The Fading Picture of Digital Imaging

Monday November 26, 2012 – Stewart Wolpin

A couple of weeks ago, CEA's statistic dynamic duo, Steve Koenig and Shawn DuBravac, presented their annual holiday sales forecast for the U.S. market. Not surprisingly, the pair predicted tablets would be the top holiday technology gifts for the second year in a row.

What was more surprising was the pair's pessimistic forecast for digital cameras and especially camcorders.

DTC has already forecasted severe downturn in sales, but the CEA statistical duo noted 2012 U.S. holiday sales for digital cameras would drop 7.6 percent, and a massive 51 percent fall off for camcorders.

These precipitous sales forecasts are far worse than CEA's mid-year forecast. In July, just four months ago, CEA projected sales of digital cameras would be flat for 2012 compared to last year, and camcorders would fall "only" 24 percent compared to 2011.

Even as digital cameras, and especially smartphones, get better and better at recording video, the camcorder market looks unsalvageable, likely to settle into a low volume/high profit high-end product niche similar to digital SLRs or high-end audio.

But, apropos to the season, digital cameras may be resurrected thanks to its mortal enemy, the smartphone.

Snapshot savior?

The same week Steve and Shawn presented their digital imaging projections, Samsung officially started selling a potential digital imaging game-changer: its smartphone-like Galaxy Camera.

Three functions make a smartphone a more desirable digital camera to most consumers:

• ubiquitousness; you always have it

• Internet connectivity to instantly share and post snapshots

• a powerful processor to improve speed and image quality

• it does a lot more than take photos

Essentially a smartphone/digital camera hybrid, the Galaxy Camera answers two of these desires. The Galaxy Camera runs the latest Android operating system (4.1 Jelly Bean), features a 4.8-inch screen with a 1.4 quad core processor, and provides 3G/4G connectivity for photo sharing. You may not always have it, but the Galaxy Camera has a smartphone's picture processing power, connectivity to share, and because it runs Android Jelly Bean is actually a small (albeit fat) tablet.

We'll soon know whether or not the Galaxy Camera connects with consumers, who still may not want to carry two imaging devices or pay for additional cellular connectivity, regardless of the second device's capabilities.

Who else wants to play?

More importantly, it's hard to know if the Galaxy Camera can be imitated.

Building an Android camera is certainly doable – Android is an open OS designed by Google to let anyone play.

But is it possible for another camera maker to successfully make one?

One problem for other potential Android camera makers is lack of Android experience. Only one other leading camera maker – Sony – also makes smartphones and PCs and, therefore, has any experience with an operating system.

To create an Android camera of their own, other leading digicam vendors such as Canon, Nikon and Fuji would be forced to wander around an unfamiliar technology neighborhood. The success of the Samsung Galaxy Camera may force them to; its failure may be a relief to an industry ready to concentrate instead on higher-margin compact system models.

Everyone else's lack of Android inexperience is good news in the short term for Samsung – it'll likely have the Android camera market to itself for a bit. But a lack of other Android cameras could be bad news for the digital camera industry in the long run as consumers continue to flock to that other OS-centric device in their pocket to snap snapshots.

MPEG Efficiency: The evolution will be mobile

Monday November 19, 2012 – Maya Jasmin

With the advent of the next generation of high definition video compression technology on the visible horizon, it looks as if it will be taking a much different path to video dominance than what has been traversed in the past. Instead of the traditional digital TV world, High Efficiency Video Coding (HEVC) will likely be ushered in by the internet and wireless parts of the video world. While Ultra HD is a definite allure of HEVC for large screen displays, it’s the increase in compression efficiency that is attracting carriers and providers in the cellular and internet world. As the first compression technology to make efficient use of mobile networks, MPEG-4 AVC has already began paving the way for HEVC dominance in the mobile device world.

With consumers increasing mobile device use for video consumption and the large number of devices on the market that support MPEG-4 AVC, mobile providers are working hard to make the most of  available bandwidth. DTC expects over 700 million MPEG-4 AVC mobile phones and tablets to ship in 2013, climbing to over a billion units shipped in 2015 (MPEG-4 AVC Forecast report). Now that MPEG-4 AVC is thoroughly entrenched in these product categories, the market is ripe for the next-generation of MPEG compression to make a major splash in the digital video world. While tablets are a much younger and dynamic product category, both phones and tablets are growing rapidly and are estimated to yield double digit year-over-year growth over the next five years. The explosive growth of VOD delivered over the internet to computers and mobile devices is driving a move toward greater efficiency gains in compression. Now that MPEG-4 AVC is fueling this online video consumption, the industry is ready for the next video-compression evolution.

