AVC Products Forecast Overview

Monday November 28, 2011 – Jing Sui

With more efficient coding and higher-quality play back, MPEG-4 AVC has expanded into every consumer digital video category going far beyond the ubiquitous MPEG-2 standard. The AVC market continues to exhibit notable growth and a majority of the product categories are experiencing growth.

DTC’s latest data narrates the trends of categories including AVC consumer electronic products, set-top boxes (STBs), mobile devices, PC and PC related products. Among AVC consumer electronics product families, integrated digital TVs (IDTVs) anticipate double-digit growth rates and experiencing the greatest compound annual growth rate throughout the forecast period. STBs are projected to have shipments of over 140 million units in 2012. Shipments of MPEG-4 AVC mobile handsets, due in part to the popularity of smartphones and high-end media handsets, are expected to grow to over 1 billion in 2016. Other AVC CE products, such as Blu-ray disc devices and video game consoles, are also consistently seeing healthy growth throughout the forecast period.

What Business Are Amazon and Barnes & Noble In?

Monday November 21, 2011 – Stewart Wolpin

This seems to be color LCD e-reader week, what with Amazon's Kindle Fire and Nook's Tablet charging into both online and retail shops within days of each other.

What is difficult to suss out is what business Amazon and Barnes & Noble think they're in – the content business or the device business?

Or, perhaps more importantly, is either company in the business of making money?

It looks as if Amazon is leaning toward being in the content business but, harkening back to its early days, not making money. Priced at $199, each Fire sold will reportedly lose Amazon $50.

Amazon figures it'll make up the difference on its content cornucopia – e-books (duh), magazines, movies, music, et al. After all, buyers will want to fuel their Fires.

It's harder to discern B&N's content v. hardware focus, though.

B&N's challenge

Barnes & Noble must think it's in the gadget business since it's selling the Nook Tablet for $50 more than the Fire, assumedly to make a profit on the hardware (or at least break even).

B&N's pricing makes sense on the surface, since the bookseller lacks the multimedia content to offset a lower tablet price as Amazon does.

Of course, B&N can't discuss its content deficiencies compared to Amazon. Instead, it will attempt to justify its higher price by stressing Nook Tablet's technical advantages – it has twice as much RAM (1 GB for Nook vs. 512 MB for Fire) and twice as much flash memory (16 GB vs. 8 GB) as Fire, plus a MicroSD card slot.

E-reader consumers, however, are unlikely to look past the price, especially since all purchased content from both book sellers can live in the cloud, and they perceive they don't need a lot of digital storage space for books.

And that's not even considering the insulting new price on the original Nook Color. The gleaming new Fire for $199, or B&N's old, clunky POS that's already been replaced for the same $199? Ooh, there's a decision!

With this ridiculous $199≠$199 price equation staring them in the face, consumers will need to be blown away by something wondrous on the Nook Tablet to justify spending an extra $50 – and they won't be. Consumers will project the poor value proposition of the over-priced old Nook Color onto the new Nook Tablet since the two are essentially twins, a similarity made more stark since they'll likely be placed in close proximity to each other in B&N stores.

In fact, it'll be the Fire that blows consumers away, thanks to its fiery moniker, its sleeker looks and its revolutionary lickety-split-loading Silk Web browser.

A different approach?

What puzzles me, considering the uphill device and pricing scenario it created for itself, why B&N didn't attempt a radical pricing approach.

What about a subsidized pricing model such as the old book and record clubs – you know, four books for $1, 12 record albums (ah, remember records?) for a penny (plus the hidden 13th), as long as you bought lots of books/records over the next year or two.

Imagine how Nook Tablet would sell if it were priced at, say, $149 (and blew out the old Nook Color at $99), and how many e-books it would subsequently sell. At $249, B&N risks losing the gains it made vs. Amazon with its only-LCD-e-reader game-in-town Nook Color, and losing the e-book battle.

Of course, both booksellers realize they are not just competing against each other. They also are competing against Apple, which suffers none of Amazon's or B&N's hardware pricing problems or content vs. hardware business schizophrenia.

This may be LCD e-reader week, but it's going to be a fascinating LCD e-reader fourth quarter.

What TV Could Be (If Steve Jobs Had His Way)

Monday November 14, 2011 – Greg Scoblete

In Walter Isaacson’s widely cited biography of Steve Jobs, we learn that Jobs “never put profits ahead of products.” Such was his devotion to making an insanely great consumer experience that he was willing to shun Business 101 in his pursuit of perfection. At least, that’s the myth. In reality it sounds just a wee bit self-serving, like an artist declaring that they would never value material success at the expense of their “art” only after they’ve become a blockbuster success and no longer subsist on mac-and-cheese.

However many grains of salt you want to sprinkle on the “products before profits” ethos, it’s pretty clear that whatever’s driving the pay TV industry, it's often the inverse of Jobs' mantra. The end-user’s experience - what they can watch, where they can watch, how they watch, etc. - is not a thing of beauty. What's frustrating for many observers is that it could be.

