What Does A Hulu IPO Mean For Internet Video?

Monday August 30, 2010

If Hulu goes public later this year it will mark the first pure play Internet video service to reach the public market. Yes, it’s a milestone for the up and coming delivery of TV services over the Internet but how much impact will it really have?

Of course an infusion of capital (assuming a successful IPO) is always welcome. Cash talks but it doesn’t always delver the entire package especially when you have to convince content owners that a heavy bet on Internet delivery won’t cannibalize their lucrative deals with traditional pay TV providers. Hulu, of course, is owned by content owners, which allows them to test out this new delivery pipeline while keeping a bubble of protection around current business models. Cash can buy more marketing and more time to experiment with different business models and new technology, but it won’t necessarily buy the coveted content (or favorable release windows) to drive consumers to the service.

Assuming Hulu can put together desirable content and release windows, it still has to convince consumers to pay to view the content. If it and other Internet video providers don’t deliver the fundamentals (desirable content, reliable quality, convenient access, and content portability), a big sack of IPO cash won’t turn it into a pay-service success. Aside: DTC doesn’t subscribe to the notion that consumers won’t pay for content on the Internet just because they’re used to having it for free. It will take some heavy lifting to reset attitudes but if the above fundamentals are met and consumers see the value, they’ll buy online programming just like they bought cable pay TV packages when they could watch for free.

So are cable, satellite and telco pay TV providers quaking at the prospect of a flood of public-market capital pouring into dedicated Internet video service providers? Probably not. Despite the frequent “news stories” written about consumers dumping their cable and satellite providers to graze unfettered on the Internet, the reality doesn’t bear that out. Just last week, a New York Times/CBS News poll (reported in the New York Times) found that 88% of respondents pay for traditional pay TV services and only 15% said they had considered replacing pay TV services with Internet video services. “Stickin’ it to the cable Man” may seem appealing, but the truth is traditional pay TV, at least for now, provides the most variety, highest quality and the most convenience.

Is 3D the Future or a Gimmick?

Monday August 23, 2010 – Stewart Wolpin

Yes, there are serious companies involved and, yes, there is serious money invested by both content creators and hardware makers, but it's difficult to shake what Comedy Central's faux pundit Stephen Colbert would call the truthiness of 3D. In other words, despite what objective reality might seem to indicate, 3D in the home doesn't feel as if it has the inevitability of past transformative format shifts such as color, high-definition, content digitalization, widescreen and surround sound a decade before each became technology ecosystem sine qua nons.

For instance, despite the popularity of 3D in the movie theater, 3D HDTV sales won't even account for 10% of total TV sales in the U.S., even by the most optimistic forecasts. A recent Kakau.com survey revealed 70% of Japanese consumers are uninterested in purchasing 3D HDTVs.

In today's technological world, a format as radical as 3D must penetrate into multiple levels of technologies, products and content to create an encompassing and seamless ecosystem. This multi-level 3D evolutionary ecosystem has been slow to develop thus far.

A movement in the glacial evolution of the 3D ecosystem was on display at an appropriate venue earlier this week, the Museum of Natural History in Manhattan, where Fuji showed off its second generation dual-lens 3D digital still camera, the W3, the follow-up to the relatively unheralded year-old W1.

While the W3 includes several improvements – a 3.5-inch screen vs. a 2.7-inch display on the W1, 720p 3D/2D AVI video capture, three simultaneous 2D shooting modes (separate/different 2D images captured by each lens), and a $100 price drop to $500 – the biggest difference is the 3D environment.

Since Fuji unveiled the W1 last September, three HDTV makers – Panasonic, Samsung and Sony – have all launched high-profile 3D HDTVs, two camcorder makers, Panasonic and DXG, have announced 3D camcorders, and last month Sony announced two single-lens 3D digital cameras. With a better-prepared market foundation, Fuji's Night at the Museum event signals the company will be a lot more aggressive promoting the W3 and, by extension, further promoting the long-term viability of 3D.

