products. DCA’s won’t die due to lack of consumer interest, but because of convergence.

Many consumers want the function, they just don’t want to stack yet one more box on their TVs. Lower-priced and better designed DCAs like the new Apple TV may be more attractive than the first iteration of DCAs, but the web-streaming function will likely follow that of Tivo and Sling functions – set up housekeeping in a centralized receiver.

The transformation has already begun with service/function providers like Vudu being snapped up by bigger companies like Walmart. Walmart finally gave us a hint of how it will use Vudu last week when it announced that when you buy the special edition of Toy Story 3 at Walmart you will also receive a free streaming copy of the movie on Vudu.

But why would TV makers and service providers want to include access to these Internet video services in their subscriptions? Because of competition and demand. Service providers have to make it easy for people to access Internet content through their TVs or they might switch to a different provider. Services such as Hulu, Vudu and Netflix are already easily accessible on a number of TVs, Blu-ray players and STBs.

There are other boxes, such as the Roku box, that show no signs of converging right now. But it’s only a matter of time before consumers stop buying them because their home entertainment equipment and service providers have made it easy to watch Netflix, Hulu, Amazon.com and many other Internet video services. The Internet video service providers/box suppliers that get acquired or secure a relationship with a company already delivering TV and video services to consumers are the ones who will last in the long run.

Source: DTC

Power Hungry eBook Readers Could Drain Bookworms

Monday November 1, 2010 – Stewart Wolpin

We'd like to welcome a new member to the MPEG-4 family of products – the NOOKcolor. Introduced Tuesday night amidst angelic swirling dervishes at Barnes & Noble's Manhattan Union Square store, this first LCD color ebook reader plays MPEG-4 videos of all stripes both from its Android Web surfer and inside ePub-formatted books and magazines.

Whether or not other ebook reader makers, most prominently Amazon, follow with their own color LCD ebook readers with MPEG-4 video playback capabilities remains to be seen. But NOOKcolor faces two other major challenges: battery life and price.

Make no mistake – NOOKcolor is a fabulous ebook reader, even if its menu-manic interface is a bit daunting. Text jumps off its bright 7-inch LCD screen, contrast and readability impossible to match by any gray monochrome e-ink-based ebook reader. Ebook illustrations, maps, diagrams and photos in their natural color condition are finally worth looking at compared to the powdery Etch-a-Sketch-like 16 layers of gray on the regular Nook and Kindle.

But Barnes & Noble has broken an unspoken agreement between ereader maker and readers.

When the Kindle first came out, book lovers cocked a cynical eyebrow and asked, "Why do we need an electronic book when the real thing never runs out of power?"

In order to allay reader battery-dead-book dread, Amazon used low-voltage electronic ink, enabling Kindle's and other e-ink ebook battery life to be measured in weeks. With battery life a non-issue, Kindle sales took off – Amazon announced not so coincidentally a day before Barnes & Noble's NOOKcolor event that only a month into Q4, Kindle sales already have surpassed last year's Q4 Kindle sales and was selling more ebooks than physical books. Occasional battery recharging has been a perfectly acceptable tradeoff for being able to carry around and access a library of literacy in a less-than-a-pound gadget.

NOOKcolor, however, has eschewed e-ink technology for a full blown color LCD screen, ending up with just an eight-hour reading battery life. By comparison, iPad, with its 9.7-inch screen, can play far more processor demanding video files for 10 hours. And you have to figure WiFi Web surfing will drain NOOKcolor's cell even faster.

With its compromised power life, B&N has re-introduced the original ebook objection – battery worry. Will you be able to read the last few chapters of that John Grisham page-turner before your NOOKcolor dies? That circumstance may prove even more dramatic than the book's plot.

But NOOKcolor is more than an ebook reader. With its Android 2.0 OS, WiFi Web surfing and MPEG-4 video and MP3/AAC music playback capabilities, NOOKcolor has pretenses to be a tablet, which raises a value proposition issue with real tablets.

iPad obviously does nearly everything NOOKcolor does merely lifting its little finger (if an iPad had appendages, a pretty creepy thought) including bright, big(ger) screen LCD ebooking, plus around 300,000 additional leisure and productivity activities, and yet is "only" twice the price as a NOOKcolor ($499 for the 16 GB WiFi iPad; $249 for the 8 GB WiFi NOOKcolor).

Forcing consumers to face both the crippled battery life and the convoluted iPad/NOOKcolor value proposition may keep Amazon and other ebook makers from venturing where B&N has chosen to tread, at least until they see how NOOKcolor does in the market.

Why Consumers Want Connected TV

Monday October 25, 2010 – Stewart Wolpin

Thanks to a wave of connected TVs, media streamer set-top boxes and the recent introduction of Google TV by both Sony and Logitech, the way consumers buy and watch television is undergoing a radically fundamental change. This change is buoyed by the usual spate of new set-top boxes and services, hampered by the usual spate of consumer confusion, and accompanied by the usual spate of intended and unintended consequences.

