Innovative or Dumb Old Box? Internet-connected TVs need more than an Ethernet port and handful of service agreements to play in the Internet sandbox

Monday September 27, 2010 – Myra Moore

There may be a new class of TVs with Ethernet ports and pre-set Internet connections, but are they truly innovative?

Internet-TV enhancing middleware/software pitches were numerous at IBC earlier this month. The simple message: If you’ve got folks watching TV that’s coming from multiple sources (traditional pay service, over the air, Internet) somebody’s got to deliver a seamless navigational/search experience. This is where the innovation part comes in.

The big-name TV makers are now throwing their hats into the connected ring in order to make their products more relevant in our hyper connected world. But including components like Ethernet ports, cable receivers, and terrestrial tuners isn’t enough to make them relevant next-generation viewing appliances. If the imbedded software doesn’t bind all the services together in a seamless way that exploits all the power IP technology affords, it will just be an underachieving box with a lot of parts inside.

Of course, middleware/software companies are happy to provide TV makers with the solutions to make their new TVs relevant. And TV suppliers have some experience with imbedding software in their sets having equipped TVs with on-screen instructions and some with grid-based programming guides.

But the software hurdles are much higher now. Programming from multiple platforms, sophisticated programming guides with video, audio and search abilities, and integration of metadata, transactional functions, and rights management make for a complex ecosystem that most TV divisions in major CE companies are unaccustomed to managing. Add to that the constant and incremental improvements required to remain competitive, and you’ve got a serious commitment to constant innovation delivered to TVs that were sold and shipped months ago. TV makers can buy some of that from third parties, but to compete at a high level that demands pumping millions of dollars into fine-tuning their products to integrate IP technology and Internet-delivered programming, third parties can’t do all the heavy lifting.

The TV makers that build additional R&D into their organizations with a solid commitment to implementing and managing software and networking technology are the only ones that stand a chance at competing with the best STB, smart phone and other device providers. For those who don’t: Your TV might be smart now but it’s going to be way behind the curve in very short order.

Finding the Bottom Line in Mobile Video

Monday September 20, 2010 – Antonette Goroch

There’s no question that usage of mobile video has sky rocketed over the past two years, fueled by increasingly advanced smartphones, more robust mobile networks and growing content availability. While this has been great news for content providers who have seen their overall audience reach blossom across mobile, pay TV and Internet platforms, for operators it has been a more challenging proposition in terms of the bottom line.

Operators hoped to capitalize on mobile video through per use /view and subscription charges, a la the billion dollar ring tone business. Though some have achieved varying degrees of success in this regard, the majority of mobile video usage occurs when users access Internet content via “mobile broadband services.” Consumers are essentially using the mobile network as a big dumb pipe for a variety of content and apps. The iPhone is a good example, as content purchases take place mostly through apps and the online store via the Internet, not from the carrier.

This has made mobile content a double edged sword for operators. On the one hand they are enjoying advanced subscriber and ARPU growth. But broadband usage under unlimited access plans has put tremendous strain, and great expense, on operators, with no mechanism for recouping those costs under “all you can eat” broadband plans.

This summer AT&T instituted changes in their data pricing plans (including for iPhones), now charging for various increments of data, and reflecting the changing landscape for mobile content. The strategy makes sense in that it allows AT&T to stick to its core business—providing the network—while still partaking in the revenues generated from that pipe.

The mobile content market remains in its infancy still, and business models are still likely to be fluid for some time with operators experimenting to find a sweet spot. Still, AT&T’s will likely be only the first of many such plans tying data usage to tiered pricing levels.

Packaged Media: R.I.P.

Monday September 13, 2010 – Stewart Wolpin

In 10 years, maybe even sooner, we'll be gazing nostalgically back at Blu-ray and DVD – in fact, all optical media – as wistfully as we look back now at video tape and laserdiscs.

And the sooner the video content providers and hardware makers understand this ultimate reality, the better they can adjust their business models to compensate.

In just 10 years you say? Change can't happen that quickly, can it? Why, last year, Blu-ray disc sales reached nearly 100 million units, growing from a little more than a million just four years ago. Blu-ray hardware sales grew 146% in 2009 and will grow another 128% in 2010. DTC estimates Blu-ray hardware sales will reach 125 million units by 2015.