Yet 3D still doesn't feel like the legitimate future of video, especially since this is our third brush with 3D, once in the 1950s and again in the 1970s. As the old – and oft mangled – saying goes, fool me once shame on you, fool me thrice…

Many in the video hardware business and in 3D glasses-wary living rooms are similarly 3D cynical. Yes, three TV heavyweights are in the 3D fight – but where are LG, Vizio, Toshiba, Sharp, et al? Perhaps some of these 3D holdouts will unveil 3D HDTVs at next month's CEDIA Expo – but maybe not. On the camera/camcorder side, where are Canon, Nikon, Flip, Kodak and 3D HDTV maker Samsung? Computer heavyweights such as Microsoft, HP, Dell and Apple – vocal and nearly obstructive during HDTV's formative stages – are shockingly 3D mute.

In addition to the inconvenient necessity of $100-plus 3D glasses, content is a contentious 3D issue. Everyone is waiting for the 800-pound 3D content gorilla to burst into the room – Avatar on Blu-ray. James Cameron's blue blockbuster is due to be re-released into theaters on 27 August, and the 3D Blu-ray likely won't appear until next year, a delay which likely frustrates 3D HDTV and Blu-ray hardware makers.

But the release of one 3D Blu-ray won't ignite a critical mass of consumers to make the expensive re-investment toward a 3D living room, especially so soon after the digital transition and especially especially in this economy. It's also hard to conceive serious Oscar-worthy dramas being produced in 3D – the technology is seen as intrusive and distractive to plot and character development and so far more conducive to explosive action flicks and animation, all of which means 3D won't become the dominant cinematic technology trend the way widescreen and surround sound were. Gaming had thus far has not been the 3D Trojan Horse many have predicted. And anyone who has watched sports in 3D knows simultaneous fast-moving player/ball action makes eye focusing far more difficult and often eye-achingly painful.

Fuji's new 3D camera is fun to use and may even sell well enough to boost the company's imaging profile even without a pervasive 3D landscape. But without a radical shift in technology, it feels as if 3D in the home will prove nothing more than an evolutionary dead end.

U.S. IPTV: How Big Can It Get?

Monday August 16, 2010 – Antonette Goroch

In the early days of telco-delivered IPTV, the saturated U.S. pay TV market (nearly 90 million households) was viewed as the potential Achilles heel for the new class of pay services. To convince U.S. pay TV subscribers to switch from satellite or cable, telcos would have to entice customers with the lower fees and high-tech extras to elbow their way into a viable business.

With the two largest U.S. IPTV operators now nearing a combined 6 million subscribers, the question is no longer can telco IPTV survive, but just how big can it get? AT&T and Verizon have so far beaten these odds, continuing to gain subscribers, as incumbent pay TV operators, both DTH satellite and cable, struggle to hold on to theirs.

In theory, U.S. IPTV could still have tremendous growth ahead of it, with the potential to reach as many as 15 million to 20 million households. Since DirecTV’s 1994 launch, DTH satellite subscribers have grown to more than 32 million as of 2009, by chipping away at analog cable subscribers and growing the pay TV base overall. While the number of analog cable subscribers is decreasing quickly, especially with cable operators’ recent moves to upgrade networks to all-digital through cheap digital-to-analog converters, there were still nearly 20 million analog cable subscribers as of 2009 that could choose IPTV as their upgrade to digital pay TV. Further, the seamless integration of TV service with voice and Internet offers pay TV services an incentive to switch for packages that can enable advanced, “TV Everywhere” services.

The telcos certainly have the need to push their IPTV services. Both AT&T and Verizon reported declines in their core voice customers for June 2010, but saw gains for both TV subscribers and their average revenue per subscriber. This is strong impetus for the two to continue deploying TV across their voice networks and adding services such as 3D, VOD and mobile access to programming. Only time will tell just how big IPTV in the U.S. will get, but it’s clearly here to stay.

How Apple Could Dominate the HDTV Business

Monday August 9, 2010 – Stewart Wolpin

There have been two undisputed 800-pound gorillas in the consumer electronics business over the last century, both perhaps not coincidentally led by genius/seer/founder: RCA and David Sarnoff until the mid 1970s, then Sony and Akio Morita until a few years ago.

As Sony's dominance has waned, Apple and Steve Jobs ascended to the CE throne. Two months ago, Apple passed Microsoft as the world's most valuable technology company, and is poised to pass Exxon Mobile as the most valuable company in the U.S.

While Apple and Jobs dominate most current gadget conversations, it's hard to think of the company as an RCA or a Sony. Why? First, Apple is conspicuously absent from CES. Second, Apple doesn't make what has been technology's marquee product – televisions. At least not yet.

