The Media Streamer Dilemma

Tuesday May 29, 2012 – Stewart Wolpin

A product marketing executive recently told me only around 25 percent of respondents in a product focus group acknowledged they had at some point streamed video.

Yet, nearly 90 percent of this same group also acknowledged to being Netflix users.

Oops.

This disconnect between the technology and the product is poisoning several businesses as technology companies try to convince Mom & Pop America to invest in home networks and wield Internet TV scissors to cut the hated cable cord.

For instance, connected TVs will account for a majority of HDTVs sold in a few years, yet the actual connect rate – jacking these connected TVs to the Internet once a consumer mounts it in their living room – is only around 20 percent.

Perhaps the most poisoned product is the media streamer.

Despite the high profile of such brand names as Roku, Boxee and even Apple, sales of streamers aren't exactly scintillating. Roku, which introduced its first media streamer almost exactly four years ago, has sold maybe 3 million total units of all its varying models. Western Digital has sold maybe a million units of its WD TV Live boxes. And Apple, which considers its Apple TV STB a hobby, is actually the market leader with around 5 million sold.

No other media streamer in the U.S. has sold as many as half a million units.

Granted, media streamers are a relatively new business. But media streamers are likely to remain a niche business if their makers can't figure out a way to quickly communicate what the hell they do and how to connect them.

What's a router?

Home Internet connectivity beyond the home office (which is usually set-up by a cable service technician) is a mystery to the majority of Americans, wireless connectivity especially. Understanding the difference between cellular wireless and Wi-Fi is a real issue, not helped by the varying Wi-Fi router standards – b, g, n, N450, N900 and now ac. All this is hard enough for consumers to deal with without confronting the jargon-filled set-up mine field consisting of SSID, WPA key, et al.

Even if a consumer has a passing familiarity with Wi-Fi, that same consumer spying a media server on a big box retailer shelf is likely to bypass it since they have no idea from the packaging what the damn thing is or what it does.

These are all tech ignorance issues that we in our high-tech bubble are shockingly blind to.

Media streamers also face hurdles from competing products. The most popular media streamer is not a media streamer at all – it's the video game console. Around 70 million PS3s and Xbox 360s, each equipped with a panoply of media streaming content sources as most media streamers, have been sold in the U.S.

Plus, all Blu-ray players are connectable if the consumer has the connection wherewithal, and more than three-quarters of them are equipped with Netflix, Hulu, Vudu, Amazon Prime and many of the other usual media streamer suspects.

Do media streams have a future? Of course. There are plenty of households with broadband connectivity but lacking a connected HDTV, lacking a videogame console and lacking a Blu-ray player.

All the media streamer makers have to do is figure out how to better communicate what it is their boxes do, why a consumer should want one and how to easily connect them.

The Economics of OTT

Monday May 21, 2012 – Greg Scoblete

Is the future of video delivery over the top? At the Connected TV World Summit in London, Nagra's Thomas Decieu, noted that the economics of over the top delivery are getting particularly enticing for satellite operators, who could trade transponder space for a content delivery network (CDN) and reap significant cost-savings.

The attitude of broadcasters toward over the top video delivery have certainly shifted remarkably over the past two years, but the economics of OTT delivery aren't what they seem - especially if the use of a CDN is a prelude to an out-of-network video play. To understand why, look at the recent dust-up between Netflix and Comcast.

Netflix CEO Reed Hastings recently took to his Facebook page to lambaste Comcast for unfairly singling out competitive video apps running on an Xbox. Wrote Hastings:

Comcast no longer following net neutrality principles. Comcast should apply caps equally, or not at all. I spent the weekend enjoying four good Internet video apps on my Xbox: Netflix, HBO GO, Xfinity, and Hulu. When I watch video on my Xbox from three of these four apps, it counts against my Comcast Internet cap. When I watch through Comcast's Xfinity app, however, it does not count against my Comcast Internet cap.