Yes, Blu-ray is booming. Enjoy it while it lasts. No consumer media format – wax records, vinyl records, audio tape, video tape, laserdisc – lasts more than around 20 years. Just look at what has happened to the CD (1982-2008), the longest-lasting media format. Two years ago, iTunes became the largest "record" seller in the U.S. In the video world, VHS hit the market in 1977 and was already considered old fashioned by 2000; in 2001, CEA reported only 15 million VCRs were shipped to dealers in the U.S. vs. 13 million DVD decks. And while DVD, born in 1996, may not be dead yet, in the immortal words of Monty Python, it was coughing up blood last night.

Source: DTC

Blu-ray, maybe not so coincidentally born the year DVD hardware sales peaked in 2006, therefore, ought to last as a viable format until around 2020 – 10 years from now. But its decline will be hastened by a competitor no physical media has ever faced, what I call Krell media – non-physical media, such as the non-physical instrumentality achieved by the denizens of Altair from Forbidden Planet.

Just consider the way we watched video in 2000, a mere decade ago. Even with declining sales, the VCR was still king of home video recording and playback that's to its 90-plus percent home penetration, and Netflix was only a wobbly two-year-old. The Web itself was also only a few years old, and we download speeds were measured by kilobits, not megabits, per second. If you said "home network" to someone, they'd have thought you meant Wayne's World. Steve Jobs had just returned to a rotten Apple, conventional wisdom assuming he'd be presiding over his iconic company's disintegration.

Flash forward to last week, when Steve Jobs announced Apple TV, take two. Tech media had been covering Jobs' negotiations with TV studios as if it were a pennant race for weeks leading up to his unveiling of 99 cent TV show rentals. Apple TV's announcement triggered a wave of reaction from other Krell media vendors; Amazon, for instance, announced its own 99 cent scheme sans rental time limitation.

Apple TV is merely a tipping point in the cancer that will eventually emaciate physical media. Blockbuster's troubles, the last physical media giant, for instance, evidenced by massive store closings and its push into the Krell media business, have been well-documented. But HD video on demand and DVRs has been lessening consumer dependence and appetite for suddenly clunky jewel cases and discs for years. "Media streamers" such as Roku, Boxee, etc., have provided a wealth of Krell media options to early adopters, and Apple TV has re-focused the klieg lights on their Krell media potential.

And Blu-ray hardware makers have been sowing the seeds of their own demise for the last 18 months with their connected HDTVs and players giving consumers access to Netflix, Amazon and other Web-based Krell media. With increasing municipal Wi-Fi ubiquity, iPhone, iPad and Android superphones and tablets all can connect to iTunes and Netflix apps for streaming on-the-go, killing the dependence not only on physical media but the living room.

Yes, the fat lady is clearing her throat to sing a requiem for optical media.

STB Market Continues Healthy Growth But How Long Can it Last?

Wednesday September 8, 2010 – Antonette Goroch

2010 has shown steady growth in STB shipments so far this year, indicating that shipments from the four main platforms (Digital Cable, DTH satellite (and subsequent references), DTT and IPTV) will surpass those seen in 2009, rising from 210 million to 214 million by year end. Indeed, STB shipments have proven to be recession proof in the past several years, showing gains while some other consumer electronics have faltered, but just how far can it go? DTC’s recent look at the markets indicates many of the factors that have been driving this surge will soon cool, putting more pressure than ever on manufacturers to push features and trim costs to preserve both market share and margins.

Several factors have been pushing shipments to new heights over the past couple of years. DTH continues to be responsible for the most substantial gains, fueled by new FTA launches worldwide, massive subscriber growth in India, as well as an increasing uptake of HD/advanced services in more mature systems worldwide, helping to fuel replacement units. Digital cable, meanwhile, continued to see gains from accelerating Chinese system deployments, as well as DTA (digital to analog) adapters in the U.S market. IPTV also saw gains, benefiting from both continued subscriber growth, particularly in the U.S., and a healthy upgrade trend.

DTC expects much of this activity to slow across the board, with shipments peaking by 2011 as new subscriber/FTA growth worldwide wanes in key markets like China, India and Eastern Europe across platforms, and more mature systems see cyclical contractions in their replacement cycles.

Source: DTC