If technology had its way, our pay TV universe would look considerably different. For instance: you wouldn't have channels. Instead, you'd have apps. No more asking yourself, in the wee hours of the night, what's on channel 7,334. Instead, you'd navigate a sleek UI to find your app of choice.

Once you're in the app, you could choose from a linear offering (particularly useful in the sports world) or from a video-on-demand catalog. The app model provides the content provider with a wealth of opportunities to integrate more interactive content, contests, games and social interaction. Content owners would naturally charge a subscription fee for an app, but consumers could pick-and-choose only the apps they wanted instead of being saddled with content they're indifferent to.

These apps could be hosted on a "smart TV" or, more likely, a wireless home gateway capable of streaming to additional thin clients attached to televisions around the home.

None of the above is terribly high-tech. With technologies like Adaptive Bit Rate Streaming making Internet-delivered video ever more enjoyable to the end-user, it could be done tomorrow. It's the business models that don't work. Profits are trumping products.

But it needn't necessarily be so. Selling bandwidth into the home can be profitable. At the recent Telco TV show, many small and rural service providers without a video offering were taking a keen look at over the top video delivered over their broadband network as an easier entre into the triple play.

Even established service providers might eventually grow weary of the retransmission battles and black-outs. The future is out there. We just need to think different.

How Smart is the Perfect Smart TV?

Monday November 7, 2011 – Stewart Wolpin

Most high-end TVs have an Ethernet port for access to online content. But does that make them “smart?” As I see it, there are five components for TV manufacturers to cover to successfully conquer the evolving digital TV business:

• Hardware

• Software

• Content

• Search

Let’s use the rumored Apple television that could go on sale as soon as the 2012 holiday season or, according to a flurry of more recent reports, 2013 as our example.

Hardware-wise, guessing what an Apple television would look and act like physically and technically is as difficult as predicting who's going to be the Democratic presidential nominee in 2012 – it'd be a giant iMac with all the appropriate media slot and external connections.

On the software side, any well-designed smart TV will have a stable operating system, easy access to storage (be it in hardware or in the cloud) a way to distribute content to other devices inside and outside the home, and a way for consumers to use a QWERTY keyboard (be it hard or soft or touch) to interact with the TV.

And, a programming guide will need a major makeover which will include search abilities presented in a unique way. Apple will presumably have a new EPG co-developed with Rovi (Apple signed a deal with about a year ago). This is what Google TV tried but failed (so far) to do.

And for the final interface trick – since we’re basically writing a wish list here – let’s have a voice activation application. Well, a bug free voice activation application.

That leaves content.

How do we watch?

The way in which viewers consume content has been evolving over the past dozen years as viewers time shift with DVRs, and watch TV shows and movies on their computers and through their streaming devices.

Now that we viewers have more freedom to cherry pick the programming we want to watch when and where we please, there is more pressure on pay TV and broadcast networks to provide more flexibility for viewers. There’s also more pressure for them to make it easier for us to source programming from multiple places. To do that we’ll need an intuitive and well-designed program guide so that current channel-centric TV search capabilities, which are like looking for a person's name in a phone book arranged only by address, are a thing of the past.

In order to keep customers, pay TV providers will have to accommodate new ways of viewing, sourcing and displaying content. That will probably mean a little less content bundling and a little more à la carte action.

The iPad Effect

And content providers (and some pay TV providers) seem willing to give a little more à la carte a try.

The red-hot tablet market (mostly iPad) has every content provider rushing to create an app filled with its programs. And, of course, there are already a variety of programming sources that deliver à la carte programs from the Internet -- Amazon Prime, Netflix, Hulu, and iTunes. Perhaps traditional distributors of programming finally realize the à la carte programming future is tailgating them.

The combination of a thoroughly well designed smart TV (we’re not there yet), seamless programming guides across multiple programming sources, and wireless access of programming by multiple devices could usher in new business models and a whole new definition of what it means to “watch TV.”

Over Connected?

Monday October 31, 2011 - Jing Sui

If there’s any doubt that the consumer electronics industry doesn’t understand the importance of content delivery via the internet, take a look at the number of connected devices shipping over the next few years. Over 111 million living room-centric connected devices (including game consoles, Blu-ray Disc players and connected TVs) will ship in 2012. The number of these devices shipping will experience a 50% increase between 2012 and 2014, and almost double between 2012 and 2016.

In addition to Blu-ray Disc players, game consoles and connected TVs, tablets and smartphones are already streaming video direct to consumers (many while sitting in their living rooms), and many pay TV suppliers are specifying Ethernet ports in the next generation of set-top boxes.

Soon your entire living room will be full of connected devices. But is it necessary to include an Internet connection in every consumer electronics device? Are consumers really going to use all of these connections? We suspect that there may be some consolidation in living-room connected devices in the near future, but for now it looks as if few consumers will be without a connection….or two, or three, or more.