Why Pay TV Video on Demand Is Underperforming

Monday November 12, 2012 – Greg Scoblete 

For the past two years, DTC has noted a slower pace of growth in video on demand (VOD) title sales among pay TV providers. It's still growing globally, thanks in part to an overall rise in pay TV subscribers, but the growth rates could be better. The cause of this sluggish pace is fairly well known: alternatives such as Netflix are taking their toll. But based on my own recent experience, we can add another: lousy marketing.

For five years, I’ve been satisfying my VOD fix with Amazon’s Instant Video (accessed via my TiVo). My version of Amazon's Internet VOD isn’t all that "instant" – the Series 2 TiVo doesn’t support streaming, instead, videos are downloaded to the hard drive. This causes anywhere between a 30 minute to two hour wait, depending on network traffic and other variables. That's typically not a problem for the adults in the house, but it does become a hassle when trying to quickly pacify the children.

Then, by sheer accident, the family discovered that Cablevision, my cable TV provider, offered its own VOD service. (You would think someone who spends an inordinate amount of time in the pay TV world would be intimately familiar with his own local offerings, but then you haven’t heard the one about the shoemaker’s children…). As a basic cable subscriber, I thought VOD was either out-of-reach or too cumbersome to order (anything involving a phone call is a no-no). But lo and behold we found a modest selection of movie titles for instant viewing. Not a lot, but enough for our casual needs.

Videos, particularly new releases, cost about $1 more through Cablevision than through Amazon but despite my penchant for thrift, I'd gladly eat it (I think of it as a 'convenience premium').

The net result of this discovery has been anywhere from a $4 to $10 monthly shift of rental cash from Amazon to Cablevision.

The only conclusion to be drawn from this sample size of one is that Cablevision missed the boat, big time: I've been a cable subscriber for five years and don't recall a single piece of advertising - online, on TV or in print - that promoted this service. All that time, Amazon was capturing my VOD dollar (and not making a profit, amazingly).

There's good reason to believe I'm not alone. Several consumer surveys have noted a serious lack of awareness of pay TV VOD offerings. The industry has even fumbled the more lucrative theatrical release market, where a film is available simultaneously in theaters and via VOD. According to survey by the studio Lions Gate, almost 90 percent of movie goers had no idea that the recent movie Arbitrage was available for viewing on demand on the same day as the theatrical release.

Clearly, more needs to be done to get the word out or Netflix, Amazon et al. will continue to eat the pay TV provider's lunch. Globally, Netflix in particular has been pushing into new markets. If pay TV providers in Europe and Latin America and other markets targeted by Internet VOD players want to retain their VOD revenue, they'd do well to learn from the failures of their North American counterparts. Or suffer their fate.

Colombia: There is No Risk in Staying

Monday November 5, 2012 – Stewart Wolpin

While watching the History Channel mini-series, "The Men Who Built America," I am reminded of how much willpower is exerted to create something out of nothing, or to transform something that doesn't work into something that does to transform society.

One of my tech compatriots with ties to the digital TV business, whom I amazingly bumped into at Bogota's Casa Vieja restaurant during lunch last week, agrees that "the transition in Colombia is exciting." We and many observers believe a decade from now, Colombia could take its place as a major software development center in the Western Hemisphere.

Over the past decade, Colombia's and Bogota's governments have been working on two fronts:

One, pushing out both the physical presence of and the lingering perception of narco-trafficking. According to government officials, the drug trade has been dismantled in the same way the Mafia has been defanged in the U.S., and is gone from Medellin and Cali, relegated to smaller towns. Both homicide and kidnapping rates are below that of most U.S. cities and not even a concern anymore. Colombia addresses its no longer relevant violent reputation in its tourism slogan, "The Only Risk is Wanting to Stay."

Two, building out the country's human, trade, physical and digital infrastructure, efforts aimed at creating an IT and software export industry unparalleled outside of the U.S.