According to DTC, 26 percent of all digital TVs estimated to sell this year will be connected, growing to 38 percent next year and more than half in 2013.

Source: DTC

Ironically, the one agent soon to bring the most radically fundamental change to an increasingly educated tube may be sowing the seeds of its own business model destruction.

What's turning the boob tube into "smart TV" is consumers now can access not only the usual spate of local and cable/DVR TV content, but content from the Web and content from their own PCs.

It's the GUI, stupid

While initial cable, Web and local content organizing attempts are interesting, they all miss a key TV watching fact: we're called "couch potatoes" for reason. TV is a lean back and relax environment. TV taters don't want to figure out behind which icon or menu listing content is buried. They don't want to worry about "walled gardens," they're not fond of more boxes piling up in their living rooms, they don't want a remote control with a QWERTY keyboard requiring more than one hand to conduct basic controls, they don't want to surf the net on their big screen TV. They want to watch TV on their TV, and they want finding content no more complicated than perusing the EPG.

Enter TotalGuide from Rovi, formerly known as Macrovision. In early 2008, Rovi bought Gemstar-TV Guide and now supplies the EPGs for 450 cable MSOs in North America. TotalGuide puts all the content available to a consumer – cable, Web-based subscription services (i.e. Netflix, Blockbuster, CinemaNow) and local networked PC-based – into the familiar EPG grid, with all the universal search capabilities of Google TV and without an extra box. A consumer can search for "Casablanca" as they would on any cable EPG, and TotalGuide will bring back all results from all available sources, cable, Web and local. Similarly, clicking any program on the grid results in a list of access choices.

Rovi has signed 35 content partnership deals and is working to sign more. Rovi plans a mid-2011 launch, and says MSOs merely need to push the new TotalGuide out to its subscriber, instantly giving all cable subscribers Google TV-like access.

And there's the rub.

Cutting the cord

Folks like Yahoo! and Google and the TV makers all are excited about connected TVs under the mistaken belief that consumers are interested in enhancing their current TV watching experience – looking up information on an actor while watching a movie, check stock quotes, news or weather, sports fantasy league stats during a game, etc.

They're wrong. Consumers can conduct these simultaneous supplementary watching/surfing without any new gear – just a PC or iPad on their lap. Nielsen reported, as of December 2009, nearly 60 percent of TV taters already prop a PC on their lap while watching TV. And anecdotal reports indicate only 20-30 percent of connected TV buyers actually connect their connected TVs to the Internet.

No, some consumers want connected TVs so they can cut the cable cord someday. They’ll still want some of the programming they get on cable and to pick up extra programming that is available on the Internet. They’d also like to cut or lessen their pay TV bills. In a perfect world consumers want to cherry-pick, to pay only for what they want to watch. That's why consumers want connected TV.

And with TotalGuide, MSOs could be giving their subscribers a reasonto cut back on premium cable subscriptions.

Cable MSOs already are scrambling to herd the cats of their increasingly shifting and diverse revenue streams. The scrum between Cablevision and Fox, which has resulted in the blackout of all Fox stations on Cablevision systems in the New York-Philadelphia area, is just the latest in a series of such broadcaster/carrier disputes. Traditional network broadcasters, faced with dwindling advertising revenue and increased programming costs are attempting to squeeze more cash from their one sure cash cow – mainstream cable subscribers. MSOs, leery of laying off these increased fees on their already angry cable subscribers, are attempting to identify other revenue streams, such as targeted advertising and their own online opportunities.

TotalGuide might help content providers, broadcasters and MSOs solve some of these revenue issues, but may result in the unintended consequences of enabling cable subscribers to go the cherry-picking DYI programming route.

TV taters may like lazily watching a smarter, connected boob tube, but they won't act like boobs given the chance to tell a hated monopoly what they can do with their wares.

Smart phones: The Latest Bubble?

Monday October 18, 2010 – Myra Moore

The latest incarnation of the smart phone has set off a kind of gadget lust that is landing these palm-top computers into millions of hands. DTC estimates that more than 300 million will ship worldwide in 2010 representing a 60% growth rate over 2009 – all during the worst economic downturn in recent history.

Cash may be tight but many consumers are willing to pay more in monthly service charges (than for a feature phone) and to be locked into a service contract in exchange for the $500-$750 they’d otherwise shell out to buy the sans provider-contract devices. Nothing new? Technically, no. The service/device subsidy is a well-entrenched business model. But the smart phone fever launched by Apple reveals some subtle but important changes in the seemingly unlikely relationship among consumers, their phones, factory workers, intellectual property owners, and companies selling devices and services.