There have been rumblings that Apple may be contemplating a full bore move into the living room. As usual, Steve Jobs' timing would be perfect.

iPod, iPhone and the iPad were raging successes because Apple capitalized on the pent-up potential of bleeding edge technologies and the pent-up desires of consumers anticipating the consumer product exploitation of these bleeding edge technologies.

HDTVs have just about reached this unfulfilled potential level. Widgets give consumers Web-lite access, but you have to add nearly every other advanced capability – optical disc drive (Blu-ray/DVD), DVR, video game, video streaming, PC-based media syncing, et al – via an increasing number of HDMI-connected set-top boxes. The TV is trying to morph into a smart box, but TVs are made by historically dumb box makers.

Apple brings to the TV party what it brought to the portable media player, the cellphone and the tablet PC businesses: nearly seamless content, functionality and user interface integration. No current TV maker has this wherewithal.

What would an Apple HDTV – iTV? – look and act like? It would likely be a cross between a dumbed-down iMac and a souped-up iPad. Physically, an Apple HDTV could be an all-in-one unit and likely include a slot-load Blu-ray player (even though not even the latest iMacs include a Blu-ray drive), a high-capacity DVR/hard drive with TiVo-like programming capability or even cloud program storage, a Web cam for FaceTime or Skype video chatting, and WiFi connectivity, along with a fully merged PC/TV jackpack, SD card slot and USB jacks.

On the software side, an Apple HDTV would likely run a customized, largely invisible version of iOS 4, with tiled multi-window/multi-program viewing, iPhone and iPad app compatibility (that's nearly 300,000 "widgets"), an EPG-equipped iTunes to access streaming and downloadable content and to sync PC-based content (perhaps with a Pandora-like streaming music service), and, of course, game and remote control via iPhone/iPod/iPad.

Apple would bring more than relatively simple function integration, though. An Apple-programmed iTV could let you remotely program or view programs without a Slingbox, or transfer DVR recorded programs onto an iPad/iPhone/iPod Touch as AT&T U-verse customers can already do. Maybe you'd even be able to check email and surf the Web via a real TV-based browser, and connect a printer for hard copy TV-based shopping receipts or photos.

With iTunes and access to sites such as Hulu, many consumers might more seriously contemplate cutting the cable cord.

One quivers at the possibilities.

What's the iTV hold-up? Certainly not distribution. Apple has carefully built retail relationships with Best Buy (and, therefore, the in-store Magnolias would be perfect iTV showcases), Wal-Mart and radio Shack, along with its high-profile stores.

Apple's concern may be about profit margin. HDTV is a price-sensitive commodity business. An Apple HDTV would likely carry a hefty premium (albeit an easily defendable one), so the company would likely not be aiming at mass market domination.

But millions would likely happily pay.

Apple, of course, doesn't need to be in the HDTV business. And given what's happened in the mobile phone business, it's debatable whether or not TVs are today's marquee technology product. But that's a topic for another day.

PC Update

Monday August 2, 2010 – Maya Jasmin

In conjunction with the bounce back of the PC market, there is a noticeable shift away from traditional desktop and laptop PCs with video optical disc drives to newer less expensive netbook and tablet PCs.

A growing number of global shipments are comprised of netbook and tablet PC units which DTC expects to see phenomenal growth within the next 5 years. DTC estimates that 14% of all PC shipments in 2009 were netbooks and tablet PCs yielding 42.6 million units, and expects that number to steadily climb with 162 million of these units shipping in 2015 accounting for 40% of the global market.

Source: DTC

The estimated surge in sales is in part because the PC market was affected much less severely than anticipated by the recent global economic downturn and is expected to bounce back nicely in 2010 experiencing an impressive recovery. DTC estimates that nearly 304 million PCs shipped globally in 2009, with nearly 350 million and 405 million units expected to ship in 2010 and 2015 respectively.

Video Optical Disc PCs although expected to experience robust shipments throughout the forecast period will not experience the growth that netbook and tablet PCs will. After a notable rebound between 2009 and 2010 in which shipments are expected to reflect 12% growth, shipments will remain flat at best throughout the remainder of the forecast period. DTC estimates that roughly 213 million units shipped in 2009 and expects shipments of nearly 239 million units by year end 2010 and 243 million units in 2015. The forecasted erosion of video optical disc PCs reflects the increasing rate in which consumers view video programming through their internet connections as opposed to playing back a DVD or Blu-ray disc.