These caps refer to the bandwidth Comcast allots to its broadband subscribers (250GB or about 100 hours of high quality video streaming). In other words, Comcast was adding a hidden cost to the over-the-top video offerings from its competitors, while exempting its own service from the rules. Whether this is legal depends on how Net Neutrality rules are interpreted (and, crucially, the balance of ideological power in the Federal Communications Commission).

But what this episode does highlight is how network operators will respond to OTT challenges. If more and more consumers do cut the cord in favor of less expensive video offerings - and especially if those video offerings come from established service providers operating out of network  - the broadband owners will respond by hiking prices on broadband access, nullifying the cost advantage of any competitive OTT offering.  They could do this subtly – a la Comcast - by applying OTT data usage from competitive apps against a bandwidth cap while exempting their own offerings. If the FCC frowns on this practice, they could do so blatantly, by sharply reducing the bandwidth cap or instituting a tiered bandwidth consumption price structure that recoups whatever revenue they lose to video cord cutters by making them pay more for broadband.

Indeed, at a Verimatrix panel at the recent National Association of Broadcasters Show, Akamai Technologies' Will Law said that bandwidth caps and tiered broadband pricing are going to be an essential tool in how network operators manage the proliferation of over the top video services (including their own). CDNs may indeed alleviate costs and network congestion for in-network video offerings, but they won't necessarily open the door to cord-cutting or cheaper video services for consumers.

CTIA: Was Everyone Shopping on their Phones?

Monday June 14, 2012 – Stewart Wolpin

Here at the just-wrapped spring version of the CTIA Wireless mobile communications show in New Orleans, the buzz on the show floor isn't about new phones or new technologies. The buzz was about the show floor, or, more precisely, what and who was NOT at CTIA.

Only two major phone vendors, LG and HTC, had booths. No Samsung, no Motorola, no Nokia, no BlackBerry (and, obviously, no Apple). None of the four major national carriers had anything more than "innovations" spaces (Verizon and AT&T) – Sprint held meetings off campus, and I saw neither hide nor hair of T-Mobile.

While officials touted the 40,000-plus attendees, and city and venue officials noted CTIA was the largest convention New Orleans had hosted post-Katrina, the show floor felt small and barren, especially compared to past shows in Atlanta and Orlando.

Why? I spoke to several officials from these usually anchor exhibitors and the reason came down to three letters: CES.

Just as smartphones are absorbing the functions of standalone devices such as cameras and GPS devices, CES is absorbing standalone shows. This year, it was PMA that CES subsumed. And with so many eyes on it, consumer cellular companies opt to unveil their latest and greatest in Las Vegas or at the Mobile World Congress in Barcelona in February.

By spring CTIA, there's little to spend money on exhibiting to report.

Maybe this is just me, but I've never understood why CES, which encompasses the entire consumer electronics product universe, requires one show, but the wireless industry needs two.

2012: The Year of NFC?

While there was a dearth of new handsets on display, perhaps the biggest impact at CTIA came from Visa and MasterCard, both of whom had fairly large exhibits.

It seems that, finally, NFC and mobile ecommerce will take off this year. Even though both credit card companies are hawking mobile wallet solutions – Visa has PayWave and its two-week-old V.me wallet service (which inaugurated on Buy.com), and MasterCard has created the PayPass service, both are members of the ISIS mobile wallet consortium, and both have created iOS and Android wallet apps – each is taking a different approach to perfecting shopping via smartphone.

Visa sees consumers using their mobile phones instead of a credit card in increasing numbers as the number of NFC-enabled phones leap from nine (Samsung, Nokia and BlackBerry) to 90 in the next year, according to Visa president John Partridge, with whom I sat down with at CTIA.

Whether these 90 NFC-enabled smartphone models include iPhone 5 no one knows – or at least no one is officially confirming (even though there have been hints). The inference, however, was that an NFC-enabled iPhone 5 would certainly accelerate consumer NFC acceptance and use.

Visa is working on several NFC issues such as security – both on the technical side and allaying consumer fears – as well as value-added NFC functions, such as couponing and redemption at point-of-sale, sales and receipt notifications, linking loyalty programs, the ability to check balances before purchase, etc.