To date, service providers have mostly sustained the smart phone service charge premium. But some percolating trends suggest that service providers may not want to take for granted that smart phone costs will stabilize with increased competition for the iPhone. Nor should they assume that consumers’ relationships to their smart phones mirror that of their old-school feature phones.

Then there is the potential expectation trap. The escalation of technical sophistication, combined with high-level design and marketing, is one of the defining characteristics that make these devices so appealing. Higher-quality camera functions, HD video recording, and multiple cameras are now populating the higher-end of smart phones (e.g., iPhone4). They aren’t just highly-designed jewel boxes, but they are jewel boxes filled with the jewels that enable communication, entertainment, productivity and are increasingly regarded as an essential life element by a growing number of consumers.

Improvements to these devices and services will only drive up prices despite some cost savings realized from technical evolution and economies of scale. The subsidy model will continue to work only as long as consumers will either sign up for higher monthly fees and/or longer contract terms.

The high-end extras add cost, but according to tear-down reports and analysis from industry insiders, the cost of manufacture and assembly is one of the smallest expenses of smart phones. That, too, is changing. As the Chinese economy fueled by its status as the world’s manufacturing plant has soared, heightened workers’ expectations are resulting in successful demands for higher wages and better working conditions especially in the special economic zones of southern China, Add to that continued increases (albeit gradual) in Chinese currency value and smart phone makers and their service partners may be facing an uncomfortable squeeze on their margins.

And anyone who doesn’t get the high competitive stakes among smart phone suppliers need only read the business press to see how the intellectual property slugfest among smart phone could inject more near-term costs into the exploding market. (see article here)

Does all this really portend a smart phone bubble? Perhaps this is an overly dramatic characterization of a booming market segment that is delivering profits (after all, Apple’s stock price hit $300 last week). Nevertheless, it might be advisable to occasionally look backward at the dot com era and the housing market debacle – both largely declared sure bets in their day. Just in case.

Apple Did Not Create a Tablet Market

Monday October 11, 2010 – Stewart Wolpin

Suddenly, iPad is the biggest star on TV. Apple's tablet has made appearances in episodes of The Good Wife, NCIS, CSI: New York and Parenthood in the last two weeks.

And many businesses are supplying their employees with iPads, including the nursing school at New York's Pace University – I know this because my neighbor is a professor there and I've been enlisted to give her an iPad lesson.

iPad's sudden initial popularity is impressive, considering for the last decade, "experts," including Bill Gates, have been touting how tablets would take over the computing world.

Gates & Co. may have been right, but not in the way they predicted. After a 10-year lackluster tablet market, suddenly everyone – Dell, BlackBerry, Samsung, Microsoft with Windows Mobile 7 this week, and, at some point webOS tablets from HP – is pouring through the hole in the tablet wall Apple has breached. Tablet PCs appear to be the current darlings of the computing world.

But has it occurred to anyone that perhaps Apple's iPad didn't so much create a market for tablets as much as it created a market just for Apple's iPad?

Why Apple succeeded

In Star Trek II: The Wrath of Kahn (warning: geek drooling ahead), Capt. Kirk is trying to thwart Kahn's initial attempt to steal the Genesis device by punching in Reliant's prefix code number. Vulcan navigator trainee Saavik asks Kirk what he's doing, and Kirk sagely replies, "You have got to learn WHY things work on a starship."

1. Specs Don't Matter. It’s unlikely that a long list of high-powered specs will be the magic bullet that will make their devices more popular than the iPad. There will likely be some attraction to features on the new devices that aren’t included on the iPad, (such as cameras, expandable memory, USB jacks) but it’s not clear that the sum of the parts will be greater than the whole.

And yet Apple has sold nearly 3.5 million iPads so far and is selling around 1.3 million a month.

Source: DTC

2: The App Gap. Apple’s closed system, which guarantees uniformity, differs from the Android operating system. Each Android app has to be optimized to work on a particular Android device. As a result, not all Android apps will work on all Android devices, especially tablets. Samsung has said there will be around 200 Galaxy S Tab-optimized apps at its launch out of tens of thousands of available Android apps.

If consumers want the most interoperable experience, they may choose the closed system that Apple provides. But even if they have things to do on their tablets, new non-iPad tablets have one other major drawback:

3: No Desktop Client. A smartphone doesn't really need apps. It has instant utility. You take it out of the box and you can make calls and send/receive texts. Apps and multimedia capabilities are nice, not necessary.

However, loading content onto a Wi-Fi only tablet out of the box is not as seamless or intuitive as it is with a closed ecosystem like Apple’s. I constantly run into Android phone users who tell me they have no content on their phones because they don't know how.

Although third party software developers offer iTunes-like desktop content sync clients client (http://www.doubletwist.com) for the Android operating system, they aren’t really as seamless or accessible as iTunes.

Without understanding WHY things work for iPad – especially necessity of an official desktop client – it's hard to imagine that iPad competitors can duplicate iPad’s initial success.