On the human side, university graduations have doubled in the last decade, during which there have been 1.8 million engineering degrees awarded in a population of 49 million. I visited software and videogame developers around Bogota doing Web-development and IT programming work for major American companies including Coca-Cola, American Express, Sears, Target, Wal-Mart, Travelocity and others. Because of its similar time zones (Bogota is on Central Time), U.S. companies are "near-shoring," especially call centers.

TRADE AND DIGITAL BUILD OUT

On the trade front, Colombia signed a free trade agreement with the U.S. last year as in the process of reaching similar deals with Europe and Asia, and has set up more than 100 free trade zones with 15 percent tax rates around the country. Bogota is about to start work on a 7,000-square-meter technology corridor. Colombia also offers funds to help companies acclimate and train employees, the tech-centric SENA (National Apprenticeship System), and INNpulsa.

Regarding digital infrastructure, the number of Colombian towns with access to broadband connections has more than quintupled in just two years thanks to a rapid fiber optic build-out. Digital TV has seen similar expansion.

According to my compatriot:

"From the perspective of video service operators (cable/sat), I'd say Colombia is in similar position to that of Argentina, slightly behind Chile, but far behind Brazil. Digital cable penetration in Colombia is under 50 percent (vs. almost 90 percent in Brazil, for example). However, going forward, new STBs for Colombia will focus not on basic STBs (i.e. standard definition, one-way), but rather on HD boxes with integrated DOCSIS modems to enable deployment of relatively advanced features (DVR, HD, VOD)."

Colombia also is about to drop the hammer on a 4G wireless spectrum auction, open to foreign bidders, from which the government hopes to yield US$480,000. Mobile phone penetration has zoomed from just 5.3 percent to 101.3 percent in the last decade, with a quarter of subscribers already using smartphones; anecdotally, I saw few smartphones that weren't iPhones.

HARDWARE AND TRANSPORTATION

On the consumer electronics front, the country's primary big box retailer, the 13-store chain K-Tronix, stocks most of the major brands found in U.S. retailers.

But prices on TVs, Blu-ray players, PCs and other CE hardware are around 25-30 percent higher than in the U.S. A 16 GB iPad 3, for instance, listed at $667, compared to just $499 in the U.S.; a 60-inch Panasonic ST50 3D plasma HDTV lists for $2,100, on sale for $1,700, in the U.S. but for $2,750, on sale for $1,911.

In addition to K-Tronix, Samsung, LG, Sony, Bose and Bang & Olufsen all have showrooms stores in varying parts of Bogota.

One way around these higher prices for Bogota residents are two adjacent tech malls, Unilago and Centro de Alta Tecnologia (Center for High Technology). Combined, these two three-story rabbit warrens pack in more than 600 "stores" – more like 200 to 300-square-foot booths, each specializing on one type of gadget category (i.e. PCs, printers, portable audio, etc.) None of these stores post prices – everything is a negotiation.

These higher prices make these goods further out of reach for most Colombians; while per capita income has doubled in the last decade, it's still a fifth of that as in the U.S.

Another potentially crippling Colombian problem is transportation. With no widespread mass transit, traffic in Bogota is a nightmare and getting worse, not only the number of cars but of buses, but the aggressive way people drive, often on pot hole-filled side and secondary streets that resemble the pock-marked face of a pubescent teen. Motorcycles are enormously popular for their ability to weave in-and-out of normal bumper-to-bumper jams.

Bogota hopes to break ground on a subway system next year with the first lines completed by 2018. The country also is expanding inter-city highways and wants to build rail links to connect cities separated by mountains and from the land-locked Bogota to both Cartagena on the Caribbean coast and Buenaventura on the Pacific – Colombia is the only South American country with access to both the Atlantic and the Pacific.

TALK TO ME

But Colombia's biggest problem in becoming an international player may be in basic communication. Outside of the professional class, not many Colombians are bi-lingual. Few hotel staffers, service workers or taxi drivers speak English.

Both the national and Bogota governments have instituted bi-lingual education and certification to address this obvious need. Individual companies also are pitching in; software developer Globant holds English classes three days a week.

But as a capitalistic country surrounded by socialist entities, Colombia – the second-largest country in South America with the second-largest Spanish-speaking population – is positioning itself as an IT/software/service development center. No matter how it turns out, Colombia's re-building is exciting to watch and worth keeping an eye on.