MasterCard, however, considering the dearth of and reliance upon NFC-enabled handsets, is taking a wait-and-see attitude towards handset-as-credit/debit card. Instead, MasterCard wants consumers to feel more comfortable using their smartphone as a mobile ecommerce platform.

According to Ed Olebe, MasterCard's mobile wallet services head, many people shop (in the browsing sense) on their smartphones – arguably the most ubiquitous shopping platform ever created – but fewer than 1.5 percent of consumers actually complete their transaction on their handsets, which means maybe they NEVER complete the transaction.

Why? Filling in the shipping and/or billing name/address/credit card numbers on that small keyboard and small screen is way too tedious, and sending this sensitive personal and financial data over the air from potentially unknown shopping sites makes many smartphone shoppers uncomfortable.

So MasterCard is creating a raft of trusted wallet services all with an automated PayPass service at their heart – just click on the PayPass payment option, and all your previously-stored-with-MasterCard credentials are filled in for you.

By promoting payment ON a smartphone rather than BY a smartphone, MasterCard hopes to generate more business for itself and its retail clients, which would then make it easier for the company to step consumers up to use MasterCard PayPass services on an NFC-enabled smartphone, if and when.

While it will still take time for mobile ecommerce to truly take off – Partridge believes it will take three-to-five years before NFC point-of-sale terminals reach a critical mass – the presence of Visa and MasterCard certainly made CTIA worthwhile, at least for me.

Digital TV: No Two Places Are Alike

Monday April 30, 2012 – Myra Moore

I recently participated in a Caribbean Telecommunications Union (CTU) meeting on spectrum management focused on the digital TV switchover.  Listening to regional broadcasters, regulatory officials, and engineers discuss the challenges of planning a digital TV ecosystem only reinforced the axiom that every place has its own DNA.

Not to get all “snow flakey” but no two places are alike. And when it comes to tallying up all the factors for a digital TV switchover, countries within the Caribbean region are as different as individual snowflakes even though (as far as I know) it’s never snowed there.

One of the CTU’s primary goals is to promote a unified approach to the regional digital TV switchover, which is never an easy task amongst separate nations.  Job number one is to coordinate spectrum use within the region and to ensure that all in-region countries/territories are informed of their neighbors’ DTT plans and potential interference issues are discussed. After that, there’s not a whole lot of uniformity as the geographic area is large, islands have different ties to other countries in Europe and North America, and existing  TV ecosystems are a mash up different transmission standards, types of pay TV providers, and regulations.

Just a handful of facts illustrating how important customization will be in individual locales:

• The islands are a mix of sovereign states and dependent territories. Even those that are sovereign nations have deep ties to European and North American countries that can have significant influence on the technology and policy decisions when building digital terrestrial TV systems. In short, European affiliated islands tend to consider systems similar to those in the U.K., the Netherlands, and France, while those associated with North America lean toward technologies implemented in the U.S.  This, however, is a generalization; other factors come in to play.

• Because the region is geographically closest to North, Central and upper South America, much of the existing analog TV infrastructure is based on the North American NTSC system. Thus, islands will have different mixtures of analog and digital TV systems that impact the sourcing of receivers.

• The region is demographically and linguistically diverse. With French, Dutch, English, Spanish, Creole (Haiti), and Papiamento official languages, the need for customization is even greater. The DTC Digital TV Transition Group is producing an analog-to-digital TV educational video for Curacao in Papiamento. This is an official language in three places in the world – Curacao, Aruba and Bonaire with a collective population of about 300,000 people.

• Demographic diversity contributes to varying rates of pay TV household penetration (as well as platforms from which services are delivered – MMDS systems are a part of the TV mix in addition to satellite, cable and IPTV).  Individual-island pay TV penetration can vary from barely measurable to 90%.  Thus, business models are going to vary significantly.

The need for customization only underscores the need for a top-level unified framework where, at the minimum, spectrum management is a harmonized effort.